Cost Terminologies and Behavior

Question 1

The relevant range is valid for all levels of activity

True/false

Answer 1

False

Question 2

If the cost of an additive is P5,000 + P0.50 for every unit of solvent produced, the cost is classified as mixed cost.

True/false

Answer 2

True

Question 3

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

Answer 3

b. Fixed cost

Question 4

Mayer Company is a construction company that builds greenhouses on special request. What is the proper classification of the carpenter’s wages?

Product Period Direct

a. Yes Yes No
b. Yes No Yes
c. No No No
d. No Yes Yes

Answer 4

b. Yes No Yes

Question 5

The final figure in the Schedule of Cost of Goods Manufactured represents the

a. Cost of goods sold for the period.
b. Total cost of manufacturing for the period.
c. Total cost of goods started and completed this period.
d. Total cost of goods completed for the period.

Answer 5

d. Total cost of goods completed for the period.

Question 6

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.

Answer 6

a. are expensed in the same period in which they are incurred.`

Question 7

Costs that are incurred to preclude defects and improper processing are:

a. prevention costs
b. detection costs
c. appraisal costs
d. failure costs

Answer 7

a. prevention costs

Question 8

Costs that are incurred for monitoring and inspecting are:

a. prevention costs
b. detection costs
c. appraisal costs
d. failure costs

Answer 8

c. appraisal costs

Question 9

Costs that are incurred when customers complain are:

a. prevention costs
b. detection costs
c. appraisal costs
d. failure costs

Answer 9

d. failure costs

Question 10

Which of the following replaces the retailing component “Purchases” in computing Cost of Goods Sold for a manufacturing company?

a. direct material used
b. cost of goods manufactured
c. total prime cost
d. cost of goods available for sale

Answer 10

b. cost of goods manufactured

Question 11

Managerial accounting provides useful information to managers on product costs.

True/false

Answer 11

True

Question 12

Cost management is narrowly focused on a continuous reduction of costs.

True/false

Answer 12

False ( Cost management is broadly focused to provide information that helps managers at all levels implement, monitor and evaluate company strategies. )

Question 13

The person most likely to use ONLY financial accounting

a. Factory shift supervisor
b. Vice president of operations
c. Current shareholder
d. Department manager

Answer 13

c. Current shareholder

Question 14

Cost accounting provides all of the following EXCEPT: a.information for management accounting and financial accounting

b. pricing information from marketing studies
c. financial information regarding the cost of acquiring resources
d. nonfinancial information regarding the cost of operational efficiencies

Answer 14

b.pricing information from marketing studies

Question 15

Which of the following statements concerning an organization’s strategy is NOT true?

a. Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.
b. Management accountants provide input to help managers formulate strategy.
c. A good strategy will always overcome poor implementation.
d. Businesses usually follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition.

Answer 15

c.A good strategy will always overcome poor implementation.

Question 16

Strategy specifies:

a. how an organization matches its own capabilities with the opportunities in the marketplace
b. standard procedures to ensure quality products c.incremental changes for improved performance
d. the demand created for products and services

Answer 16

a.how an organization matches its own capabilities with the opportunities in the marketplace

Question 17

Which of the following is NOT one of the questions management accountants might attempt to help answer in the formulation of strategy?

a. Who are our most important customers?
b. What substitute products exist in the marketplace? c.Does the strategy comply with GAAP (Generally Accepted Accounting Principles)?
d. Will adequate cash be available to implement the strategy?

Answer 17

c.Does the strategy comply with GAAP (Generally Accepted Accounting Principles)?

Question 18

Place the four business functions in the order they appear along the value chain: Customer service Design Marketing Production

a. Customer Service, Design, Production, Marketing
b. Customer Service, Marketing, Production, Design c.Design, Production, Marketing, Customer Service
d. Design, Customer Service, Production, Marketing

Answer 18

c.Design, Production, Marketing, Customer Service

Question 19

Which of the following does NOT affect the direct/indirect classification of a cost?

a. the level of budgeted profit for the next year
b. the materiality of the cost in question
c. available technology to gather information about the cost
d. the design of the operation

Answer 19

a.the level of budgeted profit for the next year

Question 20

Cost allocation is:

a. the process of tracking both direct and indirect costs associated with a cost object
b. the process of determining the actual cost of the cost object
c. the assignment of indirect costs to the chosen cost object
d. a function of cost tracing

Answer 20

c.the assignment of indirect costs to the chosen cost object

Question 21

A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line are:

a. beverages provided daily in the plant break room b.monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver c.salaries of the clerical staff that work in the company administrative offices
d. utilities paid for the manufacturing plant

Answer 21

b.monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver

Question 22

A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is:

a. material used to make the soccer balls
b. labor to shape the leather used to make the soccer ball
c. shift supervisor for the soccer line
d. plant supervisor

Answer 22

d.plant supervisor

Question 23

Which one of the following items is a direct cost? a.Customer-service costs of a multiproduct firm; Product A is the cost object.

b. Printing costs incurred for payroll check processing; payroll check processing is the cost object.
c. The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object.
d. Utility costs of the administrative offices; the accounting department is the cost object.

Answer 23

b.Printing costs incurred for payroll check processing; payroll check processing is the cost object.

Question 24

Which statement is true?

a. All variable costs are direct costs.
b. Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs.
c. All fixed costs are indirect costs.
d. All direct costs are variable costs.

Answer 24

b.Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs.