Which of the following is true? • Depreciation cost is always product cost • Depreciation cost is always period cost • Selling expense if always part of period cost, regardless of product costing system • Income under absorption is always greater than variable costing because of deferment of FOH

Which of the following is true? • Depreciation cost is always product cost • Depreciation cost is always period cost • Selling expense if always part of period cost, regardless of product costing system • Income under absorption is always greater than variable costing because of deferment of FOH

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 4MCQ

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

Which of the following is true?

• Depreciation cost is always product cost

• Depreciation cost is always period cost

• Selling expense if always part of period cost, regardless of product costing system

• Income under absorption is always greater than variable costing because of deferment of FOH

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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A general rule in relevant cost analysis is: O A. variable costs are always relevant. O B. fixed costs are always irrelevant. O C. Incremental future costs and revenues are always relevant. O D. depreciation is always irrelevant.
Why are there objections to using absorption costing when segment reports of profitability are being prepared?
Which type of cost has an unchanging total expense and a decreasing average expense as output increases?
Advocates of variable costing argue that * a. fixed production costs should be added to inventory because such costs have future service potential and therefore are inventoriable as an asset. b. fixed production costs should be capitalized as an asset and amortized over future periods when benefits from such costs are expected to be received. c. fixed production costs should be charged to the period in which they are incurred unless sales do not equal production in which case any difference should be capitalized as an asset and amortized over future periods. d. fixed production costs should be charged to the period in which they are incurred.
Which of the following best describes a fixed cost? A. It may only change in total when such change is unrelated to changes in production volume (i.e. inflation). B. It may change in total when such change is related to changes in production volume. C. It is constant per unit of change in production volume. D. It may change in total when such change depends on production volume within the relevant range. QUESTION 2 Period costs are best described as those costs: A. Incurred periodically (i.e. not on a regular basis). B. Incurred as a result of activities that occur inside the production building. C. That increase as a result of a change in volume for a particular period. D. Incurred as a result of activities that occur outside of the production building. QUESTION 3 What is the result when the contribution margin ratio increases? A. Break-even point increases B. Fixed Cost…
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A Cost-Volume-Profit graph contains an "Area of Loss" and an "Area ofProfitability". Which of the following best explains the difference between thetwo points on the graph? A. The area of loss represents the difference between Sales and Variable Cost.B. The area of loss begins with the concept that fixed costs have to be recovered priorto sales contributing to profit.C. The area of profit represents the difference between Sales and Variable Cost.D. The area of profit begins with the concept that no company would have any level ofsales below the break-even point.
Which of the following is a correct definition of the margin of safety? The excess of contribution margin over fixed costs The excess of gross margin over target income 0 The excess of sales revenue over the breakeven point The excess of ner income over all costs (both variable and fixed
Which of the following is not a true statement about variable costs? a. Total cost is known to change in proportion to any changes in related level of volume or activity. O b. When considering total cost behaviour, focus on fixed and variable costs. O c. A total cost that can change in proportion to changes in the number of products produced. O d. Total cost never changes in proportion to any changes in related levels of volume or activity. O e. An important cost to identify so managers can make important management decisions.
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