Question 1

A customer could be considered a cost object.

Accepted Answer

A cost object is anything for which costs are measured, such as a product, service, department, or customer. Therefore, a customer could be considered a cost object if costs related to serving that customer are being measured.

Question 2

Cost objects include:
A)products
B)customers
C)departments
D)All of these answers are correct.

Accepted Answer

Cost objects can be any item or group that is the focus of a cost analysis. This can include products, customers, departments, or any other element of a business that incurs costs. Therefore, all of these answers are correct as examples of potential cost objects.

Question 3

Lucas Manufacturing has three cost objects that it uses to accumulate costs for its manufacturing plants. They are:
  The following manufacturing overhead cost categories are found in the accounting records:
  Required:
Assign each of the above costs to the most appropriate cost object.

Accepted 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.

Question 4

A cost object is always either a product or a service.

Accepted Answer

A cost object can be a product, service, project, department, or any other segment for which costs are measured and assigned.

Question 5

Which of the following does NOT affect the direct/indirect classification of a cost?
A)the level of budgeted profit for the next year
B)the materiality of the cost in question
C)available technology to gather information about the cost
D)the design of the operation

Accepted Answer

The level of budgeted profit for the next year may influence the decision to classify a cost as either direct or indirect, but it does not affect the actual classification of the cost itself. The other choices (B, C, and D) can all potentially have an impact on how a cost is classified.

Question 6

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

Accepted Answer

A cost system first accumulates all relevant costs, and then assigns them to the cost object based on predetermined allocation methods. This method ensures that all costs are accounted for and accurately assigned to the cost object.

Question 7

Actual costs and historical costs are two different terms referring to the same thing.

Accepted Answer

The answer of Actual costs and historical costs are two...

Question 8

Budgeted costs are:
A)the costs incurred this year
B)the costs incurred last year
C)planned or forecasted costs
D)competitor's costs

Accepted Answer

Budgeted costs refer to planned or forecasted costs for a specific period, usually a year. They are estimates of future expenses based on projected revenues and expenses, and are used to guide spending decisions and measure financial performance. Option A and B are incorrect as they refer to actual costs incurred in the past. Option D is irrelevant as it refers to costs incurred by competitors and not relevant to the organization's own budgeting process.

Question 9

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

Accepted Answer

Cost tracing refers to the direct assignment of costs to the chosen cost object. This process helps to determine the exact cost associated with a particular product, service, or activity. It involves tracking cost elements such as materials, labor, and other direct expenses that can be attributed to a specific cost object. Therefore, option A is the correct answer.

Question 10

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

Accepted Answer

Cost assignment refers to both the tracing and allocation of costs to a cost object. Cost accumulation only refers to the accumulation of costs, while cost tracing is the initial process of identifying and tracking costs to a particular cost object. Conversion costing is a method of determining the cost of converting raw materials into finished goods.

Question 11

Cost assignment :
A)is always arbitrary
B)is includes tracing and allocating
C)is the same as cost accumulation
D)is finding the difference between budgeted and actual costs

Accepted Answer

Cost assignment involves both tracing direct costs to cost objects and allocating indirect costs to cost objects. Cost accumulation is a broader term that refers to the collection of costs by cost centers or cost objects. Therefore, B is the correct answer. A is incorrect because cost assignment is not always arbitrary; it can be a systematic process. C is incorrect because cost accumulation is a broader term than cost assignment, as stated previously. D is also incorrect because cost assignment is not related to budgeted or actual costs.

Question 12

Accountants define a cost as a resource to be sacrificed to achieve a specific objective.

Accepted Answer

This is a commonly accepted definition of cost in accounting.

Question 13

Products, services, departments, and customers may be cost objects.

Accepted Answer

Cost objects are any items, activities, or processes to which costs can be attributed. This includes products, services, departments, and customers.

Question 14

Actual costs are:
A)the costs incurred
B)budgeted costs
C)estimated costs
D)forecasted costs

Accepted Answer

Actual costs are the costs that have been incurred or actually spent. They differ from budgeted, estimated, or forecasted costs, which are all projections or planned numbers.

Question 15

In order to make decisions, managers need to know:
A)actual costs
B)budgeted costs
C)both costs
D)neither cost

Accepted Answer

Managers need both actual costs and budgeted costs in order to make informed decisions. Actual costs tell managers how much was actually spent, while budgeted costs show how much was planned to be spent. Comparing actual costs to budgeted costs allows managers to identify areas where they may be overspending or find areas where they can allocate more funds. Therefore, having access to both types of costs is crucial for decision making.

Question 16

Which of the following statements about the direct/indirect cost classification is NOT true?
A)Indirect costs are always traced.
B)Indirect costs are always allocated.
C)The design of operations affects the direct/indirect classification.
D)The direct/indirect classification depends on the choice of cost object.

Accepted Answer

Indirect costs are not always traced, as they cannot be directly linked to a specific cost object. Instead, they are allocated based on an allocation basis or cost driver. Direct costs, on the other hand, can be traced directly to a cost object.

Question 17

Costs are accounted for in two basic stages: assignment followed by accumulation.

Accepted Answer

Costs are accounted for in two basic stages: accumulation followed by assignment.

Question 18

The determination of a cost as either direct or indirect depends upon the:
A)accounting system
B)allocation system
C)cost tracing system
D)cost object chosen

Accepted Answer

The determination of a cost as either direct or indirect depends upon the cost object chosen. Direct costs are those that can be specifically and easily traced to a particular product, department or project. Indirect costs are those that cannot be traced to a particular product, department or project but are necessary for the overall operation of the business. Therefore, the choice of cost object will determine which cost is direct or indirect.

Question 19

Cost allocation is:
A)the process of tracking both direct and indirect costs associated with a cost object
B)the process of determining the actual cost of the cost object
C)the assignment of indirect costs to the chosen cost object
D)a function of cost tracing

Accepted Answer

Cost allocation refers to the assignment of indirect costs to a particular cost object. It involves identifying the costs that are not directly related to the cost object and assigning them based on an allocation method, such as using allocation bases like labor hours or machine hours. Direct costs are already traceable to a specific cost object and do not require allocation. Cost allocation allows for a more accurate determination of the total cost of a product, service or project.

Question 20

The collection of accounting data in some organized way is:
A)cost accumulation
B)cost assignment
C)cost tracing
D)conversion costing

Accepted Answer

Cost accumulation refers to the systematic collection of accounting data in an organized way. It involves collecting transaction data and organizing it in a manner that is useful for cost analysis and decision-making. Cost assignment and cost tracing are both methods used in cost accumulation. Conversion costing refers to the process of converting raw materials into finished goods and is not directly related to the collection of accounting data.

Quiz 2: An Introduction to Cost Terms and Purposes

A customer could be considered a cost object.

Cost objects include:

Lucas Manufacturing has three cost objects that it uses to accumulate costs for its manufacturing plants. They are: The following manufacturing overhead cost categories are found in the accounting records: Required: Assign each of the above costs to the most appropriate cost object.

A cost object is always either a product or a service.

Which of the following does NOT affect the direct/indirect classification of a cost?

A cost system determines the cost of a cost object by:

Actual costs and historical costs are two different terms referring to the same thing.

Budgeted costs are:

Cost tracing is:

The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is:

Cost assignment :

Accountants define a cost as a resource to be sacrificed to achieve a specific objective.

Products, services, departments, and customers may be cost objects.

Actual costs are:

In order to make decisions, managers need to know:

Which of the following statements about the direct/indirect cost classification is NOT true?

Costs are accounted for in two basic stages: assignment followed by accumulation.

The determination of a cost as either direct or indirect depends upon the:

Cost allocation is:

The collection of accounting data in some organized way is: