Test Bank for Managerial Accounting for Managers 5th Edition By Noreen

Chapter 1   Managerial Accounting and Cost Concepts 1) A factory supervisor's salary would be classified as an indirect cost with respect to a unit of product. Answer:   TRUE Difficulty: 2 MediumTopic:   Cost Classifications for Assigning Costs to Cost ObjectsLearning Objective:   01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 2) A direct cost is a cost that can be easily traced to the particular cost object under consideration. Answer:   TRUE Difficulty: 1 EasyTopic:   Cost Classifications for Assigning Costs to Cost ObjectsLearning Objective:   01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement3) A cost can be direct or indirect. The classification can change if the cost object changes. Answer:   TRUEDifficulty: 2 MediumTopic:   Cost Classifications for Assigning Costs to Cost ObjectsLearning Objective:   01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement4) Wages paid to production supervisors would be classified as manufacturing overhead. Answer:   TRUEDifficulty: 1 Easy

 Topic:   Cost Classifications for Manufacturing CompaniesLearning Objective:   01-02 Identify and give examples of each of the three basic manufacturing cost categories.Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement5) Selling costs are indirect costs. Answer:   FALSEDifficulty: 2 MediumTopic:   Cost Classifications for Manufacturing CompaniesLearning Objective:   01-02 Identify and give examples of each of the three basic manufacturing cost categories.Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 6) The sum of all manufacturing costs except for direct materials and direct labor is called manufacturing overhead. Answer:   TRUE Difficulty: 2 MediumTopic:   Cost Classifications for Manufacturing CompaniesLearning Objective:   01-02 Identify and give examples of each of the three basic manufacturing cost categories.Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 7) The three cost elements ordinarily included in product costs are direct materials, direct labor, and manufacturing overhead. Answer:   TRUE Difficulty: 1 EasyTopic:   Cost Classifications for Manufacturing CompaniesLearning Objective:   01-02 Identify and give examples of each of the three basic manufacturing cost categories.Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 8) Administrative costs are indirect costs.

 Answer:   FALSE Difficulty: 2 MediumTopic:   Cost Classifications for Manufacturing CompaniesLearning Objective:   01-02 Identify and give examples of each of the three basic manufacturing cost categories.Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 9) Depreciation is always considered a period cost for external financial reporting purposes in a manufacturing company. Answer:   FALSE Difficulty: 2 MediumTopic:   Cost Classifications for Manufacturing Companies; Cost Classifications for PreparingFinancial StatementsLearning Objective:   01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement10) Opportunity costs at a manufacturing company are not part of manufacturing overhead. Answer:   TRUEDifficulty: 3 HardTopic:   Cost Classifications for Manufacturing Companies; Cost Classifications for DecisionMakingLearning Objective:   01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement11) Conversion cost is the sum of direct labor cost and manufacturing overhead cost. Answer:   TRUEDifficulty: 1 EasyTopic:   Cost Classifications for Preparing Financial StatementsLearning Objective:   01-03 Understand cost classifications used to prepare financial statements:product costs and period costs.

 Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement12) In a manufacturing company, all costs are period costs. Answer:   FALSEDifficulty: 1 EasyTopic:   Cost Classifications for Preparing Financial StatementsLearning Objective:   01-03 Understand cost classifications used to prepare financial statements:product costs and period costs. Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement13) Advertising is not considered a product cost even if it promotes a specific product. Answer:   TRUEDifficulty: 2 MediumTopic:   Cost Classifications for Preparing Financial StatementsLearning Objective:   01-03 Understand cost classifications used to prepare financial statements:product costs and period costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 14) Selling and administrative expenses are period costs under generally accepted accounting principles. Answer:   TRUE Difficulty: 1 EasyTopic:   Cost Classifications for Preparing Financial StatementsLearning Objective:   01-03 Understand cost classifications used to prepare financial statements:product costs and period costs. Bloom's:   Remember 15) Conversion cost equals product cost less direct materials cost. Answer:   TRUEDifficulty: 3 HardTopic:   Cost Classifications for Preparing Financial StatementsLearning Objective:   01-03 Understand cost classifications used to prepare financial statements:product costs and period costs. Bloom's:   AnalyzeAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement16) Prime cost is the sum of direct materials cost and direct labor cost. Answer:   TRUEDifficulty: 1 EasyTopic:   Cost Classifications for Preparing Financial StatementsLearning Objective:   01-03 Understand cost classifications used to prepare financial statements:product costs and period costs. Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement17) Product costs are also known as inventoriable costs. Answer:   TRUEDifficulty: 1 EasyTopic:   Cost Classifications for Preparing Financial StatementsLearning Objective:   01-03 Understand cost classifications used to prepare financial statements:product costs and period costs. Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement18) Prime cost equals manufacturing overhead cost. Answer:   FALSEDifficulty: 3 HardTopic:   Cost Classifications for Preparing Financial StatementsLearning Objective:   01-03 Understand cost classifications used to prepare financial statements:product costs and period costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement

 Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement20) The cost of shipping parts from a supplier is considered a period cost. Answer:   FALSEDifficulty: 3 HardTopic:   Cost Classifications for Preparing Financial StatementsLearning Objective:   01-03 Understand cost classifications used to prepare financial statements:product costs and period costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 21) Depreciation on equipment a company uses in its selling and administrative activities would be classified as a period cost. Answer:   TRUE Difficulty: 1 EasyTopic:   Cost Classifications for Preparing Financial StatementsLearning Objective:   01-03 Understand cost classifications used to prepare financial statements:product costs and period costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement22) Indirect costs, such as manufacturing overhead, are variable costs. Answer:   FALSEDifficulty: 2 MediumTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   Understand

23) If the activity level increases, then one would expect the fixed cost per unit to increase as well. Answer:   FALSE Difficulty: 2 MediumTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement24) A fixed cost is a cost whose cost per unit varies as the activity level rises and falls. Answer:   TRUEDifficulty: 2 MediumTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 25) Cost behavior is considered curvilinear whenever a straight line is a reasonable approximation for the relation between cost and activity. Answer:   FALSE Difficulty: 2 MediumTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 26) A decrease in production will ordinarily result in a decrease in fixed production costs per unit. Answer:   FALSE Difficulty: 2 MediumTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   UnderstandAACSB:   Analytical ThinkingAICPA:   BB Critical Thinking; FN Measurement27) As activity decreases within the relevant range, fixed costs remain constant on a per unit

basis. Answer:   FALSE Difficulty: 1 EasyTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement28) The variable cost per unit depends on how many units are produced. Answer:   FALSEDifficulty: 2 MediumTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 29) In account analysis, an account is classified as either variable or fixed based on an analyst's prior knowledge of how the cost in the account behaves. Answer:   TRUE Difficulty: 1 EasyTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 30) A step-variable cost is a cost that is obtained in large chunks and that increases or decreases only in response to fairly wide changes in activity. Answer:   TRUE Difficulty: 1 EasyTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement31) Committed fixed costs remain largely unchanged in the short run.

Answer:   TRUE Difficulty: 1 EasyTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement32) Fixed costs expressed on a per unit basis do not change with changes in activity. Answer:   FALSEDifficulty: 1 EasyTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 33) A fixed cost is constant if expressed on a per unit basis but the total dollar amount changes as the number of units increases or decreases. Answer:   FALSE Difficulty: 1 EasyTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   RememberAACSB:   Analytical ThinkingAICPA:   BB Critical Thinking; FN Measurement 34) If managers are reluctant to lay off direct labor employees when activity declines leads to a decrease in the ratio of variable to fixed costs. Answer:   TRUE Difficulty: 3 HardTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 35) Within the relevant range, a change in activity results in a change in variable cost per unit and total fixed cost.

Answer:   FALSE Difficulty: 2 MediumTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   UnderstandAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement 36) When operations are interrupted or cut back, committed fixed costs are cut in the short term because the costs of restoring them later are likely to be far less than the short-run savings that are realized Answer:   FALSE Difficulty: 1 EasyTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement37) The concept of the relevant range does not apply to variable costs. Answer:   FALSEDifficulty: 1 EasyTopic:   Cost Classifications for Predicting Cost BehaviorLearning Objective:   01-04 Understand cost classifications used to predict cost behavior:variable costs, fixed costs, and mixed costs. Bloom's:   RememberAACSB:   Reflective ThinkingAICPA:   BB Critical Thinking; FN Measurement