ACCT 526 CH 2 EXAM QUESTIONS WELL ANSWERS LATEST UPDATE 2026
cost - Answers the amount of cash or cash equivalent sacrificed for goods and/or services that are
expected to bring a current or future benefit to the organization
expenses - Answers costs that are used up (expired) in the production of revenue
price - Answers the revenue per unit
cost object - Answers any item such as products, customers, departments, projects, and so on, for
which costs are measured and assigned
accumulating costs - Answers the way that costs are measured and recorded
assigning costs - Answers the way that a cost is linked to some cost object
direct costs - Answers costs that can be easily and accurately traced to a cost object
indirect costs - Answers costs that cannot be easily and accurately traced to a cost object
allocation - Answers when an indirect cost is assigned to a cost object using a reasonable and
convenient method
variable cost - Answers costs that, in total, vary in direct proportion to changes in output within the
relevant range
fixed cost - Answers costs that, in total, are constant within the relevant range as the level of output
increases or decreases
opportunity cost - Answers the benefit given up or sacrificed when one alternative is chosen over
another
products - Answers goods produced by converting raw materials through the use of labor and
indirect manufacturing resources, such as the manufacturing plant, land, and machinery
services - Answers tasks or activities performed for a customer or an activity performed by a
customer using an organization's products or facilities
manufacturing organizations - Answers an organization that produces tangible products
service organizations - Answers an organization that produces intangible products
services are/require - Answers - intangible
- perishable
- direct contact between providers and buyers
Product (manufacturing) costs - Answers - costs of producing a product in a manufacturing firm or of
acquiring a product in a merchandising firm and preparing it for sale.
- include direct materials, direct labor, and manufacturing overhead
direct materials - Answers materials that are a part of the final product and can be directly traced to
the goods or services being produced
direct labor - Answers the labor that can be directly traced to the goods or services being produced.
manufacturing overhead - Answers all product costs other than direct materials and direct labor. In a
manufacturing firm, _________ also is known as factory burden or indirect manufacturing costs. Costs
are included as __________ if they cannot be traced to the cost object of interest (e.g., unit of
product)
Total Product Cost Equation - Answers Direct materials + Direct labor + Manufacturing overhead
Per Unit Product Cost Equation - Answers Total Product Cost / Number of Units Produced
prime cost - Answers the sum of direct materials cost and direct labor cost
conversion cost - Answers the sum of direct labor cost and overhead cost
Prime Cost Equation - Answers Direct Materials + Direct Labor
Conversion Cost Equation - Answers Direct Labor + Manufacturing Overhead
period costs - Answers costs that are not product costs (i.e., all areas of the value chain except for
production)
selling costs - Answers those costs necessary to market, distribute, and service a product or service
administrative costs - Answers all costs associated with research, development, and general
administration of the organization that cannot reasonably be assigned to either selling or production
cost of goods manufactured - Answers the total product cost of goods completed during the current
period
Work in process (WIP) - Answers the cost of the partially completed goods that are still being worked
on at the end of a time period
Cost of goods sold - Answers the total product cost of goods sold during the period
Sales Revenue Equation - Answers price x units sold
gross margin - Answers the difference between sales revenue and cost of goods sold
cost - Answers the amount of cash or cash equivalent sacrificed for goods and/or services that are
expected to bring a current or future benefit to the organization
expenses - Answers costs that are used up (expired) in the production of revenue
price - Answers the revenue per unit
cost object - Answers any item such as products, customers, departments, projects, and so on, for
which costs are measured and assigned
accumulating costs - Answers the way that costs are measured and recorded
assigning costs - Answers the way that a cost is linked to some cost object
direct costs - Answers costs that can be easily and accurately traced to a cost object
indirect costs - Answers costs that cannot be easily and accurately traced to a cost object
allocation - Answers when an indirect cost is assigned to a cost object using a reasonable and
convenient method
variable cost - Answers costs that, in total, vary in direct proportion to changes in output within the
relevant range
fixed cost - Answers costs that, in total, are constant within the relevant range as the level of output
increases or decreases
opportunity cost - Answers the benefit given up or sacrificed when one alternative is chosen over
another
products - Answers goods produced by converting raw materials through the use of labor and
indirect manufacturing resources, such as the manufacturing plant, land, and machinery
services - Answers tasks or activities performed for a customer or an activity performed by a
customer using an organization's products or facilities
manufacturing organizations - Answers an organization that produces tangible products
service organizations - Answers an organization that produces intangible products
services are/require - Answers - intangible
- perishable
- direct contact between providers and buyers
Product (manufacturing) costs - Answers - costs of producing a product in a manufacturing firm or of
acquiring a product in a merchandising firm and preparing it for sale.
- include direct materials, direct labor, and manufacturing overhead
direct materials - Answers materials that are a part of the final product and can be directly traced to
the goods or services being produced
direct labor - Answers the labor that can be directly traced to the goods or services being produced.
manufacturing overhead - Answers all product costs other than direct materials and direct labor. In a
manufacturing firm, _________ also is known as factory burden or indirect manufacturing costs. Costs
are included as __________ if they cannot be traced to the cost object of interest (e.g., unit of
product)
Total Product Cost Equation - Answers Direct materials + Direct labor + Manufacturing overhead
Per Unit Product Cost Equation - Answers Total Product Cost / Number of Units Produced
prime cost - Answers the sum of direct materials cost and direct labor cost
conversion cost - Answers the sum of direct labor cost and overhead cost
Prime Cost Equation - Answers Direct Materials + Direct Labor
Conversion Cost Equation - Answers Direct Labor + Manufacturing Overhead
period costs - Answers costs that are not product costs (i.e., all areas of the value chain except for
production)
selling costs - Answers those costs necessary to market, distribute, and service a product or service
administrative costs - Answers all costs associated with research, development, and general
administration of the organization that cannot reasonably be assigned to either selling or production
cost of goods manufactured - Answers the total product cost of goods completed during the current
period
Work in process (WIP) - Answers the cost of the partially completed goods that are still being worked
on at the end of a time period
Cost of goods sold - Answers the total product cost of goods sold during the period
Sales Revenue Equation - Answers price x units sold
gross margin - Answers the difference between sales revenue and cost of goods sold
