Question 1

Salaries paid to shift supervisors is an example of a

Accepted Answer

A) step-variable cost. 
B) step-fixed cost. 
C) variable cost. 
D) mixed cost. 
A) step-variable cost. 
B) step-fixed cost. 
C) variable cost. 
D) mixed cost. B

Question 2

If production volume increases from 8,000 to 10,000 units,

Accepted Answer

A) total costs will increase by 20 per cent. 
B) total costs will increase by 25 per cent. 
C) total variable costs will increase by 25 per cent. 
D) mixed and variable costs will increase by 25 per cent. 
A) total costs will increase by 20 per cent. 
B) total costs will increase by 25 per cent. 
C) total variable costs will increase by 25 per cent. 
D) mixed and variable costs will increase by 25 per cent. C

Question 3

____ are expensed in the period in which they are incurred.

Accepted Answer

A) Direct materials 
B) Product costs 
C) Noninventoriable costs 
D) Inventoriable costs 
A) Direct materials 
B) Product costs 
C) Noninventoriable costs 
D) Inventoriable costs C

Question 4

Which item is not an example of a sunk cost?

Accepted Answer

A) materials needed for production 
B) purchase cost of machinery 
C) depreciation 
D) All are sunk costs. 
A) materials needed for production 
B) purchase cost of machinery 
C) depreciation 
D) All are sunk costs.

Question 5

The wages of a production equipment operator would be classified as

Accepted Answer

A) direct materials. 
B) direct labour. 
C) manufacturing overhead. 
D) selling and administrative costs. 
A) direct materials. 
B) direct labour. 
C) manufacturing overhead. 
D) selling and administrative costs.

Question 6

____ are expensed in the period in which they are incurred.

Accepted Answer

A) Direct materials 
B) Product costs 
C) Factory overhead 
D) Nonproduction costs 
A) Direct materials 
B) Product costs 
C) Factory overhead 
D) Nonproduction costs

Question 7

Unit costs are critical for

Accepted Answer

A) valuing inventory. 
B) determining net income. 
C) decisions to enter a new product line. 
D) all of the above. 
A) valuing inventory. 
B) determining net income. 
C) decisions to enter a new product line. 
D) all of the above.

Question 8

As the volume of activity increases within the relevant range, the variable cost per unit

Accepted Answer

A) decreases. 
B) decreases at first, then increases. 
C) remains the same. 
D) increases. 
A) decreases. 
B) decreases at first, then increases. 
C) remains the same. 
D) increases.

Question 9

Classify each of the following costs as variable, fixed, mixed, or step by writing an X under one of the following headings (Sales volume is the cost driver). $\begin{array}{|l|l|c|c|c|c|}
\hline & & \text { Variable } & \text { Fixed } & \text { Mixed } & \text { Step } \
\hline 1.& \text { Total selling and administrative costs } & & & & \
\hline 2 . & \text { Salaries of supervisors of five employees } & & & & \
\hline 3 . & \text { Raw materials used in production } & & & & \
\hline 4 . & \text { Power consumption in a restaurant } & & & & \
\hline 5 . & \text { Cost of goods sold in a bookstore } & & & & \
\hline 6.& 
\text { Salaries of employees who handle } 20 \text { claims } \
&\text { per month }
 & & & & \
\hline 7 . & \text { Pulpwood in a paper mill } & & & & \
\hline 8.&
\text { Salaries of two secretaries in the corporate } \
&\text { office }
 & & & & \
\hline 9 . & \text { Total current manufacturing costs } & & & & \
\hline 10.&
\text { The cost of an automobile rented on the basis } \
&\text { of a daily charge plus E. } 30 \text { per mile }
 & & & & \
\hline
\end{array}$

Accepted Answer

None

Question 10

Mulholland Company manufactures various wooden furniture products. If the cost object is a product, a chair, what costs would be considered direct?

Accepted Answer

A) manufacturing supervisor's salary 
B) depreciation on the factory building 
C) salary of the worker that glues the legs to the seat of the chair 
D) insurance on the factory 
A) manufacturing supervisor's salary 
B) depreciation on the factory building 
C) salary of the worker that glues the legs to the seat of the chair 
D) insurance on the factory

Question 11

Which of the following costs incurred by a furniture manufacturer would be a product cost?

Accepted Answer

A) lumber 
B) office salaries 
C) commissions paid to sales staff 
D) controller's salary 
A) lumber 
B) office salaries 
C) commissions paid to sales staff 
D) controller's salary

Question 12

Sunk costs are

Accepted Answer

A) future costs that have no benefit. 
B) relevant costs that have only short-run benefits. 
C) target costs. 
D) cannot be avoided. 
A) future costs that have no benefit. 
B) relevant costs that have only short-run benefits. 
C) target costs. 
D) cannot be avoided.

Question 13

Which of the following costs would be included as part of factory overhead?

Accepted Answer

A) depreciation of plant equipment 
B) paint used for product finish 
C) depreciation on the corporation's office building 
D) paper used in the production of books 
A) depreciation of plant equipment 
B) paint used for product finish 
C) depreciation on the corporation's office building 
D) paper used in the production of books

Question 14

Which one of the following sentences about step costs is true?

Accepted Answer

A) Step costs increase with each additional unit produced. 
B) Step costs have no relation to number of units produced. 
C) Step costs are constant within certain ranges of activity but differ outside those ranges of activity. 
D) Step costs are variable within narrowly defined ranges of activity, but constant over wider ranges of activity. 
A) Step costs increase with each additional unit produced. 
B) Step costs have no relation to number of units produced. 
C) Step costs are constant within certain ranges of activity but differ outside those ranges of activity. 
D) Step costs are variable within narrowly defined ranges of activity, but constant over wider ranges of activity.

Question 15

All of the following are product costs EXCEPT

Accepted Answer

A) direct materials. 
B) direct labour. 
C) manufacturing overhead. 
D) selling and administrative costs. 
E) none of the above. 
A) direct materials. 
B) direct labour. 
C) manufacturing overhead. 
D) selling and administrative costs. 
E) none of the above.

Question 16

All of Jill Enterprise's operations are housed in one building with the costs of occupying the building accumulated in a separate account. The total costs incurred in May amounted to £24,000. The company allocates these costs on the basis of square feet of floor space occupied. Administrative offices, sales offices, and factory operations occupy 9,000, 6,000, and 30,000 square feet, respectively. How much will be classified as a product cost for May?

Accepted Answer

A) £4,800 
B) £3,200 
C) £16,000 
D) £24,000 
A) £4,800 
B) £3,200 
C) £16,000 
D) £24,000

Question 17

Which of the following is a product cost?

Accepted Answer

A) advertising expenditures 
B) insurance on the office buildings 
C) depreciation of the salesmen's cars 
D) depreciation of the production facilities 
A) advertising expenditures 
B) insurance on the office buildings 
C) depreciation of the salesmen's cars 
D) depreciation of the production facilities

Question 18

An equipment lease that specifies a payment of £5,000 per month plus £8 per machine hour used is an example of a

Accepted Answer

A) fixed cost. 
B) variable cost. 
C) step cost. 
D) mixed cost. 
A) fixed cost. 
B) variable cost. 
C) step cost. 
D) mixed cost.

Question 19

Which of the following is an example of a possible cost object?

Accepted Answer

A) a product 
B) a customer 
C) a department 
D) All of these could be possible cost objects. 
A) a product 
B) a customer 
C) a department 
D) All of these could be possible cost objects.

Question 20

In a traditional manufacturing company, product costs include

Accepted Answer

A) direct materials only. 
B) direct materials, direct labour, and factory overhead. 
C) direct materials and direct labour only. 
D) direct labour only. 
A) direct materials only. 
B) direct materials, direct labour, and factory overhead. 
C) direct materials and direct labour only. 
D) direct labour only.

Exam 2: An Introduction to Cost Terms and Concepts

Salaries paid to shift supervisors is an example of a

If production volume increases from 8,000 to 10,000 units,

____ are expensed in the period in which they are incurred.

Which item is not an example of a sunk cost?

The wages of a production equipment operator would be classified as

____ are expensed in the period in which they are incurred.

Unit costs are critical for

As the volume of activity increases within the relevant range, the variable cost per unit

Mulholland Company manufactures various wooden furniture products. If the cost object is a product, a chair, what costs would be considered direct?

Which of the following costs incurred by a furniture manufacturer would be a product cost?

Sunk costs are

Which of the following costs would be included as part of factory overhead?

Which one of the following sentences about step costs is true?

All of the following are product costs EXCEPT

Which of the following is a product cost?

An equipment lease that specifies a payment of £5,000 per month plus £8 per machine hour used is an example of a

Which of the following is an example of a possible cost object?

In a traditional manufacturing company, product costs include

Introduction to Management Accounting

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Activity-Based Costing

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Strategic Cost Management

Strategic Performance Management

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Inventories

The Application of Linear Programming to Management Accounting

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