Chapter 02

Managerial Accounting

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Chapter 2 Cost Terms, Concepts, and Classifications True/False Questions 1. The sum of all costs of manufacturing costs except direct materials is called manufacturing overhead. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 2. Conversion cost is the sum of direct labor and manufacturing overhead. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 3. Prime cost is the sum of direct labor and manufacturing overhead. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 4. Thread used in the production of mattresses, an indirect material, is classified as manufacturing overhead. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 5. Period costs are also known as inventoriable costs. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy 6. All costs in a merchandising company are period costs. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy 7. The cost of goods sold of a manufacturing company equals beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 2-7
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Chapter 2 Cost Terms, Concepts, and Classifications 8. A variable cost is constant if expressed on a per unit basis but the total dollar amount changes as the number of units increases or decreases. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy 9. As activity increases within the relevant range, fixed costs remain constant on a per unit basis. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy 10. Direct costs are often difficult to trace to the specific cost object under consideration. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy 11. All of the following are examples of opportunity costs: salary given up to start a business; rental income given up when you live in a house you own; interest income that could be earned on money spent for a car. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Medium 12. The amount that was paid by a company for a building to house its operations is an example of a sunk cost. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Easy 13. The most effective way to minimize quality costs while maintaining high quality is to avoid having quality problems in the first place. This is the reason for incurring appraisal costs.
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Chapter 02 - Chapter 2 Cost Terms, Concepts, and...

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