Question 1

It is beneficial to assign indirect costs to cost objects.

Accepted Answer

Indirect costs are costs that cannot be directly traced to a specific cost object. Assigning these costs to cost objects helps to provide a more accurate picture of the total cost associated with the cost object. This allows for better decision-making in terms of resource allocation and pricing strategies.

Question 2

Price must be greater than cost in order for the firm to generate revenue.

Accepted Answer

Revenue is generated by the sale of goods or services at any price, not necessarily above the cost. Profit, not revenue, requires the price to be greater than the cost.

Question 3

Indirect costs are costs that are not easily and accurately traced to a cost object.

Accepted Answer

Indirect costs are costs that cannot be directly traced to a specific cost object, such as overhead costs like rent, utilities, and salaries of support staff.

Question 4

Direct costs are those costs that cannot be easily and accurately traced to a cost object.

Accepted Answer

Direct costs are those costs that can be easily and accurately traced to a cost object.

Question 5

Assigning costs involves the way that a cost is linked to some cost object.

Accepted Answer

Assigning costs is the process of identifying and linking costs to a particular cost object, which can be a product, service, department, or activity. It involves tracing or allocating costs to the cost object in order to determine the total cost of that object. This helps in determining the profitability of a product or service and in making cost-related decisions.

Question 6

An opportunity cost is the benefit given up or sacrificed when one alternative is chosen over another.

Accepted Answer

This statement correctly defines opportunity cost.

Question 7

Assigning costs tells the accountant who spent the money.

Accepted Answer

Assigning costs tells the accountant the amount of money that was spent on a particular expense, but it does not indicate who spent the money.

Question 8

A fixed cost is a cost that does not increase in total as output increases and does not decrease in total as output decreases.

Accepted Answer

Fixed costs are independent of the level of output and remain constant irrespective of whether the output is high or low. Examples of fixed costs include rent, salaries, property taxes, and insurance premiums.

Question 9

A cost object is any item such as products, customers, departments, regions, and so on, for which costs are measured and assigned.

Accepted Answer

This statement is true. A cost object is any item for which costs are measured and assigned, and can include products, customers, departments, regions, and more.

Question 10

Reducing the cost required to achieve a given benefit means that a company is becoming less efficient.

Accepted Answer

Reducing the cost required to achieve a given benefit can actually mean that a company is becoming more efficient. It could mean that the company has found ways to streamline or optimize its processes, resulting in lower costs while maintaining the same level of performance.

Question 11

Expired costs are called assets.

Accepted Answer

Expired costs are not assets, they are expenses. Assets are resources owned by a business that have future economic value.

Question 12

Allocation means that an indirect cost is assigned to a cost object using a reasonable and convenient method.

Accepted Answer

Allocation is a way of assigning indirect costs to a cost object in a reasonable and convenient manner. It involves using an allocation base to distribute the indirect cost to the cost object, such as a department, product, or service. The allocation method should be based on a systematic and rational approach that reflects the causal relationship between the cost and the cost object.

Question 13

A cost object is something for which a company wants to know the cost.

Accepted Answer

This is the definition of a cost object.

Question 14

A variable cost is one that does not increase in total as output increase and does not decrease in total as output decreases.

Accepted Answer

A variable cost is one that does increase in total as output increase and does not decrease in total as output decreases.

Question 15

Costs are incurred to produce future benefits.

Accepted Answer

Costs are incurred to produce goods or services that will generate future benefits for the organization.

Question 16

As costs are used up in the production of revenues, they are said to expire.Expired costs are called expenses.

Accepted Answer

This is a correct statement in accounting. Costs incurred in the production of goods or services are recognized as expenses when they expire or are used up. These expenses are then subtracted from revenues to determine the net income or profit.

Question 17

Costs are directly, not indirectly, associated with cost objects.

Accepted Answer

Costs can be both directly and indirectly associated with cost objects. Direct costs can be traced directly to a specific cost object, while indirect costs are allocated to cost objects as they cannot be traced directly.

Question 18

Cost is a dollar measure of the resources used to achieve a given benefit.

Accepted Answer

Cost is a measure of the resources used to achieve a given benefit. It is expressed in terms of dollars, effort, time, or any other relevant unit of measurement.

Question 19

The revenue per unit is called cost.

Accepted Answer

The revenue per unit is called price.

Question 20

Accumulating costs is the way that costs are measured and recorded.

Accepted Answer

Accumulating costs is the process of measuring and recording costs. It involves collecting data on all relevant costs, such as direct materials, labor, overhead, and other indirect expenses, and organizing them into meaningful categories or cost pools. The accumulated costs are then used to calculate the total cost of production, the cost of goods sold, and other financial metrics that help managers make informed decisions about pricing, budgeting, and resource allocation.

Quiz 2: Basic Managerial Accounting Concepts