Cost Accounting, 15e (Horngren/Datar/Rajan)
Chapter 2 An Introduction to Cost Terms and Purposes
Objective 2.1
1) An actual cost is ________. A) is the cost incurred
B) is a predicted or forecasted cost
C) is anything for which a cost measurement is desired
D) is the collection of cost data in some organized way by means of an accounting system Answer: A
Diff: 1
Objective: 1
AACSB: Analytical thinking
2) Comparing budgeted costs to actual costs helps managers to improve ________. A) coordination B) control
C) implementation D) planning Answer: B
Diff: 1
Objective: 1
AACSB: Analytical thinking
3) Budgeted costs are ________. A) the costs incurred this year B) the costs incurred last year C) planned or forecasted costs D) competitor's costs Answer: C
Diff: 1
Objective: 1
AACSB: Analytical thinking
4) Cost assignment ________.
A) includes future and arbitrary costs
B) encompasses allocating indirect costs to a cost object C) is the same as cost accumulation
D) is the difference between budgeted and actual costs Answer: B
Diff: 1
Objective: 1
AACSB: Analytical thinking
1
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5) A cost system determines the cost of a cost object by ________. A) accumulating and then assigning costs B) accumulating costs
C) assigning and then accumulating costs D) assigning costs Answer: A
Diff: 1
Objective: 1
AACSB: Analytical thinking
6) A cost object is anything for which a cost measurement is desired. Answer: TRUE
Diff: 1
Objective: 1
AACSB: Analytical thinking
7) Costs are accounted for in two basic stages: assignment followed by accumulation. Answer: FALSE
Explanation: Costs are accounted for in two basic stages: accumulation followed by assignment.
Diff: 1
Objective: 1
AACSB: Analytical thinking
8) An actual cost is the cost incurred–a historical or past cost. Answer: TRUE
Diff: 1
Objective: 1
AACSB: Analytical thinking
9) Accountants define a cost as a resource to be sacrificed to achieve a specific objective. Answer: TRUE
Diff: 1
Objective: 1
AACSB: Analytical thinking
10) A cost is a resource sacrificed or forgone to achieve a specific objective. Answer: TRUE
Explanation: A cost object could be anything management wishes to determine the cost of, for example, a department.
Diff: 1
Objective: 1
AACSB: Analytical thinking
11) Managers use cost accumulation data to make decisions and implement them. Answer: TRUE
Diff: 1
Objective: 1
AACSB: Analytical thinking
2
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12) Lucas Manufacturing has three cost objects that it uses to accumulate costs for its manufacturing plants. They are: Cost object #1: The physical buildings and equipment Cost object #2: The use of buildings and equipment Cost object #3: The availability and use of manufacturing labor
The following manufacturing overhead cost categories are found in the accounting records: a. Depreciation on buildings and equipment b. Lubricants for machines c. Property insurance d. Supervisors salaries e. Fringe benefits f. Property taxes g. Utilities
Required:
Assign each of the above costs to the most appropriate cost object. Answer:
Cost object # 1 includes categories a, c, and f.
Cost object # 2 includes categories b and g.
Cost object # 3 includes categories d and e.
Diff: 2
Objective: 1
AACSB: Application of knowledge
3
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Objective 2.2
1) Which of the following factors affect the direct/indirect classification of a cost? A) the level of budgeted profit for the next year
B) the estimation of time required to complete the order
C) the ability to execute an order in the most cost-efficient manner D) the design of the operation Answer: D
Diff: 1
Objective: 2
AACSB: Analytical thinking
2) The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is ________. A) cost accumulation B) cost assignment C) cost tracing
D) conversion costing Answer: B
Diff: 1
Objective: 1
AACSB: Analytical thinking
3) Cost accumulation is ________.
A) the collection of cost data in some organized way by means of an accounting system B) anything for which a cost measurement is desired C) anything for which a profit measurement is desired
D) the collection of profit data in some organized way by means of an accounting system Answer: A
Diff: 2
Objective: 1
AACSB: Analytical thinking
4) Which of the following statements about the direct/indirect cost classification is true? A) Indirect costs are always traced. B) Indirect costs are always allocated.
C) The design of sales target affects the direct/indirect classification.
D) The direct/indirect classification depends on the cost control measures. Answer: B
Diff: 1
Objective: 2
AACSB: Analytical thinking
4
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5) Cost tracing is ________.
A) the assignment of direct costs to the chosen cost object B) a function of cost allocation
C) the process of tracking both direct and indirect costs associated with a cost object D) the process of determining the actual cost of the cost object Answer: A
Diff: 1
Objective: 2
AACSB: Analytical thinking
6) Cost allocation is ________.
A) the process of tracking both direct and indirect costs associated with a cost object B) the process of determining the opportunity cost of a cost object chosen C) the assignment of indirect costs to the chosen cost object D) made based on material acquisition document Answer: C
Diff: 1
Objective: 2
AACSB: Analytical thinking
7) The determination of a cost as either direct or indirect depends upon the ________. A) accounting standards B) tax system chosen C) inventory valuation D) cost object chosen Answer: D
Diff: 1
Objective: 2
AACSB: Analytical thinking
8) Classifying a cost as either direct or indirect depends upon ________. A) the behavior of the cost in response to volume changes
B) whether the cost is expensed in the period in which it is incurred C) whether the cost can be easily traced with the cost object D) whether a cost is fixed or variable Answer: C
Diff: 1
Objective: 2
AACSB: Analytical thinking
9) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line is ________. A) beverages provided daily in the plant break room
B) monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver C) salaries of the clerical staff that work in the company administrative offices D) overheads incurred in producing both golf and soccer equipment Answer: B
Diff: 1
Objective: 2
AACSB: Application of knowledge
5
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