Today we’ll learn Top “30” Questions and Answers- Cost Terms, Concepts, and Classification.” At the end of the post, you’ll get a basic idea of the Cost Terms, Concepts, and Classification.
It will help you increase your knowledge of cost accounting and help you perform well on any competitive exam.
So let’s get started.
Questions and Answers-Cost Terms, Concepts, and Classification
Question-01: What does cost mean?
Answer: Cost is a sacrificed or forgotten resource to accomplish a particular goal. Usually, a cost is measured as the monetary amount to be paid to acquire goods or services.
Question-02: What does expense mean?
Answer: The expired portion of the cost is called expense. It is the part of the cost from which the benefit of cost has already been taken.
Question-03: What’s the actual cost?
Answer: The cost incurred is an actual cost. It is a historical or past cost.
Question-04: What is the planned cost?
Answer: A predicted or forecast cost (a future cost) is a planned cost.
Question-05: What are the direct costs?
Answer: Direct costs are linked to and can be traced in an economically feasible way to the specific cost object.
Question-06: What are the indirect costs?
Answer: Indirect costs relate to the particular cost object but cannot be tracked in an economically feasible manner.
Question-07: What is the accumulation of costs?
Answer: Cost accumulation is the collection using an accounting system of cost data in some organized manner.
Question-08: What is the allocation of costs?
Answer: The term allocation of costs is used to describe the distribution of indirect costs associated with a specific cost object.
Question-09: What variables influence Direct and Indirect Cost Classifications?
Answer: The variables influence direct and indirect cost classifications are as follows:
- The materiality of the cost.
- Available technologies for collecting information.
- Operations design.
Question-10: What are the two basic types of cost-behavior patterns?
Answer: The two basic types of cost-behavior patterns are
- Variable Costs and
- Fixed Costs
Question-11: What’s the variable cost?
Answer: The variable cost is a cost that changes in total in proportion to changes in the total activity or volume related level.
Question-12: What are the examples of variable costs?
Answer: The examples of variable costs are Direct Material, Direct Labor, and variable overheads.
Question-13: What is the fixed cost?
Answer: The fixed cost is a cost that, despite broad changes in the related level of total activity or volume, remains unchanged in total for a given period.
Question-14: What are the examples of Fixed Cost?
Answer: The examples of fixed costs are Administrative Salaries, Rent, Insurance, and Rates Etc.
Question-15: What is a semi-variable cost?
Answer: Semi-variable costs contain both fixed and variable components and are thus partially affected by changes in activity levels.
Question-16: What are the examples of semi-variable costs?
Answer: The example of semi-variable costs are gas, Telephone bill, and electricity.
Question-17: What is a cost center?
Answer: Any department, division, or segment of a company can be held responsible only for cost, not for revenue, profit, or Investment. For example, Purchase, Admin, Research and Development, etc.
Question-18: What is Cost Driver?
Answer: A cost driver is a variable that causally impacts costs over a given period, such as the level of activity or volume.
Question-19: What is the cost Pool?
Answer: A cost pool is a group of individual costs. A company uses a specific cost allocation base to allocate to cost objects.
Question-20: What is a cost tracing?
Answer: Cost tracing is an assignment of direct costs to a particular cost object.
Question-21: What are the costs of inventory?
Answer: Inventory costs are all costs of a product which, when incurred, are considered as assets in the balance sheet and become the cost of goods sold only when the product is sold. All manufacturing costs are inventory costs for manufacturing-sector companies.
Question-22: What are the types of inventory?
Answer: The types of inventory are as follows;
- Direct Material Inventory
- Work-in-process Inventory
- Finished Goods Inventory
Question-23: What is the Period Cost?
Answer: Period costs are all costs in the income statement other than the cost of goods sold. The periodic cost incurred in the accounting period. Because they are expected to benefit from revenue over that period and are not expected to benefit from revenue over future periods.
Question-24: What are the examples of period cost?
Answer: The example of period costs are marketing expenses, distribution expenses, customer support expenses, etc.
Question-25: What is cost control?
Answer: Cost control is known as a technique used to maintain costs according to the standards set.
Question-26: What is cost reduction?
Answer: A method used to customize the unit price without reducing its quality is known as cost reduction.
Question-27: What is the relevant range?
Answer: The relevant range is the normal activity level or volume band. A specific relationship exists between the level or volume of activity and the cost.
Question-28: What is the meaning of unit cost? And how to calculate the unit cost?
Answer: A unit cost is an average cost calculated by dividing the total cost by the corresponding number of units.
Per unit cost=Total manufacturing costs/ Number of units manufactured
Question-29: What’s the prime cost?
Answer: All direct manufacturing expenses are prime costs.
Prime costs = Direct material costs + Direct manufacturing labor costs
Question-30: What are the conversion costs?
Answer: All manufacturing costs, other than direct material costs, are conversion costs. All manufacturing costs incurred to convert direct materials into finished goods represent conversion costs.
Conversion costs = Direct manufacturing labor costs + Manufacturing overhead costs
I hope, at the end of the article, you have a basic idea about the Cost Terms, Concepts, and Classification. Read these Top “30” Questions and Answers- Cost Terms, Concepts, and Classification and improve your accounting skills and knowledges.
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