Managerial Accounting Garrison 15th Edition Test Bank

Managerial Accounting
Managerial Accounting Garrison Noreen Brewer
Managerial Accounting Garrison Noreen Brewer 15th
Managerial Accounting Garrison Noreen Brewer 15th Test Bank
Managerial Accounting Garrison 15th Edition Test Bank

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Managerial Accounting
Managerial Accounting Garrison Noreen Brewer
Managerial Accounting Garrison Noreen Brewer 15th
Managerial Accounting Garrison Noreen Brewer 15th Test Bank
Managerial Accounting Garrison 15th Edition Test Bank

File: 15e_GNB_CH02_TB, Chapter 2, Managerial Accounting and Cost Concepts

True/False

[QUESTION] 1. Selling costs can be either direct or indirect costs.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-02
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 2. A direct cost is a cost that cannot be easily traced to the particular cost object under consideration.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-01
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 3. Property taxes and insurance premiums paid on a factory building are examples of period costs.
Answer: F
Difficulty: 2 Medium
Learning Objective: 02-03
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 4. Conversion cost equals product cost less direct labor cost.
Answer: F
Difficulty: 3 Hard
Learning Objective: 02-03
Topic Area:
Bloom’s: Analyze
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 5. Thread that is used in the production of mattresses is an indirect material that is therefore classified as manufacturing overhead.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-02
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 6. Direct labor is a part of prime cost, but not conversion cost.
Answer: F
Difficulty: 2 Medium
Learning Objective: 02-03
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 7. Conversion cost is the sum of direct labor cost and direct materials cost.
Answer: F
Difficulty: 2 Medium
Learning Objective: 02-03
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 8. Direct material costs are generally fixed costs.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-02
Learning Objective: 02-04
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 9. Product costs are recorded as expenses in the period in which the related products are sold.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-03
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 10. Depreciation on manufacturing equipment is a product cost.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-02
Learning Objective: 02-03
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 11. Manufacturing salaries and wages incurred in the factory are period costs.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-03
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 12. Depreciation on office equipment would be included in product costs.
Answer: F
Difficulty: 2 Medium
Learning Objective: 02-03
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 13. Rent on a factory building used in the production process would be classified as a product cost and as a fixed cost.
Answer: T
Difficulty: 2 Medium
Learning Objective: 02-03
Learning Objective: 02-04
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 14. A fixed cost remains constant if expressed on a unit basis.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-04
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 15. Total variable cost is expected to remain unchanged as activity changes within the relevant range.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-04
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 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. Answer: T
Difficulty: 2 Medium
Learning Objective: 02-04
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 17. Committed fixed costs represent organizational investments with a multi-year planning horizon that can’t be significantly reduced even for short periods.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-04
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 18. Commissions paid to salespersons are a variable selling expense.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-04
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 19. Variable costs are costs that vary, in total, in direct proportion to changes in the volume or level of activity.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-04
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 20. The planning horizon for a committed fixed cost usually encompasses many years.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-04
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 21. Cost behavior is considered linear whenever a straight line is a reasonable approximation for the relation between cost and activity.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-05
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement

[QUESTION] 22. The high-low method uses cost and activity data from just two periods to establish the formula for a mixed cost.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-05
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 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.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-05
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement

[QUESTION] 24. The contribution margin is the amount remaining from sales revenues after variable expenses have been deducted.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-06
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 25. A contribution format income statement for a merchandising company organizes costs into two categories—cost of goods sold and selling and administrative expenses.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-06
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 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.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-06
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 27. In a contribution format income statement, the gross margin minus selling and administrative expenses equals net operating income.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-06
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 28. A traditional format income statement organizes costs on the basis of behavior.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-06
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 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.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-06
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 30. The contribution format is widely used for preparing external financial statements.
Answer: F
Difficulty: 2 Medium
Learning Objective: 02-06
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 31. Contribution margin equals revenue minus all fixed costs.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-06
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 32. The potential benefit that is given up when one alternative is selected over another is called an opportunity cost.
Answer: T
Difficulty: 1 Easy
Learning Objective: 02-07
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 33. A cost that differs from one month to another is known as a differential cost.
Answer: F
Difficulty: 1 Easy
Learning Objective: 02-07
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

Multiple Choice

[QUESTION] 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.
Answer: A
Difficulty: 3 Hard
Learning Objective: 02-01
Learning Objective: 02-03
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 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.
Answer: B
Difficulty: 2 Medium
Learning Objective: 02-01
Learning Objective: 02-07
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 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.
Answer: B
Difficulty: 3 Hard
Learning Objective: 02-01
Learning Objective: 02-07
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 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
Answer: D
Difficulty: 1 Easy
Learning Objective: 02-02
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 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.
Answer: C
Difficulty: 1 Easy
Learning Objective: 02-03
Topic Area:
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 39. The property taxes on a factory building would be an example of:

Prime Cost Conversion Cost
A) No Yes
B) Yes No
C) Yes Yes
D) No No
Answer: A
Difficulty: 2 Medium
Learning Objective: 02-03
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 40. Which of the following would most likely be included as part of manufacturing overhead in the production of a wooden table?
A) The amount paid to the individual who stains the table.
B) The commission paid to the salesperson who sold the table.
C) The cost of glue used in the table.
D) The cost of the wood used in the table.
Answer: C
Difficulty: 2 Medium
Learning Objective: 02-01
Learning Objective: 02-02
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback:

[QUESTION] 41. Property taxes on a manufacturing facility are classified as:

Conversion cost Period cost
A) Yes No
B) Yes Yes
C) No Yes
D) No No
Answer: A
Difficulty: 2 Medium
Learning Objective: 02-02
Learning Objective: 02-03
Topic Area:
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: