Question 1

Nearly all accounting systems accumulate forecasted costs.

Accepted Answer

Accounting systems typically accumulate actual costs, not forecasted costs. However, some systems may have modules for budgeting and forecasting, but these are typically separate from the main accounting functions.

Question 2

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

Accepted Answer

Products, services, departments, and customers can be considered as cost objects as they are entities that incur costs or generate revenues in an organization's accounting system. By assigning costs to these cost objects, it becomes easier to measure the profitability and efficiency of an organization's operations.

Question 3

Delivery charges are typically considered to be an indirect cost because it cannot be traced to each customer.

Accepted Answer

False

Question 4

Prime costs consist of direct and indirect manufacturing labour.

Accepted Answer

The answer of Prime costs consist of direct and indirect...

Question 5

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

Accepted Answer

A cost object can be a product, service, department, project, customer, or any item for which costs are accumulated and analyzed.

Question 6

An actual cost is a predicted cost.

Accepted Answer

An actual cost is the cost that has already been incurred and is based on real data, while a predicted cost is an estimate or projection of what the cost may be in the future.

Question 7

Factors affecting direct/indirect cost classifications are the materiality of the cost in question,the information-gathering technology used,and the operations.

Accepted Answer

Materiality, information-gathering technology, and operations are all factors that can affect whether a cost is classified as direct or indirect.

Question 8

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

Accepted Answer

A cost object is a specific item, product, service, department, or activity for which costs are measured separately. Examples of cost objects include individual products, services, a specific project, a particular department, a customer, or a geographic region. The purpose of identifying cost objects is to accurately measure and allocate costs to specific activities or products, thus providing insight into the profitability and efficiency of the organization's operations.

Question 9

Conversion costs include all direct manufacturing costs.

Accepted Answer

Conversion costs only include costs incurred during the manufacturing process that are not directly associated with the cost of materials, such as labor and overhead. Direct materials costs are not included in conversion costs.

Question 10

Costs of Sales is another way of phrasing Cost of Goods Sold.

Accepted Answer

Costs of Sales and Cost of Goods Sold are interchangeable terms that refer to the direct costs associated with producing and selling a product or service.

Question 11

Rent for the building that contains the manufacturing and engineering departments can all be charged as manufacturing overhead costs.

Accepted Answer

The answer of Rent for the building that contains the...

Question 12

Conversion costs are all manufacturing costs other than direct materials.

Accepted Answer

Conversion costs refer to the indirect costs of converting raw materials into a finished product, such as direct labor costs, indirect labor costs, factory rent, utilities, and depreciation on manufacturing equipment. Direct materials are not included in conversion costs.

Question 13

"Cost" is defined by accountants as a resource sacrificed or foregone to achieve a specific objective.

Accepted Answer

This is the correct definition of "cost" according to accounting principles.

Question 14

Cost tracing assigns indirect costs to the chosen cost object.

Accepted Answer

The answer of Cost tracing assigns indirect costs to the...

Question 15

A cost is classified as a direct or indirect cost based on the applicable cost object.

Accepted Answer

The classification of a cost as direct or indirect depends on the cost object it is being applied to. Direct costs can be traced to a specific cost object, while indirect costs cannot be easily traced and require allocation or apportionment to a cost object.

Question 16

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 17

The plant supervisor's salary is a direct labour cost.

Accepted Answer

The answer of The plant supervisor's salary is a direct...

Question 18

Assigning direct costs poses more problems than assigning indirect costs.

Accepted Answer

The answer of Assigning direct costs poses more problems than...

Question 19

A department could be considered a cost object.

Accepted Answer

A department can be considered a cost object because it is a unit of an organization to which costs are assigned and can be used to analyze and control costs.

Question 20

Indirect costs cannot be economically traced directly to the cost objective.

Accepted Answer

Indirect costs are those costs that cannot be directly traced to a specific product, service, or project. They include expenses such as rent, utilities, and salaries of support staff, which are necessary to keep the business running but cannot be attributed to a single cost object. Instead, indirect costs are allocated to cost objects based on predetermined cost drivers, such as machine hours or labor hours, which are assumed to be related to the consumption of indirect resources.

Quiz 2: An Introduction to Cost Terms and Purposes