SECTION B: MULTIPLE CHOICE QUESTIONS

All of the following are factors affecting direct versus indirect

cost classification EXCEPT:

A$)$ materiality of the cost

B$)$ cost accuracy

C$)$ information technology's ability to trace costs in an

economically feasible way

D$)$ design of operations

Cost assignment:

A$)$ includes future and arbitrary costs

B$)$ associates accumulated costs with certain cost objects

C$)$ is the same as cost accumulation

D$)$ is the difference between budgeted and actual costs

Cost allocation is:

A$)$ the process of tracking both direct and indirect costs

associated with a cost object

B$)$ the process of determining the opportunity cost of a cost

object chosen

C$)$ the assignment of indirect costs to the chosen cost object

D$)$ made based on material acquisition document

When costs can be traced to a particular cost object in an

economically feasible way, the cost is a:

A$)$ direct cost

B$)$ indirect cost

C$)$ allocated cost

D$)$ budgeted cost

Indirect manufacturing costs:

A$)$ can be traced to the product that created the costs

B$)$ can be easily identified with the cost object

C$)$ generally include the cost of material and the cost of labor

D$)$ may include both variable and fixed costs

Which of the following is true of indirect costs?

A$)$ Indirect costs are always considered sunk costs.

B$)$ All indirect costs are included in cost of goods sold.

C$)$ Indirect costs always vary in direct proportion to the level

of production.

D$)$ Indirect costs cannot be traced to a particular cost object in

an economically feasible way.

Variable costs:

A$)$ are always indirect costs

B$)$ increase in total when the actual level of activity increases

C$)$ include most personnel costs and depreciation on

machinery

D$)$ are never considered a part of prime cost