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Management Accounting Study Set 6

Business

Quiz 3 :

A Costing Framework and Cost Allocation

Quiz 3 :

A Costing Framework and Cost Allocation

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Cost allocation is the process of assigning indirect costs to cost objects.
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True False
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True

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A geographic region could be a cost object for a service organisation.
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True False
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True

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Only entities that are subject to accounting standards allocate indirect costs to cost objects.
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True False
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False

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Entities use either manual or computerised tracking systems to trace direct costs.
True False
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Direct costs can also be referred to as overhead costs.
True False
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Before determining whether a cost is direct or indirect it is necessary to know what the cost object is.
True False
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Cost benefit analysis is used to determine whether a cost object has made use of a particular resource.
True False
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Some costs are treated as indirect because it is too difficult or costly to trace them directly to the cost object.
True False
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Costs that are common to many cost objects and cannot easily be traced to a specific cost object are known as indirect costs.
True False
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One reason that entities allocate indirect costs to cost objects is to encourage the use of central resources.
True False
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The cost object determines whether costs are classified as direct or indirect.
True False
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Understanding how costs are incurred help organisations to remain competitive and generate a profit.
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A cost object is anything for which a separate measurement of cost is required.
True False
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The glue used on the spines of mass produced textbooks is an example of an indirect cost.
True False
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An example of a cost tracing system is the time card which indicates how much time an employee has spent working on a particular job.
True False
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The accuracy of costing a cost object is increased when more costs can be identified as direct costs.
True False
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Direct costs do not have a cause and effect relationship with the cost object.
True False
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Total costs for a firm vary depending on how many cost objects they have.
True False
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The only cost object for a manufacturing firm is the finished product.
True False
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When calculating the total cost for a cost object it is necessary to include both direct and indirect costs.
True False
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