acounting: exam 2

An example of a committed fixed cost is: A) management training seminars. B) a long-term equipment lease. C) research and development. D) advertising.

b

Contribution margin is: A) Sales less cost of goods sold. B) Sales less variable production, variable selling, and variable administrative expenses. C) Sales less variable production expense. D) Sales less all variable and fixed expenses.

b

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.

b

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.

b

Direct costs: A) are incurred to benefit a particular accounting period. B) are incurred due to a specific decision. C) can be easily traced to a particular cost object. D) are the variable costs of producing a product.

C

prime cost

Direct Materials + Direct Labor

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.

a

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

a

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.

a

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.

a

Manufacturing overhead includes: 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.

c

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.

c

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.

c

period cost

costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued

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.

d

Conversion Cost

direct labor + overhead

manufacturing cost

direct materials, direct labor, manufacturing overhead