Cost Accounting Chapter 2

Front 1

What is a cost object?

Back 1

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

Hint 1

Examples: a product, a service, a project, a customer, a brand category, an activity, a department

Front 2

How do managers decide whether a cost s a direct or an indirect cost?

Back 2

A direct cost is any cost that is related to a particular cost object and can be related to the particular cost object but cannont be traced to it in an economically feasible way. The same cost can be direct for one cost object and indirect for another cost object.

Front 3

How do managers decide whether a cost is a variable or a fixed cost?

Back 3

A variable cost changes in total in proportion to changes in the related level of total activty or volume. A gixed cost remains unchanged in total for a given time period despite wide changes in the related level of total activity or volume.

Front 4

How should costs be estimated?

Back 4

In general, focus on total costs, not unit costs. When making total cost estimates think of variable costs as an amount per unit and fixed costs as a total amount. The unit cost of a cost object should be interpreted cautiously when it includes a fixed cost component.

Front 5

What are the differences in the accounting for inventoriable versus period costs?

Back 5

Inventoriable costsare all costs of a product that are regarded as an asset in the accounting period when they are incurred and become cost of goods sold in the accounting period when the product is sold. Period costs are expensed in the accounting period in which they are incurred and are all of the costs in an income statement other than cost of goods sold.

Front 6

Why do managers assign different costs to the same cost objects?

Back 6

Managers can assign different costs to the same cost object depending on the purpose.

Front 7

What are the three key features of cost accounting and cost management?

Back 7

Three features of cost accounting and cost management are:

1. calculating the cost of products, services, and other cost objects.

2. obtaining information for planning and control and performance evaluation.

3. Analyzing relevant information for making decisions.