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True or False
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1
Cost is a measure of the acquisition of a resource to achieve a specific purpose.
A)True
B)False
2
When inventory is purchased, an expense has occurred.
A)True
B)False
3
In the period of sale, product costs are recognized as an expense called cost of goods sold.
A)True
B)False
4
A product cost and an inventoriable cost are the same cost.
A)True
B)False
5
The monthly rent on an office facility is an example of a product cost.
A)True
B)False
6
Research and development costs, which include all costs of developing new products and services, are properly classified as product costs.
A)True
B)False
7
Operating expenses are treated as product costs.
A)True
B)False
8
Manufacturers generally carry three inventories.
A)True
B)False
9
Products that are partially completed at the end of the accounting period are called raw-material inventory.
A)True
B)False
10
The inventory of materials that will be placed into production at some future time is called the raw-material inventory.
A)True
B)False
11
A print shop is most likely to use a production process referred to as a job-shop.
A)True
B)False
12
Dell Computer Corporation and Gateway 2000 are examples of companies using a production process referred to as a mass-customization production process.
A)True
B)False
13
A continuous flow production process is used to define conditions of high productive volume and highly standardized commodity products.
A)True
B)False
14
Before material is entered into the production process, it is called raw material.
A)True
B)False
15
Direct material and direct labor are manufacturing costs.
A)True
B)False
16
The cost of glue used to place the wooden tail on a wooden rocking horse is an example of a direct material cost.
A)True
B)False
17
Except for direct material and direct labor, all of the other costs of manufacturing are called manufacturing overhead.
A)True
B)False
18
The cost of fringe benefits for direct-labor personnel should be classified as manufacturing overhead.
A)True
B)False
19
The salary paid to a manufacturing supervisor is part of the total direct-labor cost.
A)True
B)False
20
The maintenance department costs of a manufacturer are treated as manufacturing overhead.
A)True
B)False
21
When a person working on the production line works 46 hours during the week, instead of the scheduled 40-hour week at a rate of $12 per hour, the overtime premium is $108.
A)True
B)False
22
Overtime premium should be classified as direct-labor cost, and idle time should be classified as manufacturing overhead cost.
A)True
B)False
23
Conversion costs include direct-labor costs and manufacturing overhead costs.
A)True
B)False
24
The cost of direct labor is both a conversion cost and a prime cost.
A)True
B)False
25
When a person working on the production line works 46 hours during the week, instead of the scheduled 40-hour week at a rate of $12 per hour, and was idle for 5 of the 46 hours, the amount of the employee's total wages classified as manufacturing overhead cost is $96.
A)True
B)False
26
The monthly rent expense on a manufacturing facility is a conversion cost.
A)True
B)False
27
The work-in-process inventory is composed of prime costs and manufacturing overhead costs.
A)True
B)False
28
If the value of the beginning work-in-process and the ending work-in-process are equal, the cost of goods manufactured will be equal to total manufacturing costs.
A)True
B)False
29
A major difference between a manufacturer and a service company is that the product of the manufacturer can be inventoried, but the product of a service company is consumed as it is produced.
A)True
B)False
30
The phrase "different costs for different purposes" often is used to convey the notion that different characteristics of costs can be important to understand in a variety of managerial circumstances.
A)True
B)False
31
An activity, such as driving a delivery van, can be called a cost driver.
A)True
B)False
32
There is always a benefit in identifying the cost driver.
A)True
B)False
33
The higher the correlation between the cost and the cost driver, the more accurate will be the resulting understanding of the organization's cost behavior.
A)True
B)False
34
A cost that is $14,000 at an activity level of 10,000 units of product, $18,000 at 20,000 units of product, and $22,000 at 30,000 units of product is most likely a variable cost.
A)True
B)False
35
If a variable cost per unit is $1.00 at 10,000-unit level of activity, it will be $2.00 per unit at a 20,000-unit level of activity.
A)True
B)False
36
If the per-unit cost of a particular activity is $4.50 at 10,000 units, $2.25 at 20,000 units, and $1.50 at 30,000 units, the cost of the activity is a fixed cost.
A)True
B)False
37
Tracing costs to the department or work center in which the cost was incurred is known as responsibility accounting.
A)True
B)False
38
A particular product, service, or department to which a cost is assigned is called a cost object.
A)True
B)False
39
It is possible for a cost to be classified as both an indirect cost and a direct cost.
A)True
B)False
40
Activity accounting involves tracing as many costs as possible directly to the activities that cause them to be incurred.
A)True
B)False
41
Whether a cost is classified as a controllable cost or classified as an uncontrollablecost depends upon the point of reference.
A)True
B)False
42
If you have reduced your working hours in order to complete an accounting course, the lost wages are an opportunity cost of completing the course.
A)True
B)False
43
Payments made for resources may be called out-of-pocket costs.
A)True
B)False
44
Sunk costs are relevant to future decisions.
A)True
B)False
45
After spending $2,000 for new tires, repairing dents, engine tune up, and painting your 2002 model automobile, refusing to accept a $1,500 trade-in value towards the purchase of a new car so that you do not lose the $2,000 is in your best interest.
A)True
B)False
46
A differential cost is the amount by which the cost of one action exceeds that of another.
A)True
B)False
47
The marginal cost and the average cost per unit are synonymous terms.
A)True
B)False
48
The marginal cost of producing one additional unit of product will be equal to the average cost per unit of all the units produced prior to producing the additional unit, if more than one unit has been produced.
A)True
B)False
49
The marginal cost of the third unit is $1,333.
A)True
B)False
50
Service industries do not have product costs.
A)True
B)False
51
Service industries have variable and fixed costs.
A)True
B)False
52
Service industries cannot apply the concept of direct costs and indirect costs.
A)True
B)False
53
A decision by the management of an accounting firm to reduce its auditing services and increase and promote its management services to clients involves opportunity costs.
A)True
B)False
54
Decisions made in service industries rarely involve sunk costs.
A)True
B)False





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