Question 1

Variable costs vary exponentially with the changes in the company's activity level.

Accepted Answer

A) True 
 B)False

Question 2

Direct material costs and direct labour costs are prime costs.

Accepted Answer

A) True 
 B)False

Question 3

Within the relevant range a valid argument can be made for the assumption of linearity of variable costs

Accepted Answer

A) True 
 B)False

Question 4

Variable costs

Accepted Answer

A) vary in total as activity varies. 
B) vary on a per unit basis as activity varies. 
C) are unpredictable. 
D) None of the above.

Question 5

Use the following information for questions . 
-What does the slope represent?

Accepted Answer

A) The rate at which the X variable changes as a result of the Y variable 
B) The rate at which the Y variable changes as a result of the X variable 
C) The rate at which the dependent variable changes as a result of the fixed cost component 
D) The rate at which the independent variable changes as a result of changes in the dependent variable

Question 6

A company uses sandpaper in its production process.How is the cost of the sandpaper classified?

Accepted Answer

A) An insignificant expense that can be ignored 
B) A direct material 
C) A period cost 
D) A product cost

Question 7

Which one of the following costs would be included in manufacturing overhead of a lawn mower manufacturer?

Accepted Answer

A) The cost of the wheels 
B) The cost of the fuel lines that run from the motor to the gas tank 
C) Depreciation on the testing equipment 
D) The wages earned by motor assemblers

Question 8

What the high-low method may lack in precision, it makes up for in efficiency and ease of use.

Accepted Answer

A) True 
 B)False

Question 9

For 2012, Sparkman Company has cost of goods manufactured of $500,000, beginning finished goods inventory of $25,000, and ending finished goods inventory of $20,000.How much is cost of goods sold?

Accepted Answer

A) $505,000 
B) $495,000 
C) $545,000 
D) $455,000

Question 10

Both direct material cost and indirect material cost are product costs.

Accepted Answer

A) True 
 B)False

Question 11

An activity level can be expressed in sales dollars, kilometres driven, units produced, number of dance classes taught or percentage of rooms occupied.

Accepted Answer

A) True 
 B)False

Question 12

Which one of the following is an example of a period cost?

Accepted Answer

A) A change in benefits for the union workers who work in the Toronto plant of a Fortune 1000 manufacturer 
B) Workers' compensation insurance on factory workers wages allocated to the factory 
C) A processor used to produce computers 
D) A manager's salary for work performed in the corporate head office

Question 13

A curvilinear relationship between variable costs and changes in activity levels suggests what?

Accepted Answer

A) A strictly linear relationship between fixed costs and activity levels is implausible. 
B) A strictly curvilinear relationship between changes in activity levels and variable costs is possible only within the relevant range. 
C) Since the relationship between activity levels and variable costs is linear within the relevant range and less linear at lower and higher levels outside the relevant range, the straight-line (linear) relationship takes on a curvature in the real world. 
D) None of the above.

Question 14

The relevant range is reflective of the relevant range of products a company offers to its customers.

Accepted Answer

A) True 
 B)False

Question 15

Fees for office telephones are

Accepted Answer

A) Fixed period costs. 
B) Mixed period costs. 
C) Variable period costs. 
D) Direct, fixed or variable period costs.

Question 16

Which of the following are period costs?

Accepted Answer

A) Income taxes and indirect materials 
B) Selling and administrative expenses 
C) Indirect labour 
D) Advertising and factory depreciation

Question 17

Where would you expect to find depreciation on factory equipment?

Accepted Answer

A) Included with Depreciation Expense on the income statement 
B) In the manufacturing overhead section of the costs of goods manufactured schedule 
C) Only on the income statement as part of cost of goods sold 
D) As a period cost in the operating expense section of the income statement

Question 18

Use the following information for questions . 
-Using the high-low method, what is the slope for this set of data?

Accepted Answer

A) $9 
B) $0.09 
C) $11.11 
D) $540

Question 19

Finished goods inventory for a manufacturing company is equivalent to merchandise inventory for a merchandising company.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following are considered product costs?

Accepted Answer

A) Period costs and administrative expenses 
B) Selling and administrative expenses 
C) Inventoriable costs and plant assets 
D) Direct labour costs and manufacturing overhead

Exam 2: Managerial Cost Concepts and Cost Behaviour Analysis

Variable costs vary exponentially with the changes in the company's activity level.

Direct material costs and direct labour costs are prime costs.

Within the relevant range a valid argument can be made for the assumption of linearity of variable costs

Variable costs

Use the following information for questions . -What does the slope represent?

A company uses sandpaper in its production process.How is the cost of the sandpaper classified?

Which one of the following costs would be included in manufacturing overhead of a lawn mower manufacturer?

What the high-low method may lack in precision, it makes up for in efficiency and ease of use.

For 2012, Sparkman Company has cost of goods manufactured of $500,000, beginning finished goods inventory of $25,000, and ending finished goods inventory of $20,000.How much is cost of goods sold?

Both direct material cost and indirect material cost are product costs.

An activity level can be expressed in sales dollars, kilometres driven, units produced, number of dance classes taught or percentage of rooms occupied.

Which one of the following is an example of a period cost?

A curvilinear relationship between variable costs and changes in activity levels suggests what?

The relevant range is reflective of the relevant range of products a company offers to its customers.

Fees for office telephones are

Which of the following are period costs?

Where would you expect to find depreciation on factory equipment?

Use the following information for questions . -Using the high-low method, what is the slope for this set of data?

Finished goods inventory for a manufacturing company is equivalent to merchandise inventory for a merchandising company.

Which of the following are considered product costs?