XCOSTACM – CHAPTER 2 – COSTS – CONCEPTS AND CLASSIFICATIONS

QUIZ NO. 2

MULTIPLE CHOICE – Write your letter choice in capital letter and on a yellow paper. Erasures, in any form, are not
allowed.
1. In cost terminology, conversion costs consist of:
A. Direct and indirect labor
B. Direct labor and direct materials
C. Direct labor and factory overhead
D. Indirect labor and variable factory overhead
2. Cost is the amount measured by the current monetary value of economic resources given up or to be given up in
obtaining goods and services. Costs may be classified as unexpired or expired. Which of the following costs is not
always considered to be expired immediately upon being recognized?
A. Cost of goods sold
B. Sales salaries
C. Depreciation expense for plant machinery
D. Loss from bankruptcy of a major debtor not provided for in the annual adjustment
3. All costs related to the manufacturing function in a company are:

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A. Prime cost B. Direct cost C. Product cost D. Conversion cost

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4. Indirect materials are a:

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Conversion cost Manufacturing Prime cost

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A. Yes Yes Yes

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B. Yes Yes No
C. No
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D. No No No
5. Materials used in the operation of a factory, such as cleaning supplies, that are not an integral part of the final
product should be classified as:
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A. Direct materials C. Administrative expense

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B. A period costs D. Manufacturing overhead

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6. The one cost that would be classified as part of both prime cost and conversion cost would be:
A. Indirect material B. Direct Labor C. Direct material D. Manufacturing overhead
7. Wages paid to factory machine operators of a manufacturing plant are an element of
Prime Cost Conversion Cost
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A. No No
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B. No Yes
C. Yes No
D. Yes Yes
8. Costs that vary inversely with changes in volume include
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A. Total variable costs.

B. Total variable costs divided by volume.
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C. Total fixed costs.

D. Total fixed costs divided by volume.
9. When a unit of product is the cost object, factory overhead generally is:
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A. A direct manufacturing cost. C. Both of the above

B. An indirect manufacturing cost. D. None of the above
10. Factory rent is
A. A prime cost and an inventoriable cost. C. A conversion cost and a period cost.
B. A prime cost and a period cost. D. A conversion cost and an inventoriable cost.
11. Examples of factory overhead costs are
A. Lubricants for factory machinery C. Both of the above
B. Depreciation of factory machinery D. None of the above
12. In general, the cost that could usually be most reliably predicted is
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 A. Variable cost per unit C. Total variable cost
B. Fixed cost per unit D. Total fixed cost
13. Factory supplies used would be an example of which of the following?
Prime Cost Conversion Cost
A. Yes Yes
B. Yes No
C. No Yes
D. No No
14. For a manufacturing company, which of the following is an example of a period rather than a product cost?
A. Depreciation of factory equipment C. Wages of machine operators
B. Wages of a salesperson D. Insurance on factory equipment
15. The variable portion of the semi-variable cost of electricity for a manufacturing plant is a
Conversion Cost Period Cost
A. Yes No
B. Yes Yes
C. No Yes
D. No No
16. Indirect costs are also known as:
A. Differential costs C. Opportunity costs

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B. Common costs D. Sunk costs

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17. Variable cost

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A. Increases on a per unit basis as the number of units produced increases.

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B. Is constant if expressed on a per unit basis.

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C. Remains the same in total as production increases.
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D. Is not affected by changes in activity from period to period.
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18. All of the following are examples of product costs except:
A. Depreciation on the company’s retail outlets.
B. Salary of the plant manager.
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C. Insurance on the factory equipment.

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D. Rental costs of the factory facility.

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19. The distinction between indirect and direct costs depends on

A. Whether a cost is controllable or non-controllable.
B. Whether a cost is variable or fixed.
C. Whether a cost is a product or period cost.
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D. Whether a cost can be conveniently and physically traced to a unit under consideration.
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20. Which of the following should not be included as manufacturing overhead in the manufacture of a wooden
chair?
A. Glue in the chair.
B. The amount paid to the individual who stains the chair.
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C. The workman’s compensation insurance of the supervisor who oversees production.

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D. The factory utilities of the department in which production takes place.

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