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Management Accounting

Willie Seal, University of Essex, UK
Ray Garrison, Brigham Young University, Provo, Utah, USA
Eric Noreen, INSEAD, France

Cost Terms, Concepts, and Classifications

Self-test Questions


1	Which one of the following is a Period Cost? (Learning Objective 2 Ch 2)
		A)	Raw Materials
		B)	Direct Labour
		C)	Variable Overhead
		D)	Fixed Overhead


2	A company makes computers. Which one of the following is likely to be a Variable Cost? (Learning Objective 5 Ch 2)
		A)	The salary of the managing director
		B)	The salary of the factory manager
		C)	The wages of shop floor workers paid by piece rate
		D)	The Business rates of the factory


3	A company makes made to measure plastic windows and doors. Which one of the following is likely to be a Fixed Cost? (Learning Objective 5 Ch 2)
		A)	The cost of heating the factory
		B)	The labour cost of assembly
		C)	The cost of the plastic
		D)	Sales commission


4	For a boat building company. Which one of the following is an indirect cost to the product? (Learning Objective 6 Ch 2)
		A)	The material cost of the engine
		B)	The sub-contract cost of testing the seaworthiness of the ship
		C)	The cost of buying a cutting machine used on a number of the boats
		D)	The material cost of the decking


5	For a plumber that repairs water pipes. Which one of the following is a direct cost to the service he/she provides to a particular household? (Learning Objective 6 Ch 2)
		A)	Petrol cost of visiting house
		B)	Van insurance
		C)	Public Liability Insurance
		D)	Telephone Rental


6	A company in considering building a factory in Ebbw Vale. Which one of the following is a sunk cost to the decision? (Learning Objective 7 Ch 2)
		A)	The business rates of the factory
		B)	The wages of the factory workers
		C)	The costs of the investigation so far
		D)	The cost of excavating the site


7	A company in considering replacing the production of a widget with a whojat using the same production line. Which one of the following is NOT an opportunity cost to the decision? (Learning Objective 7 Ch 2)
		A)	The selling price of the whojat
		B)	The number of units of the widget produced at the moment
		C)	Sales commission paid to salespeople selling the whojat
		D)	The costs of running the production line

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