Exercises 1 Select the best definition for the each cost lis

Exercises 1. Select the best definition for the each cost listed below: 1) Costs that change in proportion to changes in volume of activity 2) The potential benefit lost by choosing a specific action from two or more alternatives. 3) Manufacturing expenditures that cannot be separately or readily traced to finished goods. 4) Expenditures incurred in the process of converting raw materials to finished products; include direct labor and factory overhead. 5) Costs that have already been incurred and cannot be avoided or changed. 6) Expenditures directly associated with the manufacture of finished products; include direct materials and direct labor. 7) Costs that do not change with changes in the volume of activity. 8) Costs that are incurred for the benefit of more than one cost object. a. Fixed Cost b. Sunk Cost c. Indirect Cost d. Variable Cost e. Factory Overhead f. Opportunity Cost 9. Prime Cost h. Conversion Cost 2. Each of the following would be a period cost except: a. maintenance costs for machines used in manufacturing. b. the salary of the company president\'s secretary c. the cost of a general accounting office. d. sales commissions

Solution

1. d as variable cost is dependent of production activity
2. f opportunity cost in the next best alternative forgone
3. e cannot be separately traced to finished goods like depreciation of equipments
4. h incurred in converting raw materials to finished goods
5. b costs cannot be obtained back like rent
6. g Raw material cost + direct labor
7. a Like salary, rent etc
8. c general and administrative expenses

2. a. Period costs are expenditures identified with time which includes selling and general administrative expenses.