Deck 2: Basic Cost Management Concepts

Question 1

In a company that supplies garlic bread to pizza restaurants, which of the following would NOT be considered an input?

A) delivered garlic bread
B) flour
C) garlic
D) oil

Answer 1

A

Question 2

Which of the following is a cost management subsystem designed to provide accurate and timely feedback concerning the performance of managers and others relative to their planning and control of activities?

A) financial accounting information system
B) operational control information system
C) cost accounting information system
D) all of these

Answer 2

B

Question 3

In a company that supplies garlic bread to pizza restaurants, delivered garlic bread to pizza restaurants would be a(n)

A) interrelated part.
B) input.
C) output.
D) process.

Answer 3

C

Question 4

Which of the following is NOT an objective of the operational control system?

A) increasing value to customers
B) increasing profit by providing value
C) Increasing post purchase costs
D) all of these

Question 5

Which of the following is a major subsystem of the cost accounting information system?

A) ERP
B) operational control information system
C) OLAP
D) EDI

Question 6

The _______________ is an accounting information subsystem that is primarily concerned with producing outputs for external users.

A) cost management information system
B) computer system
C) internal accounting system
D) financial accounting information system

Question 7

The overall objective of accounting information systems is to

A) provide information to users.
B) manage the organization.
C) prepare financial reports.
D) report to the government.

Question 8

In a company that supplies garlic bread to pizza restaurants, which of the following would be considered a transforming process?

A) delivered garlic bread
B) baking
C) garlic
D) oil

Question 9

_______________ is(are) the cash or cash equivalent value sacrificed for goods and services that are expected to bring a current or future benefit to the organization.

A) Expenses
B) Cost
C) An activity
D) A loss

Question 10

In a company that supplies garlic bread to pizza restaurants, which of the following would NOT be considered a transforming process?

A) delivered garlic bread
B) baking
C) packaging
D) mixing

Question 11

Which of the following is NOT one of the features of an operational control information system?

A) to assist in continuous improvement of all aspects of the business
B) to improve the value received by customers
C) to improve profits by improving value
D) to provide product cost information needed by management

Question 12

In an accounting information system, which of the following is NOT a transformation process?

A) collecting data
B) analyzing data
C) performance reports
D) summarizing data

Question 13

A(n) _______________ is a set of interrelated parts that performs one or more processes to accomplish specific objectives.

A) cost objective
B) system
C) activity
D) cost driver

Question 14

Which of the following is a cost management subsystem designed to assign costs to individual products and services and other objects, as specified by management?

A) financial accounting information system
B) operational control information system
C) cost accounting information system
D) all of these

Question 15

High quality cost management systems should have an organization-wide perspective.Which of the following would NOT be a benefit of a cost management system?

A) increases speed by ignoring non-financial information
B) reduces duplicate data storage and use of data
C) improves timeliness of reports
D) increases the efficiency of generating reliable and accurate information

Question 16

The ____________ is a cost management subsystem designed to provide accurate and timely feedback concerning the performance of managers and others relative to their planning and control activities.

A) cost accounting information system
B) financial accounting system
C) operational control information system
D) tax reporting system

Question 17

_______________ represents the resources given up that are expected to bring a current or future benefit to the organization.

A) Cost
B) Expired cost
C) Expense
D) Loss

Question 18

In an accounting information system, the inputs are usually

A) financial statements.
B) analyzing data.
C) performance reports.
D) economic events.

Question 19

A(n) _______________ is a computerized information system that strives to input data once and to make it available to people across the company for different purposes.

A) cost management information system
B) enterprise resource planning system
C) internal accounting system
D) financial accounting information system

Question 20

In a company that supplies garlic bread to pizza restaurants, which of the following would be considered an input?

A) delivered garlic bread
B) flour
C) baking
D) none of these

Question 21

Direct costs

A) are incurred for the benefit of the business as a whole.
B) would continue even if a particular product were discontinued.
C) can be assigned to products only by a process of allocation.
D) are those costs that can be easily and accurately traced to a cost object.

Question 22

The direct costs of operating a university computer center would NOT include

A) rent paid for computers.
B) a fair share of university utilities.
C) paper used by the center.
D) computer consultants' salaries.

Question 23

Which of the following would NOT be a cost that could be directly traced to a custom piece of furniture based upon physical observation?

A) the wood and upholstery materials that are in the final piece
B) the labor of the worker assembling the piece of furniture
C) the depreciation paid on factory equipment
D) the labor of the woodworker who finishes the wood of the piece

Question 24

Which of the following methods of assigning costs is based on convenience or some assumed linkage, and reduces the overall accuracy of the cost assignments?

A) direct tracing
B) driver tracing
C) allocation
D) all of these

Question 25

Which of the following costs incurred by a bus manufacturer would NOT be directly attributable to the finished product?

A) the wages paid to assembly-line production workers
B) the tires for buses
C) the windshields for buses
D) the depreciation on factory building

Question 26

Which cost assignment method would likely assign the cost of an assembly-line supervisor when the assembly line is the cost object?

A) driver tracing
B) direct tracing
C) allocation
D) arbitration

Question 27

_______________ refers to the assignment of indirect costs to cost objects.

A) Allocation
B) Direct tracing
C) Physical observation
D) Cost management

Question 28

Which of the following is an example of a possible cost object?

A) a product
B) a customer
C) a department
D) all of these

Question 29

Which of the following is an example of a loss?

A) the cost of a product delivered to a customer
B) the cost of a delivered advertising campaign
C) the cost of the purchase of equipment
D) the write-off of an obsolete product

Question 30

Which of the following is an example of an expense?

A) the cost of a product delivered to a customer
B) the cost of a proposed advertising campaign
C) the cost of the purchase of equipment
D) the write-off of an obsolete product

Question 31

The insurance paid on the factory is

A) a direct cost if the cost object is the factory.
B) an indirect cost if the cost object is the product produced.
C) could be either a direct cost or an indirect cost, depending on the cost object.
D) all of these.

Question 32

The precision of driving tracing depends upon

A) physically observable relationships.
B) allocation estimations.
C) the strength of causal relationships described by the driver.
D) both b and c.

Question 33

Which cost assignment method would likely assign the cost of maintenance for machines in a department that does cutting when the cutting activity is the cost object?

A) driver tracing
B) direct tracing
C) allocation
D) arbitration

Question 34

Factors that cause changes in resource usage, activity usage, costs and revenues are called

A) indirect costs.
B) drivers.
C) assignments.
D) cost objects.

Question 35

A cost used up in the production of revenues is a(n)

A) unexpired cost.
B) expense.
C) loss.
D) asset.

Question 36

Traceability is a function of

A) an indirect relationship to the cost object.
B) distortion.
C) a causal relationship.
D) none of these.

Question 37

Which of the following expenses incurred by a department store is a direct cost for the women's shoe department?

A) the salespersons' commissions in the women's shoe department
B) the salaries for individuals working in the accounting department
C) the advertising expense for the service department
D) the allocated rent expense for the clothing department

Question 38

Which cost assignment method would likely assign the cost of heating in a plant that makes chairs and go-carts when the chair product line is the cost object?

A) driver tracing
B) direct tracing
C) allocation
D) arbitration

Question 39

What is a disadvantage of assigning costs evenly over all cost objects?

A) not all costs will be assigned
B) total costs will be distorted
C) costs may be distorted by consumption patterns of other cost objects
D) none of these

Question 40

Which of the following costs incurred by a chair manufacturer would be traced to the product cost through direct tracing?

A) the depreciation on factory equipment
B) the supervisor's salary
C) the insurance on the factory building
D) the woodworker's salary

Question 41

Which of the following costs incurred by a furniture manufacturer would be a product cost?

A) lumber
B) office salaries
C) commissions paid to sales staff
D) controller's salary

Question 42

Which of the following costs would be included in value-chain product costs?

A) research and development
B) production
C) customer service
D) all of these

Question 43

If physical observation can NOT be used to identify the exact amount of resources consumed by a cost object, the next best approach is

A) driver tracing.
B) allocation.
C) estimation.
D) none of these.

Question 44

With regards to products, perishability can be defined as

A) buyers of products who can not see, feel, hear or taste the product before it is bought.
B) services that cannot be stored.
C) buyers and sellers who must be in direct contact for the sale to take place.
D) buyers of the product who do not need direct contact with the manufacturer of the product.

Question 45

Which of the following costs would be included in traditional product costs used for external reporting?

A) research and development
B) production
C) marketing
D) all of these

Question 46

With regard to services, inseparability means that

A) products cannot be stored.
B) direct contact must take place for a sale.
C) products have a physical presence.
D) none of the above apply to inseparability.

Question 47

Which of the following costs would NOT be included in operating product costs?

A) research and development
B) production
C) marketing
D) all of these

Question 48

In a traditional manufacturing company, product costs include

A) direct materials only.
B) direct materials, direct labor, and factory overhead.
C) direct materials and direct labor only.
D) direct labor only.

Question 49

Which of the following costs is NOT a product cost?

A) rent on an office building
B) indirect labor
C) repairs on manufacturing equipment
D) steel used in inventory items produced

Question 50

Which of the following costs is an example of product costs?

A) selling commissions
B) nonfactory office salaries
C) direct materials
D) advertising expense

Question 51

Which of the following costs is a period cost for a manufacturing company?

A) controller's salary
B) wages of machine operators
C) insurance on factory equipment
D) fringe benefits for factory employees

Question 52

Which of the following is a service organization?

A) grocery store
B) department store
C) cattle ranch
D) CPA firm

Question 53

Value-chain product costs include which of the following?

A) customer service costs
B) marketing costs
C) research and development
D) all of these

Question 54

An example of a service, rather than a tangible product, would be

A) radios.
B) cloths.
C) trucks.
D) medical exams.

Question 55

An example of a tangible product, rather than a service, would be

A) housekeeping.
B) insurance coverage.
C) paper.
D) medical exam.

Question 56

Which of the following costs is an indirect product cost?

A) property taxes on plant facilities
B) wages of assembly workers
C) materials used
D) president's salary

Question 57

Services differ from tangible products in which of the following dimensions?

A) intangibility
B) inseparability
C) perishability
D) all of these

Question 58

Intangibility of services means that

A) products cannot be seen, tasted, heard or felt before the purchase.
B) products cannot be stored.
C) exchange takes place in direct contact.
D) both a and c.

Question 59

Which of the following costs is a product cost?

A) lease payments on cars used by salespersons
B) president's salary
C) property taxes on factory building
D) depreciation on office equipment

Question 60

Product value-chain costs assist managers in meeting which of the following objectives?

A) product mix decisions
B) tactical profitability analysis
C) external financial reporting
D) strategic design decisions

Question 61

Which of the following costs is a period cost?

A) depreciation of factory equipment
B) transportation-in for material shipments
C) amortization of a patent for the company's product
D) depreciation of office computers

Question 62

Which of the following costs would be included as part of direct materials in the production of an automobile?

A) glue for a sticker applied to the automobile
B) steel
C) gasoline used to fuel machines in production
D) none of these

Question 63

The sum of direct labor and factory overhead is referred to as

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

Question 64

Prime product costs include

A) only factory overhead.
B) only direct labor.
C) direct labor and factory overhead.
D) direct materials and direct labor.

Question 65

An example of a nonproduction cost is

A) wages paid to assembly-line employees.
B) manufacturing supplies.
C) insurance on manufacturing facilities.
D) the treasurer's salary.

Question 66

Period costs do NOT include

A) order-getting costs.
B) order-making costs.
C) order-filling costs.
D) All of these are period costs.

Question 67

_______________ are expensed in the period in which they are incurred.

A) Direct materials
B) Product costs
C) Factory overhead
D) Nonproduction costs

Question 68

Which of the following items would NOT be classified as part of factory overhead of a firm that makes sailboats?

A) factory supplies used
B) canvas used in sail
C) depreciation of factory buildings
D) indirect materials

Question 69

All of the following costs are included in factory overhead EXCEPT

A) factory supplies.
B) indirect labor.
C) plant foreman's salary.
D) direct labor.

Question 70

Order-getting costs would NOT include

A) marketing costs.
B) customer service costs.
C) advertising.
D) salaries of sales personnel.

Question 71

Which of the following costs would be included as part of direct labor?

A) a cutter in the production of shelving
B) a materials handler
C) an assembly-line supervisor
D) a janitor

Question 72

An example of a period cost is

A) insurance on factory equipment.
B) president's salary.
C) property taxes on factory building.
D) wages of factory custodians.

Question 73

Which of the following costs would be included as part of factory overhead?

A) depreciation of plant equipment
B) paint used for product finish
C) depreciation on the corporation's office building
D) paper used in the production of books

Question 74

Selling and administrative costs are classified as

A) product costs.
B) conversion costs.
C) period costs.
D) factory overhead.

Question 75

All of Jill Enterprise's operations are housed in one building with the costs of occupying the building accumulated in a separate account.The total costs incurred in May amounted to $24,000.The company allocates these costs on the basis of square feet of floor space occupied.Administrative offices, sales offices, and factory operations occupy 9,000, 6,000, and 30,000 square feet, respectively.How much will be classified as a product cost for May?

A) $4,800
B) $3,200
C) $16,000
D) $24,000

Question 76

If the total warehousing cost for the year amounts to $350,000, and 40 percent of the warehousing activity is associated with finished goods and 60 percent with direct materials, how much of the cost would be charged as a product cost?

A) $70,000
B) $140,000
C) $210,000
D) $350,000

Question 77

Which of the following costs is NOT a period cost?

A) steel used in steel railings
B) receptionist's salary
C) depreciation on sales staffs' cars
D) sales commission

Question 78

Wages paid to a janitor in the factory would be classified as

A) direct labor.
B) direct janitor salaries.
C) supervisor salaries.
D) factory overhead.

Question 79

The difference between a supply and an indirect material is that

A) supplies are not necessary for production.
B) indirect materials are not physically part of the product.
C) supplies are not necessary for production and are not physically part of the product.
D) supplies are necessary for production and are not physically part of the product.

Question 80

Which of the following costs would be considered a direct material?

A) glue in the production of automobiles
B) labor used to finish product
C) depreciation on the corporation's office building
D) paper used in the production of books