A) all direct material, direct labor and administrative costs.
B) all manufacturing costs except direct labor.
C) all manufacturing costs except direct labor and direct materials.
D) all selling and administrative costs.
68) Materials used in a factory that are not an integral part of the final product, such as cleaning
supplies, should be classified as:
A) direct materials.
B) a period cost.
C) administrative expense.
D) manufacturing overhead.
69) The salary paid to the president of a company would be classified on the income statement as
a(n):
A) administrative expense.
B) direct labor cost.
C) manufacturing overhead cost.
D) selling expense.
70) Which of the following is NOT a period cost?
A) Depreciation of factory maintenance equipment.
B) Salary of a clerk who handles customer billing.
C) Insurance on a company showroom where customers can view new products.
D) Cost of a seminar concerning tax law updates that was attended by the company’s controller.
71) The cost of electricity for running production equipment is classified as:
Conversion cost
Period cost
A)
Yes
No
B)
Yes
Yes
C)
No
Yes
D)
No
No
A) Choice A
B) Choice B
C) Choice C
D) Choice D
72) The cost of lubricants used to grease a production machine in a manufacturing company is an
example of a(n):
A) period cost.
B) direct material cost.
C) indirect material cost.
D) opportunity cost.
73) Wages paid to the factory warehouse foreman are considered an example of:
Direct Labor
Period Cost
A)
Yes
Yes
B)
Yes
No
C)
No
Yes
D)
No
No
A) Choice A
B) Choice B
C) Choice C
D) Choice D
74) A factory supervisor’s wages are classified as:
Indirect labor
Fixed manufacturing
overhead
A)
No
No
B)
Yes
Yes
C)
Yes
No
D)
No
Yes
A) Choice A
B) Choice B
C) Choice C
D) Choice D
75) Product costs that have become expenses can be found in:
A) period costs.
B) selling expenses.
C) cost of goods sold.
D) administrative expenses.
76) The cost of direct materials is classified as a:
Conversion cost
Prime cost
A)
No
No
B)
Yes
No
C)
No
Yes
D)
Yes
Yes
A) Choice A
B) Choice B
C) Choice C
D) Choice D
77) Which of the following costs is classified as both a prime cost and a conversion cost?
A) Direct materials.
B) Direct labor.
C) Variable overhead.
D) Fixed overhead.
78) Which of the following is an example of a period cost in a company that makes clothing?
A) Fabric used to produce men’s pants.
B) Advertising cost for a new line of clothing.
C) Factory supervisor’s salary.
D) Monthly depreciation on production equipment.
79) All of the following are examples of product costs except:
A) depreciation on the company’s retail outlets.
B) salary of the plant manager.
C) insurance on the factory equipment.
D) rental costs of factory equipment.
80) Which of the following statements about product costs is true?
A) Product costs are deducted from revenue when the production process is completed.
B) Product costs are deducted from revenue as expenditures are made.
C) Product costs associated with unsold finished goods and work in process appear on the balance
sheet as assets.
D) Product costs appear on financial statements only when products are sold.
81) Which of the following statements is correct in describing manufacturing overhead?
A) Manufacturing overhead when combined with direct materials cost forms conversion cost.
B) Manufacturing overhead consists of all manufacturing cost except for prime cost.
C) Manufacturing overhead is a period cost.
D) Manufacturing overhead when combined with direct labor cost forms prime cost.
82) Direct labor cost is classified as:
Conversion cost
Prime Cost
A)
Yes
Yes
B)
No
No
C)
No
Yes
D)
Yes
No
A) Choice A
B) Choice B
C) Choice C
D) Choice D
83) The fixed portion of the cost of electricity for a manufacturing facility is classified as a:
Period cost
Product Cost
A)
Yes
Yes
B)
No
No
C)
No
Yes
D)
Yes
No
A) Choice A
B) Choice B
C) Choice C
D) Choice D
84) Prime cost consists of:
A) direct labor and manufacturing overhead.
B) direct materials and manufacturing overhead.
C) direct materials and direct labor.
D) direct materials, direct labor and manufacturing overhead.
85) Depreciation on a personal computer used in the marketing department of a manufacturing
company would be classified as:
A) a product cost that is fixed with respect to the company’s output.
B) a period cost that is fixed with respect to the company’s output.
C) a product cost that is variable with respect to the company’s output.
D) a period cost that is variable with respect to the company’s output.
86) Property taxes on a company’s factory building would be classified as a(n):
A) product cost.
B) opportunity cost.
C) period cost.
D) variable cost.
87) Factory overhead is typically a(n):
A) mixed cost.
B) fixed cost.
C) variable cost.
D) irrelevant cost.
88) As the level of activity increases, how will a mixed cost in total and per unit behave?
In Total
Per Unit
A)
Increase
Decrease
B)
Increase
Increase
C)
Increase
No effect
D)
Decrease
Increase
E)
Decrease
No effect
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E
89) The following data have been collected for four different cost items.
Cost Item
Cost at
100 units
Cost at
140 units
W
$
8,000
$
10,560
X
$
5,000
$
5,000
Y
$
6,500
$
9,100
Z
$
6,700
$
8,580
Which of the following classifications of these cost items by cost behavior is correct?
The costs of direct materials are classified as:
Cost W
Cost X
Cost Y
Cost Z
A)
variable
fixed
mixed
variable
B)
mixed
fixed
variable
mixed
C)
variable
fixed
variable
variable
D)
mixed
fixed
mixed
mixed
A) Choice A
B) Choice B
C) Choice C
D) Choice D
90) Within the relevant range, variable costs can be expected to:
A) vary in total in direct proportion to changes in the activity level.
B) remain constant in total as the activity level changes.
C) increase on a per unit basis as the activity level increases.
D) increase on a per unit basis as the activity level decreases.
91) The relative proportion of variable, fixed, and mixed costs in a company is known as the
company’s:
A) contribution margin.
B) cost structure.
C) product mix.
D) relevant range.
92) An example of a committed fixed cost is:
A) management training seminars.
B) a long-term equipment lease.
C) research and development.
D) advertising.
93) For the past 8 months, Jinan Corporation has experienced a steady increase in its cost per unit
even though total costs have remained stable. This cost per unit increase may be due to ________
costs if the level of activity at Jinan is ________.
A) fixed, decreasing
B) fixed, increasing
C) variable, decreasing
D) variable, increasing
94) Which of the following statements is true when referring to fixed costs?
A) Committed fixed costs arise from the annual decisions by management.
B) As volume increases, unit fixed cost and total fixed cost will change.
C) Fixed costs increase in total throughout the relevant range.
D) Discretionary fixed costs can often be reduced to zero for short periods of time without
seriously impairing the long-run goals of the company.
95) Which costs will change with a decrease in activity within the relevant range?
A) Total fixed costs and total variable cost.
B) Unit fixed costs and total variable cost.
C) Unit variable cost and unit fixed cost.
D) Unit fixed cost and total fixed cost.
96) Which of the following is correct concerning reactions to INCREASES in activity?
Total Variable Cost
Variable Cost Per Unit
A)
Increase
Decrease
B)
Constant
Decrease
C)
Decrease
Constant
D)
Increase
Constant
A) Choice A
B) Choice B
C) Choice C
D) Choice D
97) For an automobile manufacturer, the cost of a driver’s side air bag purchased from a supplier
and installed in every automobile would best be described as a:
A) fixed cost.
B) mixed cost.
C) step-variable cost.
D) variable cost.
98) Fixed costs expressed on a per unit basis:
A) increase with increases in activity.
B) decrease with increases in activity.
C) are not affected by activity.
D) should be ignored in making decisions since they cannot change.
99) Within the relevant range, a difference between variable costs and fixed costs is:
A) variable costs per unit fluctuate and fixed costs per unit remain constant.
B) variable costs per unit are constant and fixed costs per unit fluctuate.
C) both total variable costs and total fixed costs are constant.
D) both total variable costs and total fixed costs fluctuate.
100) A merchandising company typically will have a high proportion of which type of cost in its
cost structure?
A) Variable.
B) Fixed.
C) Mixed.
D) Step-variable.
101) When the level of activity decreases within the relevant range, the fixed cost per unit will:
A) decrease.
B) increase.
C) remain the same.
D) The effect cannot be predicted.
102) Which of the following production costs, if expressed on a per unit basis, would be most
likely to change significantly as the production level varies?
A) Direct materials.
B) Direct labor.
C) Fixed manufacturing overhead.
D) Variable costs.
103) In the standard cost formula Y = a + bX, what does the “Y” represent?
A) total cost
B) total fixed cost
C) total variable cost
D) variable cost per unit
104) An example of a committed fixed cost would be:
A) taxes on real estate.
B) management development programs.
C) public relations costs.
D) advertising programs.
105) In the standard cost formula Y = a + bX, what does the “X” represent?
A) total cost
B) total fixed cost
C) the level of activity
D) variable cost per unit
106) One full-time clerical worker is needed for every 750 accounts receivable. The total wages of
the accounts receivable clerks is an example of a:
A) fixed cost.
B) step-variable cost.
C) mixed cost.
D) curvilinear cost.
107) Which of the following is unlikely to be classified as a fixed cost with respect to the number
of units produced and sold?
A) Property taxes on a headquarters building.
B) Legal department salaries.
C) Cost of leasing the company’s mainframe computer.
D) Production supplies.
108) Which of the following costs could contain both variable and fixed cost elements with respect
to the total output of the company?
A) Sales commissions.
B) Manufacturing overhead.
C) Direct materials.
D) Administrative salaries.