Question 1

Describe the economic characteristics of sunk costs and opportunity costs, and explain the impact that these costs may have on decisions.

Accepted Answer

Sunk costs have already been incurred. T...

Question 2

Selling and administrative costs are always period costs on any type of company's income statement.

Accepted Answer

A) True 
 B)False

Question 3

Fixed costs are costs that:

Accepted Answer

A)   vary directly with changes in activity.
B)   vary inversely with changes in activity.
C)   remain constant on a per-unit basis.
D)   remain constant as activity changes.
E)   increase on a per-unit basis as activity increases.

Question 4

Selling and administrative expenses would likely appear on the balance sheet of:

Accepted Answer

A)   A clothing store.
B)   A computer manufacturer.
C)   A television network.
D)   All of these firms.
E)   None of these firms.

Question 5

Which of the following is a period cost?

Accepted Answer

A)   Direct material.
B)   Advertising expense.
C)   Indirect labor.
D)   Miscellaneous supplies used in production activities.
E)   Factory foreman salary for the motor production line.

Question 6

Another term for product cost is cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 7

The relevant range for Maxco Industries is 10,000 to 16,000 units of product. The variable costs per unit are $6 when a company produces 12,000 units of product. What are the variable costs per unit when 14,000 units are produced?

Accepted Answer

A)   $4.50.
B)   $5.00.
C)   $5.50.
D)   $6.00.
E)   None of the answers is correct.

Question 8

As activity increases, unit variable cost:

Accepted Answer

A)   increases proportionately with activity.
B)   decreases proportionately with activity.
C)   remains constant.
D)   increases by a fixed amount.
E)   decreases by a fixed amount.

Question 9

The accounting records of Younkin Corporation revealed the following selected costs: Sales commissions, $65,000; plant supervision, $190,000; and administrative expenses, $185,000. Younkin's period costs total:

Accepted Answer

A)   $250,000.
B)   $440,000.
C)   $375,000.
D)   $255,000.
E)   $185,000.

Question 10

As activity changes, total variable cost increases or decreases proportionately with the activity change, but unit variable cost remains the same.

Accepted Answer

A) True 
 B)False

Question 11

A cost that is not directly traceable to a particular cost object is called an indirect cost.

Accepted Answer

A) True 
 B)False

Question 12

Dorsett Technologies had finished goods inventory on January 1, 20X8 of $29,300 and finished goods inventory on December 31, 20X8 of $24,100.
- If the cost of goods manufactured for the year was $385,000, what was the cost of goods sold for the year?

Accepted Answer

A)   $395,400.
B)   $385,000.
C)   $390,200.
D)   $400,600.
E)   None of the answers is correct.

Question 13

In a manufacturing company, the cost of goods completed during the period would include which of the following elements?

Accepted Answer

A)   Raw materials used.
B)   Beginning finished goods inventory.
C)   Marketing costs.
D)   Depreciation of delivery trucks.
E)   All of the answers are correct.

Question 14

If the total cost of alternative A is $50,000 and the total cost of alternative B is $34,000, then $16,000 is termed the:

Accepted Answer

A)   opportunity cost.
B)   average cost.
C)   sunk cost.
D)   out-of-pocket cost.
E)   differential cost.

Question 15

Which of the following would not be classified as direct materials by a company that makes automobiles?

Accepted Answer

A)   Wheel lubricant.
B)   Tires.
C)   Interior leather.
D)   CD player.
E)   Sheet metal used in the automobile's body.

Question 16

Which of the following would not be considered a direct cost with respect to the service department of a new car dealership?

Accepted Answer

A)   Wages of repair technicians.
B)   Property taxes paid by the dealership.
C)   Repair parts consumed.
D)   Salary of the department manager.
E)   Depreciation on new equipment used to analyze engine problems.

Question 17

Which of the following costs is not a component of manufacturing overhead?

Accepted Answer

A)   Indirect materials.
B)   Factory utilities.
C)   Factory equipment.
D)   Indirect labor.
E)   Property taxes on the manufacturing plant.

Question 18

There are three standard categories of manufacturing processes.

Accepted Answer

A) True 
 B)False

Question 19

The higher the correlation between the cost and the cost driver, the more accurate will be the resulting understanding of cost behavior.

Accepted Answer

A) True 
 B)False

Question 20

Indirect costs:

Accepted Answer

A)   can be traced to a cost object.
B)   cannot be traced to a particular cost object.
C)   are not important.
D)   are always variable costs.
E)   may be indirect with respect to theme park but direct with respect to one of its major attractions or rides.

Exam 2: Basic Cost Management Concepts

Dorsett Technologies had finished goods inventory on January 1, 20X8 of $29,300 and finished goods inventory on December 31, 20X8 of $24,100. - If the cost of goods manufactured for the year was $385,000, what was the cost of goods sold for the year?

Correct AnswerverifiedShow Answer

As activity increases, unit variable cost:

Correct AnswerverifiedShow Answer

Which of the following would not be considered a direct cost with respect to the service department of a new car dealership?

Correct AnswerverifiedShow Answer

The higher the correlation between the cost and the cost driver, the more accurate will be the resulting understanding of cost behavior.

Correct AnswerverifiedShow Answer

In a manufacturing company, the cost of goods completed during the period would include which of the following elements?

Correct AnswerverifiedShow Answer

Which of the following would not be classified as direct materials by a company that makes automobiles?

Correct AnswerverifiedShow Answer

Which of the following costs is not a component of manufacturing overhead?

Correct AnswerverifiedShow Answer

The accounting records of Younkin Corporation revealed the following selected costs: Sales commissions, $65,000; plant supervision, $190,000; and administrative expenses, $185,000. Younkin's period costs total:

Correct AnswerverifiedShow Answer

Selling and administrative expenses would likely appear on the balance sheet of:

Correct AnswerverifiedShow Answer

Describe the economic characteristics of sunk costs and opportunity costs, and explain the impact that these costs may have on decisions.

Correct AnswerverifiedSunk costs have already been incurred. T...View AnswerShow Answer

Selling and administrative costs are always period costs on any type of company's income statement.

Correct AnswerverifiedShow Answer

If the total cost of alternative A is $50,000 and the total cost of alternative B is $34,000, then $16,000 is termed the:

Correct AnswerverifiedShow Answer

Which of the following is a period cost?

Correct AnswerverifiedShow Answer

Another term for product cost is cost of goods sold.

Correct AnswerverifiedShow Answer

There are three standard categories of manufacturing processes.

Correct AnswerverifiedShow Answer

A cost that is not directly traceable to a particular cost object is called an indirect cost.

Correct AnswerverifiedShow Answer

Indirect costs:

Correct AnswerverifiedShow Answer

Fixed costs are costs that:

Correct AnswerverifiedShow Answer

The relevant range for Maxco Industries is 10,000 to 16,000 units of product. The variable costs per unit are $6 when a company produces 12,000 units of product. What are the variable costs per unit when 14,000 units are produced?

Correct AnswerverifiedShow Answer

As activity changes, total variable cost increases or decreases proportionately with the activity change, but unit variable cost remains the same.

Correct AnswerverifiedShow Answer

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Sunk costs have already been incurred. T...
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