Ch. 2 HW Solutions

Ch. 2 HW Solutions - CHAPTER 2 BASIC MANAGEMENT ACCOUNTING...

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CHAPTER 2 BASIC MANAGEMENT ACCOUNTING CONCEPTS QUESTIONS FOR WRITING AND DISCUSSION 1. Product costing accuracy means assigning the cost of the resources consumed by a cost object to that cost object. 2. A cost object is any item for which costs are measured and assigned, including such things as products, plants, projects, depart- ments, and activities. 3. An activity is a basic unit of work performed within an organization. Examples include material handling, inspection, purchasing, billing, and maintenance. 4. A direct cost is a cost that can be traced to a cost object. An indirect cost is a cost that cannot be traced to cost objects. 5. Traceability is the ability to assign a cost dir- ectly to a cost object in an economically feasible way using a causal relationship. Tracing is the assignment of costs to cost objects using either an observable measure of the cost object’s resource consumption or factors that allegedly capture the causal re- lationship. 6. Allocation is the assignment of indirect costs to cost objects based on convenience or as- sumed linkages. 7. Drivers are factors that cause changes in re- source usage, activity usage, costs, and revenues. Resource drivers measure the demands placed on resources by activities and are used to assign the cost of resources to activities. Example: time used to assign the cost of supervision to individual activit- ies. Activity drivers measure the demands placed on activities by cost objects and are used to assign the cost of activities to cost objects. Example: number of inspection hours used to assign the cost of inspection to individual products.
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Ch. 2 HW Solutions - CHAPTER 2 BASIC MANAGEMENT ACCOUNTING...

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