Cost Accounting Basics Quiz

Cost accounting aims to offer data crucial for making informed decisions.

Direct costs directly contribute to the production process, like raw materials.

Period costs are incurred outside of production, like sales commissions.

Cost allocation aims to distribute indirect costs to specific cost objects.

Variable costs fluctuate with production levels, like direct materials.

Non-manufacturing costs are unrelated to production, like advertising expenses.

Contribution margin is derived by subtracting variable costs from sales revenue.

Normal cost assumes that production will occur at its optimum capacity.

Variable costing assigns only variable manufacturing costs to the cost of goods sold.

Predetermined overhead rate is calculated by dividing estimated total overhead by estimated total direct labor hours.

Cost driver is a factor that has a significant impact on costs.

Total manufacturing cost comprises direct materials, direct labor, and fixed manufacturing overhead.

Absorption costing includes fixed manufacturing overhead in the product cost.

Direct method allocates costs based on the actual usage of resources.

When production equals sales, absorption and variable costing yield the same net income.

Activity-based costing assigns costs based on the level of activities.