Chap002 - Chapter 02 - Product Costing Systems: Concepts...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 02 - Product Costing Systems: Concepts and Design Issues CHAPTER 2 PRODUCT COSTING SYSTEMS: CONCEPTS AND DESIGN ISSUES ANSWERS TO REVIEW QUESTIONS 2.1 Cost is a more general term that refers to a sacrifice of resources and may be either an opportunity cost or an outlay cost. An expense is the write-off of an outlay cost against revenues in a particular accounting period and usually pertains only to external financial reports. 2.2 Product costs are those costs that can be more easily attributed to products, while period costs are those costs that are more easily attributed to time periods. The determination of product costs varies depending on the approach used: full absorption, variable, or throughput costing. 2.3 Yes. The costs associated with goods sold in a period are not expected to result in future benefits. They provided revenues for the period in which the goods were sold; therefore, they are expensed for financial accounting purposes. 2.4 Direct material: Material in its raw or unconverted form which become an integral part of the finished product is considered direct material. Direct labor: Costs associated with labor engaged in manufacturing activities. Sometimes this is considered as the labor which is actually responsible for converting the materials into finished product. Assembly workers, cutters, finishers and similar “hands on” personnel are classified as direct labor. Manufacturing overhead: All other costs directly related to product manufacture. These costs include the indirect labor and materials, costs related to the facilities and equipment required to carry out manufacturing operations, supervisory costs, and all other direct support activities. 2-1 Chapter 02 - Product Costing Systems: Concepts and Design Issues 2.5 Total variable costs change in proportion to a change in activity level (within the relevant range of activity). Unit variable costs remain constant, within the relevant range of activity. 2.6 Total fixed costs do not change as volume changes (within the relevant range of activity). Unit fixed costs decline as the activity level increases, within the relevant range of activity. 2-2 Chapter 02 - Product Costing Systems: Concepts and Design Issues 2.7 Material, conversion, and operating resources are names given to different types of resources based on how they are used to provide products and services to customers. Material resources are tangible, physical resources that are added or converted into products. Conversion resources are the resources used in processes to convert materials (or ideas) into products and services. Operating resources provide the infrastructure necessary to provide logistical support and support for the conversion process....
View Full Document

This note was uploaded on 04/01/2010 for the course ACCT 1 taught by Professor Bono during the Spring '10 term at Illinois State.

Page1 / 117

Chap002 - Chapter 02 - Product Costing Systems: Concepts...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online