AACE CCT Primer questions and answers 2024\2025
The sum of the practices and processes that an enterprise uses to manage the total life cycle cost
investment in its portfolio of strategic assets is called _________
- correct answer Total Cost Management
______ is the application of scientific principles and techniques to problems of :
- estimation
- cost control
- business planning & management science
- profitability analysis
- project management
- planning & scheduling
- correct answer Cost Engineering
_______ Is the value of an activity or asset. Generally, this value is determined by the cost of the
resources that are expended to complete the activity or produce the asset. An example would be the
facilities needed to produce an activity or asset, which would include the tooling, electricity, taxes, and
maintenance, etc., necessary to keep the facility available for use. Other costs might be office supplies,
communication costs, travel costs, and security costs
- correct answer Cost
Any consumable, except time, required to accomplish an activity are considered _______. From a total
cost and asset management perspective, _______ may include any real or potential investment in
strategic assets including time, monetary, human, and physical.
- correct answer Resources, Resources
A resource becomes a cost when it is ______ or consumed in an _____or project
- correct answer invested, project
Material, labor, and "other" are categories of _________.
- correct answer Resources
,The product lifecycle is the complete history of a product through its ______, definition, production,
operation, and obsolescence /______ phases.
- correct answer concept, disposal
The distinction between product life cycle and project life cycle is that the latter does not include the
______ and ______.
- correct answer operation, disposal
___________ is the systematic numeric method of classifying various categories of costs for accounting
purposes
- correct answer Code of Accounts
______ is used used in situations where each job is different and is performed to the customer's
specifications. ______ involves keeping an account of direct costs (labor, machine time, raw materials)
and indirect costs (overheads)
- correct answer Job Costing, Job Costing
A process is a sequence or independent & linked procedures which ___________ to convert inputs into
outputs. These outputs then serve as inputs for the next stage until a known goal or end result is
reached
- correct answer consume resources
A _____ is a good, idea, method, information, object, service, etc, that is the end result of a process &
serves as a need or want satisfierProduct
- correct answer Product
Product manufactured along with a different product, in a process in which both are required in the
production of another product are considered _____
- correct answer Co-products
A key feature of a ____ is that it has low value in comparison with the principal product(s) & may be
discarded or sold
- correct answer by-product
,Types of Manufacturing Operations include _____, ______ run and _____ shop
- correct answer Process, Batch, Job
This manufacturing operation runs almost continuously making the same thing. Examples are refining
and chemical plants, and very long run assembly operations.
- correct answer Process
A ______ characterized by setting up for one product, producing a set quantity of product, and then
shutting down to change over to producing another product.
- correct answer Batch Run
A _______ Similar to a batch run operation, except that you only produce 1 of the item. Each job results
in a customized product. Examples are metal fabrication, prototype, fabrication.
- correct answer job shop
Roles such as executive/senior management, legal, HR, business development, etc. These roles are the
farthest removed from the actual production of discrete product at the various facilities. They are
shared across many production locations and considered ______.
- correct answer overhead
______ are field/plant support personnel, located at the site. These resources help the operation run
smoothly. These are people like local payroll, facility maintenance, site project controls, site senior
(office-based) supervisors and management who are shared across the various products the particular
location produces.
- correct answer Indirects
_______are the remote location people directly involved in producing the product. These are the easiest
to correlate their effort to a particular product. First line supervisors are also normally considered
______.
- correct answer Directs
The owner approaches cost from a _____ point of view. Owners not only consider the cost of the
construction, or process, but ______ supervision
and overhead, implementation costs, cost of money, furniture, fixtures, equipment( FFE) and other
considerations
- correct answer holistic, internal
,Contractors, subcontractors, suppliers only consider their part of the _______ and are responsible for
that alone.
- correct answer Project costs
Appraising or estimating the worth of something having economic or monetary value is the general
description of ________.
- correct answer valuation
Valuation in _______ is the determination of the worth of the asset or that which has been damaged or
lost
- correct answer insurance, insured
Valuation in ________ is the determination of the dutiable value of imports by the customs authorities.
- correct answer International Trade
A(n) _________ represents the foregone benefit by choosing one alternative over another
- correct answer Opportunity cost
There is a relationship between time and the opportunity to influence a projects cost. The more time
that has elapsed, the ____ the chance to alter the cost. It is important to make the cost effective
decisions ______ in a project or process to have the most influence on cost.
- correct answer less, early
________focuses on external reporting. Maintain the balance sheet (assets and liabilities) and generate
income (revenues less expenses) and tax statements for the organization _________. Only look at
indirects costs as a whole, not broken out to individual products or departments.
- correct answer Managerial Accounting, as a whole
In cost accounting the focus is on ___________, and their product is often proprietary. Determine how
much it is costing the organization to produce a particular product. Looks at appropriate allocation of
overhead and indirect costs to only include those ______ to the product.
- correct answer internal reporting, directly applicable
,Impact of "One Size Fits All" Allocation
- correct answer Easy to come up with and ensure 100% allocation of the overhead costs, usually don't
reflect what is truly needed to produce that organizational deliverable. In the "one size fits all"
approach, overhead and indirect costs and forced DOWN onto the product.
Activity Based Costing
- correct answer A production process is broken down into ACTIVITIES. Typical nomenclature is an
"action verb-adjective-noun" grammar convention(inspect defective products, open new customer
accounts).
Operating Costs
- correct answer Expenses incurred during the normal operation of a facility including labor, materials,
utilities, and other related costs. Examples: fuel, lubricants, scheduled part changes, building
maintenance, cleaning services, taxes
Manufacturing Costs
- correct answer Variable & fixed, direct & indirect costs chargeable to the production of a given
product, usually expressed in cents or dollars per unit of production, or dollars per year
Maintenance Costs
- correct answer Labor, material, & other related costs incurred in conducting corrective and
preventative maintenance and repair on a facility
Fixed Capital
- correct answer Includes plant equipment, building, furniture and fixtures,and transportation
equipment used directly in the production of a product or service
Depreciation
- correct answer Form of capital recovery for property with a life span of more than 1 year; a portion of
the asset's value is periodically charged to current operations. Decreases book value on the balance
sheet, added depreciation expense to income statement. Managerial rather than cost accounting
concern.
Amortization
- correct answer form of capital recovery for property with indefinite life; distribution of the initial cost
by periodic charges to operations as in depreciation
,Accrual
- correct answer Accounting method that records revenues and expenses when they are incurred,
regardless of when cash is exchanged
Expense
- correct answer Expenditures of short-term value, including depreciation, as opposed to land and other
fixed capital
Fixed Cost
- correct answer Costs that must be provided independent of short term variations volume of work
activity. These can be either direct or indirect costs
Variable Cost
- correct answer costs that are a function of production, e.g., raw materials
costs, by-product credits, and those processing costs that vary with plant output (such as raw materials,
utilities, catalysts and chemical, packaging, and labor for batch operations)
Unit Cost
- correct answer = [(fixed costs) + (qty * variable cost)] / (qty)
Incremental (or marginal) Cost
- correct answer How much the total cost increases if you increase production by one more unit. As the
fixed costs have been recouped in the original production run pricing, the incremental cost is usually just
the variable cost.
Order-specific costing technique
- correct answer used in situations where each job is different and is performed to the customer's
specifications. Job costing involves keeping an account of direct costs (labor, machine time, raw
materials) and indirect costs
(overheads)
Material Types
- correct answer Raw, Bulk, Fabricated, Engineered, Consumables
,Materials - Raw
- correct answer Raw materials are those materials used in a production or fabrication process that
require a minimum amount of processing to be useful [S&K 5th Ed., 3.2].
Materials - Bulk
- correct answer Material bought in lots. These items can be purchased from a standard catalog
description and are bought in quantity for distribution as required. Examples are pipe, conduit, fittings
and wire [RP 10S-90].
Materials - Fabricated
- correct answer Fabricated materials are bulk materials transformed into custom-fit items for a
particular product or project [S&K 5th Ed., 3.3].
Materials - Engineered or Designed
- correct answer Engineered or designed materials constitute a category requiring substantial working in
order to attain their final form. Design or engineered materials are also based on shop drawings [S&K
5th Ed., 3.3].
Materials - Consumables
- correct answer Supplies and materials used up during construction. Includes utilities, fuels and
lubricants, welding supplies, worker's supplies, medical supplies, etc.
Items that can affect purchase cost of materials
- correct answer a. market pricing (pre-negotiated vs. competitively bid, etc.)
b. order quantity
c. taxes and duties
d. carrying charges
e. cancellation charges
f. demurrage
g. hazardous material regulations
h. warranties, maintenance and service
,Items that can affect the management cost of materials
- correct answer a. delivery schedule
b. packing
c. shipping and freight
d. freight forwarding
e. handling
f. storage and inventory
g. agent cost
h. surveillance or inspection
i. expediting
j. losses (shrinkage, waste, theft, damage)
k. spare parts (inventory or start-up)
l. surplus materials
Advantages of leasing capital equipment over renting
- correct answer Minimal upfront cash outlay
Not a loan so it does not tie up your line of credit
Maintenance agreement, service by others
Possible tax advantage as the lease is an expense and may be able to reduce overall tax liability
May include a purchase option
Advantages of renting capital equipment
- correct answer Keep work progressing when there is an equipment breakdown
Meet specialty job requirements
Very efficient for low-percentage utilization
Short-term peak or seasonal use
Considered to evaluate equipment for purchase
Fill in for equipment being repaired
Can be returned at any time, not a guaranteed amount of time
Maintenance is usually handled by dealer or rental yard
,Can conserve company capital
Can have an option to buy clause
Types of Valuation
- correct answer Reproduction, Replacement Costs, Fair Value, Market Value, Book Value,
Residual/Economic Value, Operating Cost
Reproduction Costs
- correct answer The cost of reproducing substantially the identical item or facility at a
price level as of the date specified
Replacement Costs
- correct answer Is the cost new of an item having the same or similar utility [S&K 5th Ed.,
6.1].
Fair Value
- correct answer Is the adjusted cost new of an item, giving consideration for the cost of
similar items, and taking into account utility and all standard adjustments
and discounts to list price [S&K 5th Ed., 6.1].
Types of Market Value
- correct answer Fair Market Value-in-Place, Fair Market Value-in-Exchange, Orderly Liquidation Value,
Forced Liquidation Value, Salvage Value/Part-Out Value, Scrap Value
Fair Market Value-in-Place
- correct answer amount expressed in terms of money that may reasonably be expected to exchange
between a willing buyer and a willing seller with equity to both, neither under any compulsion to buy or
sell, and both fully aware of all relevant facts as of a certain date, and taking into account installation
and
the contribution of the item to the operating facility [S&K 5th Ed.,6.1].
Fair Market Value-in-Exchange
- correct answer value of equipment in terms of the money that can be expected to be exchanged in a
, thirdparty transaction between a willing buyer, who is under no compulsion to buy, and a willing seller,
who is under no compulsion to sell, both being fully aware of all relevant facts (also referred to as retail
value) [S&K 5th Ed., 6.1].
Orderly Liquidation Value
- correct answer probable price for all capital assets and equipment in terms of money that could be
realized from a properly executed orderly liquidation type of sale, given a maximum time of six months
to conduct such sale and adequate
funds available for the remarketing campaign. (also referred to as
wholesale value) [S&K 5th Ed., 6.1].
Forced Liquidation Value
- correct answer value of equipment in terms of money that can be derived from a properly advertised
and conducted auction where time is of the essence (also referred to as "under the hammer" or "blow-
out" value) [S&K 5th Ed.]
Salvage Value/Part-Out Value
- correct answer value of equipment in terms of money that a buyer will pay to a seller, recognizing the
component value of parts of the equipment that can be used or resold to end-users, usually for repair or
replacement purposes
[S&K 5th Ed., 6.2].
Scrap Value
- correct answer is the value of equipment in terms of money that relates to the equipment's basic
commodity value [S&K 5th Ed.,6.2].
Book Value (NET)
- correct answer (1) Current investment value on the books calculated as original value less
depreciated accruals.
(2) New asset value for accounting use.
(3) The value of an outstanding share of stock of a corporation at any one
time, determined by the number of shares of that class outstanding
[RP10S-90].
The sum of the practices and processes that an enterprise uses to manage the total life cycle cost
investment in its portfolio of strategic assets is called _________
- correct answer Total Cost Management
______ is the application of scientific principles and techniques to problems of :
- estimation
- cost control
- business planning & management science
- profitability analysis
- project management
- planning & scheduling
- correct answer Cost Engineering
_______ Is the value of an activity or asset. Generally, this value is determined by the cost of the
resources that are expended to complete the activity or produce the asset. An example would be the
facilities needed to produce an activity or asset, which would include the tooling, electricity, taxes, and
maintenance, etc., necessary to keep the facility available for use. Other costs might be office supplies,
communication costs, travel costs, and security costs
- correct answer Cost
Any consumable, except time, required to accomplish an activity are considered _______. From a total
cost and asset management perspective, _______ may include any real or potential investment in
strategic assets including time, monetary, human, and physical.
- correct answer Resources, Resources
A resource becomes a cost when it is ______ or consumed in an _____or project
- correct answer invested, project
Material, labor, and "other" are categories of _________.
- correct answer Resources
,The product lifecycle is the complete history of a product through its ______, definition, production,
operation, and obsolescence /______ phases.
- correct answer concept, disposal
The distinction between product life cycle and project life cycle is that the latter does not include the
______ and ______.
- correct answer operation, disposal
___________ is the systematic numeric method of classifying various categories of costs for accounting
purposes
- correct answer Code of Accounts
______ is used used in situations where each job is different and is performed to the customer's
specifications. ______ involves keeping an account of direct costs (labor, machine time, raw materials)
and indirect costs (overheads)
- correct answer Job Costing, Job Costing
A process is a sequence or independent & linked procedures which ___________ to convert inputs into
outputs. These outputs then serve as inputs for the next stage until a known goal or end result is
reached
- correct answer consume resources
A _____ is a good, idea, method, information, object, service, etc, that is the end result of a process &
serves as a need or want satisfierProduct
- correct answer Product
Product manufactured along with a different product, in a process in which both are required in the
production of another product are considered _____
- correct answer Co-products
A key feature of a ____ is that it has low value in comparison with the principal product(s) & may be
discarded or sold
- correct answer by-product
,Types of Manufacturing Operations include _____, ______ run and _____ shop
- correct answer Process, Batch, Job
This manufacturing operation runs almost continuously making the same thing. Examples are refining
and chemical plants, and very long run assembly operations.
- correct answer Process
A ______ characterized by setting up for one product, producing a set quantity of product, and then
shutting down to change over to producing another product.
- correct answer Batch Run
A _______ Similar to a batch run operation, except that you only produce 1 of the item. Each job results
in a customized product. Examples are metal fabrication, prototype, fabrication.
- correct answer job shop
Roles such as executive/senior management, legal, HR, business development, etc. These roles are the
farthest removed from the actual production of discrete product at the various facilities. They are
shared across many production locations and considered ______.
- correct answer overhead
______ are field/plant support personnel, located at the site. These resources help the operation run
smoothly. These are people like local payroll, facility maintenance, site project controls, site senior
(office-based) supervisors and management who are shared across the various products the particular
location produces.
- correct answer Indirects
_______are the remote location people directly involved in producing the product. These are the easiest
to correlate their effort to a particular product. First line supervisors are also normally considered
______.
- correct answer Directs
The owner approaches cost from a _____ point of view. Owners not only consider the cost of the
construction, or process, but ______ supervision
and overhead, implementation costs, cost of money, furniture, fixtures, equipment( FFE) and other
considerations
- correct answer holistic, internal
,Contractors, subcontractors, suppliers only consider their part of the _______ and are responsible for
that alone.
- correct answer Project costs
Appraising or estimating the worth of something having economic or monetary value is the general
description of ________.
- correct answer valuation
Valuation in _______ is the determination of the worth of the asset or that which has been damaged or
lost
- correct answer insurance, insured
Valuation in ________ is the determination of the dutiable value of imports by the customs authorities.
- correct answer International Trade
A(n) _________ represents the foregone benefit by choosing one alternative over another
- correct answer Opportunity cost
There is a relationship between time and the opportunity to influence a projects cost. The more time
that has elapsed, the ____ the chance to alter the cost. It is important to make the cost effective
decisions ______ in a project or process to have the most influence on cost.
- correct answer less, early
________focuses on external reporting. Maintain the balance sheet (assets and liabilities) and generate
income (revenues less expenses) and tax statements for the organization _________. Only look at
indirects costs as a whole, not broken out to individual products or departments.
- correct answer Managerial Accounting, as a whole
In cost accounting the focus is on ___________, and their product is often proprietary. Determine how
much it is costing the organization to produce a particular product. Looks at appropriate allocation of
overhead and indirect costs to only include those ______ to the product.
- correct answer internal reporting, directly applicable
,Impact of "One Size Fits All" Allocation
- correct answer Easy to come up with and ensure 100% allocation of the overhead costs, usually don't
reflect what is truly needed to produce that organizational deliverable. In the "one size fits all"
approach, overhead and indirect costs and forced DOWN onto the product.
Activity Based Costing
- correct answer A production process is broken down into ACTIVITIES. Typical nomenclature is an
"action verb-adjective-noun" grammar convention(inspect defective products, open new customer
accounts).
Operating Costs
- correct answer Expenses incurred during the normal operation of a facility including labor, materials,
utilities, and other related costs. Examples: fuel, lubricants, scheduled part changes, building
maintenance, cleaning services, taxes
Manufacturing Costs
- correct answer Variable & fixed, direct & indirect costs chargeable to the production of a given
product, usually expressed in cents or dollars per unit of production, or dollars per year
Maintenance Costs
- correct answer Labor, material, & other related costs incurred in conducting corrective and
preventative maintenance and repair on a facility
Fixed Capital
- correct answer Includes plant equipment, building, furniture and fixtures,and transportation
equipment used directly in the production of a product or service
Depreciation
- correct answer Form of capital recovery for property with a life span of more than 1 year; a portion of
the asset's value is periodically charged to current operations. Decreases book value on the balance
sheet, added depreciation expense to income statement. Managerial rather than cost accounting
concern.
Amortization
- correct answer form of capital recovery for property with indefinite life; distribution of the initial cost
by periodic charges to operations as in depreciation
,Accrual
- correct answer Accounting method that records revenues and expenses when they are incurred,
regardless of when cash is exchanged
Expense
- correct answer Expenditures of short-term value, including depreciation, as opposed to land and other
fixed capital
Fixed Cost
- correct answer Costs that must be provided independent of short term variations volume of work
activity. These can be either direct or indirect costs
Variable Cost
- correct answer costs that are a function of production, e.g., raw materials
costs, by-product credits, and those processing costs that vary with plant output (such as raw materials,
utilities, catalysts and chemical, packaging, and labor for batch operations)
Unit Cost
- correct answer = [(fixed costs) + (qty * variable cost)] / (qty)
Incremental (or marginal) Cost
- correct answer How much the total cost increases if you increase production by one more unit. As the
fixed costs have been recouped in the original production run pricing, the incremental cost is usually just
the variable cost.
Order-specific costing technique
- correct answer used in situations where each job is different and is performed to the customer's
specifications. Job costing involves keeping an account of direct costs (labor, machine time, raw
materials) and indirect costs
(overheads)
Material Types
- correct answer Raw, Bulk, Fabricated, Engineered, Consumables
,Materials - Raw
- correct answer Raw materials are those materials used in a production or fabrication process that
require a minimum amount of processing to be useful [S&K 5th Ed., 3.2].
Materials - Bulk
- correct answer Material bought in lots. These items can be purchased from a standard catalog
description and are bought in quantity for distribution as required. Examples are pipe, conduit, fittings
and wire [RP 10S-90].
Materials - Fabricated
- correct answer Fabricated materials are bulk materials transformed into custom-fit items for a
particular product or project [S&K 5th Ed., 3.3].
Materials - Engineered or Designed
- correct answer Engineered or designed materials constitute a category requiring substantial working in
order to attain their final form. Design or engineered materials are also based on shop drawings [S&K
5th Ed., 3.3].
Materials - Consumables
- correct answer Supplies and materials used up during construction. Includes utilities, fuels and
lubricants, welding supplies, worker's supplies, medical supplies, etc.
Items that can affect purchase cost of materials
- correct answer a. market pricing (pre-negotiated vs. competitively bid, etc.)
b. order quantity
c. taxes and duties
d. carrying charges
e. cancellation charges
f. demurrage
g. hazardous material regulations
h. warranties, maintenance and service
,Items that can affect the management cost of materials
- correct answer a. delivery schedule
b. packing
c. shipping and freight
d. freight forwarding
e. handling
f. storage and inventory
g. agent cost
h. surveillance or inspection
i. expediting
j. losses (shrinkage, waste, theft, damage)
k. spare parts (inventory or start-up)
l. surplus materials
Advantages of leasing capital equipment over renting
- correct answer Minimal upfront cash outlay
Not a loan so it does not tie up your line of credit
Maintenance agreement, service by others
Possible tax advantage as the lease is an expense and may be able to reduce overall tax liability
May include a purchase option
Advantages of renting capital equipment
- correct answer Keep work progressing when there is an equipment breakdown
Meet specialty job requirements
Very efficient for low-percentage utilization
Short-term peak or seasonal use
Considered to evaluate equipment for purchase
Fill in for equipment being repaired
Can be returned at any time, not a guaranteed amount of time
Maintenance is usually handled by dealer or rental yard
,Can conserve company capital
Can have an option to buy clause
Types of Valuation
- correct answer Reproduction, Replacement Costs, Fair Value, Market Value, Book Value,
Residual/Economic Value, Operating Cost
Reproduction Costs
- correct answer The cost of reproducing substantially the identical item or facility at a
price level as of the date specified
Replacement Costs
- correct answer Is the cost new of an item having the same or similar utility [S&K 5th Ed.,
6.1].
Fair Value
- correct answer Is the adjusted cost new of an item, giving consideration for the cost of
similar items, and taking into account utility and all standard adjustments
and discounts to list price [S&K 5th Ed., 6.1].
Types of Market Value
- correct answer Fair Market Value-in-Place, Fair Market Value-in-Exchange, Orderly Liquidation Value,
Forced Liquidation Value, Salvage Value/Part-Out Value, Scrap Value
Fair Market Value-in-Place
- correct answer amount expressed in terms of money that may reasonably be expected to exchange
between a willing buyer and a willing seller with equity to both, neither under any compulsion to buy or
sell, and both fully aware of all relevant facts as of a certain date, and taking into account installation
and
the contribution of the item to the operating facility [S&K 5th Ed.,6.1].
Fair Market Value-in-Exchange
- correct answer value of equipment in terms of the money that can be expected to be exchanged in a
, thirdparty transaction between a willing buyer, who is under no compulsion to buy, and a willing seller,
who is under no compulsion to sell, both being fully aware of all relevant facts (also referred to as retail
value) [S&K 5th Ed., 6.1].
Orderly Liquidation Value
- correct answer probable price for all capital assets and equipment in terms of money that could be
realized from a properly executed orderly liquidation type of sale, given a maximum time of six months
to conduct such sale and adequate
funds available for the remarketing campaign. (also referred to as
wholesale value) [S&K 5th Ed., 6.1].
Forced Liquidation Value
- correct answer value of equipment in terms of money that can be derived from a properly advertised
and conducted auction where time is of the essence (also referred to as "under the hammer" or "blow-
out" value) [S&K 5th Ed.]
Salvage Value/Part-Out Value
- correct answer value of equipment in terms of money that a buyer will pay to a seller, recognizing the
component value of parts of the equipment that can be used or resold to end-users, usually for repair or
replacement purposes
[S&K 5th Ed., 6.2].
Scrap Value
- correct answer is the value of equipment in terms of money that relates to the equipment's basic
commodity value [S&K 5th Ed.,6.2].
Book Value (NET)
- correct answer (1) Current investment value on the books calculated as original value less
depreciated accruals.
(2) New asset value for accounting use.
(3) The value of an outstanding share of stock of a corporation at any one
time, determined by the number of shares of that class outstanding
[RP10S-90].
