Question 1

When costs can be traced to a particular cost object in an economically feasible way, the cost is a:

Accepted Answer

A)  direct cost 
B)  indirect cost 
C)  allocated cost 
D)  budgeted cost 
A)  direct cost 
B)  indirect cost 
C)  allocated cost 
D)  budgeted cost

Question 2

A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.

Accepted Answer

A)  average range 
B)  cost-allocation range 
C)  cost driver range 
D)  relevant range 
A)  average range 
B)  cost-allocation range 
C)  cost driver range 
D)  relevant range

Question 3

Which one of the following items is a direct cost?

Accepted Answer

A)  Customer-service costs of a multiproduct firm; Product A is the cost object. 
B)  Printing costs incurred for payroll check processing; payroll check processing is the cost object. 
C)  The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object. 
D)  Utility costs of the administrative offices; the accounting department is the cost object. 
A)  Customer-service costs of a multiproduct firm; Product A is the cost object. 
B)  Printing costs incurred for payroll check processing; payroll check processing is the cost object. 
C)  The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object. 
D)  Utility costs of the administrative offices; the accounting department is the cost object.

Question 4

Indirect manufacturing costs such as rent, factory supervisor salary, and depreciation on production equipment are always costs of the period in which they are
incurred and are not associated with inventories.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following would be considered an actual cost of a current period?

Accepted Answer

A)  The $25 of materials in a manufactured chair that is ready to be shipped to the customer 
B)  The $22 of direct material cost per unit assumed in the actual budget of a manufacturer of chairs 
C)  The expected cost of materials for a chair as a result of engineering specifications 
D)  The average of historical material cost data for a chair manufactured in several past accounting periods 
A)  The $25 of materials in a manufactured chair that is ready to be shipped to the customer 
B)  The $22 of direct material cost per unit assumed in the actual budget of a manufacturer of chairs 
C)  The expected cost of materials for a chair as a result of engineering specifications 
D)  The average of historical material cost data for a chair manufactured in several past accounting periods

Question 6

Puritan Apparels is a clothing retailer. Unit costs associated with one of its products, Product DCF 130, are as follows:
 
What are the indirect nonmanufacturing variable costs per unit associated with Product DCF130?

Accepted Answer

A)  $5 
B)  $29 
C)  $160 
D)  $213 
A)  $5 
B)  $29 
C)  $160 
D)  $213

Question 7

Classifying a cost as either direct or indirect depends upon ________.

Accepted Answer

A)  the behavior of the cost in response to volume changes 
B)  whether the cost is expensed in the period in which it is incurred 
C)  whether the cost can be traced to a particular cost object in an economically feasible way 
D)  whether a cost is fixed or variable 
A)  the behavior of the cost in response to volume changes 
B)  whether the cost is expensed in the period in which it is incurred 
C)  whether the cost can be traced to a particular cost object in an economically feasible way 
D)  whether a cost is fixed or variable

Question 8

A cost may be direct for one cost object and indirect for another cost object.

Accepted Answer

A) True 
 B)False

Question 9

The East Company manufactures several different products. Unit costs associated with Product ORD105 are as follows:
 
What is the percentage of the total variable costs per unit associated with Product ORD105 with respect to total cost?

Accepted Answer

A)  81% 
B)  68% 
C)  84% 
D)  71% 
A)  81% 
B)  68% 
C)  84% 
D)  71%

Question 10

Which of the following factors affect the direct/indirect classification of a cost?

Accepted Answer

A)  the level of budgeted profit for the next year 
B)  the estimation of time required to complete the order 
C)  the ability to execute an order in the most cost-efficient manner 
D)  the design where a particular area is dedicated to a specific cost object 
A)  the level of budgeted profit for the next year 
B)  the estimation of time required to complete the order 
C)  the ability to execute an order in the most cost-efficient manner 
D)  the design where a particular area is dedicated to a specific cost object

Question 11

Indirect manufacturing costs ________.

Accepted Answer

A)  can be traced to the product that created the costs 
B)  can be easily identified with the cost object 
C)  generally include the cost of material and the cost of labor 
D)  may include both variable and fixed costs 
A)  can be traced to the product that created the costs 
B)  can be easily identified with the cost object 
C)  generally include the cost of material and the cost of labor 
D)  may include both variable and fixed costs

Question 12

Indirect manufacturing costs include the compensation of all manufacturing labor that can be traced to the cost object in an economically feasible way.

Accepted Answer

A) True 
 B)False

Question 13

Fixed cost per unit falls with an increase in production volume.

Accepted Answer

A) True 
 B)False

Question 14

The cost of natural gas used to heat a production facility that makes three products (A,B, and
C) would be classified as an indirect cost when the cost object is one of the products (either A, B, or
C).

Accepted Answer

A) True 
 B)False

Question 15

Department stores, such as Macy's and Khols, are examples of a merchandising company.

Accepted Answer

A) True 
 B)False

Question 16

Exceptional Manufacturing Co. wants to classify costs for the product produced at its facility. The company produces only one product at the facility and operates continually. The cost categories are:
Product cost
Prime cost
Conversion cost
Period cost
The following costs are found in the accounting records:
a.Quality control inspection wages
b.Raw material purchases
c.Sales commissions
d.Factory depreciation
e.Assembly wages
Required:
Assign each of the above costs to the most appropriate cost categories.

Accepted Answer

Product cost includes a, b, d,

Question 17

A fixed cost is fixed only in relation to a given wide range of total activity or volume and only for a given
time span, usually a particular budget period.

Accepted Answer

A) True 
 B)False

Question 18

Merchandising-sectors ________.

Accepted Answer

A)  purchase and then sell tangible products without changing their basic form 
B)  provide intangible products 
C)  purchase materials and components and convert them into finished goods 
D)  purchase and then sell tangible products by changing their basic form 
A)  purchase and then sell tangible products without changing their basic form 
B)  provide intangible products 
C)  purchase materials and components and convert them into finished goods 
D)  purchase and then sell tangible products by changing their basic form

Question 19

Francis Kenney is paid $26 an hour for straight-time and $31 an hour for overtime. One week she worked 46 hours, which included 6 hours of overtime. What is the overtime premium incurred to the company?

Accepted Answer

A)  $186 
B)  $72 
C)  $31 
D)  $432 
A)  $186 
B)  $72 
C)  $31 
D)  $432

Question 20

Expert Manufacturing reported the following:
 
What is Expert's operating income?

Accepted Answer

A)  $346,400 
B)  $218,200 
C)  $204,200 
D)  $200,200 
A)  $346,400 
B)  $218,200 
C)  $204,200 
D)  $200,200

Exam 2: An Introduction to Cost Terms and Purposes

When costs can be traced to a particular cost object in an economically feasible way, the cost is a:

A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.

Which one of the following items is a direct cost?

Indirect manufacturing costs such as rent, factory supervisor salary, and depreciation on production equipment are always costs of the period in which they are incurred and are not associated with inventories.

Which of the following would be considered an actual cost of a current period?

Puritan Apparels is a clothing retailer. Unit costs associated with one of its products, Product DCF 130, are as follows: What are the indirect nonmanufacturing variable costs per unit associated with Product DCF130?

Classifying a cost as either direct or indirect depends upon ________.

A cost may be direct for one cost object and indirect for another cost object.

The East Company manufactures several different products. Unit costs associated with Product ORD105 are as follows: What is the percentage of the total variable costs per unit associated with Product ORD105 with respect to total cost?

Which of the following factors affect the direct/indirect classification of a cost?

Indirect manufacturing costs ________.

Indirect manufacturing costs include the compensation of all manufacturing labor that can be traced to the cost object in an economically feasible way.

Fixed cost per unit falls with an increase in production volume.

The cost of natural gas used to heat a production facility that makes three products (A,B, and C) would be classified as an indirect cost when the cost object is one of the products (either A, B, or C).

Department stores, such as Macy's and Khols, are examples of a merchandising company.

A fixed cost is fixed only in relation to a given wide range of total activity or volume and only for a given time span, usually a particular budget period.

Merchandising-sectors ________.

Francis Kenney is paid $26 an hour for straight-time and $31 an hour for overtime. One week she worked 46 hours, which included 6 hours of overtime. What is the overtime premium incurred to the company?

Expert Manufacturing reported the following: What is Expert's operating income?

The Manager and Management Accounting

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

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