True/False

1. A cost object is anything for which a separate measurement of cost is required 2. Understanding how costs are incurred help organisations to remain competitive and generate a profit 3. The only cost object for a manufacturing firm is the finished product 4. A geographic region could be a cost object for a service organisation 5. Total costs for a firm vary depending on how many cost objects they have 6. When calculating the total cost for a cost object it is necessary to include both direct and indirect costs 7. Before determining whether a cost is direct or indirect it is necessary to know what the cost object is 8. Direct costs do not have a cause and effect relationship with the cost object 9. Costs that are common to many cost objects and cannot easily be traced to a specific cost object are known as indirect costs 10. The cost object determines whether costs are classified as direct or indirect 11. Direct costs can also be referred to as overhead costs 12. The accuracy of costing a cost object is increased when more costs can be identified as direct costs. 13. The glue used on the spines of mass produced textbooks is an example of an indirect cost 14. Entities use either manual or computerised tracking systems to trace direct costs. 15. Cost benefit analysis is used to determine whether a cost object has made use of a particular resource 16. An example of a cost tracing system is the time card which indicates how much time an employee has spent working on a particular job. 17 Some costs are treated as indirect because it is too difficult or costly to trace them directly to the cost object 18 Cost allocation is the process of assigning indirect costs to cost objects 18. Cost allocation is the process of assigning indirect costs to cost objects 19. One central resources. reason that entities allocate indirect costs to cost objects is to encourage the use of 20. Only entities that are subject to accounting standards allocate indirect costs to cost objects 21. A cost driver or allocation base provides a measure of activity that explains the cost object's use of the indirect cost. 3ra ul 23. The prime consideration when selecting a cost driver is the accuracy of the full cost measurement. 24. Cost drivers can be volume drivers or activity drivers 25. Allocating indirect costs based on machine hours is an example of using an activity driver 26. The first step in allocating indirect costs is to calculate the indirect cost rate 27. To develop a cost allocation formula entities need to decide on the number of indirect cost pools. 28 As the number of cost pools decreases the accuracy of the cost information decreases 29. To be consistent in the cost assignment process the same cost driver must be chosen for each indirect cost pool. 30. The indirect cost rate is determined by dividing the budgeted indirect cost by the budgeted cost driver usage in each indirect cost pool 31. Organisations use budgeted costs so they ean calculate a predetermined indirect cost rate prior to actual costs becoming available