MANAGEMENT ACCOUNTING - Solutions ManualCHAPTER 8SYSTEMS DESIGN: JOB-ORDER COSTING ANDPROCESS COSTING

MANAGEMENT ACCOUNTING - Solutions Manual CHAPTER 7 COST CONCEPTS AND CLASSIFICATIONS I. Questions 1. The phrase “different costs for different purposes” refers to the fact that the word “cost” can have different meanings depending on the context in which it is used. Cost data that are classified and recorded in a particular way for one purpose may be inappropriate for another use. 2. Fixed costs remain constant in total across changes in activity, whereas variable costs change in proportion to the level of activity. 3. Examples of direct costs of the food and beverage department in a hotel include the money spent on the food and beverages served, the wages of table service personnel, and the costs of entertainment in the dining room and lounge. Examples of indirect costs of the food and beverage department include allocations of the costs of advertising for the entire hotel, of the costs of the grounds and maintenance department, and of the hotel general manager’s salary. 4. The cost of idle time is treated as manufacturing overhead because it is a normal cost of the manufacturing operation that should be spread out among all of the manufactured