Basic Cost Management Concepts

Basic Cost Management Concepts

The cost management information system is primarily concerned with producing outputs for internal users using inputs and processes needed to satisfy management objectives.

    1. True
    2. False

ANSWER: True

  1. The Financial accounting information system provides information for three broad objectives: costing services and products, planning and control, and decision making.
    1. True
    2. False

ANSWER: False

  1. The value chain is the set of activities required to design, develop, produce, market, deliver and provide post-sales service for the products and services sold to customers.
    1. True
    2. False

ANSWER: True

  1. Cost management information benefits production, marketing, and customer service systems as well as being a crucial part of managerial decision making.
    1. True
    2. False

ANSWER: True

  1. An integrated cost management system receives information from and provides information to only the controller of a company.
    1. True
    2. False

ANSWER: False

  1. Cost assignment is one of the key processes of the cost accounting system.
    1. True
    2. False

ANSWER: True

  1. Cost is the cash or cash equivalent value sacrificed for goods and services that are expected to bring a current or future loss to the company.
    1. True
    2. False

ANSWER: False

  1. The three methods of cost assignment are direct tracing, driver tracing, and allocation.
    1. True
    2. False

ANSWER: True

  1. Assigning costs accurately to cost objects is of low priority. Accuracy is not evaluated based on knowledge of

some underlying “true cost”.

    1. True
    2. False

ANSWER: False

  1. The most precise of the three methods of cost assignment is direct tracing since it relies on observable causal relationships.
    1. True
    2. False

ANSWER: True

  1. Services differ from tangible products on three dimension: intangibility, perishability, and inseparability.
    1. True
    2. False

ANSWER: True

  1. Intangible products are goods produced by converting raw material into finished products through the use of labor and capital inputs.
    1. True
    2. False

ANSWER: False

  1. Production costs are costs associated with manufacturing goods or providing services and are classified as direct materials, direct labor, and overhead.
    1. True
    2. False

ANSWER: True

  1. Conversion cost is the sum of direct materials and direct labor cost and prime cost is the sum of direct labor and overhead cost.
    1. True
    2. False

ANSWER: False

  1. Product costs include production, marketing, and customer service, and are used for strategic design decisions and tactical profitability analysis.
    1. True
    2. False

ANSWER: True

  1. The income statement prepared for external parties is frequently referred to as absorption-costing income, or full costing income.
    1. True
    2. False

ANSWER: True

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