Question 1

Eldervale Winery is a producer of premium wine. Which of the following is NOT an example of an upstream cost?

Accepted Answer

A)  The costs associated with marketing a new range of wine in an international trade fair 
B)  The costs associated with researching a new variety of grapes 
C)  The costs associated with testing a new wine barrel 
D)  The costs associated with negotiating with and managing the farmers who supply the grapes 
A)  The costs associated with marketing a new range of wine in an international trade fair 
B)  The costs associated with researching a new variety of grapes 
C)  The costs associated with testing a new wine barrel 
D)  The costs associated with negotiating with and managing the farmers who supply the grapes

Question 2

Indirect costs:

Accepted Answer

A)  cannot be traced to a particular cost object. 
B)  cannot be economically traced to a particular cost object. 
C)  are always variable costs. 
D)  are always fixed costs. 
A)  cannot be traced to a particular cost object. 
B)  cannot be economically traced to a particular cost object. 
C)  are always variable costs. 
D)  are always fixed costs.

Question 3

Mydas Ltd operates a large factory which manufactures three types of motor vehicles, including family cars, sports cars and motorcycles. If the cost object is a motorcycle, which of the following is a direct cost?

Accepted Answer

A)  The costs of wheels on the motorcycle 
B)  The salary of the factory general manager 
C)  The salary of the factory quality inspector 
D)  The windscreen wipers on a family car 
A)  The costs of wheels on the motorcycle 
B)  The salary of the factory general manager 
C)  The salary of the factory quality inspector 
D)  The windscreen wipers on a family car

Question 4

Which of the following statements correctly completes this sentence? 'For a firm that manufactures floor tiles, when the tiles are completed and ready for sale ....'

Accepted Answer

A)  there is no change in the value of the firm's assets. 
B)  the firm's total assets are decreased. 
C)  the firm's total cost of the goods sold is increased. 
D)  the firm's work in process inventory is increased. 
A)  there is no change in the value of the firm's assets. 
B)  the firm's total assets are decreased. 
C)  the firm's total cost of the goods sold is increased. 
D)  the firm's work in process inventory is increased.

Question 5

The flow of manufacturing costs through the system is:

Accepted Answer

A)  raw materials inventory; work in process inventory; finished goods inventory; cost of goods sold. 
B)  raw materials inventory; work in process inventory; cost of goods sold; finished goods inventory. 
C)  work in process inventory; raw materials inventory; finished goods inventory; cost of goods sold. 
D)  raw materials inventory; finished goods inventory; work in process inventory; cost of goods sold. 
A)  raw materials inventory; work in process inventory; finished goods inventory; cost of goods sold. 
B)  raw materials inventory; work in process inventory; cost of goods sold; finished goods inventory. 
C)  work in process inventory; raw materials inventory; finished goods inventory; cost of goods sold. 
D)  raw materials inventory; finished goods inventory; work in process inventory; cost of goods sold.

Question 6

'Prime costs' is the term given to direct labour and direct materials, as they are the major costs directly associated with the manufacture of a product.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the following data.  
The conversion costs are:

Accepted Answer

A)  $150 000. 
B)  $142 000. 
C)  $182 000. 
D)  $190 000. 
A)  $150 000. 
B)  $142 000. 
C)  $182 000. 
D)  $190 000.

Question 8

Idle time is:

Accepted Answer

A)  frequently an avoidable cost. 
B)  classified as overhead. 
C)  caused by events such as equipment breakdown and new set-ups of production runs. 
D)  All of the given answers. 
A)  frequently an avoidable cost. 
B)  classified as overhead. 
C)  caused by events such as equipment breakdown and new set-ups of production runs. 
D)  All of the given answers.

Question 9

Fixed costs per unit decrease as activity levels increase.

Accepted Answer

A) True 
 B)False

Question 10

Variable costs:

Accepted Answer

A)  vary indirectly with changes in activity level. 
B)  vary directly with changes in activity level. 
C)  vary on a per unit basis. 
D)  vary indirectly with changes in activity level AND vary on a per unit basis. 
A)  vary indirectly with changes in activity level. 
B)  vary directly with changes in activity level. 
C)  vary on a per unit basis. 
D)  vary indirectly with changes in activity level AND vary on a per unit basis.

Question 11

Resources that are surrendered to achieve a particular objective in business are known as:

Accepted Answer

A)  resources. 
B)  expenses. 
C)  assets. 
D)  costs. 
A)  resources. 
B)  expenses. 
C)  assets. 
D)  costs.

Question 12

Eldervale Winery is a producer of premium wine. Which of the following is NOT an example of a downstream cost?

Accepted Answer

A)  The costs associated with random quality check during the wine production process 
B)  The costs associated with the sales team travelling to a wine show to promote Eldervale wine 
C)  The costs associated with delivering wine to customers 
D)  The costs associated with answering customer inquiries on the differences between wine varieties 
A)  The costs associated with random quality check during the wine production process 
B)  The costs associated with the sales team travelling to a wine show to promote Eldervale wine 
C)  The costs associated with delivering wine to customers 
D)  The costs associated with answering customer inquiries on the differences between wine varieties

Question 13

Production costs assist management to determine:

Accepted Answer

A)  sales revenue. 
B)  cost of goods sold. 
C)  gross profit. 
D)  net profit. 
A)  sales revenue. 
B)  cost of goods sold. 
C)  gross profit. 
D)  net profit.

Question 14

The Casual Furniture Company manufactures outdoor furniture and incurred the following costs during the month of January:  
The conversion costs are:

Accepted Answer

A)  $34 500. 
B)  $29 500. 
C)  $20 000. 
D)  $35 000. 
A)  $34 500. 
B)  $29 500. 
C)  $20 000. 
D)  $35 000.

Question 15

Modern management accounting places a much greater emphasis on non-financial information.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is true? A cost is:

Accepted Answer

A)  always an expense. 
B)  always an asset. 
C)  can be either an expense or an asset. 
D)  always a liability. 
A)  always an expense. 
B)  always an asset. 
C)  can be either an expense or an asset. 
D)  always a liability.

Question 17

Describe how the value chain can help a business analyse its cost structures. What is meant by upstream costs and downstream costs? Give examples.

Accepted Answer

By analysing the business's value chain,

Question 18

Eldervale Winery is a producer of premium wine. Which of the following is an example of a downstream cost?

Accepted Answer

A)  The costs associated with storing wine for customers 
B)  The costs associated with designing the labels on a wine bottle 
C)  The costs associated with researching a new variety of grapes 
D)  The costs associated with quality testing 
A)  The costs associated with storing wine for customers 
B)  The costs associated with designing the labels on a wine bottle 
C)  The costs associated with researching a new variety of grapes 
D)  The costs associated with quality testing

Question 19

On-costs on direct labour are classified as:

Accepted Answer

A)  direct labour. 
B)  indirect labour. 
C)  manufacturing overhead. 
D)  either direct labour or indirect labour depending on the decision made by the firm. 
A)  direct labour. 
B)  indirect labour. 
C)  manufacturing overhead. 
D)  either direct labour or indirect labour depending on the decision made by the firm.

Question 20

Which of the following is not an example of a manufacturing overhead?

Accepted Answer

A)  Assembly line workers' wages 
B)  Factory rent 
C)  Depreciation of factory machinery 
D)  Factory lighting 
A)  Assembly line workers' wages 
B)  Factory rent 
C)  Depreciation of factory machinery 
D)  Factory lighting

Exam 2: Management Accounting: Cost Terms and Concepts

Eldervale Winery is a producer of premium wine. Which of the following is NOT an example of an upstream cost?

Indirect costs:

Mydas Ltd operates a large factory which manufactures three types of motor vehicles, including family cars, sports cars and motorcycles. If the cost object is a motorcycle, which of the following is a direct cost?

Which of the following statements correctly completes this sentence? 'For a firm that manufactures floor tiles, when the tiles are completed and ready for sale ....'

The flow of manufacturing costs through the system is:

'Prime costs' is the term given to direct labour and direct materials, as they are the major costs directly associated with the manufacture of a product.

Refer to the following data. The conversion costs are:

Idle time is:

Fixed costs per unit decrease as activity levels increase.

Variable costs:

Resources that are surrendered to achieve a particular objective in business are known as:

Eldervale Winery is a producer of premium wine. Which of the following is NOT an example of a downstream cost?

Production costs assist management to determine:

The Casual Furniture Company manufactures outdoor furniture and incurred the following costs during the month of January: The conversion costs are:

Modern management accounting places a much greater emphasis on non-financial information.

Which of the following statements is true? A cost is:

Describe how the value chain can help a business analyse its cost structures. What is meant by upstream costs and downstream costs? Give examples.

Eldervale Winery is a producer of premium wine. Which of the following is an example of a downstream cost?

On-costs on direct labour are classified as:

Which of the following is not an example of a manufacturing overhead?

Management Accounting: Information for Creating Value and Managing Resources

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

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