Questions
„..40/hat is a cost object? Identify four different cost objects in which an accountant would be interested. 2. Why is cost accumulation imprecise? 3. If the cost object is a manufactured product, what are the three major cost categories to accumulate? 4. What is a direct cost? What criteria are used to determine whether a cost is a direct cost? .why are the terms direct cost and indirect cost independent of the terms fixed cost and variable cost? Give an example to illustrate. 6. Give an example of why the statement “All direct costs are avoidable” is incorrect. .shat are the important factors in determining the appropriate cost driver to use in allocating a cost? 8. How is an allocation rate determined? How is an allocation made? 9. In a manufacturing environment, which costs are direct and which are indirect in product costing? ahy are some manufacturing costs not directly traceable to products? what is the objective of allocating indirect manufacturing overhead costs to the product? 12. On January 31, the managers of Integra, Inc., seek to determine the cost of producing their product during January for product pricing and control purposes. The company can easily determine the costs of direct materials and direct labor used in January production, but many fixed indirect costs are not affected by the level of production activity and have not yet been incurred. The managers can reasonably estimate the overhead costs for the year based on the fixed indirect costs incurred in past periods. Assume the managers decide to allocate an equal amount of these estimated costs to the products produced each month. Explain why this practice may not provide a reasonable estimate of product costs in January. 13. Respond to the following statement: “The allocation base chosen is unimportant. What is important in product costing is that overhead costs be assigned to production in a specific period by an allocation process.” 14. Larry Kwang insists that the costs of his school’s fund-raising project should be determined after the project is complete. He argues that only after the project is complete can its costs be determined accurately and that it is a waste of time to try to estimate future costs. Georgia Sundum counters that waiting until the project is complete will not provide timely information for planning expenditures. How would you arbitrate this discussion? Explain the trade-offs between accuracy and timeliness. 15. What are the three methods used for allocating service center costs? How do the methods differ? ( g Appendix)

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