1. A cost is best defined as the price paid for a good or service.

• ❌ True

• ✅ False
  Explanation: Cost = value of resources sacrificed, not only price paid.

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2. Examples of an organization’s resources (Check all that apply):

• ✅ Cash

• ✅ Land owned by the organization

• ✅ Time

• ❌ Cash owed to the bank

• ✅ Materials

• ❌ Expenses incurred last quarter
  Explanation: Resources = assets or inputs available for use.

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3. Jeff’s 1 hour cleaning: organization hasn’t incurred a cost.

• ❌ True

• ✅ False
  Explanation: His time has opportunity cost, even if unpaid extra.

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4. Costs are sometimes difficult to measure accurately.

• ✅ True

• ❌ False
  Explanation: Many costs (time, indirect costs) are hard to quantify.

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5. Opportunity costs are often difficult to quantify.

• ✅ True

• ❌ False
  Explanation: Opportunity costs are not recorded and require estimation.

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6. Statements Jerry makes about resources/costs (Check all that apply):

• ✅ “Wildcat incurs costs when its resources are used.”

• ❌ “Wildcat never incurs opportunity costs.”

• ✅ “Not all of Wildcat’s costs are financial.”

• ❌ “Only quantified-in-currency costs matter.”
  Explanation: Opportunity and non-financial costs exist.

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7. A cost system organizes cost information for decisions.

• ✅ True

• ❌ False
  Explanation: That is the definition of a cost system.

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8. NOT a category of product costs:

• ❌ Direct materials

• ❌ Direct labor

• ✅ Direct overhead
  Explanation: The correct term is manufacturing overhead, not “direct overhead.”

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9. Process costing systems (Check all that apply):

• ❌ Used in custom-product settings

• ❌ Organizes costs by project

• ✅ Used in high-volume settings

• ✅ Allocates costs to products based on quantity
  Explanation: Process costing = mass production.

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10. Job costing systems (Check all that apply):

• ✅ Organizes costs by project or engagement

• ❌ Used in high-volume settings

• ✅ Allocates costs based on usage of different resources

• ❌ Allocates based on quantity
  Explanation: Job costing = customized jobs.

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11. Would rely on process costing? (Check all that apply):

• ❌ Package delivery service

• ❌ Law firm

• ❌ Custom automobile manufacturer

• ✅ Manufacturer of socks
  Explanation: High-volume, identical units = process costing.

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12. Activity-based costing increases accuracy?

• ✅ True

• ❌ False
  Explanation: ABC gives more accurate overhead allocation.

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13. Transition to ABC (Check all that apply):

• ❌ Need more accurate direct materials & labor (these are already easy to track)

• ✅ More categories of overhead costs will exist

• ✅ Managers need more accurate cost information

• ❌ Current overhead estimates are sufficient
  Explanation: ABC improves overhead accuracy.

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14. Disadvantages of ABC (Check all that apply):

• ❌ Managers might use ABC for more than product costs (not a disadvantage)

• ✅ Requires more maintenance

• ❌ Provides less accurate cost info (actually more accurate)

• ✅ Requires substantial implementation effort
  Explanation: ABC is accurate but costly to implement.

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15. Predictions about future costs benefit from organizing by cost behavior.

• ✅ True

• ❌ False
  Explanation: Cost behavior predicts how costs change with activity.

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16. Accurate statements about cost behavior (Check all that apply):

• ❌ Total variable costs do NOT fluctuate

• ✅ Total variable costs fluctuate with activity

• ❌ Mixed costs are mostly variable—they include both

• ✅ Total fixed costs do not fluctuate with volume
  Explanation: Variable varies, fixed stays constant, mixed = both.

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17. Fixed costs at Gopher Inc. (Check all that apply):

• ✅ Rent for production equipment

• ✅ Manufacturing supervisor salaries

• ❌ Electricity bills (usually variable/mixed)

• ❌ Input materials (variable cost)
  Explanation: Fixed costs don’t change with production volume.

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18. Advice for Sharon (Check all that apply):

• ❌ ABC will simplify overhead (ABC is more complex)

• ✅ Job costing useful for catering

• ✅ Separating costs into materials/labor/overhead helps predictions

• ✅ Process costing useful for restaurant
  Explanation: Restaurant = repetitive process; catering = custom orders.

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🧾 SUMMARY TABLE