True/False
[QUESTION]
1. A factory supervisor's salary would be classified as an indirect cost with respect to a unit of product.
Answer: T
Difficulty: 2 Medium
Learning Objective: 01-01
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
2. A direct cost is a cost that can be easily traced to the particular cost object under consideration.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-01
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
3. A cost can be direct or indirect. The classification can change if the cost object changes.
Answer: T
Difficulty: 2 Medium
Learning Objective: 01-01
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
4. Wages paid to production supervisors would be classified as manufacturing overhead.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-02
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
5. Selling costs are indirect costs.
Answer: F
Difficulty: 2 Medium
Learning Objective: 01-02
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
6. The sum of all manufacturing costs except for direct materials and direct labor is called manufacturing overhead.
Answer: T
Difficulty: 2 Medium
Learning Objective: 01-02
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
7. The three cost elements ordinarily included in product costs are direct materials, direct labor, and manufacturing
overhead.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-02
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
8. Administrative costs are indirect costs.
Answer: F
Difficulty: 2 Medium
Learning Objective: 01-02
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
9. Depreciation is always considered a period cost for external financial reporting purposes in a manufacturing company.
Answer: F
Difficulty: 2 Medium
Learning Objective: 01-02
Learning Objective: 01-03
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
10. Opportunity costs at a manufacturing company are not part of manufacturing overhead.
Answer: T
Difficulty: 3 Hard
Learning Objective: 01-02
Learning Objective: 01-05
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
11. Conversion cost is the sum of direct labor cost and manufacturing overhead cost.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-03
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
12. In a manufacturing company, all costs are period costs.
Answer: F
Difficulty: 1 Easy
Learning Objective: 01-03
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
13. Advertising is not a considered a product cost even if it promotes a specific product.
Answer: T
Difficulty: 2 Medium
Learning Objective: 01-03
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
14. Selling and administrative expenses are period costs under generally accepted accounting principles.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-03
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
15. Conversion cost equals product cost less direct materials cost.
Answer: T
Difficulty: 3 Hard
Learning Objective: 01-03
Topic Area:
Blooms: Analyze
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
16. Prime cost is the sum of direct materials cost and direct labor cost.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-03
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
17. Product costs are also known as inventoriable costs.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-03
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
18. Prime cost equals manufacturing overhead cost.
Answer: F
Difficulty: 3 Hard
Learning Objective: 01-03
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
19. Conversion cost is the same thing as manufacturing overhead.
Answer: F
Difficulty: 1 Easy
Learning Objective: 01-03
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
20. The cost of shipping parts from a supplier is considered a period cost.
Answer: F
Difficulty: 3 Hard
Learning Objective: 01-03
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
21. Depreciation on equipment a company uses in its selling and administrative activities would be classified as a period
cost.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-03
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
22. Indirect costs, such as manufacturing overhead, are variable costs.
Answer: F
Difficulty: 2 Medium
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
23. If the activity level increases, then one would expect the fixed cost per unit to increase as well.
Answer: F
Difficulty: 2 Medium
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
24. A fixed cost is a cost whose cost per unit varies as the activity level rises and falls.
Answer: T
Difficulty: 2 Medium
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
25. Cost behavior is considered curvilinear whenever a straight line is a reasonable approximation for the relation
between cost and activity.
Answer: F
Difficulty: 2 Medium
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
[QUESTION]
26. A decrease in production will ordinarily result in a decrease in fixed production costs per unit.
Answer: F
Difficulty: 2 Medium
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
27. As activity decreases within the relevant range, fixed costs remain constant on a per unit basis.
Answer: F
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
28. The variable cost per unit depends on how many units are produced.
Answer: F
Difficulty: 2 Medium
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
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: T
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
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: T
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
31. Committed fixed costs remain largely unchanged in the short run.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
32. Fixed costs expressed on a per unit basis do not change with changes in activity.
Answer: F
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
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: F
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
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: T
Difficulty: 3 Hard
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
35. Within the relevant range, a change in activity results in a change in variable cost per unit and total fixed cost.
Answer: F
Difficulty: 2 Medium
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
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: F
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
37. The concept of the relevant range does not apply to variable costs.
Answer: F
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
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: T
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
39. A fixed cost fluctuates in total as activity changes but remains constant on a per unit basis over the relevant range.
Answer: F
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
40. The relevant range is the range of activity within which the assumption that cost behavior is strictly linear is reasonably
valid.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
41. Variable costs per unit are not affected by changes in activity.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
42. The relevant range concept is applicable to mixed costs.
Answer: T
Difficulty: 2 Medium
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
43. A variable cost remains constant if expressed on a unit basis.
Answer: T
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
44. Committed fixed costs represent organizational investments with a one-year planning horizon.
Answer: F
Difficulty: 1 Easy
Learning Objective: 01-04
Topic Area:
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
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: T
Difficulty: 2 Medium
Learning Objective: 01-04
Topic Area:
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:
[QUESTION]
46. A fixed cost is not constant per unit of product.
Answer: T