Ch5 Question + Ans Cost acounting

School: Al-Fajr International School - Course: AC COST ACCOU - Subject: Accounting

Chapter : 5 Questions & Answers 1-A ________-_____________ system allocates OH costs broadly in an easy, inexpensive, and reasonably accurate way. Historically used for companies that produced a limited variety of products. Ans =simple-costing 2-____________-_____________ costing broadlyaveragesorspreadsthe cost of resources uniformly to cost object when in fact, individual products or services use those resources in a non-uniform way. Ans=Peanut - butter 3-[]Averaging leads to inaccurate and misleading data. 4-[]Broad averaging often leads to over costing or undercosting of products or services. 5-When a product consumes a high level of resources but reports to have a lower cost per unit: Ans=Undercosting 6-When a product consumes a low level of resources but reports to have a higher cost per unit. Ans=Overcosting 7-Using cost info for strategic decisions: ________________ products will underpriced and lead to sales that result in losses because cost outweighs its revenue. Ans=Undercosted 8- Using cost info for strategic decisions: ________________ products will overpricing, causing those products to lose market to competitors and lose their market share. Ans=Overcosted 9-[] Product-cost cross-subsidization is very common when a cost is uniformly spread (averaged) across multiple products. 10- Simple or complex sequence process follows these three steps: Ans :- 1-Design products and processes 2. Manufacture lenses 3. Distribute lenses

11- List the 7 Steps to a Simple-costing System: Ans:- 1.Identify products that are the chosen cost objects. (What will be produced?) 2. Identify the direct costs of the products. (DM + DL) 3. Select the cost-allocation bases to use for allocating indirect (or overhead) costs to the products. (Everything besides DL and DM). 4. Identify the indirect costs associated with each cost-allocation base. (If using simple- costing, then only one indirect cost pool). 5. Compute the rate per unit of each cost-allocation base. (Use budgeted indirect-cost rate formula). 6. Compute the indirect costs allocated to the products. 7. Compute the total cost of the products by adding all direct and indirect costs assigned to the products. 12- A ______________-_______________ system reduces the broad averages for assigning the cost of resources to cost objects (such as jobs, products, or services). Ans=refined-costing system 13-This refining guideline identifies as many direct costs as economically feasible. This guideline aims to reduce the amount of costs classified as indirect costs, thereby minimizing "allocated vs traced." Ans :-Direct-cost tracing 14- This refining guideline expands the nuber of indirect-cost pools until each pool is more homogenous. All costs in homogenous pool have same or similar cause-and-effect (benefits received) relationship with a single cost driver that is used as a cost allocation base. Ans :-Indirect-cost pools 15-This refining guideline that suggests to use the cost driver (indirect costs cause) as the cost- allocation base for each homogenous indirect-cost pool (the effect). Ans :-Cost-allocation bases 16-One of the best tools for refining a cost system, _______________-_______________ costing refines a costing system by identifying individual activities as the fundamental cost objects.