ACC 202 Chapter 1 Quiz
true
in a traditional format income statement, the gross margin minus selling and administrative expenses equals net operating income
true
in account analysis an account is classified as either variable or fixed based on an analysts prior knowledge of how the cost in account behaves
true
product costs are also known as inventoriable costs
true
selling and administrative expenses are period costs under generally accepting accounting principles
true
the amount that a manufacturing company could earn by renting unused portions of its warehouse is an example of an opportunity cost
true
the contribution format income statement is used as an internal planning and decision making tool. Its emphasis is on cost behavior aids cost volume profit analysis, management performance appraisals, and budgeting.
true
the cost of napkins put on each persons tray at a fast food restaurant is a variable cost with respect to how many persons are served
false
the potential benefit that is given up when one alternative is selected over another is called a sunk cost
true
the relevant range is the range of activity within which the assumption that cost behavior is strictly linear is reasonably valid
true
the three elements ordinarily included in product costs are direct materials, direct labor, and manufacturing overhead
true
traditional format income statements are widely used for preparing external financial statements
true
variable costs per unit are not affected by changes in activity
true
wages paid to production supervisors would be classified as manufacturing overhead
false
contribution format income statements are prepared primarily for external reporting purposes
false
conversion cost is the same thing as manufacturing overhead
true
conversion cost is the sum of direct labor cost and manufacturing overhead cost
false
A fixed cost is constant if expressed on a per unit basis but the total dollar amount changes as the number of units increases or decreases
true
depreciation on equipment a company uses in its selling and administrative activities would be classified as a period cost
false
in a contribution format income statement for a merchandising company, the costs of goods sold reports the product costs attached to the merchandise sold during the period.
false
in a manufacturing company all costs are period costs
false
in a traditional format income statement for a merchandising company, cost of goods sold is a variable cost that is included in the "variable expenses" portion of the income statement
false
The concept of relevant range does not apply to variable costs
true
a contribution format income statement separates costs into fixed and variable categories, first deducting variable expenses from sales to obtain the contribution margin
false
a cost that differs from one month to another is known as a sunk cost
true
a direct cost is a cost that can be easily traced to the particular cost object under consideration
false
a fixed cost fluctuates in total as activity changes but remains constant on a per unit basis over the relevant range.
true
a step variable cost is a cost that is obtained in large chunks and that increases or decreases only in response to fairly wide changes in activity
true
a variable cost remains constant if expressed on a per unit basis
true
although the traditional format income statement is useful for external reporting purposes, it has serious limitations when used for internal purposes because it does not distinguish between fixed and variable costs
false
as activity decreases within the relevant range, fixed costs remain constant on a per unit basis
true
committed fixed costs may remain largely unchanged in the short run
false
committed fixed costs represent organizational investments with one year planning horizon