Tutorial 1 - Costs

An example of a semi variable cost would be

• The costs of material to be used for production.

• The salaries of supervisors in a department.

• Power and lighting costs.

• The costs of insuring assets.

Prime cost can be defined as

• The total costs of manufacturing a product.

• The total direct costs of manufacturing a product.

• The cost of the first stage of the manufacture of a product.

• The total costs of operating the production department where the product is made.

Which of the following best describes a fixed cost?

• Represents a fixed proportion of total costs

• Has a direct relationship with output

• Its average remains at the same level as output increases

• Remains at the same level up to a particular level of output

A semi variable cost would

• Be zero when output is zero and would increase in direct proportion to output

• Be more than zero if no products were made and would then increase in direct proportion to output

• Be a fixed amount when output was zero and would not increase in direct proportion to output

• Be zero if output were zero and would change erratically as output increased

Which of the following best describes a semi variable cost:

• A cost which is difficult to estimate

• A cost which has a fixed and a variable element

• A cost which only varies sometimes

• A cost which will be fixed for specific levels of production

Advertising, insurance and managers’ salaries are all examples of

• variable costs

• fixed costs

• direct labour costs

• direct material costs

Which of the following would NOT usually be considered a fixed cost?

• insurance

• managers’ salaries

• plant depreciation

• syringes used in a hospital

Which of the following would most likely be a variable cost?

• direct materials

• direct labour

• sales commissions

• all of the above

Factory overhead includes:

• indirect labour but not indirect materials

• indirect materials but not indirect labour

• all manufacturing costs, except direct materials and labour

• all manufacturing costs

The term “prime cost” refers to:

• the sum of raw material costs and direct labour costs

• the sum of direct labour costs and all factory overhead costs

• all costs associated with manufacturing other than direct labour costs and raw material costs

• manufacturing costs incurred to produce units of output