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 Medium
Topic: Cost Classifications for Assigning Costs to Cost Objects
Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: 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 Easy
Topic: Cost Classifications for Assigning Costs to Cost Objects
Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
3) A cost can be direct or indirect. The classification can change if the cost object changes. Answer: TRUE
Difficulty: 2 Medium
Topic: Cost Classifications for Assigning Costs to Cost Objects
Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
4) Wages paid to production supervisors would be classified as manufacturing overhead.
Answer: TRUE
Difficulty: 1 Easy
Topic: Cost Classifications for Manufacturing Companies
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
5) Selling costs are indirect costs. Answer: FALSE
Difficulty: 2 Medium
Topic: Cost Classifications for Manufacturing Companies
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: 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 Medium
Topic: Cost Classifications for Manufacturing Companies
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: 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 Easy
Topic: Cost Classifications for Manufacturing Companies
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
8) Administrative costs are indirect costs.
Answer: FALSE Difficulty: 2 Medium
Topic: Cost Classifications for Manufacturing Companies
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: 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 Medium
Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing
Financial Statements
Learning 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: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
10) Opportunity costs at a manufacturing company are not part of manufacturing overhead. Answer: TRUE
Difficulty: 3 Hard
Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Decision
Making
Learning 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: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
11) Conversion cost is the sum of direct labor cost and manufacturing overhead cost.
Answer: TRUE
Difficulty: 1 Easy
Topic: Cost Classifications for Preparing Financial Statements
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements:
product costs and period costs.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
12) In a manufacturing company, all costs are period costs. Answer: FALSE
Difficulty: 1 Easy
Topic: Cost Classifications for Preparing Financial Statements
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements:
product costs and period costs. Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
13) Advertising is not considered a product cost even if it promotes a specific product. Answer: TRUE
Difficulty: 2 Medium
Topic: Cost Classifications for Preparing Financial Statements
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements:
product costs and period costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
14) Selling and administrative expenses are period costs under generally accepted accounting principles.
Answer: TRUE Difficulty: 1 Easy
Topic: Cost Classifications for Preparing Financial Statements
Learning 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: TRUE
Difficulty: 3 Hard
Topic: Cost Classifications for Preparing Financial Statements
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements:
product costs and period costs.
Bloom's: Analyze
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
16) Prime cost is the sum of direct materials cost and direct labor cost. Answer: TRUE
Difficulty: 1 Easy
Topic: Cost Classifications for Preparing Financial Statements
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements:
product costs and period costs. Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
17) Product costs are also known as inventoriable costs. Answer: TRUE
Difficulty: 1 Easy
Topic: Cost Classifications for Preparing Financial Statements
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements:
product costs and period costs. Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
18) Prime cost equals manufacturing overhead cost. Answer: FALSE
Difficulty: 3 Hard
Topic: Cost Classifications for Preparing Financial Statements
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements:
product costs and period costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
20) The cost of shipping parts from a supplier is considered a period cost. Answer: FALSE
Difficulty: 3 Hard
Topic: Cost Classifications for Preparing Financial Statements
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements:
product costs and period costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: 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 Easy
Topic: Cost Classifications for Preparing Financial Statements
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements:
product costs and period costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
22) Indirect costs, such as manufacturing overhead, are variable costs. Answer: FALSE
Difficulty: 2 Medium
Topic: Cost Classifications for Predicting Cost Behavior
Learning 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 Medium
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
24) A fixed cost is a cost whose cost per unit varies as the activity level rises and falls. Answer: TRUE
Difficulty: 2 Medium
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: 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 Medium
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Remember
AACSB: Reflective Thinking
AICPA: 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 Medium
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Understand
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
27) As activity decreases within the relevant range, fixed costs remain constant on a per unit
basis.
Answer: FALSE Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
28) The variable cost per unit depends on how many units are produced. Answer: FALSE
Difficulty: 2 Medium
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: 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 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Remember
AACSB: Reflective Thinking
AICPA: 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 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
31) Committed fixed costs remain largely unchanged in the short run.
Answer: TRUE Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
32) Fixed costs expressed on a per unit basis do not change with changes in activity. Answer: FALSE
Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: 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 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Remember
AACSB: Analytical Thinking
AICPA: 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 Hard
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: 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 Medium
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: 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 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
37) The concept of the relevant range does not apply to variable costs. Answer: FALSE
Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
38) The cost of napkins put on each person's tray at a fast food restaurant is a variable cost with respect to how many persons are served.
Answer: TRUE Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
39) A fixed cost fluctuates in total as activity changes but remains constant on a per unit basis over the relevant range.
Answer: FALSE Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
40) The relevant range is the range of activity within which the assumption that cost behavior is strictly linear is reasonably valid.
Answer: TRUE Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior:
variable costs, fixed costs, and mixed costs. Bloom's: Remember
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