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Chap 2

Satisfactory Essays
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Chap 2
1.
Selling costs can be either direct or indirect costs.
TRUE

2.
A direct cost is a cost that cannot be easily traced to the particular cost object under consideration.
FALSE

3.
Property taxes and insurance premiums paid on a factory building are examples of period costs.
FALSE

4.
Conversion cost equals product cost less direct labor cost.
FALSE

5.
Thread that is used in the production of mattresses is an indirect material that is therefore classified as manufacturing overhead.
TRUE

6.
Direct labor is a part of prime cost, but not conversion cost.
TRUE

7.
Conversion cost is the sum of direct labor cost and direct materials cost.
FALSE

8.
Direct material costs are generally fixed costs.
FALSE

9.
Product costs are recorded as expenses in the period in which the related products are sold.
TRUE

10.
Depreciation on manufacturing equipment is a product cost.
TRUE

11.
Manufacturing salaries and wages incurred in the factory are period costs.
FALSE

12.
Depreciation on office equipment would be included in product costs.
FALSE

13.
Rent on a factory building used in the production process would be classified as a product cost and as a fixed cost.
TRUE

14.
A fixed cost remains constant if expressed on a unit basis.
FALSE

15.
Total variable cost is expected to remain unchanged as activity changes within the relevant range.
FALSE

16.
Country Charm Restaurant is open 24 hours a day and always has a fire going in the fireplace in the middle of its dining area. The cost of the firewood for this fire is fixed with respect to the number of meals served at the restaurant.
TRUE

17.
Committed fixed costs represent organizational investments with a multi-year planning horizon that can't be significantly reduced even for short periods.
TRUE

18.
Commissions paid to salespersons are a variable selling expense.
TRUE

19.
Variable costs are costs that vary, in total, in direct proportion to changes in the volume or level of activity.
TRUE

20.
The

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