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Cost Accounting: A Managerial Emphasis, 6e
Chapter 2 – An Introduction to Cost Terms and Purposes Copyright © 2013 Pearson Canada Inc. 2-1 Chapter 2 An Introduction to Cost Terms and Purposes
2.1 Identify and distinguish between two manufacturing cost classification systems: direct and indirect, prime and conversion.
1) "Cost" is defined by accountants as a resource sacrificed or foregone to achieve a specific objective.
Answer: TRUE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
2) Costs of Sales is another way of phrasing Cost of Goods Sold.
Answer: TRUE
Diff: 2 Type: TF
Skill: Knowledge
Objective: LO 2-1
3) An actual cost is a predicted cost.
Answer: FALSE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
4) Nearly all accounting systems accumulate forecasted costs.
Answer: FALSE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
5) A cost object is anything for which a separate measurement of costs is desired.
Answer: TRUE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
6) Indirect costs cannot be economically traced directly to the cost objective.
Answer: TRUE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
Cost Accounting A Managerial Emphasis Canadian 6th Edition Horngren Test Bank Visit TestBankDeal.com to get complete for all chapters
Cost Accounting: A Managerial Emphasis, 6e
Chapter 2 – An Introduction to Cost Terms and Purposes Copyright © 2013 Pearson Canada Inc. 2-2 7) Delivery charges are typically considered to be an indirect cost because it cannot be traced to each customer.
Answer: FALSE
Diff: 2 Type: TF
Skill: Comprehension
Objective: LO 2-1
8) A cost is classified as a direct or indirect cost based on the applicable cost object.
Answer: TRUE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
9) Cost tracing assigns indirect costs to the chosen cost object.
Answer: FALSE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
10) Factors affecting direct/indirect cost classifications are the materiality of the cost in question, the information-gathering technology used, and the operations.
Answer: TRUE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
11) A firm's strategy and mission are usually the same.
Answer: FALSE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
12) Governance refers to a company's relationship with all levels of government.
Answer: FALSE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
13) A value proposition is a distinct benefit for which customers will pay.
Answer: TRUE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
Cost Accounting: A Managerial Emphasis, 6e
Chapter 2 – An Introduction to Cost Terms and Purposes Copyright © 2013 Pearson Canada Inc. 2-3 14) Rent for the building that contains the manufacturing and engineering departments can all be charged as manufacturing overhead costs.
Answer: FALSE
Diff: 2 Type: TF
Skill: Comprehension
Objective: LO 2-1
15) The plant supervisor's salary is a direct labour cost.
Answer: FALSE
Diff: 2 Type: TF
Skill: Knowledge
Objective: LO 2-1
16) Inventoriable costs are reported as an asset when incurred and expensed on the income statement when the product is sold.
Answer: TRUE
Diff: 2 Type: TF
Skill: Knowledge
Objective: LO 2-1
17) Period costs are never included as part of inventory.
Answer: TRUE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
18) Conversion costs include all direct manufacturing costs.
Answer: FALSE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
19) Overtime premium consists of wages paid to all workers in excess of their straight-time wage rates.
Answer: TRUE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
20) Prime costs consist of direct and indirect manufacturing labour.
Answer: FALSE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
Cost Accounting: A Managerial Emphasis, 6e
Chapter 2 – An Introduction to Cost Terms and Purposes Copyright © 2013 Pearson Canada Inc. 2-4 21) Conversion costs are all manufacturing costs other than direct materials.
Answer: TRUE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
22) Overtime premium is always a component of direct labour.
Answer: FALSE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
23) Products, services, departments, and customers may be cost objects.
Answer: TRUE
Diff: 1 Type: TF
Skill: Knowledge
Objective: LO 2-1
24) 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 Type: TF
Skill: Comprehension
Objective: LO 2-1
25) A cost object is always either a product or a service.
Answer: FALSE
Explanation: A cost object could be anything management wishes to determine the cost of, for example, a department.Diff: 2 Type: TF
Skill: Knowledge
Objective: LO 2-1
26) Assigning direct costs poses more problems than assigning indirect costs.
Answer: FALSE
Explanation: Tracing direct costs is quite straightforward, whereas assigning indirect costs to a number of different cost objects can be very challenging.Diff: 2 Type: TF
Skill: Comprehension
Objective: LO 2-1
27) A department could be considered a cost object.
Answer: TRUE
Diff: 2 Type: TF
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