Review_Cost Concepts

A cost that changes in direct proportion to the level of production or sales volume. Examples include raw materials, direct labor, and sales commissions.

• Variable Cost

• Fixed Cost

• Opportunity Cost

• Sunk Cost

A cost that remains constant regardless of the level of production or sales volume. Examples include rent, salaries, insurance, and depreciation.

• Variable Cost

• Fixed Cost

• Opprtunity Cost

• Sunk Cost

All expired costs that are deductible from revenues

• Expense

• Cost

• Loss

• Income

Cost Tracing is…

• The assignment of direct costs to the chosen cost object

• A function of cost allocation

• The process of tracking both direct and indirect costs associated with a cost object

• The process of determining the actual cost of the cost object

How is contribution margin calculated?

• Sales less variable costs

• Sales less fixed costs

• Sales plus variable costs

• Sales plus fixed costs

The amount remaining from sales revenue after deducting variable costs. It represents the portion of sales that contributes to covering fixed costs and generating profit.

• Income

• Contribution Margin

• Marginal Revenue

• Margin of safety

Good Service, Inc. is a construction company that builds houses on a special request. What is

the proper classification of the carpenters' wages? Product / Period / Direct

• yes, yes, no

• yes, no, yes

• no, no, no

• no, yes, yes

Statement I: Selling and administrative costs are period costs under both absorption and variable costing.

Statement II: Manufacturing cost per unit will be higher under variable costing than under absorption costing.

• Both statements are true

• Both statements are false

• Only statement one is true

• Only statement two is true

Statement 1: If volume increases, both total variable and total fixed costs will increase.

Statement 2: The relevant range of activity is the activity level at which a company makes the highest amount of profits.

• Both statements are true

• Both statements are false

• Only statement one is true

• Only statement two is true

The level of sales at which total revenues equal total costs, resulting in zero profit.

• Net Profit

• Operating Leverage

• Margin of Safety

• Break-even Point