Game Show Time

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Game Show Time

• Cost Terminology

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Question 1

• Contribution margin is the excess of revenues
  over
• Direct costs.
• Manufacturing costs.
• All variable costs.
• Cost of goods sold.

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Question 2

• For product costing purposes, the cost of
  production overtime caused by equipment failure
  that represents idle time plus the overtime
  premium should be classified as a(n)
• Direct cost.
• Indirect cost.
• Discretionary cost.
• Controllable cost.

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Question 3

• When production increases, fixed manufacturing
  costs react in which of the following ways?

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Question 4

• Which one of the following is true regarding a
  relevant range?
• Total fixed costs will not change.
• Total variable costs will not change.
• The relevant range cannot be changed after being
  established.
• Actual fixed costs usually fall outside the
  relevant range.

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Question 5

• The difference between the sales price and total
  variable costs is
• Gross operating profit.
• Net profit.
• The contribution margin.
• The breakeven point.

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Question 6

• Controllable costs
• Are primarily subject to the influence of a given
  manager of a given responsibility center for a
  given time span.
• Arise from periodic appropriation decisions and
  have no well-specified function relating inputs
  to outputs.
• Result specifically from a clear-cut measured
  relationship between inputs and outputs.
• Arise from having property, plant, and equipment,
  and a functioning organization.

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Question 7

• All costs related to the manufacturing function
  in a company are
• Direct costs.
• Prime costs.
• Conversion costs.
• Product costs.

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Question 8

• A company that manufactures custom-made machinery
  routinely incurs sizable long-distance telephone
  expenses in the process of taking sales orders
  from its customers. Which of the following is a
  proper classification of this expense?
• Conversion cost.
• Factory overhead.
• Product cost.
• Period cost.

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Question 9

• A fixed cost that would be considered a direct
  cost is
• A cost accountant's salary when the cost object
  is a unit of product.
• The rental cost of a warehouse to store inventory
  when the cost object is the Purchasing
  Department.
• Board of directors' fees when the cost object is
  the Marketing Department.
• A production supervisor's salary when the cost
  object is the Production Department.

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Question 10

• Opportunity costs are
• The same as variable costs.
• Equal to historical costs.
• Relevant to decision making.
• Fixed costs.

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Question 11

• Which of the following is a true statement
  regarding the contribution margin and the gross
  margin?
• The contribution margin is calculated by
  subtracting all product costs from revenues.
• The contribution margin is calculated by
  subtracting all variable costs from revenues.
• Direct materials and labor, variable factory
  overhead and general overhead, and fixed factory
  overhead are deducted from revenues to arrive at
  the contribution margin.
• The gross margin is calculated by subtracting all
  variable costs from revenues.

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Question 12

• Joint costs are those costs
• Of a product from a common process that has
  relatively little sales value and only a small
  effect on profit.
• Of two or more products produced from a common
  process.
• Of products requiring the services of two or more
  processing departments.
• Of production that are combined in the overhead
  account.

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Question 13

• A cost that remains unchanged on a per unit basis
  in a given time period despite changes in the
  level of activity should be considered
• A prime cost.
• An overhead cost.
• A variable cost.
• A fixed cost.

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Question 14

• A manufacturing firm classifies its costs as
  either product or period costs. A product cost
• Is expensed in the same period as incurred.
• Requires a cash disbursement.
• Is assigned to inventory when incurred.
• Arises from past expenditures that cannot be
  changed.

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Question 15

• Which of the following is not an inventoriable
  cost for a company engaged in the manufacture and
  sale of goods?
• Prime cost.
• Conversion cost.
• Period cost.
• Product cost.

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Question 16

• When the number of units manufactured increases,
  the most significant change in average unit cost
  will be reflected as
• An increase in the semivariable element.
• An increase in the nonvariable element.
• A decrease in the nonvariable element.
• A decrease in the variable element.

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Question 17

• Which one of the following best describes direct
  labor?
• A period cost.
• A prime cost.
• A product cost.
• Both a product cost and a prime cost.

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Question 18

• Costs incurred to produce two or more products
  from a common process are
• Conversion costs.
• Differential costs.
• Joint costs.
• Sunk costs.

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Question 19

• In a retailing enterprise, the income statement
  includes cost of goods sold. Cost of goods sold
  is, in effect, purchases adjusted for changes in
  inventory. In a manufacturing company, the
  purchases account is replaced by which account?
• Cost of goods sold.
• Finished goods.
• Inventory.
• Cost of goods manufactured.

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Question 20

• The relevance of a particular cost to a decision
  is determined by
• Riskiness of the decision.
• Amount of the cost.
• Number of decision variables.
• Potential effect on the decision.

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Question 21

• In a traditional manufacturing operation, direct
  costs normally include
• Wood in a furniture factory.
• Machine repairs in an automobile factory.
• Electricity in an electronics plant.
• Commissions paid to sales personnel.

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Question 22

• A production engineer's salary should be
  classified as
• Direct labor cost.
• Variable cost.
• Overhead cost.
• Engineered cost.

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Question 23

• Costs that can definitely be influenced by a
  given manager within a given time span are best
  defined as
• Period costs.
• Fixed costs.
• Variable costs.
• Controllable costs.

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Question 24

• The salary of the line supervisor in the assembly
  division of an automobile company should be
  included in
• Conversion costs.
• General and administrative costs.
• Opportunity costs.
• Prime costs.

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Question 25

• The wages of the factory janitorial staff should
  be classified as
• Direct labor cost.
• Period cost.
• Factory overhead cost.
• Prime cost.

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Question 26

• Incremental cost is
• A cost that continues to be incurred in the
  absence of activity.
• A cost common to all choices in question and not
  clearly or feasibly allocable to any of them.
• The profit forgone by selecting one choice
  instead of another.
• The difference in total costs that results from
  selecting one choice instead of another.

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Question 27

• The difference between variable costs and fixed
  costs is
• Unit variable costs fluctuate, and unit fixed
  costs remain constant.
• Unit variable costs are fixed over the relevant
  range, and unit fixed costs are variable.
• Unit variable costs change in varying increments,
  while unit fixed costs change in equal
  increments.
• Total variable costs are variable over the
  relevant range and fixed in the long term, while
  fixed costs never change.

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Question 28

• Conversion costs do not include
• Depreciation.
• Indirect labor.
• Indirect materials.
• Direct materials.

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Question 29

• The portion of a product's unit cost that
  decreases as the number of units produced
  increases is the
• Sunk cost.
• Step-function cost.
• Variable cost.
• Fixed cost.

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Question 30

• Unit fixed costs
• Are determined by dividing total fixed costs by a
  denominator such as production or sales volume.
• Are constant per unit regardless of units
  produced or sold.
• Include both fixed and variable elements.
• Vary directly with the activity level when stated
  on a per-unit basis.

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Question 31

• Costs that arise from periodic budgeting
  decisions having no strong input-output
  relationship are commonly called
• Committed costs.
• Engineered costs.
• Opportunity costs.
• Discretionary costs.

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Question 32

• An opportunity cost is
• The benefit forgone by selecting one choice
  instead of another.
• A cost that may be shifted to the future with
  little or no effect on current operations.
• A cost that may be saved by not adopting an
  alternative.
• The difference in total costs that results from
  selecting one choice instead of another.

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Question 33

• The marginal cost of the economist is most
  closely associated with the accountant's
• Unit fixed cost.
• Unit variable cost.
• Unit manufacturing cost.
• Unit total cost.

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Question 34

• Which one of the following categories of cost is
  most likely not considered a component of fixed
  factory overhead?
• Power.
• Rent.
• Property taxes.
• Supervisory salaries.

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Question 35

• Costs expected to vary with the management
  decision made are
• Future costs classified as variable rather than
  fixed.
• Sunk costs.
• Historical costs.
• Relevant costs.

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Question 36

• What is the nature of the work-in-process
  account?
• Nominal.
• Inventory.
• Cost of goods sold.
• Productivity.

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Question 37

• In a manufacturing firm, the income statement
  includes cost of goods manufactured. For a
  retailer, this account is replaced by
• Cost of goods sold.
• Inventory.
• Finished goods.
• Purchases.

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Question 38

• Which of the following is not a characteristic of
  product costs?
• Product costs do not include any fixed cost.
• Product costs are expensed when the product is
  sold.
• Product costs include direct materials, direct
  labor, and factory overhead.
• Product costs include costs of the factors of
  production identifiable with the product.

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Question 39

• Period costs
• Are associated with the periodic inventory
  method.
• Are always expensed in the same period in which
  they are incurred.
• Vary from one period to the next.
• Remain unchanged over a given period of time.

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Question 40

• The fixed portion of the semivariable cost of
  electricity for a manufacturing plant is a  

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Question 41

• To calculate the contribution margin, all of the
  following are subtracted from revenue (sales
  price) except
• Direct materials.
• Fixed factory overhead.
• Variable factory overhead.
• Direct labor.

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Question 42

• A factory manager's salary is
• Indirect labor.
• Administrative expense.
• Direct labor.
• Variable overhead.

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Question 43

• Which one of the following costs is classified as
  a period cost?
• The wages paid to workers for rework on defective
  products.
• The wages of a worker paid for idle time
  resulting from a machine breakdown in the molding
  operation.
• The wages of the workers on the shipping docks
  who load completed products onto outgoing trucks.
  
• The payments for employee (fringe) benefits paid
  on behalf of the workers in the manufacturing
  plant.

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Question 44

• An avoidable cost is
• The benefit forgone by selecting one choice
  instead of another.
• A cost that continues to be incurred in the
  absence of activity.
• A cost that does not arise from an actual
  transaction recognized in the accounting records
  but that is relevant to the decision-making
  process.
• A cost that may be eliminated by not adopting an
  alternative.

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Question 45

• Costs that increase as the volume of activity
  decreases within the relevant range are
• Total fixed costs.
• Average costs per unit.
• Average variable costs per unit.
• Total variable costs.

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Question 46

• In making an equipment-replacement decision, both
  the historical cost and the book value of the
  equipment to be replaced are best described as
• Fixed costs.
• Semivariable costs.
• Sunk costs.
• Opportunity costs.

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Question 47

• Which of the following is a fixed manufacturing
  cost for an automobile plant?
• Rent of assembly line equipment.
• Insurance for the sales showroom.
• Salaries of administrative personnel.
• Tires for the automobiles produced.

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Question 48

• A sunk cost
• May be shifted to the future with little or no
  effect on current operations.
• Cannot be avoided because it has already been
  incurred.
• Does not arise from an actual transaction
  recognized in the accounting records, but is
  relevant to the decision-making process.
• Varies with the action taken and therefore has an
  effect on the decision to be made.