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Chapter 2-2A

Name_________________________
Choose the best answer.

1. Variable costs are those costs that: 
A) vary inversely with changes in activity. 
B) vary directly with changes in activity. 
C) remain constant as activity changes. 
D) decrease on a per-unit basis as activity increases. 
E) increase on a per-unit basis as activity increases. 

Ans: B

2. Fixed costs are those costs that: 
A) vary directly with changes in activity. 
B) vary inversely with changes in activity. 
C) remain constant on a per-unit basis. 
D) increase on a per-unit basis as activity increases. 
E) remain constant as activity changes. 

Ans: E

3. Total costs are $80,000 when 8,000 units are produced; of this amount, variable costs are $48,000. What are the total costs when 10,000 units are produced? 
A) $80,000. 
B) $92,000. 
C) $98,000. 
D) $100,000. 
E) $108,000. 

Ans: B

4. Indirect costs: 
A) can be traced to a cost object. 
B) cannot be traced to a particular cost object. 
C) are not important. 
D) are always variable costs. 
E) may be indirect with respect to Disney World but direct with respect to one its major components, Epcot Center. 

Ans: B

5. Quality Appliance produces washers and dryers in an assembly-line process. Labor costs incurred during a recent period were: corporate executives, $100,000; assembly-line workers, $60,000; security guards, $11,000; and plant supervisor, $18,000. The total of Quality's direct labor cost was: 
A) $60,000. 
B) $71,000. 
C) $78,000. 
D) $89,000. 
E) $189,000. 

Ans: A

6. Conversion costs are: 
A) direct material, direct labor, and manufacturing overhead. 
B) direct material and direct labor. 
C) direct labor and manufacturing overhead. 
D) prime costs. 
E) period costs. 

Ans: C

7. Which of the following would not be classified as a product cost? 
A) Direct materials. 
B) Direct labor. 
C) Indirect materials. 
D) Insurance on the manufacturing plant. 
E) Sales commissions. 

Ans: E

8. The accounting records of Ohio Corporation revealed the following selected costs: Sales commissions, $20,000; plant supervision, $84,000; and administrative expenses, $100,000. Ohio's period costs total: 
A) $20,000. 
B) $84,000. 
C) $100,000. 
D) $120,000. 
E) $204,000. 

Ans: D

9. The accounting records of Ohio Corporation revealed the following selected costs: Sales commissions, $20,000; plant supervision, $84,000; and administrative expenses, $100,000. Ohio's period costs total: 
A) $20,000. 
B) $84,000. 
C) $100,000. 
D) $120,000. 
E) $204,000. 

Ans: D

10. Work-in-process inventory is composed of: 
A) direct material and direct labor. 
B) direct labor and manufacturing overhead. 
C) direct material and manufacturing overhead. 
D) direct material only. 
E) direct material, direct labor, and manufacturing overhead. 

Ans: E

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