Deck 4: Cost Management Systems and an Introduction to Activity-Based Costing

Question 1

Accountants can specifically and exclusively identify indirect costs with a given cost objective in an economically feasible way.

Answer 1

False

Question 2

Cost accounting is that part of the cost management system that measures costs for the sole purpose of financial reporting.

Answer 2

False

Question 3

A territory is an example of a cost objective.

Answer 3

True

Question 4

Companies do not make strategic and operational control decisions simultaneously.

Question 5

Parts and materials included in a product are direct costs.

Question 6

An example of a strategic decision is deciding on the optimal product and customer mix.

Question 7

A cost accounting system typically includes two processes: cost allocation and cost determination.

Question 8

Cost systems initially record costs, then group costs in different ways to make decisions.

Question 9

Product costs include direct labor and conversion costs.

Question 10

Accountants initially record costs by category.

Question 11

Evaluating the cost of a production process is an example of the strategic purpose of the cost-management system.

Question 12

Costs can be classified only as direct or indirect.

Question 13

A cost is consumption of resources for a particular purpose.

Question 14

For many organizations, the single largest cost is advertising.

Question 15

Cost allocation is the tracing and reassigning of costs to one or more cost objectives such as departments, customers, or products.

Question 16

A cost object is anything for which a separate measurement of costs is desired.

Question 17

An example of a cost objective is an account title, such as advertising or office supplies.

Question 18

Cost can be measured by dollars, yen, and euros, as well as other currencies.

Question 19

Cost assignment is the tracing or allocating of costs to one or more cost objectives, such as activities and departments.

Question 20

Period costs include selling and administrative expenses.

Question 21

For a merchandising company, factory insurance and depreciation are product costs.

Question 22

Depreciation of assembly equipment is an example of a direct cost.

Question 23

Product costs only become an expense when sold.

Question 24

Unallocated costs have no identifiable relationship to a cost objective.

Question 25

Examples of factory overhead costs include property taxes on the factory and factory depreciation.

Question 26

The application of computer technology has increased the number and amount of indirect costs.

Question 27

An example of an unallocated cost is research and development.

Question 28

Product costs appear on either the balance sheet or income statement, but not both.

Question 29

In highly automated factories with a flexible workforce, there may be no direct-labor costs.

Question 30

An example of an unallocated cost is factory supervisor salaries.

Question 31

Forklift operators and factory security guards are examples of direct-labor costs.

Question 32

Direct materials often do not include minor items such as tacks or glue.

Question 33

Period costs become expenses during the current period.

Question 34

For a manufacturing company, product costs first appear on the income statement, then are transferred to the balance sheet.

Question 35

Product costs first become part of the inventory on hand.

Question 36

A merchandising company has direct materials inventory.

Question 37

Whenever economically feasible, managers prefer costs to be indirect rather than direct.

Question 38

In general, many more costs are direct when a department is the cost objective than when a product or service is the cost objective.

Question 39

Sometimes employee benefits are included in direct-labor costs.

Question 40

Most firms' financial statements include research and development, and customer service costs as selling and administrative costs.

Question 41

A cost accounting system first assigns costs to organizational units and then accumulates these costs within the unit.

Question 42

A manufacturer has three classes of inventories: direct materials, work-in-process, and merchandise inventory.

Question 43

Direct manufacturing costs are the same as manufacturing overhead costs.

Question 44

Products or services are the final cost objectives.

Question 45

Finished goods inventory for a manufacturer is the same as merchandise inventory for a
merchandiser.

Question 46

Square feet is the best cost driver for depreciation of heating and air conditioning equipment.

Question 47

Eventually, all direct service department costs will become indirect production department costs.

Question 48

The contribution approach is a method of internal reporting that emphasizes the distinction between variable and fixed costs for the purpose of better decision making.

Question 49

There is no "best" cost allocation system.

Question 50

In both merchandising and manufacturing accounting, selling and administrative costs are period costs.

Question 51

The best cost driver for janitorial services is square feet.

Question 52

Companies must assign all costs for internal management purposes.

Question 53

A cost pool is a group of individual costs that is allocated to cost objectives using multiple cost drivers.

Question 54

Allocation of costs to cost objectives may be described as apportion or attribute.

Question 55

Costs can denote an asset and an expense.

Question 56

Work-in-process inventory usually decreases when finished goods inventory increases.

Question 57

If the vast majority of costs were directly traceable, then cost allocation would be a minor issue.

Question 58

Companies must assign all production costs and only production costs for external financial reporting purposes.

Question 59

In general, allocating fixed cost is less challenging than allocating variable cost.

Question 60

Examples of service departments include personnel, legal, and corporate accounting.

Question 61

Benchmarks can come from within the organization, from competing organizations, or from other organizations having similar products.

Question 62

Traditional costing systems work well with complex production and operating systems.

Question 63

If ending finished goods inventory is larger than beginning finished goods inventory, then cost of goods sold is less than the sum of direct materials + direct labor + overhead.

Question 64

Benchmarking is the continuous process of comparing products, services, and activities to the average industry standards.

Question 65

Collecting relevant data concerning costs and the physical flow of the cost-driver units among resources and activities is the third step of design of an ABC system.

Question 66

Costs included in work-in-process inventory are direct material, direct labor, and administrative.

Question 67

Traditional cost systems generally allocate only indirect production costs to the products.

Question 68

_____ need aggregate rather than detailed cost information.

A)External users
B)Internal users
C)Both internal and external users
D)Neither internal nor external users

Question 69

Having only one cost driver is acceptable when indirect manufacturing costs are very large as compared to total costs.

Question 70

Handling and storing inventories and transporting finished goods from one part of the plant to another are examples of non-value-added activities.

Question 71

Cost drivers are usually expressed in dollars.

Question 72

Value-added costs are not necessary.

Question 73

The finished goods inventory account is only found on the balance sheet.

Question 74

Determining the key components of the Activity-Based Cost system is the first step of design of an ABC system.

Question 75

A value-added cost is the cost of an activity that a company cannot eliminate without affecting a product's value to the customer.

Question 76

A reason that more organizations in manufacturing and nonmanufacturing industries are adopting activity-based costing systems is that new production techniques have decreased the proportion of indirect costs.

Question 77

Determining the relationships among cost objects, activities, and resources is the second step of design of an ABC system.

Question 78

A cost pool is a group of individual costs that is allocated to cost objectives using a single cost driver.

Question 79

Companies try to maximize non-value-added costs.

Question 80

Activity?based accounting is a system that first accumulates overhead costs for each of the activities of an organization, and then assigns the costs of activities to the products, services, or other cost objects that caused that activity.