1. Cost concepts - Cost optimization

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

• True

• False

Conversion cost equals product cost less direct labor cost.

• True

• False

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

• True

• False

Depreciation on manufacturing equipment is a product cost.

• True

• False

Depreciation on office equipment would be included in product costs.

• True

• False

In a manufacturing company, direct labor costs combined with direct materials costs are known as:

• conversion costs.

• period costs.

• prime costs

• opportunity costs.

Indirect labor is a(n):

• Prime cost.

• Conversion cost.

• Period cost.

• Opportunity cost.

All of the following would be classified as product costs except:

• property taxes on production equipment.

• insurance on factory machinery.

• salaries of the marketing staff.

• wages of machine operators.

Inventoriable costs are also known as:

• variable costs.

• conversion costs.

• product costs.

• fixed costs.

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

• True

• False