Cost Terms and Purposes Quiz

What is the definition of 'cost'?

• A cost that has occurred

• A sacrificed resource to achieve a specific objective

• A predicted cost

• An expired cost with no revenue benefit

Which of the following is an example of a direct cost?

• Electricity

• Assembly line wages

• Rent

• Property taxes

What type of costs are incurred to produce future benefits?

• Revenue

• Costs

• Losses

• Expenses

What is the difference between actual cost and budgeted cost?

• Both are the same

• Neither is related to costs

• Actual cost is a predicted cost, while budgeted cost has occurred

• Actual cost has occurred, while budgeted cost is a predicted cost

Which of the following is NOT a component of manufacturing costs?

• Direct materials

• Marketing expenses

• Direct labor

• Factory overhead

What are variable costs?

• Costs that contain both fixed and variable elements

• Costs that vary in total directly with changes in activity level

• Costs that are incurred to produce future benefits

• Costs that remain the same in total regardless of activity level

What is a common cost?

• Costs of facilities or services in two or more accounting periods

• Costs incurred in the manufacture of two or more products

• Costs that can be traced to a specific product

• Costs that are fixed regardless of production

Which of the following best describes fixed costs?

• Costs that are only relevant in the short term

• Costs that are incurred to produce future benefits

• Costs that remain constant in total regardless of activity level

• Costs that vary with production levels

What is the purpose of the high-low method?

• To determine the total cost of production

• To allocate joint costs

• To classify costs into fixed and variable elements

• To calculate the average cost per unit

What is a prime cost?

• Costs that cannot be traced to a product

• Direct materials and direct labor

• Factory overhead and indirect labor

• Total costs of production