True False Questions

2-1 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Chapter 02 Cost Concepts and Behavior

True / False Questions

• The cost of an item is the sacrifice of resources made to acquire it.

True False

• An expense is a cost charged against revenue in an accounting period.

True False

• If a cost is recorded as an asset (for example, prepaid rent for an office building), it becomes an

expense when the asset has been consumed.

True False

• Accounting systems typically record opportunity costs as assets and treat them as intangible

items on the financial statements.

True False

• Total cost of goods purchased minus beginning merchandise inventory plus ending merchandise

inventory equals cost of goods sold.

True False

Fundamentals of Cost Accounting 5th Edition Lanen Test Bank Visit TestBankDeal.com to get complete for all chapters

2-2 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

• Cost of goods sold includes the actual costs of the goods sold and the costs required to sell them

to the customer.

True False

• Period costs are those costs assigned to units of production in the period in which they are

incurred.

True False

• Only direct costs can be classified as product costs; indirect costs are classified as period costs.

True False

• The three categories of product costs are direct materials, direct labor, and manufacturing

overhead.

True False

• The first step in determining whether a cost is direct or indirect is to specify the cost allocation

rule.

True False

• Total work-in-process during the period is the sum of the beginning work-in-process inventory and

the total manufacturing costs incurred during the period.

True False

2-3 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

• Cost of goods sold plus the ending finished goods inventory minus the beginning finished goods

inventory equals the cost of goods manufactured.

True False

• If the cost of goods manufactured during the period exceeds the cost of goods sold, the ending

balance of Finished Goods Inventory account increased.

True False

• Total variable costs change inversely with changes in the volume of activity.

True False

• Fixed costs per unit change inversely with changes in the volume of activity.

True False

• The range within which fixed costs remain constant as volume of activity varies is known as the

relevant range.

True False

• The term full cost refers to the cost of manufacturing and selling a unit of product and includes

both fixed and variable costs.

True False

• Variable marketing and administrative costs are included in determining full absorption costs.

True False

2-4 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

• Revenue minus cost of goods sold equals contribution margin.

True False

• The primary goal of the cost accounting system is to provide managers with information to

prepare their annual financial statements.

True False

Multiple Choice Questions

• An opportunity cost is

• a cost that is charged against revenue in an accounting period.

• the foregone benefit from the best alternative course of action.

• the excess of operating revenues over operating costs.

• the cost assigned to the products sold during the period.

• Which of the following statements is (are) true?

(1). An asset is a cost that will be matched with revenues in a future accounting period.(2). Opportunity costs are recorded as intangible assets in the current accounting period.

• Only (1) is true.

• Only (2) is true.

• Both (1) and (2) are true.

• Neither (1) nor (2) are true.