PRICOS Review Quiz

Indirect costs are also known as overhead costs, as they include expenses that are necessary for the business to function, but do not directly contribute to production.

• True

• False

Direct costs are always variable costs, while indirect costs are always fixed costs.

• True

• False

Direct costs are easily assignable to a specific product or service, while indirect costs cannot be attributed to a specific item.

• True

• False

Direct costs are more easily controlled than indirect costs, as they are directly related to production and can be adjusted through changes in production methods or materials.

• True

• False

Indirect costs can be allocated to specific products or services through the use of cost drivers, such as machine hours or labor hours.

• True

• False

Which of the following is an example of a fixed cost?

• Raw materials

• Rent

• Direct labor

• Shipping costs

Which of the following is an example of a variable cost?

• Salaries for administrative staff

• Property taxes

• Electricity bills

• Insurance premiums

Which of the following statements is true regarding fixed costs?

• They remain constant regardless of the level of production.

• They increase proportionally with the level of production.

• They decrease proportionally with the level of production.

• They are not affected by changes in the level of production.

Which of the following statements is true regarding variable costs?

• They remain constant regardless of the level of production.

• They increase proportionally with the level of production.

• They decrease proportionally with the level of production.

• They are not affected by changes in the level of production.

Which of the following costs can be both fixed and variable depending on the circumstances?

• Advertising expenses

• Employee salaries

• Depreciation of equipment

• Cost of goods sold