CH 4 Homework Solutions (All)

CH 4 Homework Solutions (All) - Chapter 4 Planning For and...

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Chapter 4 Planning For and Predicting Performance Review of Concepts A. A cost object is an activity, product, service, project, geographic region, or business segment for which management desires separate cost measurement. B. A direct cost is a cost that is easily traced to one cost object. A common cost is a cost shared by a number of cost objects. C. A cost driver is the activity that causes an expense to occur while a cost object refers to the activity that management desires as a separate cost measurement. D. An activity-based cost system identifies the specific activity that causes the cost to occur and uses the activity as the basis for common cost allocation. A standard cost system is one in which management sets cost standards and uses them to evaluate actual performance. Employees use standard costs to plan how factory resources will be acquired and used to control costs. E. Product costs are all costs of acquiring or manufacturing goods to make them available for sale to customers. Period costs are the costs of operating the business that are not product costs. F. Delivery expense is treated as a selling cost because it is part of the cost of operating the business necessary to complete the sale of goods and it is not treated as part of the cost of acquiring or manufacturing the goods. 75
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76 Chapter 4: Planning for and Predicting Performance G. The cost of storing inventory is treated as a part of the product cost because the items have not yet been sold and the storage of inventory is considered an inventoriable cost. H. Selling costs are period costs related to advertising, selling, and delivering goods to customers. Administrative costs represent all costs of a business that are not product and selling costs. Administrative costs include support functions such as accounting, finance, executive, and personnel. I. Product costs begin as assets on the balance sheet, and when sold to customers they move to cost of goods sold on the income statement. Product costs are part of the inventory until sold and are considered inventoriable costs . J. When preparing budgets for a business for the future it is important for management to predict the costs it will incur. It is beneficial if management has an understanding as to how various costs behave when trying to compute the costs for the budget. K. A fixed cost will remain the same amount in total as the volume or level of activity increases. L. If activity increases within a relative range the fixed cost per unit will decrease whereas the variable cost per unit will remain the same. Because the fixed cost per unit decreases as activity increases and the variable cost per unit remains the same, the total cost per unit will also decrease as activity increases. M.
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This note was uploaded on 04/06/2008 for the course BUS 212 taught by Professor Wiolliams during the Spring '08 term at Cal Poly.

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CH 4 Homework Solutions (All) - Chapter 4 Planning For and...

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