Question 1

Direct materials are an example of a

Accepted Answer

A)  fixed cost.
B)  variable cost.
C)  step cost.
D)  mixed cost.E) A) and D)
F) B) and D)

Question 2

Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that starts at the origin and reaches a maximum value and beyond the point that the line becomes parallel to the horizontal axis?

Accepted Answer

A)  total direct material costs
B)  a consultant paid £100 per hour with a maximum fee of £2,000
C)  employees who are paid £15 per hour and guaranteed a minimum weekly wage of £300
D)  rent on exhibit space at a conventionE) A) and B)
F) B) and C)

Question 3

Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that is parallel to the horizontal axis?

Accepted Answer

A)  total direct material costs
B)  a consultant paid £75 per hour with a maximum fee of £1,200
C)  employees who are paid £10 per hour and guaranteed a minimum weekly wage of £200
D)  rent on exhibit space at a conventionE) B) and D)
F) B) and C)

Question 4

Product costs are converted from cost to expense when

Accepted Answer

A)  units are completed.
B)  materials are purchased.
C)  units are sold.
D)  materials are requisitioned.E) A) and B)
F) A) and C)

Question 5

Which of the following is an example of a step-fixed cost?

Accepted Answer

A)  cost of disposable surgical scissors, which are purchased in increments of 100
B)  cost of soaking solution to clean jewelry (Each jar can soak 50 rings before losing effectiveness.) 
C)  cost of tuition at £300 per credit hour up to 15 credit hours (Hours taken in excess of 15 hours are free.) 
D)  cost of disposable gowns used by patients in a hospitalE) A) and B)
F) B) and D)

Question 6

Which of the following is a period cost?

Accepted Answer

A)  the production supervisor's salary
B)  direct labour
C)  property taxes on the office building
D)  property taxes on the production facilitiesE) B) and C)
F) B) and D)

Question 7

Which of the following costs is a period cost for a manufacturing company?

Accepted Answer

A)  accountant's salary
B)  wages of machine operators
C)  insurance on factory equipment
D)  fringe benefits on factory employeesE) A) and B)
F) A) and C)

Question 8

Direct costs

Accepted Answer

A)  are incurred for the benefit of the business as a whole.
B)  would continue even if a particular product were discontinued.
C)  can be assigned to product only by a process of allocation.
D)  are those costs that can be easily and accurately traced to a cost objective.E) None of the above
F) B) and C)

Question 9

Which of the following is an example of a variable cost?

Accepted Answer

A)  insurance on the production equipment
B)  direct materials
C)  the production supervisor's salary
D)  depreciation of the factory buildingE) B) and C)
F) A) and C)

Question 10

Selling and administrative costs are classified as

Accepted Answer

A)  product costs.
B)  conversion costs.
C)  period costs.
D)  factory overhead.E) None of the above
F) B) and C)

Question 11

Which of the following costs would be classified as variable costs with respect to volume?

Accepted Answer

A)  property taxes on the manufacturing facility
B)  the wheels on an automobile
C)  the cost of installing production equipment
D)  all of the aboveE) A) and B)
F) B) and C)

Question 12

TEK, Inc., is considering whether to replace a production machine with a newer model of the same machine. If TEK keeps the old machine, the trade-in value of the old equipment is an example of a(n)

Accepted Answer

A)  sunk cost.
B)  opportunity cost.
C)  avoidable cost.
D)  imputed cost.E) C) and D)
F) None of the above

Question 13

Variable costs,

Accepted Answer

A)  in total, remain constant within a relevant range.
B)  on a per unit basis, are constant as activity increases or decreases.
C)  on a per unit basis, decreases as activity decreases.
D)  in total, decrease when activity increases.E) B) and C)
F) None of the above

Question 14

Which of the following costs is NOT recorded in the company's accounting system?

Accepted Answer

A)  sunk cost
B)  opportunity cost
C)  direct cost
D)  indirect costE) None of the above
F) B) and D)

Question 15

Which of the following is an example of a fixed cost?

Accepted Answer

A)  power cost in the machining department
B)  wood in the manufacture of furniture
C)  labour cost paid on a piece basis
D)  lease payments on machineryE) A) and C)
F) B) and C)

Question 16

An example of a period cost is

Accepted Answer

A)  insurance on factory equipment.
B)  chief executive's salary.
C)  property taxes on factory building.
D)  wages of factory custodians.E) A) and B)
F) A) and C)

Question 17

A supervisor's salary of £2,000 per month is an example of a

Accepted Answer

A)  fixed cost.
B)  variable cost.
C)  step cost.
D)  mixed cost.E) B) and C)
F) All of the above

Question 18

Which of the following costs is a variable cost?

Accepted Answer

A)  supervisors' salaries
B)  research and development
C)  materials used in production
D)  rentE) None of the above
F) A) and C)

Question 19

Mixed costs

Accepted Answer

A)  are step costs.
B)  in total, remain constant within a relevant range.
C)  have a fixed and variable component.
D)  on a per unit basis, are constant as activity increases or decreases.E) A) and B)
F) B) and C)

Question 20

Which of the following items would NOT be classified as part of factory overhead of a firm that makes sailboats?

Accepted Answer

A)  factory supplies used
B)  canvas used in sail
C)  depreciation of factory buildings
D)  indirect materialsE) A) and B)
F) B) and D)

Exam 2: An Introduction to Cost Terms and Concepts

Selling and administrative costs are classified as

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Which of the following is an example of a variable cost?

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Which of the following costs is NOT recorded in the company's accounting system?

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Which of the following costs is a period cost for a manufacturing company?

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Which of the following is an example of a fixed cost?

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Which of the following costs is a variable cost?

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A supervisor's salary of £2,000 per month is an example of a

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Variable costs,

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Direct materials are an example of a

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Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that starts at the origin and reaches a maximum value and beyond the point that the line becomes parallel to the horizontal axis?

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TEK, Inc., is considering whether to replace a production machine with a newer model of the same machine. If TEK keeps the old machine, the trade-in value of the old equipment is an example of a(n)

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An example of a period cost is

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Which of the following is an example of a step-fixed cost?

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Which of the following is a period cost?

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Direct costs

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Product costs are converted from cost to expense when

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Which of the following costs would be classified as variable costs with respect to volume?

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Which of the following items would NOT be classified as part of factory overhead of a firm that makes sailboats?

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Mixed costs

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Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that is parallel to the horizontal axis?

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