Introduction to Managerial Accounting 7th Edition Brewer Garrison Noreen Test Bank.

Introduction to Managerial Accounting 7th Edition Brewer Garrison Noreen Test Bank. Chapter 01 Managerial Accounting and Cost Concepts True / False Questions 1. Selling costs can be either direct or indirect costs. True False 2. A direct cost is a cost that cannot be easily traced to the particular cost object under consideration. True False 3. Property taxes and insurance premiums paid on a factory building are examples of period costs. True False 4. Conversion cost equals product cost less direct labor cost. True False 5. Thread that is used in the production of mattresses is an indirect material that is therefore classified as manufacturing overhead. True False 6. Direct labor is a part of prime cost, but not conversion cost. True False 7. Conversion cost is the sum of direct labor cost and direct materials cost. True False 8. Direct material costs are generally fixed costs. True False 9. Product costs are recorded as expenses in the period in which the related products are sold. True False 10. Depreciation on manufacturing equipment is a product cost. True False 11. Manufacturing salaries and wages incurred in the factory are period costs. True False 12. Depreciation on office equipment would be included in product costs. True False 13. Rent on a factory building used in the production process would be classified as a product cost and as a fixed cost. True False 14. A fixed cost remains constant if expressed on a unit basis. True False 15. Total variable cost is expected to remain unchanged as activity changes within the relevant range. True False 16. Country Charm Restaurant is open 24 hours a day and always has a fire going in the fireplace in the middle of its dining area. The cost of the firewood for this fire is fixed with respect to the number of meals served at the restaurant. True False 17. Committed fixed costs represent organizational investments with a multi-year planning horizon that can't be significantly reduced even for short periods. True False 18. Commissions paid to salespersons are a variable selling expense. True False 19. Variable costs are costs that vary, in total, in direct proportion to changes in the volume or level of activity. True False 20. The planning horizon for a committed fixed cost usually encompasses many years. True False 21. Cost behavior is considered linear whenever a straight line is a reasonable approximation for the relation between cost and activity. True False 22. The high-low method uses cost and activity data from just two periods to establish the formula for a mixed cost. True False 23. The engineering approach to the analysis of mixed costs involves a detailed analysis of what cost behavior should be, based on an industrial engineer's evaluation of the production methods to be used, the materials specifications, labor requirements, equipment usage, production efficiency, power consumption, and so on. True False 24. The contribution margin is the amount remaining from sales revenues after variable expenses have been deducted. True False 25. A contribution format income statement for a merchandising company organizes costs into two categories—cost of goods sold and selling and administrative expenses. True False 26. The traditional format income statement provides managers with an income statement that clearly distinguishes between fixed and variable costs and therefore aids planning, control, and decision making. True False 27. In a contribution format income statement, the gross margin minus selling and administrative expenses equals net operating income. True False 28. A traditional format income statement organizes costs on the basis of behavior. True False 29. In a traditional format income statement for a merchandising company, the selling and administrative expenses report all period costs that have been expensed as incurred. True False 30. The contribution format is widely used for preparing external financial statements. True False 31. Contribution margin equals revenue minus all fixed costs. True False 32. The potential benefit that is given up when one alternative is selected over another is called an opportunity cost. True False 33. A cost that differs from one month to another is known as a differential cost. True False Multiple Choice Questions 34. The nursing station on the fourth floor of Central Hospital is responsible for the care of orthopedic surgery patients. The costs of prescription drugs administered by the nursing station to patients should be classified as: A. direct patient costs. B. indirect patient costs. C. overhead costs of the nursing station. D. period costs of the hospital. 35. All of the following costs would be found in a company's accounting records except: A. sunk cost. B. opportunity cost. C. indirect costs. D. direct costs. 36. The costs of the Accounting Department at Central Hospital would be considered by the Surgery Department to be: A. direct costs. B. indirect costs. C. incremental costs. D. opportunity costs. 37. Which of the following is classified as a direct labor cost? Wages of assembly- line workers Wages of a factory supervisor A) No No B) Yes Yes C) No Yes D) Yes No A. Option A B. Option B C. Option C D. Option D 38. In a manufacturing company, direct labor costs combined with direct materials costs are known as: A. period costs. B. conversion costs. C. prime costs. D. opportunity costs.