Accounting -- Chap 1 --
Brewer/Garrison/Noreen Questions And
Answers
Account Analysis - ANS A method for analyzing cost behavior where an account is
classified as either variable or fixed based on the analyst's prior knowledge of how the cost in
the account behaves (p. 32)
Activity Base - ANS A measure of whatever causes the incurrence of a variable cost. Ex:
Total cost of x-ray film in hospital will increase as the number of x-rays taken increases.
Therefore, the number of x-rays is the activity base that explains the total cost of x-ray film
(p.26)
Administrative Costs - ANS All Executive, organizational, and clerical costs associated with
the general management of an organization rather than with manufacturing or selling (p.23)
Committed Fixed Costs - ANS Investments in facilities, equipment, and basic
organizational structure that can't be significantly reduced even for short periods of time without
making fundamental changes (p.28)
Common Cost - ANS A cost that is incurred to support a number of cost objects but that
cannot be traced to them individually.
Ex: The wage cost of the pilot of a 747 airliner is a common cost of all of the passengers in the
aircraft. Without the pilot, there would be no flight and no passengers. But no part of the pilot's
wage is caused by any one passenger taking the flight (p.40)
Contribution Approach - ANS An income statement format that organizes costs by their
behavior. Costs are separated into variable and fixed categories rather than being separated
into product and period costs for external reporting purposes (p.39)
Contribution Margin - ANS The amount remaining from sales revenues after all variable
expenses have been deducted (p.39)
Conversion Cost - ANS Direct labor cost + Manufacturing overhead cost (p.24)
Cost Behavior - ANS The way in which a cost reacts to changes in the level of activity
(p.26)
Brewer/Garrison/Noreen Questions And
Answers
Account Analysis - ANS A method for analyzing cost behavior where an account is
classified as either variable or fixed based on the analyst's prior knowledge of how the cost in
the account behaves (p. 32)
Activity Base - ANS A measure of whatever causes the incurrence of a variable cost. Ex:
Total cost of x-ray film in hospital will increase as the number of x-rays taken increases.
Therefore, the number of x-rays is the activity base that explains the total cost of x-ray film
(p.26)
Administrative Costs - ANS All Executive, organizational, and clerical costs associated with
the general management of an organization rather than with manufacturing or selling (p.23)
Committed Fixed Costs - ANS Investments in facilities, equipment, and basic
organizational structure that can't be significantly reduced even for short periods of time without
making fundamental changes (p.28)
Common Cost - ANS A cost that is incurred to support a number of cost objects but that
cannot be traced to them individually.
Ex: The wage cost of the pilot of a 747 airliner is a common cost of all of the passengers in the
aircraft. Without the pilot, there would be no flight and no passengers. But no part of the pilot's
wage is caused by any one passenger taking the flight (p.40)
Contribution Approach - ANS An income statement format that organizes costs by their
behavior. Costs are separated into variable and fixed categories rather than being separated
into product and period costs for external reporting purposes (p.39)
Contribution Margin - ANS The amount remaining from sales revenues after all variable
expenses have been deducted (p.39)
Conversion Cost - ANS Direct labor cost + Manufacturing overhead cost (p.24)
Cost Behavior - ANS The way in which a cost reacts to changes in the level of activity
(p.26)
