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
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
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
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
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
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
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
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
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
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
