Managerial Accounting Eric Noreen 5th Edition- Test Bank

Managerial Accounting for Managers, 5e (Noreen) Chapter 1 Managerial Accounting and Cost Concepts 1) A factory supervisor's salary would be classified as an indirect cost with respect to a unit of product. Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 2) A direct cost is a cost that can be easily traced to the particular cost object under consideration. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Assigning Costs to Cost Objects Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 3) A cost can be direct or indirect. The classification can change if the cost object changes. Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 1 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 4) Wages paid to production supervisors would be classified as manufacturing overhead. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 5) Selling costs are indirect costs. Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 6) The sum of all manufacturing costs except for direct materials and direct labor is called manufacturing overhead. Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 7) The three cost elements ordinarily included in product costs are direct materials, direct labor, and manufacturing overhead. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 2 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 8) Administrative costs are indirect costs. Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 9) Depreciation is always considered a period cost for external financial reporting purposes in a manufacturing company. Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 10) Opportunity costs at a manufacturing company are not part of manufacturing overhead. Answer: TRUE Difficulty: 3 Hard Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Decision Making Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 3 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 11) Conversion cost is the sum of direct labor cost and manufacturing overhead cost. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 12) In a manufacturing company, all costs are period costs. Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 13) Advertising is not considered a product cost even if it promotes a specific product. Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 14) Selling and administrative expenses are period costs under generally accepted accounting principles. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 4 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 15) Conversion cost equals product cost less direct materials cost. Answer: TRUE Difficulty: 3 Hard Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Analyze AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 16) Prime cost is the sum of direct materials cost and direct labor cost. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 17) Product costs are also known as inventoriable costs. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 18) Prime cost equals manufacturing overhead cost. Answer: FALSE Difficulty: 3 Hard Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 5 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19) Conversion cost is the same thing as manufacturing overhead. Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 20) The cost of shipping parts from a supplier is considered a period cost. Answer: FALSE Difficulty: 3 Hard Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 21) Depreciation on equipment a company uses in its selling and administrative activities would be classified as a period cost. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 22) Indirect costs, such as manufacturing overhead, are variable costs. Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 6 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 23) If the activity level increases, then one would expect the fixed cost per unit to increase as well. Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 24) A fixed cost is a cost whose cost per unit varies as the activity level rises and falls. Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 25) Cost behavior is considered curvilinear whenever a straight line is a reasonable approximation for the relation between cost and activity. Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 26) A decrease in production will ordinarily result in a decrease in fixed production costs per unit. Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Analytical Thinking AICPA: BB Critical Thinking; FN Measurement 7 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 27) As activity decreases within the relevant range, fixed costs remain constant on a per unit basis. Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 28) The variable cost per unit depends on how many units are produced. Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 29) In account analysis, an account is classified as either variable or fixed based on an analyst's prior knowledge of how the cost in the account behaves. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 30) 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. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 8 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 31) Committed fixed costs remain largely unchanged in the short run. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 32) Fixed costs expressed on a per unit basis do not change with changes in activity. Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 33) 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. Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Analytical Thinking AICPA: BB Critical Thinking; FN Measurement 34) If managers are reluctant to lay off direct labor employees when activity declines leads to a decrease in the ratio of variable to fixed costs. Answer: TRUE Difficulty: 3 Hard Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 9 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 35) Within the relevant range, a change in activity results in a change in variable cost per unit and total fixed cost. Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 36) When operations are interrupted or cut back, committed fixed costs are cut in the short term because the costs of restoring them later are likely to be far less than the short-run savings that are realized Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 37) The concept of the relevant range does not apply to variable costs. Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 10 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 38) The cost of napkins put on each person's tray at a fast food restaurant is a variable cost with respect to how many persons are served. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 39) A fixed cost fluctuates in total as activity changes but remains constant on a per unit basis over the relevant range. Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 40) The relevant range is the range of activity within which the assumption that cost behavior is strictly linear is reasonably valid. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 41) Variable costs per unit are not affected by changes in activity. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Analytical Thinking AICPA: BB Critical Thinking; FN Measurement 11 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 42) The relevant range concept is applicable to mixed costs. Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 43) A variable cost remains constant if expressed on a unit basis. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 44) Committed fixed costs represent organizational investments with a one-year planning horizon. Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 45) The following costs are all examples of committed fixed costs: depreciation on buildings, salaries of highly trained engineers, real estate taxes, and insurance expenses. Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 12 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 46) A fixed cost is not constant per unit of product. Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 47) Differential costs can only be variable. Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Decision Making; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 48) The potential benefit that is given up when one alternative is selected over another is called a sunk cost. Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Decision Making Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 13 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 49) The amount that a manufacturing company could earn by renting unused portions of its warehouse is an example of an opportunity cost. Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Decision Making Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 50) A cost that differs from one month to another is known as a sunk cost. Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Decision Making Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 51) In a traditional format income statement, the gross margin is sales minus cost of goods sold. Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 52) 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. Answer: FALSE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 14 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 53) In a contribution format income statement for a merchandising company, the cost of goods sold reports the product costs attached to the merchandise sold during the period. Answer: FALSE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 54) Contribution format income statements are prepared primarily for external reporting purposes Answer: FALSE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 55) Contribution margin and gross margin mean the same thing. Answer: FALSE Difficulty: 2 Medium Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 56) In a traditional format income statement, the gross margin minus selling and administrative expenses equals net operating income. Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 15 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 57) Most companies use the contribution approach in preparing financial statements for external reporting purposes. Answer: FALSE Difficulty: 2 Medium Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 58) 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. Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 59) The contribution format income statement is used as an internal planning and decision- making tool. Its emphasis on cost behavior aids cost-volume-profit analysis, management performance appraisals, and budgeting. Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 16 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 60) A contribution format income statement separates costs into fixed and variable categories, first deducting variable expenses from sales to obtain the contribution margin. Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 61) Traditional format income statements are widely used for preparing external financial statements. Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 62) Which of the following statements concerning direct and indirect costs is NOT true? A) Whether a particular cost is classified as direct or indirect does not depend on the cost object. B) A direct cost is one that can be easily traced to the particular cost object. C) The factory manager's salary would be classified as an indirect cost of producing one unit of product. D) A particular cost may be direct or indirect, depending on the cost object. Answer: A Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 17 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 63) 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. Answer: C Difficulty: 1 Easy Topic: Cost Classifications for Assigning Costs to Cost Objects Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 64) Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory? A) The cost of the glue in a chair. B) The amount paid to the individual who stains a chair. C) The workman's compensation insurance of the supervisor who oversees production. D) The factory utilities of the department in which production takes place. Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects; Cost Classifications for Manufacturing Companies Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.; 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 18 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 65) 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? A) Direct Cost - Yes; Fixed Cost - Yes B) Direct Cost - Yes; Fixed Cost - No C) Direct Cost - No; Fixed Cost - Yes D) Direct Cost - No; Fixed Cost - No Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 66) The costs of direct materials are classified as: Conversion cost Manufacturing cost A) Yes Yes B) No No No C) Yes D) No A) Choice A B) Choice B C) Choice C D) Choice D Yes No Yes Yes Answer: D Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 19 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Prime cost Yes 67) 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. Answer: C Difficulty: 1 Easy Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 68) Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as: A) direct materials. B) a period cost. C) administrative expense. D) manufacturing overhead. Answer: D Difficulty: 1 Easy Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 69) 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. Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 20 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 70) Which of the following is NOT a period cost? A) Depreciation of factory maintenance equipment. B) Salary of a clerk who handles customer billing. C) Insurance on a company showroom where customers can view new products. D) Cost of a seminar concerning tax law updates that was attended by the company's controller. Answer: A Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 71) The cost of electricity for running production equipment is classified as: Conversion cost Yes Yes No Answer: A Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 21 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. A) B) C) D) No No A) Choice A B) Choice B C) Choice C D) Choice D Period cost No Yes Yes 72) 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. Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 73) 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: Direct Labor Yes Yes No Answer: D Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 22 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. A) B) C) D) No No A) Choice A B) Choice B C) Choice C D) Choice D Period Cost Yes No Yes 74) A factory supervisor's wages are classified as: A) Indirect labor - No; Fixed manufacturing overhead - No B) Indirect labor - Yes; Fixed manufacturing overhead - Yes C) Indirect labor - Yes; Fixed manufacturing overhead - No D) Indirect labor - No; Fixed manufacturing overhead - Yes Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 75) Product costs that have become expenses can be found in: A) period costs. B) selling expenses. C) cost of goods sold. D) administrative expenses. Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 23 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 76) The cost of direct materials is classified as a: Conversion cost Prime cost A) No No B) Yes No C) No Yes D) Yes Yes A) Choice A B) Choice B C) Choice C D) Choice D Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 77) 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. Answer: B Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 24 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 78) Which of the following is an example of a period cost in a company that makes clothing? A) Fabric used to produce men's pants. B) Advertising cost for a new line of clothing. C) Factory supervisor's salary. D) Monthly depreciation on production equipment. Answer: B Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 79) All of the following are examples of product costs except: A) depreciation on the company's retail outlets. B) salary of the plant manager. C) insurance on the factory equipment. D) rental costs of factory equipment. Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 80) Which of the following statements about product costs is true? A) Product costs are deducted from revenue when the production process is completed. B) Product costs are deducted from revenue as expenditures are made. C) Product costs associated with unsold finished goods and work in process appear on the balance sheet as assets. D) Product costs appear on financial statements only when products are sold. Answer: C Difficulty: 3 Hard Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 25 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 81) Which of the following statements is correct in describing manufacturing overhead? A) Manufacturing overhead when combined with direct materials cost forms conversion cost. B) Manufacturing overhead consists of all manufacturing cost except for prime cost. C) Manufacturing overhead is a period cost. D) Manufacturing overhead when combined with direct labor cost forms prime cost. Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 82) Direct labor cost is classified as: Conversion cost Prime Cost A) Yes Yes B) No No C) No Yes D) Yes No A) Choice A B) Choice B C) Choice C D) Choice D Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 26 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 83) The fixed portion of the cost of electricity for a manufacturing facility is classified as a: Period cost Product Cost A) Yes Yes B) No No C) No Yes D) Yes No A) Choice A B) Choice B C) Choice C D) Choice D Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 84) 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. Answer: C Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 27 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 85) Depreciation on a personal computer used in the marketing department of a manufacturing company would be classified as: A) a product cost that is fixed with respect to the company's output. B) a period cost that is fixed with respect to the company's output. C) a product cost that is variable with respect to the company's output. D) a period cost that is variable with respect to the company's output. Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 86) Property taxes on a company's factory building would be classified as a(n): A) product cost. B) opportunity cost. C) period cost. D) variable cost. Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements; Cost Classifications for Decision Making; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.; 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 28 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 87) Factory overhead is typically a(n): A) mixed cost. B) fixed cost. C) variable cost. D) irrelevant cost. Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 88) As A) B) C) D) E) A) Choice A B) Choice B C) Choice C D) Choice D E) Choice E the level of activity increases, how will a mixed cost in total and per unit behave? In Total Increase Increase Increase Decrease Decrease Per Unit Decrease Increase No effect Increase No effect Answer: A Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 29 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 89) The following data have been collected for four different cost items. Cost at Cost Item 100 units W$ 8,000 X$ 5,000 Y$ 6,500 Z$ 6,700 Cost at 140 units $ 10,560 $ 5,000 $ 9,100 $ 8,580 Which of the following classifications of these cost items by cost behavior is correct? A) B) C) D) Cost W variable mixed variable mixed Cost X fixed fixed fixed fixed Cost Y mixed variable variable mixed Cost Z variable mixed variable mixed A) Choice A B) Choice B C) Choice C D) Choice D Answer: B Difficulty: 3 Hard Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 30 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 90) 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. Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 91) The relative proportion of variable, fixed, and mixed costs in a company is known as the company's: A) contribution margin. B) cost structure. C) product mix. D) relevant range. Answer: B Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 92) An example of a committed fixed cost is: A) management training seminars. B) a long-term equipment lease. C) research and development. D) advertising. Answer: B Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 31 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 93) 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 ________. A) fixed, decreasing B) fixed, increasing C) variable, decreasing D) variable, increasing Answer: A Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 94) 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. Answer: D Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement garrison managerial accounting test bank, managerial accounting test bank, managerial accounting test bank pdf, managerial accounting test bank chapter 10, managerial accounting test bank chapter 3,