Quiz 1

Which of the following is an example of a period cost in a company that makes clothing?

Advertising cost for a new line of clothing.

Rotonga Manufacturing Company leases a vehicle to deliver its finished products to customers. Which of the following terms correctly describes the monthly lease payments made on the delivery vehicle?

C) No Yes

The cost of direct materials is classified as a:

C) No Yes

The fixed portion of the cost of electricity for a manufacturing facility is classified as a:

C) No Yes

Which of the following is NOT a period cost?

Depreciation of factory maintenance equipment

Which of the following costs is classified as both a prime cost and a conversion cost?

Direct labor.

Which of the following statements is true when referring to fixed costs?

Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company.

Which costs will change with a decrease in activity within the relevant range?

Unit fixed costs and total variable cost.

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 _______________.

fixed, decreasing

When the level of activity decreases within the relevant range, the fixed cost per unit will:

increase.

The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n):

indirect material cost.

Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as:

manufacturing overhead.

Factory overhead is typically a(n):

mixed cost.

Property taxes on a company's factory building would be classified as a(n):

product cost.

Within the relevant range, a difference between variable costs and fixed costs is:

variable costs per unit are constant and fixed costs per unit fluctuate.

Within the relevant range, variable costs can be expected to:

vary in total in direct proportion to changes in the activity level.

As the level of activity increases, how will a mixed cost in total and per unit behave?

A) Increase Decrease

The cost of electricity for running production equipment is classified as:

A) Yes No

Direct labor cost is classified as:

A) Yes Yes

Which of the following approaches to preparing an income statement includes a calculation of the gross margin?

B) Yes No

A factory supervisor's wages are classified as:

B) Yes Yes

Which of the following is correct concerning reactions to INCREASES in activity?

D) Increase Constant

Wages paid to the supervisor of the warehouse where raw materials and parts are temporarily stored before being used in production is considered an example of:

D) No No

The costs of direct materials are classified as:

D) No Yes Yes

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?

Fixed manufacturing overhead.

Which of the following statements is correct in describing manufacturing overhead?

Manufacturing overhead consists of all manufacturing cost except for prime cost.

Which of the following costs could contain both variable and fixed cost elements with respect to the total output of the company?

Manufacturing overhead.

Which of the following is unlikely to be classified as a fixed cost with respect to the number of units produced and sold?

Production supplies.

Contribution margin is:

Sales less variable production, variable selling, and variable administrative expenses.

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?

The amount paid to the individual who stains a chair.

A merchandising company typically will have a high proportion of which type of cost in its cost structure?

Variable.

Which of the following statements concerning direct and indirect costs is NOT true?

Whether a particular cost is classified as direct or indirect does not depend on the cost object.

An example of a committed fixed cost is:

a long-term equipment lease.

Depreciation on a personal computer used in the marketing department of a manufacturing company would be classified as:

a period cost that is fixed with respect to the company's output.

The salary paid to the president of a company would be classified on the income statement as a(n):

administrative expense.

Manufacturing overhead includes:

all manufacturing costs except direct labor and direct materials.

Differential costs can:

be either fixed or variable.

Direct costs:

can be easily traced to a particular cost object.

Product costs that have become expenses can be found in:

cost of goods sold.

The relative proportion of variable, fixed, and mixed costs in a company is known as the company's:

cost structure.

Fixed costs expressed on a per unit basis:

decrease with increases in activity.

All of the following are examples of product costs except:

depreciation on the company's retail outlets.

Prime cost consists of:

direct materials and direct labor.

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:

step-variable cost.

A cost incurred in the past that is not relevant to any current decision is classified as a(n):

sunk cost.

The term that refers to costs incurred in the past that are not relevant to a decision is:

sunk cost.

All of the following can be differential costs except:

sunk costs.

An example of a committed fixed cost would be:

taxes on real estate.

In the standard cost formula Y = a + bX, what does the "X" represent?

the level of activity

In the standard cost formula Y = a + bX, what does the "Y" represent?

total cost

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:

variable cost.