1. It is beneficial to assign indirect costs to cost objects.

• It is beneficial to assign indirect costs to cost objects.
• True
• False

ANSWER: True

• Price must be greater than cost in order for the firm to generate revenue.
• True
• False

ANSWER: False

• Accumulating costs is the way that costs are measured and recorded.
• True
• False

ANSWER: True

• Assigning costs involves the way that a cost is linked to some cost object.
• True
• False

ANSWER: True

• Assigning costs tells the accountant who spent the money.
• True
• False

ANSWER: False

• A cost object is any item such as products, customers, departments, regions, and so on, for which costs are

measured and assigned.

• True
• False

ANSWER: True

• Costs are directly, not indirectly, associated with cost objects.
• True
• False

ANSWER: False

• Direct costs are those costs that cannot be easily and accurately traced to a cost object.
• True
• False

ANSWER: False

RATIONALE: Direct costs are those costs that can be easily and accurately traced to a cost object. CengageLearningTesting,Poweredby CogneroPage 1Chapter 2 - Basic Managerial Accounting Concepts Cornerstones of Managerial Accounting 6th Edition Mowen Test Bank Visit TestBankDeal.com to get complete for all chapters

• Indirect costs are costs that are not easily and accurately traced to a cost object.
• True
• False

ANSWER: True

• Allocation means that an indirect cost is assigned to a cost object using a reasonable and convenient method.
• True
• False

ANSWER: True

• A variable cost is one that does not increase in total as output increase and does not decrease in total as output

decreases.

• True
• False

ANSWER: False

RATIONALE: A variable cost is one that does increase in total as output increase and does not decrease in total as output decreases.

• A fixed cost is a cost that does not increase in total as output increases and does not decrease in total as output

decreases.

• True
• False

ANSWER: True

• An opportunity cost is the benefit given up or sacrificed when one alternative is chosen over another.
• True
• False

ANSWER: True

• Cost is a dollar measure of the resources used to achieve a given benefit.
• True
• False

ANSWER: True

• A cost object is something for which a company wants to know the cost.
• True
• False

ANSWER: True CengageLearningTesting,Poweredby CogneroPage 2Chapter 2 - Basic Managerial Accounting Concepts

• The revenue per unit is called cost.
• True
• False

ANSWER: False

RATIONALE: The revenue per unit is called price.

• As costs are used up in the production of revenues, they are said to expire. Expired costs are called expenses.
• True
• False

ANSWER: True

• Costs are incurred to produce future benefits.
• True
• False

ANSWER: True

• Expired costs are called assets.
• True
• False

ANSWER: False

• Reducing the cost required to achieve a given benefit means that a company is becoming less efficient.
• True
• False

ANSWER: False

• Costs can be assigned to cost objects in only one way.
• True
• False

ANSWER: False

RATIONALE: Costs can be assigned to cost objects in a number of ways.

• Property taxes on a factory building would normally be classified as a fixed cost.
• True
• False

ANSWER: True CengageLearningTesting,Poweredby CogneroPage 3Chapter 2 - Basic Managerial Accounting Concepts

• Glue used in the manufacture of cabinets would be an example of a fixed cost.
• True
• False

ANSWER: False

RATIONALE: Glue used in the manufacture of cabinets would be an example of a variable cost.

• Industries that provide services do not normally have direct contact with their customers.
• True
• False

ANSWER: False

• Research and development costs would be classified as product cost.
• True
• False

ANSWER: False

RATIONALE: Research and development costs would be classified as period costs.

• Product costs include direct materials, direct labor, and selling costs.
• True
• False

ANSWER: False

• All product costs other than direct materials and indirect labor are called overhead.
• True
• False

ANSWER: False

• Direct materials can be directly traced to the goods or services being produced.
• True
• False

ANSWER: True

• Any costs associated with storing, selling, and delivering the product are classified as product costs.
• True
• False

ANSWER: False

RATIONALE: Any costs associated with storing, selling, and delivering the product are classified as period costs. CengageLearningTesting,Poweredby CogneroPage 4Chapter 2 - Basic Managerial Accounting Concepts