Deck 1: Cost Terminology and Cost Behaviors

Question 1

The portion of an asset that was consumed during a period is referred to an expired cost.

Answer 1

True

Question 2

A cost that shifts upward or downward when activity changes by a certain interval is referred to as a mixed cost.

Answer 2

False

Question 3

Unexpired costs are reflected on the balance sheet.

Answer 3

True

Question 4

Fixed cost per unit varies directly with production.

Question 5

If the cost of an additive is $5,000 + $0.50 for every unit of solvent produced, the cost is classified as a mixed cost.

Question 6

A specific product cannot be a cost object

Question 7

A fixed cost remains constant on a per-unit basis as production changes.

Question 8

The portion of an asset's value on the balance sheet is referred to as an expired cost.

Question 9

A production plant could be a cost object.

Question 10

A mixed cost will be an effective cost driver.

Question 11

The relevant range is valid for all levels of activity

Question 12

An indirect cost can be easily traced to a cost object.

Question 13

A variable cost will be an effective cost driver.

Question 14

A cost that shifts upward or downward when activity changes by a certain interval is referred to as a step cost.

Question 15

A variable cost remains constant on a per-unit basis as production increases

Question 16

Variable cost per unit remains constant within the relevant range.

Question 17

A predictor which has an absolute cause and effect relationship to a cost is referred to a cost driver.

Question 18

If the cost of an additive is $5,000 + $0.50 for every unit of solvent produced, the cost is classified as a step cost.

Question 19

Both accountants and economists view variable costs as linear in nature.

Question 20

A cost object is anything for which management wants to collect or accumulate costs.

Question 21

In a service industry, direct materials are usually insignificant in amount and cannot easily be traced to a cost object.

Question 22

In a service industry, direct materials are usually significant in amount and can be easily traced to a cost object.

Question 23

In an normal cost system, actual production overhead costs are accumulated in an Overhead Control account and assigned to Work in Process at the end of the period.

Question 24

There is an inverse relationship between prevention costs and failure costs.

Question 25

In an actual cost system, overhead is assigned to Work in Process Inventory with a credit entry to the account.

Question 26

Expired costs are reflected on the balance sheet.

Question 27

Retailers generally have a much higher degree of conversion than do manufacturing or professional firms.

Question 28

In an actual cost system, actual production overhead costs are accumulated in an Overhead Control account and assigned to Work in Process at the end of the period.

Question 29

Distribution costs are an example of period costs.

Question 30

Retailers generally have a much lower degree of conversion than do manufacturing or professional firms.

Question 31

In an actual cost system, overhead is assigned to Work in Process Inventory with a debit entry to the account.

Question 32

Distribution costs are an example of product costs.

Question 33

A cost that remains unchanged in total within the relevant range is known as a ____________________ cost.

Question 34

Costs that can be conveniently traced to a cost object are referred to as ____________________ costs.

Question 35

In a normal cost system, factory overhead is applied to Work in Process using a predetermined overhead rate.

Question 36

There is a direct relationship between prevention costs and failure costs.

Question 37

Anything for which management wants to accumulate or collect costs is known as a _________________________.

Question 38

In an actual cost system, factory overhead is applied to Work in Process using a predetermined overhead rate.

Question 39

Costs that cannot be conveniently traced to a cost object are known as ____________________ costs.

Question 40

It is not necessary to prepare the Cost of Goods Manufactured statement prior to preparing the Cost of Goods Sold statement.

Question 41

Which of the following would generally be considered a fixed factory overhead cost? $\begin{array}{ll}\text { Straight-line}&\text { Factory } & \text { Units-of-production } \\\underline{\text { depreciation}}&\underline{\text { insurance} } &\underline{ \text { depreciation }}\end{array}$

A) no no no
B) yes no yes
C) yes yes no
D) no yes no

Question 42

Another name for inventoriable costs is ____________________ costs.

Question 43

A cost that shifts upward or downward when activity changes by a certain interval is referred to as a ____________________ cost.

Question 44

Which of the following defines variable cost behavior? $\begin{array}{llcc} \text {Total cost reaction } & \text {Cost per urit reaction } \\ \text { to increase in activity } & \text {to increase in activity } \end{array}$

A) remains constant remains constant
B) remains constant increases
C) increases increases
D) increases remains constant

Question 45

The three stages of production for a manufacturing firm are _________________________, ______________________________, and _________________________.

Question 46

Costs that result from defective units, product returns, and complaints are referred to as ____________________ costs.

Question 47

A cost that remains constant on a per unit basis within the relevant range is a ____________________ cost.

Question 48

A cost that has both fixed and variable components is known as a ____________________ cost.

Question 49

When the number of units manufactured increases, the most significant change in unit cost will be reflected as a(n)

A) increase in the fixed element.
B) decrease in the variable element.
C) increase in the mixed element.
D) decrease in the fixed element.

Question 50

The term "relevant range" as used in cost accounting means the range over which

A) costs may fluctuate.
B) cost relationships are valid.
C) production may vary.
D) relevant costs are incurred.

Question 51

A cost that varies in total in direct proportion to changes in activity is known as a ____________________ cost

Question 52

A cost that varies inversely with the level of production is known as a ____________________ cost.

Question 53

When cost relationships are linear, total variable prime costs will vary in proportion to changes in

A) direct labor hours.
B) total material cost.
C) total overhead cost.
D) production volume.

Question 54

A(n) ____ cost increases or decreases in intervals as activity changes.

A) historical cost
B) fixed cost
C) step cost
D) budgeted cost

Question 55

The assumed range of activity that reflects the company's normal operating range is referred to as the ______________________________.

Question 56

A cost that remains constant in total but varies on a per-unit basis with changes in activity is called a(n)

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

Question 57

Which of the following always has a direct cause-effect relationship to a cost? $\begin{array}{llcc} \underline{ \text { Predictor } }& \underline{ \text { Cost driver} }\\\end{array}$

A) yes yes
B) yes no
C) no yes
D) no no

Question 58

An example of a fixed cost is

A) total indirect material cost.
B) total hourly wages.
C) cost of electricity.
D) straight-line depreciation.

Question 59

Costs incurred for monitoring or inspecting products are known as ____________________ costs.

Question 60

Costs that are incurred to improve quality by precluding defects and improper processing are referred to as ____________________ costs.

Question 61

Langley Company is a construction company that builds houses on special request. What is the proper classification of indirect material used? $\underline{\text { Prime }}\quad\underline{\text {Conversion }} \quad\underline{ \text { Variable} }$

A) no no no
B) no yes yes
C) yes yes yes
D) yes no no

Question 62

A selling cost is a(n) $\begin{array}{llcc} \underline{ \text {podiuct cost }} &\underline{ \text { period cost } }&\underline{ \text { inventoriable cost} }\\\end{array}$

A) yes yes no
B) yes no no
C) no yes no
D) no yes yes

Question 63

All costs related to the manufacturing function in a company are

A) prime costs.
B) direct costs.
C) product costs.
D) conversion costs.

Question 64

The three primary inventory accounts in a manufacturing company are

A) Merchandise Inventory, Supplies Inventory, and Finished Goods Inventory.
B) Merchandise Inventory, Work in Process Inventory, and Finished Goods Inventory.
C) Supplies Inventory, Work in Process Inventory, and Finished Goods Inventory.
D) Raw Material Inventory, Work in Process Inventory, and Finished Goods Inventory.

Question 65

Period costs include $\begin{array}{llcc} \underline{\text {clistribution costs }} & \underline{ \text {outsude processing costs } }&\underline{ \text { sales commissions }} \\\end{array}$

A) yes no yes
B) no yes yes
C) no no no
D) yes yes yes

Question 66

Langley Company is a construction company that builds houses on special request. What is the proper classification of the carpenters' wages? $\begin{array}{lll}\underline{\text { Product }} & \underline{\text { Period }} & \underline{\text { Direct }}\end{array}$

A) yes yes no
B) yes no yes
C) no no no
D) no yes yes

Question 67

Cost of Goods Sold is an

A) unexpired product cost.
B) expired product cost.
C) unexpired period cost.
D) expired period cost.

Question 68

Which of the following is not a product cost component?

A) rent on a factory building
B) indirect production labor wages
C) janitorial supplies used in a factory
D) commission on the sale of a product

Question 69

Langley Company is a construction company that builds houses on special request. What is the proper classification of the cost of the cement building slab used? $\underline{\text { Direct }} \quad\underline{ \text { Fixed }}$

A) no no
B) no yes
C) yes yes
D) yes no

Question 70

Prime cost consists of $\begin{array}{llcc} \underline{\text { direct material } }&\underline{ \text { direct labor }} & \underline{ \text {overhead }}\\\end{array}$

A) no yes no
B) yes yes no
C) yes no yes
D) no yes yes

Question 71

Which of the following costs would be considered overhead in the production of chocolate chip cookies?

A) flour
B) chocolate chips
C) sugar
D) oven electricity

Question 72

The term "prime cost" refers to

A) all manufacturing costs incurred to produce units of output.
B) all manufacturing costs other than direct labor and raw material costs.
C) raw material purchased and direct labor costs.
D) the raw material used and direct labor costs.

Question 73

The distinction between direct and indirect costs depends on whether a cost

A) is controllable or non-controllable.
B) is variable or fixed.
C) can be conveniently and physically traced to a cost object under consideration.
D) will increase with changes in levels of activity.

Question 74

Plastic used to manufacture dolls is a $\begin{array}{llcc}\underline{ \text { prime cost } }&\underline{ \text { product cost }}&\underline{ \text { direct cost} }&\underline{ \text {fixed cost }} \\\end{array}$

A) no yes yes yes
B) yes no yes no
C) yes yes no yes
D) yes yes yes no

Question 75

Which of the following would need to be allocated to a cost object?

A) direct material
B) direct labor
C) direct production costs
D) indirect production costs

Question 76

Period costs

A) are generally expensed in the same period in which they are incurred.
B) are always variable costs.
C) remain unchanged over a given period of time.
D) are associated with the periodic inventory method.

Question 77

A cost driver

A) causes fixed costs to rise because of production changes.
B) has a direct cause-effect relationship to a cost.
C) can predict the cost behavior of a variable, but not a fixed, cost.
D) is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.

Question 78

The indirect costs of converting raw material into finished goods are called

A) period costs.
B) prime costs.
C) overhead costs.
D) conversion costs.

Question 79

Product costs are deducted from revenue

A) as expenditures are made.
B) when production is completed.
C) as goods are sold.
D) to minimize taxable income.

Question 80

Conversion cost does not include

A) direct labor.
B) direct material.
C) factory depreciation.
D) supervisors' salaries.