answers the question.

Version 1 1 Chapter 1

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.1) Which of the following statements are true?

• A factory supervisor's salary would be classified as an indirect cost with respect to a unit

of product.

• A direct cost is a cost that can be easily traced to the particular cost object under

consideration.

• A cost can be direct or indirect. The classification can change if the cost object changes.
• Only statement I is true.
• Statements I and II are true.
• All of the statements are true.
• None of the statements are true.

2) Which of the following statements are true?

• Wages paid to production supervisors would be classified as manufacturing overhead.
• Indirect costs, such as manufacturing overhead, are variable costs.
• Selling costs are indirect costs.
• Administrative costs are indirect costs.
• Only statement I is true.
• Statements I and III are true.
• All statements are true.
• None of the statements are true.

3) Which of the following statements are true?

• The sum of all manufacturing costs except for direct materials and direct labor is called

manufacturing overhead.

• The three cost elements ordinarily included in product costs are direct materials, direct

labor, and manufacturing overhead.

• Only statement I is true.
• Only statement II is true.
• Both of the statements are true.
• Neither of the statements are true.

(Managerial Accounting, 18e Ray Garrison, Eric Noreen, Peter Brewer) (Test Bank, Answer at the end of each Chapter) (For Complete File, Download link at the end of this File) 1 / 4

Version 1 2 4) Which of the following statements are true?

• Depreciation is always considered a period cost for external financial reporting purposes

in a manufacturing company.

• Depreciation on equipment a company uses in its selling and administrative activities

would be classified as a period cost.

• Only statement I is true.
• Only statement II is true.
• Both of the statements are true.
• Neither of the statements are true.

5) Which of the following statements are true?

• Conversion cost is the sum of direct labor cost and manufacturing overhead cost.
• Conversion cost is the same thing as manufacturing overhead.
• Conversion cost equals product cost less direct materials cost.
• Only statement I is true.
• Statements I and III are true.
• All statements are true.
• None of the statements are true.

6) Which of the following statements are true?

• In a manufacturing company, all costs are period costs.
• Selling and administrative expenses are period costs under generally accepted accounting

principles.

• The cost of shipping parts from a supplier is considered a period cost.
• Only statement I is true.
• Only statement II is true.
• Statements I and II are true.
• Statements I and III are true.

7) Which of the following statements are true?

• Advertising is not a considered a product cost even if it promotes a specific product.
• Product costs are also known as inventoriable costs.
• Prime cost is the sum of direct materials cost and direct labor cost.
• Prime cost equals manufacturing overhead cost.
• Only statement I is true.
• Both statements I and IV are true.
• Statements I, II, and III are true.
• None of the statements are true.
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Version 1 3 8) Which of the following statements are true?

• If the activity level increases, then one would expect the fixed cost per unit to increase as

well.

• A fixed cost is a cost whose cost per unit varies as the activity level rises and falls.
• A decrease in production will ordinarily result in a decrease in fixed production costs per

unit.

• Only statement II is true.
• Only statement III is true.
• Statements I and II are true.
• Statements I and III are true.

9) Which of the following statements are true?

• Cost behavior is considered curvilinear whenever a straight line is a reasonable

approximation for the relation between cost and activity.

• As activity decreases within the relevant range, fixed costs remain constant on a per unit

basis.

• In account analysis, an account is classified as either variable or fixed based on an

analyst’s prior knowledge of how the cost in the account behaves.

• Only statement I is true.
• Only statement II is true.
• Only statement III is true.
• All statements are true.

10) Which of the following statements are true?

• The variable cost per unit depends on how many units are produced.
• A step-variable cost is a cost that is obtained in large chunks and that increases or

decreases only in response to fairly wide changes in activity.

• Only statement I is true.
• Only statement II is true.
• Both of the statements are true.
• Neither of the statements are true.
• / 4

Version 1 4 11) Which of the following statements are true?

• A fixed cost is constant if expressed on a per unit basis but the total dollar amount

changes as the number of units increases or decreases.

• Fixed costs expressed on a per unit basis do not change with changes in activity.
• Committed fixed costs remain largely unchanged in the short run.
• Only statement I is true.
• Only statement II is true.
• Only statement III is true.
• All statements are true.

12) Which of the following statements are true?

• Within the relevant range, a change in activity results in a change in variable cost per unit

and total fixed cost.

• The concept of the relevant range does not apply to variable costs.
• Only statement I is true.
• Only statement II is true.
• Both of the statements are true.
• Neither of the statements are true.

13) Which of the following statements are true?

• When operations are interrupted or cut back, committed fixed costs are cut in the short

term because the costs of restoring them later are likely to be far less than the short-run savings that are realized.

• The cost of napkins put on each person's tray at a fast food restaurant is a variable cost

with respect to how many persons are served.

• Committed fixed costs represent organizational investments with a one-year planning

horizon.

• The following costs are all examples of committed fixed costs: depreciation on buildings,

salaries of highly trained engineers, real estate taxes, and insurance expenses.

• Only statement III is true.
• Both statement I and II are true.
• Both statement II and IV are true.
• All statements are true.
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