Question 1

Which of the following costs is an indirect product cost?

Accepted Answer

A)  property taxes on plant facilities 
B)  wages of assembly workers 
C)  materials used 
D)  president's salary 
A)  property taxes on plant facilities 
B)  wages of assembly workers 
C)  materials used 
D)  president's salary

Question 2

Selling and administrative costs are classified as

Accepted Answer

A)  product costs. 
B)  conversion costs. 
C)  period costs. 
D)  factory overhead. 
A)  product costs. 
B)  conversion costs. 
C)  period costs. 
D)  factory overhead.

Question 3

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 4

Which of the following costs incurred by a bus manufacturer would NOT be directly attributable to the finished product?

Accepted Answer

A)  the wages paid to assembly-line production workers 
B)  the tires for buses 
C)  the windshields for buses 
D)  the depreciation on factory building 
A)  the wages paid to assembly-line production workers 
B)  the tires for buses 
C)  the windshields for buses 
D)  the depreciation on factory building

Question 5

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 6

A supervisor's salary of £2,000 per month 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 7

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 8

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 9

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 10

Product costs are converted from cost to expense when

Accepted Answer

A)  units are completed. 
B)  materials are purchased. 
C)  units are sold. 
D)  materials are requisitioned. 
A)  units are completed. 
B)  materials are purchased. 
C)  units are sold. 
D)  materials are requisitioned.

Question 11

Which of the following items would NOT be classified as part of factory overhead of a firm that makes sailboats?

Accepted Answer

A)  factory supplies used 
B)  canvas used in sail 
C)  depreciation of factory buildings 
D)  indirect materials 
A)  factory supplies used 
B)  canvas used in sail 
C)  depreciation of factory buildings 
D)  indirect materials

Question 12

Which of the following is an example of a step-fixed cost?

Accepted Answer

A)  cost of disposable surgical scissors, which are purchased in increments of 100 
B)  cost of soaking solution to clean jewelry (Each jar can soak 50 rings before losing effectiveness.) 
C)  cost of tuition at £300 per credit hour up to 15 credit hours (Hours taken in excess of 15 hours are free.) 
D)  cost of disposable gowns used by patients in a hospital 
A)  cost of disposable surgical scissors, which are purchased in increments of 100 
B)  cost of soaking solution to clean jewelry (Each jar can soak 50 rings before losing effectiveness.) 
C)  cost of tuition at £300 per credit hour up to 15 credit hours (Hours taken in excess of 15 hours are free.) 
D)  cost of disposable gowns used by patients in a hospital

Question 13

Adams Ltd. rents a truck for a flat fee plus an additional charge per mile. What type of cost is the rent?

Accepted Answer

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

Question 14

Which of the following costs would be classified as variable costs with respect to volume?

Accepted Answer

A)  property taxes on the manufacturing facility 
B)  the wheels on an automobile 
C)  the cost of installing production equipment 
D)  all of the above 
A)  property taxes on the manufacturing facility 
B)  the wheels on an automobile 
C)  the cost of installing production equipment 
D)  all of the above

Question 15

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 16

The Penang Company has the following information available regarding costs at various levels of monthly production:   Required: 
a.
Identify each cost as being variable, fixed, or mixed by writing the name of each cost under one of the following headings:
Variable Costs
Fixed Costs
Mixed Costs
b.
Develop an equation for total monthly production costs.
c.
Predict total costs for a monthly production volume of 8,000 units.

Accepted Answer

@#IMG-DLM& b.
Variable costs = (£300,600 - £219,60

Question 17

Which of the following is an example of a variable cost?

Accepted Answer

A)  insurance on the production equipment 
B)  direct materials 
C)  the production supervisor's salary 
D)  depreciation of the factory building 
A)  insurance on the production equipment 
B)  direct materials 
C)  the production supervisor's salary 
D)  depreciation of the factory building

Question 18

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 19

Direct costs

Accepted Answer

A)  can be assigned to cost objects in an economically feasible way. 
B)  are typically assigned to cost objects using a cause-and-effect relationship. 
C)  result in more accurate cost assignments. 
D)  do all of the above. 
A)  can be assigned to cost objects in an economically feasible way. 
B)  are typically assigned to cost objects using a cause-and-effect relationship. 
C)  result in more accurate cost assignments. 
D)  do all of the above.

Question 20

Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that is parallel to the horizontal axis?

Accepted Answer

A)  total direct material costs 
B)  a consultant paid £75 per hour with a maximum fee of £1,200 
C)  employees who are paid £10 per hour and guaranteed a minimum weekly wage of £200 
D)  rent on exhibit space at a convention 
A)  total direct material costs 
B)  a consultant paid £75 per hour with a maximum fee of £1,200 
C)  employees who are paid £10 per hour and guaranteed a minimum weekly wage of £200 
D)  rent on exhibit space at a convention

Exam 2: An Introduction to Cost Terms and Concepts

Which of the following costs is an indirect product cost?

Selling and administrative costs are classified as

Which of the following costs incurred by a bus manufacturer would NOT be directly attributable to the finished product?

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

A supervisor's salary of £2,000 per month is an example of a

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

The wages of a production equipment operator would be classified as

All of the following are product costs EXCEPT

Product costs are converted from cost to expense when

Which of the following items would NOT be classified as part of factory overhead of a firm that makes sailboats?

Which of the following is an example of a step-fixed cost?

Adams Ltd. rents a truck for a flat fee plus an additional charge per mile. What type of cost is the rent?

Which of the following costs would be classified as variable costs with respect to volume?

Which item is not an example of a sunk cost?

Which of the following is an example of a variable cost?

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

Direct costs

Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that is parallel to the horizontal axis?

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

Pricing Decisions and Profitability Analysis

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

Cost Management

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

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