Question 1

Which of the following job positions is an example of direct labour?
A)production line worker
B)maintenance person
C)security guard
D)management accountant

Accepted Answer

Direct labour refers to workers who are directly involved in the production process, such as assembly line workers. Maintenance persons and security guards provide support services and are not directly involved in production. Management accountants are not involved in production at all, as they primarily deal with financial data and analysis.

Question 2

Which of the following is characteristic of indirect costs?
A)Indirect costs can be easily and accurately traced to a cost object.
B)Indirect costs are shared between or among more than one cost object.
C)Indirect costs should always be assigned to a cost object.
D)Indirect costs include all labour.

Accepted Answer

Indirect costs are those that cannot be easily and accurately traced to a specific cost object. Instead, they are shared between or among multiple cost objects. This makes it difficult to assign indirect costs to a specific cost object without some sort of allocation method. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect because they do not accurately describe the characteristics of indirect costs.

Question 3

Which of the following is an example of a direct materials cost?
A)wood used to make furniture
B)nails used to construct furniture
C)glue used to build furniture
D)screws used to manufacture furniture

Accepted Answer

Direct materials cost refers to the cost of materials that are directly used in the manufacturing of a product. In this case, the wood used to make furniture is a direct materials cost as it is an essential component that goes into producing the final product. Nails, glue, and screws are also used in the manufacturing of furniture, but they are classified as indirect materials costs as they are not the primary components of the product.

Question 4

When do materials in the raw materials account become direct materials?
A)when they are withdrawn from inventory for use in production
B)when they are returned to the supplier
C)when they are spoiled
D)when they are put into production

Accepted Answer

Materials in the raw materials account become direct materials when they are put into production, as this is when they are actively used to manufacture a product.

Question 5

Which of the following is an example of an intangible product?
A)hamburgers
B)computers
C)automobiles
D)dental care

Accepted Answer

Dental care is an intangible product as it cannot be physically touched or seen, but rather it is a service provided by a dentist. Hamburgers, computers, and automobiles are all tangible products that can be physically touched and seen.

Question 6

Which of the following are production costs?
A)selling costs, administrative costs, and period costs
B)indirect materials, indirect labour, and administrative costs
C)direct materials, direct labour, and selling costs
D)direct materials, direct labour, and overhead

Accepted Answer

Production costs are those costs that are directly related to the production process. Direct materials, direct labor, and overhead are all examples of production costs as they are costs that are incurred in the process of producing goods or services. Selling costs, administrative costs, and period costs are all examples of non-production costs, as they are not directly related to the production process. Indirect materials and indirect labor may be production costs, but they are not the only production costs, as overhead is also a production cost.

Question 7

Into which two major functional categories are costs subdivided?
A)production and nonproduction
B)selling and administration
C)prime and conversion
D)opportunity and direct

Accepted Answer

Costs are typically divided into production (related to manufacturing) and nonproduction (related to selling and administration) categories.

Question 8

What are expired costs?
A)assets
B)expenses
C)revenues
D)profit

Accepted Answer

Expired costs refer to expenses that have already been incurred but are no longer able to provide any economic benefit to the company. These costs are recognized and recorded as expenses on the income statement in the period in which they were incurred.

Question 9

Which of the following is an example of a direct materials cost?
A)the nails in a dining room table
B)the engine in an airplane
C)the glue used to manufacture furniture
D)the paint on a new car

Accepted Answer

Direct materials are those that can be directly traced to the finished product. The engine in an airplane is a significant and traceable component, making it a direct material cost.

Question 10

What is the definition of opportunity cost?
A)a cost that increases as output increases and decreases as output decreases
B)a cost that does not increase as output increases and does not decrease as output decreases
C)a benefit given up or sacrificed when one alternative is chosen over another
D)a benefit that cannot be easily and accurately traced to a cost object

Accepted Answer

Opportunity cost refers to the benefit or value forgone by choosing one option over another. It represents the benefits one could have received by taking an alternative action.

Question 11

What type of cost is direct labour?
A)a nonproduction cost
B)a period cost
C)a nonmanufacturing cost
D)a product cost

Accepted Answer

Direct labor is a product cost because it is directly tied to the production of goods or services. It includes the wages, salaries, and benefits of employees who are directly involved in the production process.

Question 12

What is one of the main purposes of assigning costs to cost objects?
A)It provides information on why money was spent.
B)It records the historical events of the organization.
C)It allows management to incorporate products in marketing.
D)It facilitates service businesses in following financial regulations.

Accepted Answer

Assigning costs to cost objects provides information on why money was spent, which helps management to make informed decisions about planning and budgeting for future activities. It also helps in identifying areas where cost reduction is necessary.

Question 13

Which of the following is an example of a tangible product?
A)funeral care
B)legal services
C)furniture
D)video rental

Accepted Answer

Furniture is a physical object that can be touched and seen, making it a tangible product. Funeral care and legal services are examples of intangible products, and while video rental involves a physical item, it is not considered a tangible product because the rental itself is a service rather than a product.

Question 14

Which of the following statements best describes product costs?
A)Product costs are direct materials and direct labour costs only.
B)Product costs are manufacturing costs.
C)Product costs do not include overhead.
D)Product costs do not include direct materials.

Accepted Answer

Product costs include all costs associated with manufacturing a product, including direct materials, direct labor, and overhead costs.

Question 15

Which of the following is a characteristic of price per unit?
A)It is equal to the revenue.
B)It must be less than cost for the firm to earn income.
C)It is the same as total cost.
D)It is the same as cost per unit plus income per unit.

Accepted Answer

Price per unit is calculated by adding cost per unit and desired income per unit. It is not equal to revenue (A), and it does not have to be less than cost for the firm to earn income (B). It is also not the same as total cost (C).

Question 16

Which of the following is included in nonmanufacturing costs?
A)marketing
B)direct materials
C)indirect materials
D)overhead

Accepted Answer

Nonmanufacturing costs are also known as selling, general, and administrative expenses (SG&A). Marketing costs, such as advertising and promotion, are part of SG&A expenses and are therefore included in nonmanufacturing costs. Direct and indirect materials are part of manufacturing costs, while overhead includes both manufacturing and nonmanufacturing costs.

Question 17

What type of organization is the Hudson Bay Company?
A)production organization
B)service organization
C)manufacturing organization
D)merchandising organization

Accepted Answer

The Hudson Bay Company is a merchandising organization, as it specializes in retail sales of various products including clothing, home goods, and outdoor equipment.

Question 18

What is the behaviour pattern of a variable cost?
A)It increases in total as output increases.
B)It remains constant in total at all levels of output.
C)It increases per unit as output increases.
D)It decreases per unit as output increases.

Accepted Answer

Variable costs are directly related to the level of output. As output increases, variable costs also increase in total. This is because variable costs are related to the cost of producing additional units of output, such as the cost of raw materials or labor. As more units of output are produced, more materials and labor are required, increasing the total variable cost.

Question 19

What is the definition of assigning costs?
A)the way costs are measured and recorded
B)the way companies can tell what money was spent
C)the allocation applied to a cost object using a reasonable method
D)the benefit given up when one choice is made over another

Accepted Answer

Assigning costs refers to the process of allocating a cost to a specific cost object using a reasonable method. This is done to determine the total cost of producing or providing a product or service. A cost object may be a product, a department, a project, or any other item for which cost data is needed. By assigning costs, a company can determine the costs involved in various activities and make informed decisions about pricing, resource allocation, and budgeting.

Question 20

In terms of managerial accounting,which of the following is the best definition of cost?
A)the cash sacrificed for goods expected to bring future benefit to the organization
B)a dollar measure of the cash used to achieve a given benefit
C)the asset incurred to produce future benefits
D)the equivalent of the cost of goods sold

Accepted Answer

Cost in managerial accounting refers to the cash sacrificed or expended for the acquisition of goods or services that are expected to bring future benefits to the organization. This definition takes into account the concept of opportunity cost, which recognizes that choosing one option over another means giving up the benefits that could have been derived from the forgone option. Option B is incorrect because cost is not always measured in dollars; it can also be measured in other units of value such as time, resources, or effort. Option C is incomplete because it defines cost as an asset when in fact cost represents a reduction in assets. Finally, option D is incorrect because cost of goods sold is only one type of cost and does not capture the full range of costs incurred by an organization.

Quiz 2: Basic Managerial Accounting Concepts

Which of the following job positions is an example of direct labour?

Which of the following is characteristic of indirect costs?

Which of the following is an example of a direct materials cost?

When do materials in the raw materials account become direct materials?

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

Which of the following are production costs?

Into which two major functional categories are costs subdivided?

What are expired costs?

Which of the following is an example of a direct materials cost?

What is the definition of opportunity cost?

What type of cost is direct labour?

What is one of the main purposes of assigning costs to cost objects?

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

Which of the following statements best describes product costs?

Which of the following is a characteristic of price per unit?

Which of the following is included in nonmanufacturing costs?

What type of organization is the Hudson Bay Company?

What is the behaviour pattern of a variable cost?

What is the definition of assigning costs?

In terms of managerial accounting,which of the following is the best definition of cost?