Deck 2: Cost Terminology and Cost Behaviors

Question 1

A mixed cost will be an effective cost driver.

Answer 1

False

Question 2

A specific product cannot be a cost object.

Answer 2

False

Question 3

If the cost of an additive is $5,000 + $0.50 for every unit of solvent produced, the cost is classified as a mixed cost.

Answer 3

True

Question 4

If the cost of an additive is $5,000 + $0.50 for every unit of solvent produced, the cost is classified as a step cost.

Question 5

Variable cost per unit remains constant within the relevant range.

Question 6

Unexpired costs are reflected on the balance sheet.

Question 7

A variable cost remains constant on a per-unit basis as production increases.

Question 8

A cost that shifts upward or downward when activity changes by a certain interval is referred to as a mixed cost.

Question 9

A fixed cost remains constant on a per-unit basis as production changes.

Question 10

Fixed cost per unit varies directly with production.

Question 11

The relevant range is valid for all levels of activity.

Question 12

An indirect cost can be easily traced to a cost object.

Question 13

A variable cost will be an effective cost driver.

Question 14

The portion of an asset's value on the balance sheet is referred to as an expired cost.

Question 15

The portion of an asset that was consumed during a period is referred to an expired cost.

Question 16

A predictor which has an absolute cause and effect relationship to a cost is referred to a cost driver.

Question 17

Both accountants and economists view variable costs as linear in nature.

Question 18

A production plant could be a cost object.

Question 19

A cost object is anything for which management wants to collect or accumulate costs.

Question 20

A cost that shifts upward or downward when activity changes by a certain interval is referred to as a step cost.

Question 21

There is typically a direct relationship between prevention costs and failure costs.

Question 22

Distribution costs are an example of product costs.

Question 23

Distribution costs are an example of period costs.

Question 24

In an actual cost system, factory overhead is applied to Work in Process using a predetermined overhead rate.

Question 25

In a normal cost system, actual production overhead costs are typically accumulated in an Overhead Control account and assigned to Work in Process at the end of the period.

Question 26

There is typically an inverse relationship between prevention costs and failure costs.

Question 27

Expired costs are reflected on the balance sheet.

Question 28

In a service industry, direct materials are usually significant in amount and can be easily traced to a cost object.

Question 29

Retailers generally have a much lower degree of conversion than do manufacturing or professional firms.

Question 30

Retailers generally have a much higher degree of conversion than do manufacturing or professional firms.

Question 31

It is not necessary to prepare the Cost of Goods Manufactured statement prior to preparing the Cost of Goods Sold statement.

Question 32

Anything for which management wants to accumulate or collect costs is known as a _________________________.

Question 33

Costs that can be conveniently traced to a cost object are referred to as ____________________ costs.

Question 34

In a normal cost system, factory overhead is applied to Work in Process using a predetermined overhead rate.

Question 35

In a service industry, direct materials are usually insignificant in amount and can not easily be traced to a cost object.

Question 36

A cost that remains unchanged in total within the relevant range is known as a ____________________ cost.

Question 37

Costs that cannot be conveniently traced to a cost object are known as ____________________ costs.

Question 38

In an actual cost system, overhead is assigned to Work in Process Inventory with a debit entry to the account.

Question 39

In an actual cost system, overhead is assigned to Work in Process Inventory with a credit entry to the account.

Question 40

In an actual cost system, actual production overhead costs are typically accumulated in an Overhead Control account and assigned to Work in Process at the end of the period.

Question 41

Costs that are incurred to improve quality by precluding defects and improper processing are referred to as ____________________ costs.

Question 42

The term "relevant range" as used in cost accounting means the range over which

A) costs may fluctuate.
B) cost relationships are valid.
C) production may vary.
D) relevant costs are incurred.

Question 43

Another name for inventoriable costs is ____________________ costs.

Question 44

Costs incurred for monitoring or inspecting products are known as ____________________ costs.

Question 45

Costs that result from defective units, product returns, and complaints are referred to as ____________________ costs.

Question 46

A cost that varies inversely with the level of production is known as a ____________________ cost.

Question 47

Which of the following defines variable cost behavior?

A) remains constant remains constant
B) remains constant increases
C) increases increases
D) increases remains constant

Question 48

A cost that remains constant in total but varies on a per-unit basis with changes in activity is called a(n)

A) expired cost.
B) fixed cost.
C) variable cost.
D) mixed cost.

Question 49

When cost relationships are linear, total variable prime costs will vary in proportion to changes in

A) direct labor hours.
B) total material cost.
C) total overhead cost.
D) production volume.

Question 50

An example of a fixed cost is

A) total indirect material cost.
B) total hourly wages.
C) cost of electricity.
D) straight-line depreciation.

Question 51

The assumed range of activity that reflects the company's normal operating range is referred to as the ______________________________.

Question 52

A(n) ____ cost increases or decreases in intervals as activity changes.

A) historical cost
B) fixed cost
C) step cost
D) budgeted cost

Question 53

When the number of units manufactured increases, the most significant change in unit cost will be reflected as a(n)

A) increase in the fixed element.
B) decrease in the variable element.
C) increase in the mixed element.
D) decrease in the fixed element.

Question 54

A cost that has both fixed and variable components is known as a ____________________ cost.

Question 55

A cost that shifts upward or downward when activity changes by a certain interval is referred to as a ____________________ cost.

Question 56

Which of the following always has a direct cause-effect relationship to a cost?

A) yes yes
B) yes no
C) no yes
D) no no

Question 57

The three stages of production for a manufacturing firm are _________________________, ______________________________, and _________________________.

Question 58

Which of the following would generally be considered a fixed factory overhead cost?

A) no no no
B) yes no yes
C) yes yes no
D) no yes no

Question 59

A cost that varies in total in direct proportion to changes in activity is known as a ____________________ cost

Question 60

A cost that remains constant on a per unit basis within the relevant range is a ____________________ cost.

Question 61

Period costs

A) are expensed in the same period in which they are incurred.
B) are always variable costs.
C) remain unchanged over a given period of time.
D) are associated with the periodic inventory method.

Question 62

Conversion cost does not include

A) direct labor.
B) direct material.
C) factory depreciation.
D) supervisors' salaries.

Question 63

The distinction between direct and indirect costs depends on whether a cost

A) is controllable or non-controllable.
B) is variable or fixed.
C) can be conveniently and physically traced to a cost object under consideration.
D) will increase with changes in levels of activity.

Question 64

Product costs are deducted from revenue

A) as expenditures are made.
B) when production is completed.
C) as goods are sold.
D) to minimize taxable income.

Question 65

Prime cost consists of

A) no yes no
B) yes yes no
C) yes no yes
D) no yes yes

Question 66

Moore Company is a construction company that builds greenhouses on special request. What is the proper classification of indirect material used?

A) no no no
B) no yes yes
C) yes yes yes
D) yes no no

Question 67

The indirect costs of converting raw material into finished goods are called

A) period costs.
B) prime costs.
C) overhead costs.
D) conversion costs.

Question 68

A selling cost is a(n)

A) yes yes no
B) yes no no
C) no yes no
D) no yes yes

Question 69

The three primary inventory accounts in a manufacturing company are

A) Merchandise Inventory, Supplies Inventory, and Finished Goods Inventory.
B) Merchandise Inventory, Work in Process Inventory, and Finished Goods Inventory.
C) Supplies Inventory, Work in Process Inventory, and Finished Goods Inventory.
D) Raw Material Inventory, Work in Process Inventory, and Finished Goods Inventory.

Question 70

Cost of Goods Sold is an

A) unexpired product cost.
B) expired product cost.
C) unexpired period cost.
D) expired period cost.

Question 71

Which of the following costs would be considered overhead in the production of chocolate chip cookies?

A) flour
B) chocolate chips
C) sugar
D) oven electricity

Question 72

Which of the following is not a product cost component?

A) rent on a factory building
B) indirect production labor wages
C) janitorial supplies used in a factory
D) commission on the sale of a product

Question 73

Which of the following would need to be allocated to a cost object?

A) direct material
B) direct labor
C) direct production costs
D) indirect production costs

Question 74

A cost driver

A) causes fixed costs to rise because of production changes.
B) has a direct cause-effect relationship to a cost.
C) can predict the cost behavior of a variable, but not a fixed, cost.
D) is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.

Question 75

Plastic used to manufacture dolls is a

A) no yes yes yes
B) yes no yes no
C) yes yes no yes
D) yes yes yes no

Question 76

Moore Company is a construction company that builds greenhouses on special request. What is the proper classification of the carpenters' wages?

A) yes yes no
B) yes no yes
C) no no no
D) no yes yes

Question 77

Period costs include

A) yes no yes
B) no yes yes
C) no no no
D) yes yes yes

Question 78

Moore Company is a construction company that builds greenhouses on special request. What is the proper classification of the cost of the cement building slab used?

A) no no
B) no yes
C) yes yes
D) yes no

Question 79

All costs related to the manufacturing function in a company are

A) prime costs.
B) direct costs.
C) product costs.
D) conversion costs.

Question 80

The term "prime cost" refers to

A) all manufacturing costs incurred to produce units of output.
B) all manufacturing costs other than direct labor and raw material costs.
C) raw material purchased and direct labor costs.
D) the raw material used and direct labor costs.