Question 1

Although ________ costs are important in management decision-making, they cannot be directly related to individual cost units.
A)overhead
B)direct
C)material
D)fixed

Accepted Answer

Overhead costs, also known as indirect costs, cannot be traced back to specific cost units or products. They include expenses such as rent, utilities, and salaries of support staff, and are allocated among different cost units using overhead allocation methods. Direct costs, on the other hand, can be directly attributed to a cost unit or product, such as materials and labor. Material and fixed costs are also types of direct costs that can be assigned to specific cost units.

Question 2

Anything for which a separate measurement of cost is desired is called a:
A)cost unit.
B)job.
C)article.
D)fixed cost object.

Accepted Answer

A cost unit is a term used to describe any item or activity for which a separate cost measurement is desired. This can include products, services, projects, or any other item that requires a distinct cost analysis. Cost units are used in accounting and financial management to track the cost of production, sales, and other business operations. The other answer choices are not as appropriate, as a job refers to a specific task performed by an individual or group, an article is a product or item for sale, and a fixed cost object is a specific cost that does not vary with changes in production or sales levels.

Question 3

In full costing overhead, costs are:
A)economically identifiable with the cost object.
B)always fixed costs.
C)not economically identifiable with the cost object.
D)Both B and C.

Accepted Answer

Full costing overhead costs are indirect costs that cannot be directly traced to the cost object, and thus are not economically identifiable with the cost object.

Question 4

Use the information below to answer the following questions.
Scott's Fencing constructs paling fences. During last month, the fencing division erected 4,000 metres of fencing. The costs incurred by the division were as follows: $$\begin{array} { l r } 
\text { Palings } & \$ 4,000 \
\text { Posts } & \$ 5,000 \
\text { Nails (no usage records) } & \$ 500 \
\text { Cement (no usage records) } & \$ 500 \
\text { Wear and tear on equip. } & \$ 2,000
\end{array}$$
-Refer to the table above. The cost per metre of fencing is:
A)$2.25.
B)$2.75.
C)$2.50.
D)$3.00.

Accepted Answer

The total cost is $12,000 ($4,000 + $5,000 + $500 + $500 + $2,000). Dividing by 4,000 metres gives a cost per metre of $3.00.

Question 5

What is the difference between selling price and profit?
A)direct cost.
B)full cost.
C)variable cost.
D)fixed cost.

Accepted Answer

The difference between selling price and profit is the full cost, which includes both fixed and variable costs. Profit is calculated by subtracting the full cost from the selling price.

Question 6

Use the information below to answer the following questions.
Jan runs a successful hairdressing salon in the CBD. The type of costs incurred in providing services to clients are:
i)Hairdressers' salaries
ii)Shampoo and Conditioner
(no individual records kept of usage)
iii)Colour and Perm Solutions
(individual records kept of usage per client)
iv)Electricity and Gas
v)Depreciation of equipment
-Refer to the information above. The indirect costs incurred in providing a perm to a client would be:
A)all costs mentioned above.
B)shampoo and conditioner, electricity and gas, depreciation on equipment.
C)shampoo and conditioner, electricity and gas, colour and perm solution.
D)shampoo and conditioner, electricity and gas.

Accepted Answer

Indirect costs are those that cannot be directly traced to a specific service. Shampoo and conditioner, electricity and gas, and depreciation on equipment are indirect costs as they are not directly attributable to a single client's perm service.

Question 7

Use the information below to answer the following questions.
Jan runs a successful hairdressing salon in the CBD. The type of costs incurred in providing services to clients are:
i)Hairdressers' salaries
ii)Shampoo and Conditioner
(no individual records kept of usage)
iii)Colour and Perm Solutions
(individual records kept of usage per client)
iv)Electricity and Gas
v)Depreciation of equipment
-Refer to the information above. The direct costs incurred in providing a haircut only to a client would be:
A)all costs mentioned above.
B)hairdresser salary, shampoo and conditioner.
C)hairdresser salary, shampoo and conditioner and electricity and gas.
D)hairdresser salary.

Accepted Answer

Direct costs are those that can be directly attributed to the production of a specific good or service. In the context of providing a haircut, the hairdresser's salary is the only cost that can be directly attributed to the service provided to a specific client. Shampoo and conditioner, while used, are not tracked per client and are therefore considered indirect costs, similar to electricity, gas, and depreciation of equipment.

Question 8

What costing system is used to assign costs to a distinct, identifiable job or service?
A)job costing system.
B)material control system.
C)process costing system.
D)average costing system.

Accepted Answer

Job costing system is used to assign costs to a distinct, identifiable job or service. This system is commonly used in industries such as construction, custom manufacturing, and professional services where each job or service is unique and requires customized cost tracking. Material control system, process costing system, and average costing system all have different purposes and are not designed for assigning costs to a specific job or service.

Question 9

A cost unit can be:
A)a product.
B)a department.
C)a job.
D)all of the above.

Accepted Answer

A cost unit can refer to any item, activity or group that is being measured for its cost. This can include a product that is being manufactured, a department within a company or even a specific job being completed. All of these options represent possible cost units.

Question 10

What does an overhead recovery rate represent?
A)a rate at which jobs will be charged with overheads.
B)a rate at which jobs are charged labour costs.
C)a rate at which jobs are charged to clients.
D)a rate at which jobs use overhead.

Accepted Answer

The overhead recovery rate is used to allocate overhead costs to jobs or products, based on a predetermined formula. It represents the rate at which jobs will be charged with overheads to ensure that the overhead costs are covered by the jobs.

Question 11

Use the information below to answer the following questions.
Jan runs a successful hairdressing salon in the CBD. The type of costs incurred in providing services to clients are:
i)Hairdressers' salaries
ii)Shampoo and Conditioner
(no individual records kept of usage)
iii)Colour and Perm Solutions
(individual records kept of usage per client)
iv)Electricity and Gas
v)Depreciation of equipment
-Refer to the information above. The indirect costs incurred in providing a haircut only to a client would be:
A)all costs mentioned above.
B)shampoo and conditioner, electricity and gas.
C)electricity and gas and depreciation of equipment.
D)shampoo and conditioner, electricity and gas, and depreciation of equipment.

Accepted Answer

The indirect costs incurred in providing a haircut only to a client would be shampoo and conditioner (as no individual records are kept of usage), electricity and gas (as they are used to power the salon as a whole, not just for one client), and depreciation of equipment (as the equipment is used for all clients, not just one). Colour and perm solutions are not indirect costs for a simple haircut, as they are only used if a client specifically requests those services. Hairdressers' salaries are direct costs, as they are paid specifically for the service provided to the client.

Question 12

A printing firm that produces newsletters, advertising brochures and other small documents for individual clients is operating what type of costing system?
A)Process costing.
B)Job costing.
C)Periodic costing.
D)None of the above.

Accepted Answer

The printing firm is operating a job costing system because it produces small documents for individual clients. Job costing is a costing system that assigns costs to specific jobs or orders, which are often unique, distinct, and customized.

Question 13

Use the information below to answer the following questions.
Scott's Fencing constructs paling fences. During last month, the fencing division erected 4,000 metres of fencing. The costs incurred by the division were as follows: $$\begin{array} { l r } 
\text { Palings } & \$ 4,000 \
\text { Posts } & \$ 5,000 \
\text { Nails (no usage records) } & \$ 500 \
\text { Cement (no usage records) } & \$ 500 \
\text { Wear and tear on equip. } & \$ 2,000
\end{array}$$
-Refer to the table above. The full cost associated with constructing the 4,000 metres of fencing is:
A)$12,000.
B)$9,500.
C)$9,000.
D)$10,000.

Accepted Answer

The full cost associated with constructing the 4,000 metres of fencing is $12,000. This includes the cost of palings, posts, nails, cement, and wear and tear on equipment.

Question 14

The approach to deriving full costs in an operation where only identical products are produced is:
A)(total cost times percentage allocated to each unit)divided by total units.
B)total cost divided by total units.
C)(total units times percentage allocated to each unit)times total cost.
D)total units times total cost.

Accepted Answer

When only identical products are produced, the total cost can be divided equally or proportionately among the total units, resulting in the cost per unit. Therefore, the best approach to deriving full costs is to divide the total cost by the total units produced, which is the method used in choice B.

Question 15

Which of the following statements is correct?
A)Full costing takes into account all resources sacrificed to achieve a specific objective.
B)Full costing only takes into account manufacturing costs.
C)Only variable costs are required to determine the selling price for a product.
D)Full costing cannot be used in the service industries.

Accepted Answer

Full costing takes into account all resources sacrificed to achieve a specific objective, including both variable and fixed costs. It is a method of costing that considers direct costs (such as materials, labor costs) as well as indirect costs (such as rent, depreciation, and utilities) when determining the cost of a product or service. B, C, and D are incorrect statements.

Question 16

What does full cost represent?
A)only semi-variable costs.
B)variable costs.
C)both fixed and variable costs.
D)fixed costs.

Accepted Answer

Full cost represents both fixed and variable costs. It includes all the costs associated with producing a product or providing a service, including direct costs such as materials and labor, as well as indirect costs such as rent, utilities, and depreciation. By including both fixed and variable costs, full cost gives a comprehensive view of the true cost of production.

Question 17

The classification of a cost as either direct or indirect depends primarily on:
A)the computer tracing system within the organisation.
B)the definition of the cost object.
C)the knowledge of the accountant.
D)the type of business.

Accepted Answer

Direct and indirect costs are classified based on the cost object, which is the product, department, or activity to which the cost is assigned. Costs that can be easily traced and assigned to a cost object are considered direct costs, while costs that cannot be easily traced and assigned are considered indirect costs. Therefore, the definition of the cost object plays a crucial role in determining whether a cost is direct or indirect. The other options are not primary factors in the classification of costs.

Question 18

Use the information below to answer the following questions.
Scott's Fencing constructs paling fences. During last month, the fencing division erected 4,000 metres of fencing. The costs incurred by the division were as follows: $$\begin{array} { l r } 
\text { Palings } & \$ 4,000 \
\text { Posts } & \$ 5,000 \
\text { Nails (no usage records) } & \$ 500 \
\text { Cement (no usage records) } & \$ 500 \
\text { Wear and tear on equip. } & \$ 2,000
\end{array}$$
-Refer to the table above. The total direct costs incurred in erecting the 4,000 metres of fencing is:
A)$11,000.
B)$9,000.
C)$9,500.
D)$10,000.

Accepted Answer

Direct costs are those that can be directly attributed to the production of a specific good or service. In this case, the costs for palings and posts can be directly attributed to the construction of the fencing, totaling $4,000 + $5,000 = $9,000. Nails, cement, and wear and tear on equipment are considered indirect costs because they cannot be directly attributed to the production of a specific length of fencing or may be used in a manner that is not directly quantifiable per project.

Question 19

Full product costs comprise:
A)non-production costs only.
B)production costs only.
C)both production and non-production costs.
D)all costs except warrantee costs.

Accepted Answer

Full product costs comprise both production and non-production costs, which include direct materials, direct labor, factory overhead, selling expenses, administrative expenses, and other expenses directly associated with the production and distribution of the product. Warrantee costs are not included as they are considered a separate cost category.

Question 20

Use the information below to answer the following questions.
Jan runs a successful hairdressing salon in the CBD. The type of costs incurred in providing services to clients are:
i)Hairdressers' salaries
ii)Shampoo and Conditioner
(no individual records kept of usage)
iii)Colour and Perm Solutions
(individual records kept of usage per client)
iv)Electricity and Gas
v)Depreciation of equipment
-Refer to the information above. The direct costs incurred in providing a perm to a client would be:
A)all costs mentioned above.
B)hairdresser salary, shampoo, and conditioner.
C)hairdresser salary, colour and perm solution.
D)hairdresser salary.

Accepted Answer

The direct costs incurred in providing a perm to a client would only include the hairdresser salary and the cost of the colour and perm solution as they are specifically used for that service. Shampoo and conditioner are indirect costs that are used for multiple services and not specific to the perm service. Electricity and gas and depreciation of equipment are overhead costs that are not directly related to providing the perm service.

Quiz 10: Full Costing

Although ________ costs are important in management decision-making, they cannot be directly related to individual cost units.

Anything for which a separate measurement of cost is desired is called a:

In full costing overhead, costs are:

What is the difference between selling price and profit?

What costing system is used to assign costs to a distinct, identifiable job or service?

A cost unit can be:

What does an overhead recovery rate represent?

A printing firm that produces newsletters, advertising brochures and other small documents for individual clients is operating what type of costing system?

The approach to deriving full costs in an operation where only identical products are produced is:

Which of the following statements is correct?

What does full cost represent?

The classification of a cost as either direct or indirect depends primarily on:

Full product costs comprise: