College Acct 2- Chapter 1

Which of the following costs is considered both a direct cost and a conversion cost?

• Variable overhead

• Fixed overhead

• Direct materials

• Direct labor

Which of the following is considered a period cost?

• Depreciation of factory machinery

• Advertising expenses for a new product

• Raw materials used in production

• Wages of factory workers

What does the contribution margin represent?

• Sales less all expenses

• Sales less variable costs

• Sales less fixed costs

• Sales less cost of goods sold and variable expenses

A company pays $3,000 for a four-year insurance policy at the beginning of the first year. Seventy percent of the premium is for manufacturing operations and thirty percent is for selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage?

• Product - $525

  Period - $225

• Product - $225

  Period - $525

• Product - $750

  Period - $0

• Product - $0

  Period - $750

Which of the following statements is true when referring to fixed costs?

• Committed fixed costs arise from the annual decisions by management

• As volume increases, unit fixed cost and total fixed cost will change

• Fixed costs increase in total throughout the relevant range

• Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company

A cost that has already been incurred and cannot be recovered is known as a(n):

• Sunk cost

• Marginal cost

• Fixed cost

• Variable cost

Which of the following would most likely be considered a direct cost in a furniture factory?

• The salary of the factory manager

• The cost of wood used in making a table

• The depreciation on factory equipment

• The factory's electricity bill

In the cost formula Y = a + bX, what does the "a" represent?

• Total fixed cost

• Total variable cost

• Variable cost per unit

• Total cost

Indirect costs:

• are incurred to benefit a particular accounting period.

• cannot be easily traced to a particular cost object.

• are incurred due to a specific decision.

• are the fixed costs of producing a product.

As the level of activity increases, how will a mixed cost in total and per unit behave?

• In Total - Decrease

  Per Unit - Increase

• In Total - Increase

  Per Unit - No Effect

• In Total - Increase

  Per Unit - Decrease

• In Total - Increase

  Per Unit - Increase

• In Total - Decrease

  Per Unit - No Effect