Deck 2: Basic Managerial Accounting Concepts

Question 1

It is beneficial to assign indirect costs to cost objects.

Answer 1

True

Question 2

Price must be greater than cost in order for the firm to generate revenue.

Answer 2

False

Question 3

Indirect costs are costs that are not easily and accurately traced to a cost object.

Answer 3

True

Question 4

Direct costs are those costs that cannot be easily and accurately traced to a cost object.

Question 5

Assigning costs involves the way that a cost is linked to some cost object.

Question 6

An opportunity cost is the benefit given up or sacrificed when one alternative is chosen over another.

Question 7

Assigning costs tells the accountant who spent the money.

Question 8

A fixed cost is a cost that does not increase in total as output increases and does not decrease in total as output decreases.

Question 9

A cost object is any item such as products, customers, departments, regions, and so on, for which costs are measured and assigned.

Question 10

Reducing the cost required to achieve a given benefit means that a company is becoming less efficient.

Question 11

Expired costs are called assets.

Question 12

Allocation means that an indirect cost is assigned to a cost object using a reasonable and convenient method.

Question 13

A cost object is something for which a company wants to know the cost.

Question 14

A variable cost is one that does not increase in total as output increase and does not decrease in total as output decreases.

Question 15

Costs are incurred to produce future benefits.

Question 16

As costs are used up in the production of revenues, they are said to expire.Expired costs are called expenses.

Question 17

Costs are directly, not indirectly, associated with cost objects.

Question 18

Cost is a dollar measure of the resources used to achieve a given benefit.

Question 19

The revenue per unit is called cost.

Question 20

Accumulating costs is the way that costs are measured and recorded.

Question 21

Research and development costs would be classified as product cost.

Question 22

Glue used in the manufacture of cabinets would be an example of a fixed cost.

Question 23

Employees who convert direct materials into a product or who provide a service to customers are classified as indirect labor.

Question 24

Marketing costs would be classified as period costs.

Question 25

A factory building needs to hire janitorial services.This is classified as indirect labor.

Question 26

Cost of goods sold is the total product cost of the units sold during a period.

Question 27

All product costs other than direct materials and indirect labor are called overhead.

Question 28

Costs can be assigned to cost objects in only one way.

Question 29

Prime cost is the sum of direct materials cost and direct labor cost.

Question 30

Cost of goods manufactured represents the cost of direct materials, direct labor, and overhead incurred during the current accounting period.

Question 31

All manufacturing costs are classified as overhead.

Question 32

Period costs are all costs that are not product costs, such as office supplies.

Question 33

For external reporting purposes, costs must be classified into only three categories.

Question 34

Any costs associated with storing, selling, and delivering the product are classified as product costs.

Question 35

Industries that provide services do not normally have direct contact with their customers.

Question 36

Product costs include direct materials, direct labor, and selling costs.

Question 37

Property taxes on a factory building would normally be classified as a fixed cost.

Question 38

Sales revenue equals the product cost per unit times the number of units sold.

Question 39

Direct materials can be directly traced to the goods or services being produced.

Question 40

Product costs are carried in inventory until the goods are finished, then they are expensed.

Question 41

All product costs other than direct materials and direct labor are put into a category called _________________________.

Question 42

The process of assigning an indirect cost to a cost object by using a reasonable and convenient method is called _____________.

Question 43

________________ are those costs, both direct and indirect, of producing a product in a manufacturing firm or of acquiring a product in a merchandising firm and preparing it for sale.

Question 44

______________is the amount of cash or cash equivalent sacrificed for goods and/or services that are expected to bring a current or future benefit to the organization.

Question 45

Costs that can be easily and accurately traced to a cost object are called __________.

Question 46

Materials that become part of a product usually are classified as _______________.

Question 47

Expired costs are called ____________.

Question 48

Employees who convert direct materials into a product are classified as _____________.

Question 49

___________________ is the cost of the partially completed goods that are still on the factory floor at the end of a time period.

Question 50

________________ and _________________ costs are considered period costs.

Question 51

Organizations that produce products are called _______________________.

Question 52

_____________________ is the way that a cost is linked to some cost object.

Question 53

Insurance coverage, medical care, and accounting are examples of _________________ performed for customers.

Question 54

A(n) __________________ is any item such as a product, customer, department, project, geographic region, and so on, for which costs are measured and assigned.

Question 55

A(n)_________________ is the benefit given up or sacrificed when one alternative is chosen over another.

Question 56

A(n) ________________ is a cost that does not increase in total as output increase and does not decrease in total as output decreases.

Question 57

The difference between sales revenue and cost of goods sold is known as the ______________.

Question 58

______________________ is the sum of direct labor cost and manufacturing overhead cost.

Question 59

_________________ equals the sum of direct materials, direct labor, and manufacturing overhead.

Question 60

Gross margin is the difference between sales revenue and cost of goods sold.

Question 61

Product costs

A) are costs that are included in the determining the value of the inventory.
B) are manufacturing costs.
C) include direct materials, direct labor, and overhead.
D) are all of these.

Question 62

Which of the following is an example of direct labor?

A) vice president of marketing
B) assembly line worker for televisions
C) staff accountant
D) supervisor at a manufacturing plant

Question 63

Materials in the raw materials account do not become direct materials

A) until they are withdrawn from inventory for use in production.
B) until the finished product is sold.
C) until they are purchased from a vendor.
D) none of these are correct.

Question 64

An opportunity cost is:

A) the benefit given up or sacrificed when one alternative is chosen over another.
B) the cost to market, distribute, and service a product or service.
C) expensed in the period in which it is incurred; it is not inventoried.
D) the difference between gross margin and operating expenses.

Question 65

The ____________________________ represents that total product cost of goods completed during the current period and transferred to finished goods inventory.

Question 66

Product costs consist of

A) period costs.
B) indirect materials, indirect labor, and administrative costs.
C) direct materials, direct labor, and selling costs.
D) direct materials, direct labor, and overhead.

Question 67

Which of the following statements is true of cost?

A) Cost is the difference between gross margin and operating expenses.
B) Cost and price are always same for the owner of a company.
C) Cost is a dollar measure of the resources used to achieve a given benefit.
D) Cost is the revenue per unit.

Question 68

Costs are subdivided into what two major functional categories?

A) opportunity and allocation
B) fixed and variable
C) product and non-production
D) direct and indirect

Question 69

Which of the following is true of a variable cost?

A) A variable cost in total changes in direct proportion to changes in output within the relevant range.
B) A variable cost is a cost that is not linked to a company's output.
C) A variable cost in total remains constant regardless of the level of output.
D) A variable cost in total increases as output decreases and decreases as output increases.

Question 70

Which of the following is an example of a service?

A) motorcycle
B) eye exam
C) stereo
D) television

Question 71

Which of the following statements is true of assigning costs to a cost object?

A) Assigning costs to a cost object is the way that costs are measured and recorded.
B) Assigning costs to a cost object can be accomplished in a number of ways.
C) Assigning costs to a cost object typically is simpler than cost accumulation.
D) All of these

Question 72

Non-manufacturing costs include

A) marketing and administration.
B) direct materials.
C) indirect materials.
D) overhead.

Question 73

​Which of the following statements best describes an indirect cost?

A) An indirect cost can be easily and accurately traced to a cost object.
B) An indirect cost is assigned to a cost object using allocation.
C) It is not important to assign an indirect cost as it can be traced to a cost object.
D) None of these statements are true.

Question 74

Which of the following would be an example of a direct materials cost?

A) engine on an airplane
B) lubricant used to manufacture a lighting fixture
C) glue used to build cabinets
D) nails used to manufacture a table

Question 75

Which of the following is true of expired costs?

A) Expired costs are reported as fixed assets on a company's balance sheet.
B) Expired costs are added to revenue to determine income on the income statement.
C) Expired costs are used up in the production of revenue.
D) Expired costs are recognized as liabilities on the balance sheet.

Question 76

Which of the following is not an example of a direct materials cost?

A) shelves on a bookcase
B) engine in a car
C) tires on a bicycle
D) nails used to manufacture a desk

Question 77

Which of the following would not be a period cost?

A) research and development
B) direct materials
C) advertising costs
D) office supplies

Question 78

Which of the following is an example of a tangible product?

A) lawn care
B) accounting services
C) customer service
D) computer

Question 79

Which of the following is true of price?

A) Price must be greater than cost for a firm to earn income.
B) Price is the difference between gross margin and the cost of goods sold.
C) Price is a dollar measure of the resources used to achieve a given benefit.
D) Price is the difference between cost per unit and income per unit.

Question 80

Which of the following is true of assigning costs to cost objects?

A) Assigning costs to cost objects typically is more difficult than cost accumulation.
B) Assigning costs to cost objects can be accomplished in a number of ways.
C) The choice of a method for assigning costs to cost objects depends on a number of factors, such as the need for accuracy.
D) All of these are true.