Question 1

Which of the following costs incurred by a chair manufacturer would be traced to the product cost through direct tracing?
A)the depreciation on factory equipment
B)the supervisor's salary
C)the insurance on the factory building
D)the woodmaker's salary

Accepted Answer

The woodmaker's salary is directly involved in the production of chairs and therefore can be traced directly to the product cost.

Question 2

Which of the following costs incurred by a bus manufacturer would NOT be directly attributable to the finished product?
A)the wages paid to assembly-line production workers
B)the tires for buses
C)the windshields for buses
D)the depreciation on factory building

Accepted Answer

Depreciation on factory building is an indirect cost and cannot be directly attributed to the finished product. The other options (wages, tires, windshields) are all direct costs.

Question 3

Which of the following is an example of a variable cost?
A)insurance on the production equipment
B)direct materials
C)the production supervisor's salary
D)depreciation of the factory building

Accepted Answer

Direct materials are considered variable costs because they vary with the level of production. The more units produced, the more materials needed. The other options, such as insurance, salary, and depreciation, are typically considered fixed costs because they do not vary directly with production levels.

Question 4

Which of the following costs would be classified as fixed costs with respect to volume?
A)the salary of the manager of the Research and Development Department
B)the cost of a copy machine in the Human Resource Department
C)the property taxes on the manufacturing facility
D)all of the above

Accepted Answer

Fixed costs are those that do not change with the level of production or sales volume. The salary of the manager of the Research and Development Department, the cost of a copy machine in the Human Resource Department, and the property taxes on the manufacturing facility are all examples of fixed costs because they remain constant regardless of the company's output level.

Question 5

A cost used up in the production of revenues is a(n)
A)unexpired cost.
B)expense.
C)loss.
D)asset.

Accepted Answer

Expenses are costs incurred in the production of revenue.

Question 6

Whether a cost is fixed or variable depends on the time horizon. In the long run, all costs are
A)fixed.
B)variable.
C)mixed.
D)step.

Accepted Answer

In the long run, all costs are considered variable because firms have the flexibility to adjust all inputs and resources they use, unlike in the short run where some costs are fixed.

Question 7

An equipment lease that specifies payment of £1,000 per month plus £5 per machine hour used is an example of a
A)fixed cost.
B)variable cost.
C)mixed cost.
D)step cost.

Accepted Answer

The answer of An equipment lease that specifies payment of...

Question 8

Which of the following costs would be classified as variable costs with respect to volume?
A)property taxes on the manufacturing facility
B)the wheels on an automobile
C)the cost of installing production equipment
D)all of the above

Accepted Answer

Variable costs change with the level of production, and the cost of wheels on an automobile will vary depending on the number of automobiles produced. Property taxes and the cost of installing production equipment are fixed costs that do not vary with production levels.

Question 9

Direct costs
A)are incurred for the benefit of the business as a whole.
B)would continue even if a particular product were discontinued.
C)can be assigned to product only by a process of allocation.
D)are those costs that can be easily and accurately traced to a cost objective.

Accepted Answer

Direct costs are those costs that can be easily and accurately traced to a cost objective, such as a product or department.

Question 10

Mixed costs
A)are step costs.
B)in total, remain constant within a relevant range.
C)have a fixed and variable component.
D)on a per unit basis, are constant as activity increases or decreases.

Accepted Answer

Mixed costs have a fixed component and a variable component that both contribute to the total cost. As the level of activity increases, the variable component increases while the fixed component remains constant, resulting in a mixed cost that is partially variable and partially fixed.

Question 11

Which of the following costs incurred by a furniture manufacturer would be a product cost?
A)lumber
B)office salaries
C)commissions paid to sales staff
D)controller's salary

Accepted Answer

Lumber is a direct material cost and is used in the production process, making it a product cost. Office salaries, commissions paid to sales staff, and the controller's salary are all indirect costs and would be classified as period costs.

Question 12

In a traditional manufacturing company, product costs include
A)direct materials only.
B)direct materials, direct labour, and factory overhead.
C)direct materials and direct labour only.
D)direct labour only.

Accepted Answer

Product costs in a traditional manufacturing company include direct materials, direct labour, and factory overhead. Direct materials are the cost of the materials that go into a finished product. Direct labour is the cost of the workers who directly contribute to the production of the product. Factory overhead includes all other costs associated with producing the product, such as rent, utilities, and depreciation of equipment. Therefore, option B is the correct answer as it includes all three components of product costs.

Question 13

Which of the following costs is NOT a product cost?
A)rent on an office building
B)indirect labour
C)repairs on manufacturing equipment
D)steel used in inventory items produced

Accepted Answer

Rent on an office building is a period cost as it is not directly related to the production of a specific product. Product costs are those costs that are directly tied to the production of goods, such as direct materials, direct labour, and manufacturing overhead.

Question 14

Which of the following costs is an example of product costs?
A)selling commissions
B)nonfactory office salaries
C)direct materials
D)advertising expense

Accepted Answer

Direct materials are a cost that is directly tied to the production of a specific product, making it an example of a product cost. Selling commissions, nonfactory office salaries, and advertising expense are all examples of period costs.

Question 15

The direct costs of operating a university computer centre would NOT include
A)rent paid for computers.
B)a fair share of university utilities.
C)paper used by the centre.
D)computer consultants' salaries.

Accepted Answer

Direct costs are those costs that can be directly attributed to a specific department or project, such as salaries for staff working in that department, equipment, and supplies. A fair share of university utilities is considered an indirect cost because it supports the entire university's operations and is not directly attributable to the computer centre alone.

Question 16

Which of the following costs is an indirect product cost?
A)property taxes on plant facilities
B)wages of assembly workers
C)materials used
D)president's salary

Accepted Answer

Indirect product costs are costs that cannot be easily traced to the product being manufactured. Property taxes on plant facilities are an example of an indirect product cost, as they are necessary for the production process but cannot be directly linked to a specific product. The other options are all direct product costs, as they can be directly traced to the product being manufactured.

Question 17

Which one of the following sentences about step costs is true?
A)Step costs increase with each additional unit produced.
B)Step costs have no relation to number of units produced.
C)Step costs are constant within certain ranges of activity but differ outside those ranges of activity.
D)Step costs are variable within narrowly defined ranges of activity, but constant over wider ranges of activity.

Accepted Answer

Step costs are costs that remain constant within a certain range of activity but increase or decrease once that range is exceeded. In other words, step costs are fixed costs over a certain range of activity, but become variable costs once a certain threshold is crossed.

Question 18

Which of the following cost behaviour patterns are unrelated to unit activity?
A)fixed costs
B)variable costs
C)step costs
D)mixed costs

Accepted Answer

Fixed costs remain constant in total regardless of changes in the level of activity, making them unrelated to unit activity.

Question 19

Which statement describes step-cost behaviour?
A)discontinuous
B)displays a constant level of cost for a range of output and then jumps to a higher level at some point
C)must be purchased in chunks
D)All of the above describe step-cost behaviour.

Accepted Answer

Step-cost behavior is characterized by all the mentioned features: it is discontinuous, displays a constant level of cost for a range of output before jumping to a higher level, and must be purchased in chunks.

Question 20

Which of the following is an example of a possible cost object?
A)a product
B)a customer
C)a department
D)All of these could be possible cost objects.

Accepted Answer

All of these could be possible cost objects. A cost object is anything for which a cost is being calculated. It can be a product, a customer, or a department, depending on the context and purpose of the cost analysis.

Quiz 2: An Introduction to Cost Terms and Concepts

Which of the following costs incurred by a chair manufacturer would be traced to the product cost through direct tracing?

Which of the following costs incurred by a bus manufacturer would NOT be directly attributable to the finished product?

Which of the following is an example of a variable cost?

Which of the following costs would be classified as fixed costs with respect to volume?

A cost used up in the production of revenues is a(n)

Whether a cost is fixed or variable depends on the time horizon. In the long run, all costs are

An equipment lease that specifies payment of £1,000 per month plus £5 per machine hour used is an example of a

Which of the following costs would be classified as variable costs with respect to volume?

Direct costs

Mixed costs

Which of the following costs incurred by a furniture manufacturer would be a product cost?

In a traditional manufacturing company, product costs include

Which of the following costs is NOT a product cost?

Which of the following costs is an example of product costs?

The direct costs of operating a university computer centre would NOT include

Which of the following costs is an indirect product cost?

Which one of the following sentences about step costs is true?

Which of the following cost behaviour patterns are unrelated to unit activity?

Which statement describes step-cost behaviour?

Which of the following is an example of a possible cost object?