COMM 305 Chapter 2

The high-low method is a quick means of separating fixed and variable costs.

True

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

True

Which of the following would most likely be viewed as indirect materials? a) ball bearings associated with an industrial tractor wheel b) axle grease associated with the suspension of a new car c) new tires for a commercial truck d) cost of boring a cylinder in assembly

b) axle grease associated with the suspension of a new car

In which of the following categories do indirect materials belong? a) Period Cost b) Product Cost c) Product Cost and Manufacturing Overhead d) Product Cost, Manufacturing Overhead and Period Cost

c) Product Cost and Manufacturing Overhead

Examples of fixed costs include all but one of the following: a) cost of factory rent for the 12 month contract term b) cost of Janet's apartment rent during her 3rd year of university c) cost of a car rental which includes a fee per km driven d) a one-week rental of a carpet cleaning machine

c) cost of a car rental which includes a fee per km driven

Fixed costs are costs that remain the same per unit regardless of changes in the activity level.

False

Manufacturing costs that cannot be classified as direct material or direct labour are classified as operating expenses.

False

Both direct and indirect materials may physically become part of the finished product.

True

Product costs are costs that are a necessary and integral part of the producing the finished product.

True

If the ending work in process inventory is less than the beginning work in process inventory, then the cost of goods manufactured will be less than total manufacturing costs for the period.

False

Raw materials are equal to direct materials.

False

Raw materials inventory is NOT an asset until it is used to make a product.

False

The cost of beginning work in process plus the total manufacturing costs for the current period is the cost of goods manufactured.

False

Which of the following is true? a) Within the relevant range a valid argument can be made for the assumption of linearity of variable costs b) At the upper and lower limits of the relevant range of company activity, linearity of variable c) costs is a given c) The relevant range is reflective of the relevant range of products a company offers to its customers d) Fixed costs vary in total within the relevant range

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

Which one of the following represents a period cost? a) company advertisement b) depreciation of plant equipment c) production manager's salary d) direct materials

a) company advertisement

Which of the following is considered manufacturing overhead? a) depreciation on the press that moulds the plastic into work in process b) the line worker's Christmas bonus designated by management c) tools that were originally utilized for production but are currently being used by management ti fix a copier in the upstairs corporate office d) the courier charge for delivering a new ball bearing joint for a robotic paint arm

a) depreciation on the press that moulds the plastic into work in process

Which of the following are period costs? a) workers wage in the shipping department b) factory workers wages paid for statutory holidays c) workers wages in the plant maintenance department d) workers wages on an assembly line

a) workers wage in the shipping department