1. Match the fo llowing terms with the appropriate definition: Definition # Term

ID: 1109158 • Letter: 1

Question

1. Match the fo llowing terms with the appropriate definition: Definition # Term Sunk costs Indirect costs Prime costs Fixed costs Opportunity costs Conversion costs Factory overhead Variable costs . Costs that change in proportion to changes in volume of 2 The potential benefit lost by choosing a specific action from . Manufacturing expenditures that cannot be separately or activity two or more alternatives. readily traced to finished goods. incurred in the process of converting ravw materials to finished products; nclude direct labor 4 Expenditures and factory overhead. s. 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. Costs that do not change with changes in the volume of activity Costs that are incurred for the benefit of more than one cost object.

Explanation / Answer

Solution:

Sunk costs

Costs that have already been incurred and cannot be avoided or changed (5)

Indirect costs

Costs that are incurred for the benefit of more than one cost object (8)

Prime costs

Expenditures directly associated with the manufacture of finished products; include direct materials and direct labour. (6)

Fixed costs

Costs that do not change with the changes in the volume of activity. (7)

Opportunity costs

The potential benefit lost by choosing a specific action from two or more alternatives (2)

Conversion costs

Expenditures incurred in the process of converting raw materials to finished products; include direct labour and factory overhead. (4)

Factory overhead

Manufacturing expenditure that cannot be separately or readily traced to finished goods.(3)

Variable costs

Costs that change in proportion to the changes in volume of activity. (1)