1) Manufacturing costs are also known as product costs. Which of the following best describes those costs which are considered to be manufacturing costs?

a. direct labor, direct material and selling costs

b. direct labor, direct material and overhead costs

c. indirect labor, indirect material and overhead costs

d. indirect labor, indirect material and selling costs

2) Machine lubricant used on processing equipment in a manufacturing plant would be classified as a:

a. period cost/overhead

b. product cost/overhead

c. product cost/SG&A

d. period cost/SG&A

3) Which of the following product costs is both a prime cost and conversion cost?

a. direct labor

b. direct materials

c. overhead

d. SG&A

4) A company's telephone bill consisting of a $200 monthly base amount, plus long distance charges, would be classified as a:

a. Fixed cost

b. Variable cost

c. Mixed cost

d. Direct cost

5) Talbot ot Company is planning to sell air filter systems for $2,500 per unit. Variable costs are $1,500 per unit and total fixed costs are $1,000,000. What is the dollar value of sales necessary to break even?

a. $1,000,000

b. $2,000,000

c. $2,500,000

d. $5,000,000

6) A mixed cost contains

a. both selling and administrative costs.

b. both operating and nonoperating costs.

c. a variable element and a fixed element.

d. direct materials and overhead

7) The break-even point is where

a. total sales equal total variable costs.

b. total variable costs equal total fixed costs.

c. contribution margin equals total fixed costs.

d. total sales equal total fixed costs.

8) Capital budgeting is the process

a. of determining how much capital stock to issue.

b. used in sell or process further decisions.

c. of determining special orders

d. of making capital expenditure decisions.

9) Which of the following is a disadvantage of the cash payback technique?

a. It is difficult to calculate

b. It relies on the time value of money

c. It can only be calculated when there are equal annual net cash flows

d. It ignores the expected profitability of a project

10) Which of the following does not consider a companys required rate of return?

a. Net present value

b. Internal rate of return

c. Annual rate of return

d. Cash payback

11) Intangible benefits in capital budgeting

a. should be ignored because they are difficult to determine.

b. include increased quality or employee loyalty.

c. are not considered because they are usually not relevant to the decision.

d. have a rate of return in excess of the companys cost of capital.

12) In traditional costing systems, overhead is generally applied based on

a. direct labor.

b. machine hours.

c. direct material dollars.

d. units of production.

13) The costs that are easiest to trace directly to products are

a. direct materials and direct labor.

b. direct labor and overhead.

c. direct materials and overhead.

d. none of the above; all three costs are equally easy to trace to the product.

14) Ordering materials, setting up machines, assembling products, and inspecting products are examples of

a. overhead cost pools.

b. cost drivers.

c. direct labor costs.

d. nonmanufacturing activities.

15) The last step in activity-based costing is to

a. assign overhead costs to products, using overhead rates determined for each cost pool.

b. compute the activity-based overhead rate per cost driver.

c. identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools. d. identify the cost driver that has a strong correlation to the activity cost pool.

16) Which of the following is not an example of an activity cost pool?

a. Setting up machines

b. Machining

c. Inspecting

d. Machine hours

17) Which of the following would not be considered an aspect of budgetary control?

a. It assists in the determination of differences between actual and planned results.

b. It provides feedback value needed by management to see whether actual operations are on course.

c. It assists management in controlling operations.

d. It provides a guarantee for favorable results.

18) Which statement is true?

a. An investment center is responsible for revenues and expenses, as well as earning a return on assets.

b. An investment center is only responsible for its investments.

c. An investment center is only responsible for revenues and expenses.

d. A profit center is evaluated using contribution margin, while an investment center is evaluated using ROI.

19) A profit center is a.

a responsibility center that always reports a profit.

b. a responsibility center that incurs costs and generates revenues.

c. evaluated by the rate of return earned on the investment allocated to the center.

d. referred to as a loss center when operations do not meet the company's objectives.

20) A manager of a cost center is evaluated mainly on

a. the profit that the center generates.

b. his or her ability to control costs.

c. the amount of investment it takes to support the cost center.

d. the amount of revenue that can be generated.