©THEBRIGHT 2025 ALL RIGHTS RESERVED 11:11AM.
ACC 222 Miami University Exam 1
Questions And Answers 2025 Update.
Why do we categorize costs? - Answer✔1) to assign costs to a cost object
2) to distinguish between manufacturing & non-manufacturing costs
3) to determine if costs should be inventories or expensed on financial statements
4) to estimate costs at different levels of volume
5) to make relevant or irrelevant strategic decisions
Cost object - Answer✔anything for which we want to measure costs (ex: unit of a product or
service, business segment or division, firm as a whole)
*can also be something like building a boat
Direct cost - Answer✔TRACED to cost objects
Indirect cost - Answer✔allocated to cost objects based on some denominator (an estimation)
To assign costs to a cost object, what must we do first? - Answer✔distinguish whether it's direct
or indirect
Direct vs. Indirect also depends on - Answer✔1) record keeping
2) cost object
Manufacturing costs - Answer✔the cost of all resources consumed in the manufacture of
products that will be inventories & then sold
(DIRECT MATERIAL + DIRECT LABOR + MANUFACTURING OVERHEAD)
Direct Materials - Answer✔the cost of materials used in the final product & whose cost can be
traced
Direct labor - Answer✔the cost of labor that can be traced to units of the final product (also
known as touch labor)
Touch Labor - Answer✔same as direct labor, (think: does the person doing the labor touch the
product?)
1
, ©THEBRIGHT 2025 ALL RIGHTS RESERVED 11:11AM.
Manufacturing Overhead - Answer✔manufacturing costs that are not direct materials or direct
labor (MOH is indirect), can be fixed and/or variable
Non-manufacturing costs - Answer✔all costs other than manufacturing costs
(selling costs & administrative costs)
Selling costs - Answer✔costs incurred to secure orders & get them to customers (advertising,
shipping, sales salaries, & sales commissions)
Administrative costs - Answer✔costs incurred to manage the organization (rather than
manufacture or sell products) such as executive salaries
Product costs - Answer✔all costs involved in acquiring or making a product, also called
inventoriable costs (COGS in income statement)
*incurred to produce units of inventory & therefore become part of inventory until the unit is
sold (when expensed as COGS)*
Period costs - Answer✔all costs other than product costs & are NOT inventoried, but rather
expensed in the period in which they're incurred (shows up in all other costs section on income
statement)
Fixed costs - Answer✔fixed in total with respect to production (but vary on a per unit basis as
production changes) over the relevant range
*graph is downward sloping*
Variable costs - Answer✔vary in total with respect to production (but are fixed on a per unit
basis) over the relevant range
*graph is linear*
Examples of fixed costs - Answer✔rent, depreciation, property taxes, management salaries,
equipment & lease
Mixed costs - Answer✔contain both fixed & variable elements but act purely as neither (ex:
salary w/ a bonus)
Mixed cost equation - Answer✔y = a + bX
where
y=total mixed cost
2
ACC 222 Miami University Exam 1
Questions And Answers 2025 Update.
Why do we categorize costs? - Answer✔1) to assign costs to a cost object
2) to distinguish between manufacturing & non-manufacturing costs
3) to determine if costs should be inventories or expensed on financial statements
4) to estimate costs at different levels of volume
5) to make relevant or irrelevant strategic decisions
Cost object - Answer✔anything for which we want to measure costs (ex: unit of a product or
service, business segment or division, firm as a whole)
*can also be something like building a boat
Direct cost - Answer✔TRACED to cost objects
Indirect cost - Answer✔allocated to cost objects based on some denominator (an estimation)
To assign costs to a cost object, what must we do first? - Answer✔distinguish whether it's direct
or indirect
Direct vs. Indirect also depends on - Answer✔1) record keeping
2) cost object
Manufacturing costs - Answer✔the cost of all resources consumed in the manufacture of
products that will be inventories & then sold
(DIRECT MATERIAL + DIRECT LABOR + MANUFACTURING OVERHEAD)
Direct Materials - Answer✔the cost of materials used in the final product & whose cost can be
traced
Direct labor - Answer✔the cost of labor that can be traced to units of the final product (also
known as touch labor)
Touch Labor - Answer✔same as direct labor, (think: does the person doing the labor touch the
product?)
1
, ©THEBRIGHT 2025 ALL RIGHTS RESERVED 11:11AM.
Manufacturing Overhead - Answer✔manufacturing costs that are not direct materials or direct
labor (MOH is indirect), can be fixed and/or variable
Non-manufacturing costs - Answer✔all costs other than manufacturing costs
(selling costs & administrative costs)
Selling costs - Answer✔costs incurred to secure orders & get them to customers (advertising,
shipping, sales salaries, & sales commissions)
Administrative costs - Answer✔costs incurred to manage the organization (rather than
manufacture or sell products) such as executive salaries
Product costs - Answer✔all costs involved in acquiring or making a product, also called
inventoriable costs (COGS in income statement)
*incurred to produce units of inventory & therefore become part of inventory until the unit is
sold (when expensed as COGS)*
Period costs - Answer✔all costs other than product costs & are NOT inventoried, but rather
expensed in the period in which they're incurred (shows up in all other costs section on income
statement)
Fixed costs - Answer✔fixed in total with respect to production (but vary on a per unit basis as
production changes) over the relevant range
*graph is downward sloping*
Variable costs - Answer✔vary in total with respect to production (but are fixed on a per unit
basis) over the relevant range
*graph is linear*
Examples of fixed costs - Answer✔rent, depreciation, property taxes, management salaries,
equipment & lease
Mixed costs - Answer✔contain both fixed & variable elements but act purely as neither (ex:
salary w/ a bonus)
Mixed cost equation - Answer✔y = a + bX
where
y=total mixed cost
2
