Q. In cost classification, which term refers to costs that can be traced directly to a specific product?
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A.
Indirect Costs
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B.
Direct Costs
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C.
Fixed Costs
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D.
Variable Costs
Solution
Direct costs can be directly traced to a specific product or service.
Correct Answer:
B
— Direct Costs
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Q. What is the main difference between direct and indirect costs?
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A.
Direct costs are variable, indirect costs are fixed
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B.
Direct costs can be traced to a specific cost object, indirect costs cannot
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C.
Direct costs are always higher than indirect costs
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D.
There is no difference
Solution
Direct costs can be traced directly to a specific cost object, while indirect costs cannot.
Correct Answer:
B
— Direct costs can be traced to a specific cost object, indirect costs cannot
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Q. What is the primary purpose of cost classification?
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A.
To increase sales
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B.
To determine pricing
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C.
To facilitate cost control and decision making
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D.
To reduce production time
Solution
Cost classification helps in understanding costs for better control and decision-making.
Correct Answer:
C
— To facilitate cost control and decision making
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Q. What is the term for costs that are incurred regardless of the level of production?
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A.
Variable Costs
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B.
Fixed Costs
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C.
Sunk Costs
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D.
Opportunity Costs
Solution
Fixed costs are incurred regardless of production levels.
Correct Answer:
B
— Fixed Costs
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Q. What is the term for costs that are incurred to support the production process but cannot be directly traced to specific products?
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A.
Direct Costs
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B.
Indirect Costs
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C.
Variable Costs
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D.
Fixed Costs
Solution
Indirect costs are incurred to support production but cannot be traced directly to specific products.
Correct Answer:
B
— Indirect Costs
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Q. What is the term for the difference between actual costs and budgeted costs?
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A.
Cost Variance
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B.
Cost Control
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C.
Cost Allocation
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D.
Cost Classification
Solution
Cost variance measures the difference between actual costs incurred and budgeted costs.
Correct Answer:
A
— Cost Variance
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Q. What type of cost is associated with the production of goods but cannot be directly traced to specific units?
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A.
Direct Materials
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B.
Direct Labor
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C.
Manufacturing Overhead
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D.
Selling Expenses
Solution
Manufacturing overhead includes indirect costs that cannot be traced directly to specific units.
Correct Answer:
C
— Manufacturing Overhead
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Q. What type of cost remains constant in total regardless of changes in the level of activity within a relevant range?
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A.
Variable Cost
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B.
Fixed Cost
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C.
Mixed Cost
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D.
Step Cost
Solution
Fixed costs do not change with the level of production or sales within a relevant range.
Correct Answer:
B
— Fixed Cost
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Q. Which of the following costs would be classified as a direct cost for a manufacturing company?
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A.
Factory rent
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B.
Direct labor
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C.
Depreciation on factory equipment
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D.
Utilities for the factory
Solution
Direct labor costs can be directly traced to the production of specific goods.
Correct Answer:
B
— Direct labor
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Q. Which of the following costs would be classified as a mixed cost?
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A.
Electricity bill with a fixed service charge and variable usage charge
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B.
Direct labor
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C.
Raw materials
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D.
Insurance
Solution
A mixed cost has both fixed and variable components, such as an electricity bill.
Correct Answer:
A
— Electricity bill with a fixed service charge and variable usage charge
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Q. Which of the following is an example of a variable cost?
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A.
Rent
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B.
Direct Materials
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C.
Salaries
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D.
Depreciation
Solution
Direct materials costs vary directly with the level of production.
Correct Answer:
B
— Direct Materials
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Q. Which of the following is NOT a characteristic of fixed costs?
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A.
Remain constant in total
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B.
Per unit cost decreases as production increases
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C.
Vary with production levels
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D.
Do not change with short-term fluctuations
Solution
Fixed costs do not vary with production levels; they remain constant in total.
Correct Answer:
C
— Vary with production levels
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