The cost of the cushions that are used to manufacture sofas is best described as a:
a. manufacturing overhead cost
b. period cost
c. variable cost
d. conversion cost - C. Variable cost
Manufacturing overhead includes:
a. all direct material, direct labor and administrative costs.
b. all manufacturing costs except direct labor.
c. all manufacturing costs except direct labor and direct materials.
d. all selling and administrative costs. - C. all manufacturing cost except direct labor and direct materials.
Materials used in the operation of a factory, such as cleaning supplies, that are not an integral part of
the final product should be classified as:
a. direct materials
b. period cost
c. administrative expense
d. manufacturing overhead - D. manufacturing overhead
The potential benefit that is given up when one alternative is selected over another is called:
a. a sunk cost
b. an opportunity cost
c. both a sunk cost and an opportunity cost
d. neither a sunk cost nor an opportunity cost - B. an opportunity cost
A sunk cost is:
,a. a cost that is planned to be incurred in the near future
b. irrelevant for decision making
c. a cost connected with drilling for oil
d. affected by changes in the level of activity - B. irrelevant for decision making
Which of the following types of firms typically would use process costing rather than job-order costing?
a. a small appliance repair shop
b. a manufacturer of commercial passenger aircraft
c. a specialty equipment manufacturer
d. a breakfast cereal manufacturer - D. a breakfast cereal manufacturer
A good description of "cost of goods manufactured" is the recorded cost of the:
a. units completed during the period
b. units started and completed during the period
c. work done on all units during the period
d. work done this period on units completed this period - A. units completed during the period
Gullett Corporation had $26,000 of raw materials on hand on November 1. During the month, the
company purchased an additional $75,000 of raw materials. The journal entry to record the purchase of
raw materials would include a:
a. debt to Raw Materials of $101,000
b. credit to Raw Materials of $75,000
c. debt to Raw Materials of $75,000
d. credit to Raw Materials of $101,000 - c. debit to Raw Materials of $75,000
Raw Materials 75,000
Accounts Payable 75,000
Which of the following activities would be classified as a batch-level activity?
a. setting up equipment
,b. designing a new product
c. training employees
d. milling a part required for the final product - a. setting up equipment
A is a fixed cost; B is a variable cost. during the current year the level of activity has decreased but is still
within the relevant range. We would expect that:
a. The cost per unit of A has remained unchanged
b. The cost per unit of B has decreased
c. The cost per unit of A has decreased
d. The cost per unit of B has remained unchanged - D. the cost per unit of B has remained unchanged
Limousine Conversion Company purchases ordinary Cadillacs, cuts them in half, and then adds a middle
section to the vehicles to create stretch limousine. With respect to the number of cars converted, the
cost of the Cadillacs purchased for conversion by Limousine Conversion Company would be best
described as a:
a. fixed cost
b. mixed cost
c. step-variable cost
d. variable cost - D. variable cost
With respect to a fixed cost, an increase in the activity level within the relevant range results in:
a. an increase in fixed cost per unit
b. a proportionate increase in total fixed costs
c. an unchanged fixed cost per unit
d. a decrease in fixed cost per unit - D. a decrease in fixed cost per unit
In the standard cost formula
Y = a + bX, what does the "Y" represent?
a. total cost
b. total fixed cost
, c. total variable cost
d. variable cost per unit - a. total cost
In the standard cost formula
Y = a + bX, what does the "X" represent?
a. total cost
b. total fixed cost
c. units of activity
d. variable cost per unit - C. units of activity
Contribution margin is computed as sales revenue minus:
a. fixed expenses
b. variable expenses
c. cost of goods sold
d. cost of goods manufactured - b. variable expenses
Which of the following statements is correct with regard to a CVP graph?
a. a CVP graph shows the maximum possible profit
b. a CVP graph shows the break-even point as the intersection of the total sales revenue line and the
total expense line
c. a CVP graph assumes that total expense varies in direct proportion to unit sales
d. a CVP graph shows the operating leverage as the gap between total sales revenue and total expense
at the actual level of sale - B. A CVP graph shows the break-even point as the intersection of the total
sales revenue line and the total expense line
At the break-even point:
a. sales would be equal to contribution margin
b. contribution margin would be equal to fixed expenses
c. contribution margin would be equal to net operating income
d. sales would be equal to fixed expenses - b. contribution margin would be equal to fixed expenses
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