Chapter 1 Accounting

Which of the following statements is true? (You may select more than one answer.)

Traditional income statements exclude fixed selling expenses from the computation of gross margin. Contribution format income statements exclude all fixed expenses from the computation of contribution margin.

In months 1 and 2, a company's total selling expense was $64,000 and $80,000, respectively, at sales volumes of 8,000 and 12,000 units, respectively. Using the high-low method, what is the company's estimated selling expense in month 3 if it plans to sell 11,000 units?

$76,000

Which of the following statements is true? (You may select more than one answer.)

Direct labor is a manufacturing cost and a product cost. Nonmanufacturing costs are treated as period costs.

Which of the following statements is true? (You may select more than one answer.)

Indirect materials and indirect labor are included in manufacturing overhead. Examples of selling costs include sales commissions, advertising, shipping, and the costs of operating finished goods warehouses. For financial accounting purposes, product costs include direct materials, direct labor, and manufacturing overhead.

Which of the following statements is true? (You may select more than one answer.)

Opportunity costs are not usually recorded in the accounts of an organization. A particular cost may be direct or indirect depending on the cost object.

Which of the following cost behavior assumptions is true? (You may select more than one answer.)

Variable costs are constant if expressed on a per unit basis. Total variable costs increase as the level of activity increases.

Assume the following: (1) three people go to a restaurant, (2) each person orders a soda for $2 and the group of three orders a large pizza to share for a price of $12, and (3) a fourth person joins the group and orders one soda and is invited to share in eating the pizza. Which of the following statements is false? (You may select more than one answer.)

When the fourth person joined the group the total cost of the large pizza increased to $16.

Which of the following statements is true with respect to the equation Y = a + bX? (You may select more than one answer.)

Y equals the total amount of the mixed cost. a equals the total fixed cost included in the mixed cost. X equals the level of activity.