ch01

Student:

1. Direct material costs are generally variable costs.
True False

2. Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead.
True False

3. Manufacturing overhead combined with direct materials is known as conversion cost.
True False

4. All costs incurred in a merchandising firm are considered to be period costs.
True False

5. Depreciation is always considered a product cost for external financial reporting purposes in a manufacturing firm.
True False

6. In external financial reports, factory utilities costs may be included in an asset account on the balance sheet at the end of the period.
True False

7. Advertising costs are considered product costs for external financial reports because they are incurred in order to promote specific products.
True False

8. Selling and administrative expenses are product costs under generally accepted accounting principles.
True False

9. A variable cost is a cost whose cost per unit varies as the activity level rises and falls.
True False

10. When the level of activity increases, total variable cost will increase.
True False

11. A decrease in production will ordinarily result in an increase in fixed production costs per unit.
True False

12. Automation results in a shift away from variable costs toward more fixed costs.
True False

13. In order for a cost to be variable it must vary with either units produced or units sold.
True False

14. The concept of the relevant range does not apply to fixed costs.
True False

15. Indirect costs, such as manufacturing overhead, are always fixed costs.
True False

16. Discretionary fixed costs arise from annual decisions by management to spend in certain fixed cost areas.
True False 17. Even if operations are interrupted or cut back, committed fixed costs remain