AN INTRODUCTION TO COST TERMS AND PURPOSES(1)

AN INTRODUCTION TO COST TERMS AND PURPOSES(1) - CHAPTER 2...

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Unformatted text preview: CHAPTER 2 AN INTRODUCTION TO COST TERMS AND PURPOSES TRUE/FALSE 1. A cost object is always either a product or a service. Answer: True/False 2. A department could be considered a cost object. Answer: True/False 3. The same cost may be direct for one cost object and indirect for another cost object. Answer: True/False 4. Improvements in information-gathering technologies are making it possible to trace more costs as direct. Answer: True/False 5. Misallocated indirect costs may lead to promoting products that are not profitable. Answer: True/False 6. The materiality of the cost is a factor in classifying the cost as a direct or indirect cost. Answer: True/False 7. Fixed costs have no cost driver in the short run, but may have a cost driver in the long run. Answer: True/False 8. Costs that are difficult to change over the short run are always variable over the long run. Answer: True/False 9. Fixed costs depend on the resources used, not the resources acquired. 2-1 Answer: True/False 10. An appropriate cost driver for shipping costs might be the number of units shipped. Answer: True/False 11. When making decisions using fixed costs, the focus should be on total costs and not unit costs. Answer: True/False 12. When 50,000 units are produced the fixed cost is $10 per unit. Therefore, when 100,000 units are produced fixed costs will remain at $10 per unit. Answer: True/False 13. Merchandising companies purchase products and sell them to customers without changing their basic form. Answer: True/False 14. Merchandising companies only hold two types of inventories: merchandise inventory, and direct material. Answer: True/False 15. Manufacturing sector firms normally hold three types of inventory: direct materials inventory, work-in-process inventory, and finished goods inventory. Answer: True/False 16. Inventoriable costs are reported as an asset when incurred and expensed on the income statement when the product is sold. Answer: True/False 17. All manufacturing costs are inventoriable costs. Answer: True/False 18. The wages of a plant supervisor would be classified as a period cost. Answer: True/False 2-2 19. Depreciation can be classified as either an inventoriable cost or a period cost, depending on what is being depreciated. Answer: True/False 20. Insurance on a factory can be classified as a period cost. Answer: True/False 21. A product cost that is useful for one decision may not be useful information for another decision. Answer: True/False 22. For external reporting purposes, indirect manufacturing costs must be allocated to individual units. Answer: True/False 23. Overtime premium is normally considered as a component of direct labor. Answer: True/False 24. If a worker is paid for 8 hours, but is idle for 1 of those 8 hours, the 1 hour of idle time would be considered a component of direct labor....
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This note was uploaded on 03/08/2012 for the course ACC 4304 taught by Professor Ralultapia during the Spring '10 term at Texas State.

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AN INTRODUCTION TO COST TERMS AND PURPOSES(1) - CHAPTER 2...

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