Test Bank all Chapters

Managerial Accounting, 2nd Middle East Edition 2e Ray Garrison , Eric Noreen, Peter Brewer, Rania Mardini (Test Bank all Chapters) (Answers at the end of each Chapter)

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Chapter 02 Managerial Accounting and Cost Concepts

True / False Questions

• Selling costs can be either direct or indirect costs.

True False

• A direct cost is a cost that cannot be easily traced to the particular cost object under

consideration.

True False

• Property taxes and insurance premiums paid on a factory building are examples of period

costs.

True False

• Conversion cost equals product cost less direct labor cost.

True False

• Thread that is used in the production of mattresses is an indirect material that is therefore

classified as manufacturing overhead.

True False

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• Direct labor is a part of prime cost, but not conversion cost.

True False

• Conversion cost is the sum of direct labor cost and direct materials cost.

True False

• Direct material costs are generally fixed costs.

True False

• Product costs are recorded as expenses in the period in which the related products are sold.

True False

• Depreciation on manufacturing equipment is a product cost.

True False

• Manufacturing salaries and wages incurred in the factory are period costs.

True False

• Depreciation on office equipment would be included in product costs.

True False

• Rent on a factory building used in the production process would be classified as a product

cost and as a fixed cost.

True False

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2-8 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

• A fixed cost remains constant if expressed on a unit basis.

True False

• Total variable cost is expected to remain unchanged as activity changes within the relevant

range.

True False

• Country Charm Restaurant is open 24 hours a day and always has a fire going in the fireplace

in the middle of its dining area. The cost of the firewood for this fire is fixed with respect to the number of meals served at the restaurant.

True False

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

horizon that can't be significantly reduced even for short periods.

True False

• Commissions paid to salespersons are a variable selling expense.

True False

• Variable costs are costs that vary, in total, in direct proportion to changes in the volume or

level of activity.

True False

• The planning horizon for a committed fixed cost usually encompasses many years.

True False

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