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CHAPTER 2E - CHAPTER 2 AN INTRODUCTION TO COST TERMS AND...

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CHAPTER 2 AN INTRODUCTION TO COST TERMS AND PURPOSES TRUE/FALSE 1. Products, services, departments, and customers may be cost objects. Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost object 2. Costs are accounted for in two basic stages: assignment followed by accumulation. Answer : False Difficulty : 1 Objective : 1 Terms to Learn: cost accumulation Costs are accounted for in two basic stages: accumulation followed by assignment. 3. Actual costs and budgeted costs are two different terms referring to the same thing. Answer : False Difficulty : 1 Objective : 1 Terms to Learn: budgeted costs Budgeted costs are what are planned before the beginning of the accounting period, while actual costs are those costs compiled at the end of the accounting period. 4 . Accountants define a cost as a resource to be sacrificed to achieve a specific objective. Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost 5. A cost object is always either a product or a service. Answer: False Difficulty: 2 Objective: 1 Terms to Learn: cost object A cost object could be anything management wishes to determine the cost of, for example, a department.
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6. A department could be considered a cost object. Answer: True Difficulty: 2 Objective: 1 Terms to Learn: cost object 7. The same cost may be direct for one cost object and indirect for another cost object. Answer : True Difficulty : 3 Objective : 2 Terms to Learn: cost object 8. Assigning direct costs poses more problems than assigning indirect costs. Answer : False Difficulty : 2 Objective : 2 Terms to Learn: direct costs of a cost object, indirect costs of a cost object Tracing direct costs is quite straightforward, whereas assigning indirect costs to a number of different cost objects can be very challenging. 9. Improvements in information-gathering technologies are making it possible to trace more costs as direct. Answer : True Difficulty : 2 Objective : 2 Terms to Learn: direct costs of a cost object 10. Misallocated indirect costs may lead to promoting products that are not profitable. Answer : True Difficulty : 2 Objective : 2 Terms to Learn: cost allocation 11. The materiality of the cost is a factor in classifying the cost as a direct or indirect cost. Answer : True Difficulty : 2 Objective : 2 Terms to Learn: direct costs of a cost object, indirect costs of a cost object 12. The cost of a customized machine only used in the production of a single product would be classified as a direct cost. Answer : True Difficulty : 1 Objective : 2 Terms to Learn: direct costs of a cost object 13. Some fixed costs may be classified as direct manufacturing costs.
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