cost accounting test bank chapter 2

5) Cost tracing is ________.

A) the assignment of direct costs to the chosen cost object B) a function of cost allocation

C) the process of tracking both direct and indirect costs associated with a cost object D) the process of determining the actual cost of the cost object Answer: A

Diff: 1

Objective: 2

AACSB: Analytical thinking

6) Cost allocation is ________.

A) the process of tracking both direct and indirect costs associated with a cost object B) the process of determining the opportunity cost of a cost object chosen C) the assignment of indirect costs to the chosen cost object D) made based on material acquisition document Answer: C

Diff: 1

Objective: 2

AACSB: Analytical thinking

7) The determination of a cost as either direct or indirect depends upon the ________. A) accounting standards B) tax system chosen C) inventory valuation D) cost object chosen Answer: D

Diff: 1

Objective: 2

AACSB: Analytical thinking

8) Classifying a cost as either direct or indirect depends upon ________. A) the behavior of the cost in response to volume changes

B) whether the cost is expensed in the period in which it is incurred C) whether the cost can be easily traced with the cost object D) whether a cost is fixed or variable Answer: C

Diff: 1

Objective: 2

AACSB: Analytical thinking

9) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line is ________. A) beverages provided daily in the plant break room

B) monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver C) salaries of the clerical staff that work in the company administrative offices D) overheads incurred in producing both golf and soccer equipment Answer: B

Diff: 1

Objective: 2

AACSB: Application of knowledge

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10) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is the ________. A) material used to make the soccer balls

B) labor to shape the leather used to make the soccer ball C) material used to manufacture the soccer studs D) salary paid to plant supervisor Answer: D

Diff: 1

Objective: 2

AACSB: Application of knowledge

11) Which one of the following items is a direct cost?

A) Customer-service costs of a multiproduct firm; Product A is the cost object.

B) Printing costs incurred for payroll check processing; payroll check processing is the cost object. C) The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object.

D) Utility costs of the administrative offices; the accounting department is the cost object. Answer: B

Diff: 1

Objective: 2

AACSB: Application of knowledge

12) Indirect manufacturing costs ________.

A) can be traced to the product that created the costs B) can be easily identified with the cost object

C) generally include the cost of material and the cost of labor D) may include both variable and fixed costs Answer: D

Diff: 1

Objective: 2

AACSB: Application of knowledge

13) Which of the following is true of indirect costs? A) Indirect costs are always considered sunk costs.

B) All indirect costs are included in cost of goods sold.

C) Indirect costs always vary in direct proportion to the level of production.

D) Indirect costs cannot be traced to a particular cost object in an economically feasible way. Answer: D

Diff: 1

Objective: 2

AACSB: Application of knowledge

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14) Which of the following statements is true?

A) A direct cost of one cost object will always be a direct cost of another cost object. B) Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs. C) All fixed costs are indirect costs. D) All direct costs are variable costs. Answer: B

Diff: 1

Objective: 2

AACSB: Analytical thinking

15) Which of the following statements is true of direct costs?

A) A direct cost of one cost object is a true sense of the budgeted costs. B) All variable costs are direct costs.

C) A direct cost of one cost object can be an indirect cost of another cost object. D) All fixed costs are direct costs. Answer: C

Diff: 1

Objective: 2

AACSB: Application of knowledge

16) A cost may be direct for one cost object and indirect for another cost object. Answer: TRUE

Diff: 1

Objective: 2

AACSB: Application of knowledge

17) Assigning indirect costs is easier than assigning direct costs. Answer: FALSE

Explanation: Tracing direct costs is quite straightforward, whereas assigning indirect costs to a number of different cost objects can be very challenging.

Diff: 1

Objective: 2

AACSB: Application of knowledge

18) Improvements in information-gathering technologies are making it possible to trace more costs as direct.

Answer: TRUE

Diff: 1

Objective: 2

AACSB: Analytical thinking

19) The smaller the amount of a cost the more likely it is economically feasible to trace it to a particular cost object.

Answer: FALSE

Explanation: The smaller the amount of a cost the less likely it is economically feasible to trace it to a particular cost object.

Diff: 1

Objective: 2

AACSB: Application of knowledge

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20) A direct cost of one cost object can be an indirect cost of another cost object. Answer: TRUE

Diff: 1

Objective: 2

AACSB: Analytical thinking

21) The cost of electricity used in the production of multiple products would be classified as a indirect cost.

Answer: TRUE

Diff: 1

Objective: 2

AACSB: Application of knowledge

22) The broader the cost object definition, higher the proportion of direct costs are of total costs. Answer: TRUE

Diff: 1

Objective: 2

AACSB: Analytical thinking

23) The distinction between direct and indirect costs is clearly set forth in Generally Accepted Accounting Principles (GAAP). Answer: FALSE

Explanation: The distinction between direct and indirect costs is not set forth in GAAP. Direct costs of a cost object are related to the particular cost object and can be traced to it in an economically feasible (cost-effective) way. Indirect costs of a cost object are related to the particular cost object but cannot be traced to it in an economically feasible (cost-effective) way.

Diff: 1

Objective: 2

AACSB: Analytical thinking

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