Cost Accounting a Managerial Emphasis 14th Edition Solutions Pdf

two-1

Chapter 2

AN INTRODUCTION TO Price TERMS AND PURPOSES

2-1 A cost object is anything for which a separate measurement of costs is desired. Examples

include a production, a service, a project, a customer, a brand category, an activity, and a

section.

ii-2 Direct costs of a cost object are related to the detail price object and tin can be traced to

that cost object in an economically feasible (cost-effective) way.

Indirect costs of a price object are related to the particular cost object simply cannot be traced

to that cost object in an economically feasible (cost-effective) way.

Cost consignment is a generafifty term that encompasses the assignment of both directly costs

and indirect costs to a toll object. Direct costs are traced to a price object while indirect costs are

allocated to a cost object.

2-3 Managers believe that direct costs that are traced to a item cost object are more

accurately assigned to that cost object than are indirect allocated costs. When costs are allocated,

managers are less certain whether the toll allocation base accurately measures the resources

demanded past a price object. Managers prefer to employ more accurate costs in their decisions.

2-4 Factors affecting the classification of a toll as direct or indirect include

the materiality of the price in question,

available information-gathering engineering,

pattern of operations

ii-5 A variable cost changes in total in proportion to changes in the related level of full

activeness or volume. An eastxample is a sales commission that is a percentage of each sales acquirement

dollar.

A fixed cost remains unchanged in full for a given time menstruum, despite wide changes in

the related level of total activity or volume. An example is the leasing price of a machine that is

unchanged for a given time period (such as a twelvemonth) regardless of the number of units of product

produced on the machine.

two-6 A price driver is a variable, such as the level of activity or volume, that causally affects

total costs over a given fourth dimension span. A change in the cost driver results in a change in the level of

total costs. For instance, the number of vehicles assembled is a driver of the costs of steering

wheels on a motor-vehicle assembly line.

2-7 The relevant range is the band of normal activity level or volume in which there is a

specific relationship betnosotrosen the level of activity or volume and the price in question. Costs are

described as variable or fixed with respect to a particular relevant range.

2-8 A unit price is computed by dividing some amount of full costs (the numerator) by the

related number of units (the denominator). In many cases, the numerator volition include a fixed toll

that will not change despite changes in the denominator. Information technology is erroneous in those cases to multiply

the unit cost by activeness or volume change to predict changes inorthward full costs at dissimilar activity or

volume levels.

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