Question 1

If a worker is paid for 40 hours, but is idle for 5 of those 40 hours, the 5 hour of idle time would be considered a component of direct labor.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is a fixed cost with respect to units produced in a factory?

Accepted Answer

A)  monthly rent payment for the building 
B)  electricity expenses 
C)  utilities cost of the building 
D)  direct material costs 
A)  monthly rent payment for the building 
B)  electricity expenses 
C)  utilities cost of the building 
D)  direct material costs

Question 3

Service-sector companies ________.

Accepted Answer

A)  do not produce tangible products but cost accounting is still utilized in service firms. 
B)  do not manufacture a product and therefore do not apply or adapt cost accounting to their operations. 
C)  purchase and then sell tangible products by changing their basic form and therefore need cost accounting. 
D)  purchase merchandise then sell it without changing its basic form and therefor do not need cost accounting systems. 
A)  do not produce tangible products but cost accounting is still utilized in service firms. 
B)  do not manufacture a product and therefore do not apply or adapt cost accounting to their operations. 
C)  purchase and then sell tangible products by changing their basic form and therefore need cost accounting. 
D)  purchase merchandise then sell it without changing its basic form and therefor do not need cost accounting systems.

Question 4

Direct material costs are the acquisition costs of all materials that eventually become part of the cost object and cannot be traced to the cost object in an economically feasible way.

Accepted Answer

A) True 
 B)False

Question 5

Explain the difference between an inventoriable cost and a period cost. What potential problems does an inaccurate classification of product and period costs cause?

Accepted Answer

Inventoriable costs are all costs of a p

Question 6

A direct cost of one cost object cannot be an indirect cost of another cost object.

Accepted Answer

A) True 
 B)False

Question 7

For an automobile manufacturer, period costs include the cost of ________.

Accepted Answer

A)  the dashboard 
B)  labor used for assembly 
C)  advertising 
D)  assembly-line equipment 
A)  the dashboard 
B)  labor used for assembly 
C)  advertising 
D)  assembly-line equipment

Question 8

Which of the following companies is part of the service sector of our economy?

Accepted Answer

A)  Macy's 
B)  KPMG 
C)  Apple Inc. 
D)  Amazon.com 
A)  Macy's 
B)  KPMG 
C)  Apple Inc. 
D)  Amazon.com

Question 9

Each of the following items pertains to one of these companies: Bedell Electronics (a manufacturing company), Gregory Food Retailers (a merchandising company), and Larson Real Estate (a service sector company). Classify each item as either inventoriable (I) costs or period (P) costs.

Accepted Answer

The answer of Each of the following items pertains to...

Question 10

Which of the following is not reported on the income statement of a manufacturing firm?

Accepted Answer

A)  cost of goods sold 
B)  administrative and selling expenses 
C)  work in progress 
D)  marketing and distribution costs 
A)  cost of goods sold 
B)  administrative and selling expenses 
C)  work in progress 
D)  marketing and distribution costs

Question 11

When 25,000 units are produced, fixed costs are $21.00 per unit. Therefore, when 20,000 units are produced, fixed costs will ________.

Accepted Answer

A)  increase to $26.25 per unit 
B)  remain at $21.00 per unit 
C)  decrease to $16.80 per unit 
D)  total $420,000 
A)  increase to $26.25 per unit 
B)  remain at $21.00 per unit 
C)  decrease to $16.80 per unit 
D)  total $420,000

Question 12

Conversion costs include all direct manufacturing costs and some of the period costs including research and development costs and customer service.

Accepted Answer

A) True 
 B)False

Question 13

Costs that are initially recorded as assets and expensed when goods sold are called ________.

Accepted Answer

A)  period costs 
B)  inventoriable costs 
C)  irrelevant costs 
D)  research and development costs 
A)  period costs 
B)  inventoriable costs 
C)  irrelevant costs 
D)  research and development costs

Question 14

R&D costs are treated as period costs because ________.

Accepted Answer

A)  these costs may increase revenues in the current period 
B)  these costs may increase revenues in the future period 
C)  these costs may decrease revenues in the current period 
D)  these costs are expensed when the goods are sold 
A)  these costs may increase revenues in the current period 
B)  these costs may increase revenues in the future period 
C)  these costs may decrease revenues in the current period 
D)  these costs are expensed when the goods are sold

Question 15

Direct manufacturing cost labor includes plant rent and salaries paid to plant supervisors.

Accepted Answer

A) True 
 B)False

Question 16

The following information pertains to Expert System Corporation:
 
What is the gross profit margin earned by the company?

Accepted Answer

A)  $56,000 
B)  $63,000 
C)  $68,000 
D)  $66,000 
A)  $56,000 
B)  $63,000 
C)  $68,000 
D)  $66,000

Question 17

For merchandising companies, inventoriable costs include ________.

Accepted Answer

A)  selling expenses 
B)  shipping (incoming) costs to acquire merchandise 
C)  distribution costs 
D)  outgoing freight and handling costs 
A)  selling expenses 
B)  shipping (incoming) costs to acquire merchandise 
C)  distribution costs 
D)  outgoing freight and handling costs

Question 18

Work-in-process inventory would normally include ________.

Accepted Answer

A)  direct materials in stock and awaiting use in the manufacturing process 
B)  goods partially worked on but not yet fully completed 
C)  goods fully completed but not yet sold 
D)  goods returned after being sold to be re-worked on further improvements and quality 
A)  direct materials in stock and awaiting use in the manufacturing process 
B)  goods partially worked on but not yet fully completed 
C)  goods fully completed but not yet sold 
D)  goods returned after being sold to be re-worked on further improvements and quality

Question 19

A lease for a store calls for a base monthly rent of $1,500 up to $10,000 of sales with a possible additional monthly cost of 2% of sales over $10,000. The rent is a fixed cost for the month for a relevant range of zero to $10,000 sales.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true?

Accepted Answer

A)  A direct cost of one cost object will always be a direct cost of another cost object. 
B)  Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs. 
C)  All fixed costs are indirect costs. 
D)  All direct costs are variable costs. 
A)  A direct cost of one cost object will always be a direct cost of another cost object. 
B)  Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs. 
C)  All fixed costs are indirect costs. 
D)  All direct costs are variable costs.

Exam 2: An Introduction to Cost Terms and Purposes

If a worker is paid for 40 hours, but is idle for 5 of those 40 hours, the 5 hour of idle time would be considered a component of direct labor.

Which of the following is a fixed cost with respect to units produced in a factory?

Service-sector companies ________.

Direct material costs are the acquisition costs of all materials that eventually become part of the cost object and cannot be traced to the cost object in an economically feasible way.

Explain the difference between an inventoriable cost and a period cost. What potential problems does an inaccurate classification of product and period costs cause?

A direct cost of one cost object cannot be an indirect cost of another cost object.

For an automobile manufacturer, period costs include the cost of ________.

Which of the following companies is part of the service sector of our economy?

Each of the following items pertains to one of these companies: Bedell Electronics (a manufacturing company), Gregory Food Retailers (a merchandising company), and Larson Real Estate (a service sector company). Classify each item as either inventoriable (I) costs or period (P) costs.

Which of the following is not reported on the income statement of a manufacturing firm?

When 25,000 units are produced, fixed costs are $21.00 per unit. Therefore, when 20,000 units are produced, fixed costs will ________.

Conversion costs include all direct manufacturing costs and some of the period costs including research and development costs and customer service.

Costs that are initially recorded as assets and expensed when goods sold are called ________.

R&D costs are treated as period costs because ________.

Direct manufacturing cost labor includes plant rent and salaries paid to plant supervisors.

The following information pertains to Expert System Corporation: What is the gross profit margin earned by the company?

For merchandising companies, inventoriable costs include ________.

Work-in-process inventory would normally include ________.

A lease for a store calls for a base monthly rent of $1,500 up to $10,000 of sales with a possible additional monthly cost of 2% of sales over $10,000. The rent is a fixed cost for the month for a relevant range of zero to $10,000 sales.

Which of the following statements is true?

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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