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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.1)All costs incurred in a merchandising firm are considered to be period costs.A)True B)False
Answer:B
2)Depreciation is always considered a product cost for external financial reporting purposes in a manufacturing firm.A)True B)False
Answer:B
3)Advertising costs are considered product costs for external financial reports since they are incurred in order to promote specific products.A)True B)False
Answer:B
4)Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead.A)True B)False
Answer:A
5)Manufacturing overhead combined with direct materials is known as conversion cost.A)True B)False
Answer:B
6)If the ending inventory of finished goods is understated, net income will be overstated.A)True B)False
Answer:B
7)In a manufacturing company, goods available for sale equals the sum of the cost of goods manufactured and the beginning finished goods inventory.A)True B)False
Answer:A
8)Variable costs are costs whose per unit costs vary as the activity level rises and falls.A)True B)False
Answer:B
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9)On a per unit basis, a fixed cost varies inversely with the level of activity.A)True B)False
Answer:A
10)All the following would typically be considered indirect costs of manufacturing a particular Boeing 747 to be delivered to Singapore Airlines: electricity to run production equipment, the factory manager's salary, and the cost of the General Electric jet engines installed on the aircraft.A)True B)False
Answer:B
11)All the following costs should be considered direct costs of providing delivery room services to a particular mother and her baby: the costs of drugs administered in the operating room, the attending physician's fees, and a portion of the liability insurance carried by the hospital to cover the delivery room.A)True B)False
Answer:B
12)The following costs should be considered by a law firm to be indirect costs of defending a particular client in court: rent on the law firm's offices, the law firm's receptionist's wages, the costs of heating the law firm's offices, and the depreciation on the personal computer in the office of the attorney who has been assigned the client.A)True B)False
Answer:A
13)A cost that differs from one month to another is known as a differential cost.A)True B)False
Answer:B
14)Opportunity costs are always recorded as expenses in the accounts of an organization.A)True B)False
Answer:B
15)Sunk costs are irrelevant in making decisions.A)True B)False
Answer:A
16)The inventory accounts reported on the balance sheet of a manufacturing company will differ from those of a merchandising company.A)True B)False
Answer:A
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17)The corporate controller's salary would be considered a(n):
A)administrative cost.B)product cost.C)selling expense.D)manufacturing cost.
Answer:A
18)The cost of fire insurance for a manufacturing plant is generally considered to be a: A)period cost. B)variable cost. C)product cost. D)fixed cost.
Answer:C
19)The cost of rent for a manufacturing plant is generally considered to be a:
Prime costProduct cost
- No Yes
- No No
- Yes No
- Yes Yes
A)choice a. B)choice b. C)choice c. D)choice d.
Answer:A
20)Each of the following would be a period cost except:
A)the cost of a general accounting office.B)the salary of the company president's secretary.C)sales commissions.D)depreciation of a machine used in manufacturing.
Answer:D
21)For a manufacturing company, which of the following is an example of a period rather than a product cost?A)Wages of machine operators.B)Insurance on factory equipment.C)Depreciation of factory equipment. D)Wages of salespersons.
Answer:D
22)Which of the following would be considered a product cost for external financial reporting purposes?A)Cost of a warehouse used to store finished goods.B)Cost of guided public tours through the company's facilities.C)Cost of sand spread on the factory floor to absorb oil from manufacturing machines.D)Cost of travel necessary to sell the manufactured product.
Answer:C
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23)Which of the following would NOT be treated as a product cost for external financial reporting purposes?A)Indirect labour in the factory. B)Advertising expenses.C)Salaries of factory workers.D)Depreciation on a factory building.
Answer:B
24)Transportation costs incurred by a manufacturing company to ship its product to its customers would be classified as which of the following?A)Product cost.B)Manufacturing overhead.C)Administrative cost.D)Period cost.
Answer:D
25)The salary of the president of a manufacturing company would be classified as which of the following?A)Direct labour.B)Period cost.C)Product cost.D)Manufacturing overhead.
Answer:B
26)Micro Computer Company has set up a toll-free telephone line for customer inquiries regarding computer hardware produced by the company. The cost of this toll-free line would be classified as which of the following?A)Direct labour.B)Manufacturing overhead.C)Period cost.D)Product cost.
Answer:C
27)The wages of factory maintenance personnel would usually be considered to be: Indirect labourManufacturing overhead
- No Yes
- Yes No
- Yes Yes
- No No
A)choice a. B)choice b. C)choice c. D)choice d.
Answer:C
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