True False Questions

Chapter 02 - Cost Concepts and Behavior 2-1 Chapter 02 Cost Concepts and Behavior

True / False Questions

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

True False

• An expense is an expired cost matched with revenues in a specific accounting period.

True False

• An asset is a cost matched with revenues in a future accounting period.

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

• Cost of goods sold includes the actual costs of the goods sold and the cost of selling 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

Fundamentals of Cost Accounting 3rd Edition Lanen Test Bank Visit TestBankDeal.com to get complete for all chapters

Chapter 02 - Cost Concepts and Behavior 2-2

• 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

• 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

balance of the Finished Goods Inventory account increased.True False

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

True False

Chapter 02 - Cost Concepts and Behavior 2-3

• 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

• 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

Chapter 02 - Cost Concepts and Behavior 2-4

Multiple Choice Questions

• 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.

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

(1). In general, the term expense is used for managerial purposes, while the term cost refers to external financial reports.(2). An opportunity cost is the benefit forgone by selecting one alternative over another.

• Only (1) is false.
• Only (2) is false.
• Both (1) and (2) are false.
• Neither (1) nor (2) are false.

• Which of the following best distinguishes an opportunity cost from an outlay cost?
• Opportunity costs are recorded, whereas outlay costs are not.
• Outlay costs are speculative in nature, whereas opportunity costs are easily traceable to

products.

• Opportunity costs have very little utility in practical applications, whereas outlay costs are

always relevant.

• Opportunity costs are sacrifices from foregone alternative uses of resources, whereas

outlay costs are cash outflows.

• Which of the following accounts would be a period cost rather than a product cost?
• Depreciation on manufacturing machinery.
• Maintenance on factory machines.
• Production manager's salary.
• Direct Labor.
• Freight out.