COST ACCOUNTING Chapter 2 Quiz

I. Multiple Choices
1. The term used to describe the assignment of direct costs to the particular cost object is
a.
b.
c.
d.

cost
cost
cost
cost

allocation
assignment
accumulation
tracing

2. The term used to describe the assignment of indirect costs to a particular cost object would be
a.
b.
c.
d.

cost
cost
cost
cost

assignment
allocation
accumulation
tracing

3. As activity changes, a cost that is variable will

a.
b.
c.
d.

remain the same in total amount

remain the same per unit
vary per unit
vary inversely with activity per unit

4. A cost that is constant in total amount is always considered a(n)

a.
b.
c.
d.

variable cost.
direct cost.
indirect cost.
fixed cost.

5. As the quantity produced increases, fixed costs per unit are expected to
a.
b.
c.
d.

decrease per unit.

stay the same per unit.
increase per unit.
None of the above.

6. An average cost is also known as a(n)

a.
b.
c.
d.

unit cost.
total cost.
fixed cost.
variable cost.

7. A merchandising company engages in all of the following except for

a.
b.
c.
d.

manufacturing.
wholesaling.
retailing.
distributing.

8. Ford Automotive Company is considered an example of a(n)

a.
b.
c.
d.

merchandiser.
service company.
manufacturer.
wholesaler.

9. Hotels.com, a company that sells hotel reservations over the Internet is an example of a(n)
a.
b.
c.
d.

service company.
merchandiser.
manufacturer.
None of the above.

10. The cost of materials that have been started into production, but are not completely processed,
would be found in which inventory account on the balance sheet?
a.
b.
c.
d.

Supplies inventory
Work-in-process inventory
Direct materials inventory
Finished goods inventory

11. Finished goods inventory costs represent the costs of goods that are
a.
b.
c.
d.

already delivered to customers.

waiting to be worked on.
waiting to be sold.
currently being worked on.

12. An example of an inventoriable cost would be

a.
b.
c.
d.

advertising flyers.
sales commissions.
shipping fees.
direct materials.

13. Prime costs would include

a.
b.
c.
d.

direct
direct
direct
direct

material costs and indirect manufacturing costs.

material and direct labor costs.
labor costs and indirect manufacturing costs.
material costs, direct labor costs, and indirect manufacturing costs.

14. Costs at a service sector company are normally considered

a.
b.
c.
d.

prime costs.
inventoriable costs.
period costs.
None of the above.

15. Cost of incoming freight on merchandise to be sold to customers by a retail chain would be
considered by that merchandiser to be
a.
b.
c.
d.

prime costs.
inventoriable costs.
period costs.
None of the above.

II. Fill in the Blanks.

1. A cost is a resource ______ to achieve a specific objective.
a.
b.
c.
d.

Contributed
Earned
Sacrificed
Donated

2. A(n) ______ is anything for which a measurement of costs is desired.

a.
b.
c.
d.

actual cost
cost accumulation
cost object
cost assignment

3. Cost allocation assigns ______ costs to the cost object, while cost tracing assigns the ______
costs.
a.
b.
c.
d.

direct, direct
indirect, direct
indirect, indirect
direct, indirect

4. A ______ cost changes ______ as activity level changes.

a.
b.
c.
d.

fixed, per unit

fixed, in total
variable, per unit
variable, inversely

5. A cost that is traceable to a cost object, but that remains the same in total no matter what level of
activity the cost object has is a ______ and ______ cost.
a.
b.
c.
d.

direct, fixed
indirect, variable
direct, variable
indirect, fixed

6. A variable cost is one that is constant ______, and varies ______ as activity level changes.
a.
b.
c.
d.

in total, per unit

per unit, in total
in total, in total
per unit, per unit

7. A ______ is an example of a service level company.

a.
b.
c.
d.

Dentist
grocery store
computer builder
food-processing company

8. The ______ inventory account stores information about goods that are completed, but not yet
sold.
a.
b.
c.
d.

Work-in-process
Direct Material
Supplies
Finished Goods

9. ______ would be considered a product cost, while ______ would be considered a period cost.
a.
b.
c.
d.

Advertising flyers, sales commissions

Plant depreciation, sales commissions
Shipping (outgoing), direct labor
Direct labor, plant supervisor salary

10. ______ would be an inventoriable cost for a merchandiser, while ______ would be a period cost
for a merchandiser.
a.
b.
c.
d.

Freight-out, salary of the store supervisor

Salary of the store supervisor, freight-in
Salary of the store supervisor, freight-out
Freight-in, salary of the store supervisor

11. Oil for the machines used to manufacture furniture would most likely be considered a(n) ______
cost. With respect to changes in the amount of furniture produced it would be considered a
______ cost.
a.
b.
c.
d.

period, fixed
inventoriable, fixed
inventoriable, variable
period, variable

12. At a service sector company, the president's salary would normally be considered a(n) ______
cost. With respect to changes in the activity level at the service company, it would be considered
______.
a.
b.
c.
d.

period, fixed
inventoriable, variable
inventoriable, fixed
period, variable

13. When determining the conversion costs for a product, ______ costs would be included, but
______ costs would not be included.
a.
b.
c.
d.

direct material, indirect manufacturing

direct material, direct labor
direct labor, direct material
indirect manufacturing, direct labor

III. True or False.

1. Cost assignment involves only tracing accumulated costs with direct relationship to a cost
2.
3.
4.
5.
6.
7.
8.
9.
10.

objective.
Cost allocation describes the assignment of direct costs to a particular cost object.
The cost object has no bearing on whether a cost is direct or indirect.
All fixed costs are considered indirect.
A unit cost is valid at only one level of production.
Service companies always have a finished goods inventory on their balance sheets.
Merchandising companies do not normally manufacture a product.
Manufacturing companies normally have three types of inventories on their balance sheets.
Inventoriable costs are expensed in the same period in which they are incurred
Electricity for a production line is considered an inventoriable cost.

Answers.

I.
1. d.
2. b.
3. b.
4. d.
5. a.
6. a.
7. a.
8. c.
9. a.
10. b.
11. c.
12. d.
13. b.
14. c.
15. b.

Multiple Choices
cost tracing
cost allocation
remain the same per unit
fixed cost.
decrease per unit.
unit cost.
manufacturing.
manufacturer.
service company.
Work-in-process inventory
waiting to be sold.
direct materials.
direct material and direct labor costs.
period costs.
inventoriable costs.

II. Fill in the Blanks

1. c.
2. c.
3. b.
4. a.
5. a.
6. b.
7. a.
8. d.
9. b.
10. d.
11. c.
12. a.
13. c.

Sacrificed
cost object
indirect, direct
fixed, per unit
direct, fixed
per unit, in total
Dentist
Finished Goods
Plant depreciation, sales commissions
Freight-in, salary of the store supervisor
inventoriable, variable
period, fixed
direct labor, direct material

III. True or False

1. False
2. False
3. False
4. False
5. True
6. False
7. True
8. True
9. False
10. True

Cost assignment includes both tracing direct costs and allocating indirect costs.
Cost tracing describes the assignment of direct costs to a particular cost object. Cost allocation involves
the assignment of indirect costs.
A particular cost can be an indirect cost to one cost object and a direct cost to a different cost object.
Some fixed costs are traceable.
Unit costs have both fixed and variable components. The fixed costs per unit change as activity level
changes.
Service companies normally do not have any significant inventory on their balance sheet since they do
not manufacture or sell a tangible product to their customers.
The major function of a merchandising company is to purchase products from various suppliers and sell
them to customers. They do little if any manufacturing.
Manufacturers normally have three types of inventory on their balance sheets: raw material, work in
process, and finished goods.
An inventoriable cost becomes part of the inventory and becomes an expense only when the product is
sold.
Since electricity for a production line is a cost of producing the product it would be considered
inventoriable.