Accounting 202 - Chapter 2 Review Test Quiz
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Which of the following are merchandising companies?
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Manufactures
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Retailers
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Wholesalers
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Both Retailers and Wholesalers
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Accounting 202 - Chapter 2 Review Test Quiz
Managerial accounting, as we know, is a branch of accounts that helps in collecting, analyzing, and reporting information about the operations and finances of a business. These reports are generally used to show the position of a business to continue as a going concern. Take up the quiz and see what you know See moreabout it.
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- 2.
Raw materials, work in process and finished goods are the three types of inventory held by which of the following types of companies?
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Manufacturing
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Retailers
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Wholesalers
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Service Companies
Correct Answer
A. ManufacturingExplanation
Manufacturing companies hold three types of inventory: raw materials, work in process, and finished goods. Raw materials are the basic materials used in production, work in process includes partially completed products, and finished goods are the final products ready for sale. This inventory is necessary for manufacturing companies as they are involved in the production process, unlike retailers, wholesalers, and service companies who do not typically have such inventory.Rate this question:
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- 3.
The balance sheet of a service company has:
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Little of no inventory
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Raw materials inventory
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Three categories of inventory
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Two categories of inventory
Correct Answer
A. Little of no inventoryExplanation
A service company typically does not have a significant amount of inventory as its primary focus is on providing services rather than selling physical products. Therefore, the balance sheet of a service company would usually show little or no inventory.Rate this question:
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- 4.
Which types of company typically produces it's own inventory?
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Manufacturer
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Service company
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Retailer
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Wholesaler
Correct Answer
A. ManufacturerExplanation
Manufacturers typically produce their own inventory because they are involved in the production process of goods. They transform raw materials into finished products through various manufacturing processes. This allows them to have control over the quality, quantity, and timing of their inventory. Service companies, retailers, and wholesalers do not typically produce their own inventory as their focus is on providing services, selling products, or distributing goods respectively.Rate this question:
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- 5.
What type of company resells products it previously purchased ready-made from suppliers?
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Merchandise
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Retailer
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Wholesaler
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All of the above
Correct Answer
A. All of the aboveExplanation
All of the above is the correct answer because all three options - merchandise, retailer, and wholesaler - involve the resale of products that have been purchased ready-made from suppliers. A merchandise company buys products from suppliers and resells them to customers. A retailer purchases products from suppliers and sells them directly to consumers. A wholesaler buys products in bulk from suppliers and resells them to retailers or other businesses. Therefore, all three types of companies engage in the resale of products they have purchased from suppliers.Rate this question:
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- 6.
Before these materials are used to manufacture its cars, Honda classifies steel, glass, and plastic as:
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Finished goods inventory
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Raw materials inventory
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Work in process inventory
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Merchandise inventory
Correct Answer
A. Raw materials inventoryExplanation
Honda classifies steel, glass, and plastic as raw materials inventory because these materials are used in the manufacturing process of its cars. Raw materials inventory refers to the materials that are yet to be transformed into finished products. Since steel, glass, and plastic are not yet processed or assembled into cars, they are considered raw materials. Once these materials are used in the production process, they will be transformed into finished goods inventory.Rate this question:
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- 7.
Wal-Mart classifies its clothing held for sale as:
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Finished goods inventory
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Raw materials inventory
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Work in process inventory
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Merchandise inventory
Correct Answer
A. Merchandise inventoryExplanation
Wal-Mart classifies its clothing held for sale as merchandise inventory because it is the inventory that is purchased or manufactured by the company with the intention of selling it to customers. Merchandise inventory includes finished goods that are ready for sale and does not include raw materials or work in process inventory, which are used in the production process. Therefore, merchandise inventory is the appropriate classification for Wal-Mart's clothing held for sale.Rate this question:
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- 8.
How would Honda classify its partially completed vehicles?
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Finished goods
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Raw materials
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Supplies
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Work in process
Correct Answer
A. Work in processExplanation
Honda would classify its partially completed vehicles as work in process. This classification is used for goods that are in the production process but not yet completed. Since the vehicles are still being worked on and are not yet finished goods, they are considered as work in process. This category helps Honda track the progress of production and the value of partially completed vehicles that are still undergoing manufacturing processes.Rate this question:
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- 9.
Intel Corporation makes computer chips. Intel Corporation would be classified as a:
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Manufacturing company
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Merchandising company
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Service company
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Simple company
Correct Answer
A. Manufacturing companyExplanation
Intel Corporation would be classified as a manufacturing company because it is involved in the production of computer chips. Manufacturing companies are involved in the physical production of goods, such as assembling or fabricating products, and Intel fits this description as it manufactures computer chips.Rate this question:
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- 10.
In ______________, inventory consists of freight-in and the cost of the product which is to be resold.
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A service company
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A merchandising company
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A manufacturing company
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All of these companies
Correct Answer
A. A merchandising companyExplanation
A merchandising company is the correct answer because it involves buying products from suppliers and reselling them to customers. In this type of company, inventory consists of both the cost of purchasing the products (freight-in) and the cost of the products themselves. This is different from a service company, which does not sell physical products, and a manufacturing company, which produces its own products instead of buying them for resale. Therefore, a merchandising company is the only option that accurately describes the inventory components mentioned in the question.Rate this question:
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- 11.
Which of the following items would NOT be found in raw materials inventory for a furniture manufacturer?
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Wood
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Fabric
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Assembly worker wages
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Steel framing
Correct Answer
A. Assembly worker wagesExplanation
Assembly worker wages would not be found in raw materials inventory for a furniture manufacturer because raw materials inventory typically consists of the materials and components used in the production process, such as wood, fabric, and steel framing. Assembly worker wages, on the other hand, are a labor cost associated with the manufacturing process and would be categorized as a separate expense, such as direct labor or overhead costs.Rate this question:
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- 12.
Which of the following costs could be found in work in process inventory for an ice cream manufacturer?
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Utilities for administrative offices
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Assembly worker wages
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Depreciation of sales office
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Customer order forms
Correct Answer
A. Assembly worker wagesExplanation
Assembly worker wages could be found in work in process inventory for an ice cream manufacturer because it is a direct cost associated with the production process. Work in process inventory includes the costs of direct materials, direct labor, and manufacturing overhead that are incurred during the production process. Assembly worker wages are considered a direct labor cost as they are directly related to the manufacturing of the ice cream products.Rate this question:
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- 13.
A company decision as to where to locate a new store would be considered?
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Customer service
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Marketing
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Production
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Research and development
Correct Answer
A. MarketingExplanation
When a company is deciding where to locate a new store, it would be considered a marketing decision. This is because the location of a store directly impacts its target market, visibility, accessibility, and potential customer base. Marketing strategies, such as market research, customer segmentation, and competitor analysis, are essential in determining the optimal location for a new store. By strategically placing the store in a location that aligns with the target market's preferences and needs, the company can maximize its chances of success and profitability.Rate this question:
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- 14.
Delivery expenses are are charged to which of the following areas?
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Customer service
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Distribution
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Production or purchases
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Marketing
Correct Answer
A. DistributionExplanation
Delivery expenses are charged to the distribution area because it is responsible for the transportation and delivery of goods from the production or purchases area to the customers. Distribution involves activities such as warehousing, inventory management, and logistics, which all incur costs related to the delivery of products. Therefore, it is logical to allocate the expenses of delivery to the distribution area.Rate this question:
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- 15.
A product support hot line would be considered:
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Customer service
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Distribution
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Production or purchases
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Marketing
Correct Answer
A. Customer serviceExplanation
A product support hot line would be considered customer service because it is a service provided to customers to address their queries, concerns, and issues related to the product. This hot line is dedicated to assisting customers in troubleshooting problems, providing technical support, and offering guidance on product usage. By offering this service, the company aims to enhance customer satisfaction, build loyalty, and ensure a positive customer experience. Therefore, the product support hot line falls under the domain of customer service rather than distribution, production or purchases, or marketing.Rate this question:
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- 16.
Indirect costs incurred in manufacturing autos include all of the following EXCEPT:
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Cost of the engines
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Machinery depreciation in the factory
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Plant utilities
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Plant supervisor salary
Correct Answer
A. Cost of the enginesExplanation
The cost of the engines is not considered an indirect cost incurred in manufacturing autos because it directly relates to the production of the vehicles. Indirect costs are expenses that are not directly tied to the production process, such as machinery depreciation, plant utilities, and plant supervisor salary.Rate this question:
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- 17.
Prime costs consist of:
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Direct labor and manufacturing overhead.
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Direct materials and direct labor
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Direct materials and manufacturing overhead
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Direct materials, direct labor and manufacturing overhead
Correct Answer
A. Direct materials and direct laborExplanation
Prime costs refer to the direct costs incurred in the production of goods or services. These costs are directly attributable to the production process and include direct materials and direct labor. Direct materials are the raw materials or components that are used in the manufacturing process, while direct labor refers to the wages or salaries paid to the workers who are directly involved in the production. Therefore, the correct answer is direct materials and direct labor.Rate this question:
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- 18.
Conversion costs consist of:
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Direct labor and manufacturing overhead
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Direct materials and direct labor
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Direct materials and manufacturing overhead
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Direct materials, direct labor and manufacturing overhead
Correct Answer
A. Direct labor and manufacturing overheadExplanation
Conversion costs refer to the expenses incurred in transforming raw materials into finished goods. These costs include both direct labor and manufacturing overhead. Direct labor refers to the wages and benefits paid to the workers directly involved in the production process. Manufacturing overhead includes all other indirect costs associated with production, such as factory rent, utilities, and depreciation of machinery. Therefore, the correct answer is direct labor and manufacturing overhead.Rate this question:
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- 19.
Which of the following is an example of direct labor?
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Salary of a production manager
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Salary of the vice-president of operations
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Wages of assembly line personnel
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Wages of factory security
Correct Answer
A. Wages of assembly line personnelExplanation
Direct labor refers to the cost of labor that can be directly traced to the production of goods or services. It includes the wages and benefits paid to employees who directly work on the assembly line or in the production process. The wages of assembly line personnel are a clear example of direct labor as they are directly involved in the manufacturing process. The salary of a production manager and the salary of the vice-president of operations are considered indirect labor costs as they are not directly involved in the production process. The wages of factory security are also indirect labor costs as they do not contribute directly to the production of goods.Rate this question:
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- 20.
Which of the following are classifed as manufacturing overhead?
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Direct materials and direct labor
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Indirect labor and indirect materials
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All materials
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Factory rent and direct labor
Correct Answer
A. Indirect labor and indirect materialsExplanation
Indirect labor and indirect materials are classified as manufacturing overhead because they are not directly traceable to a specific product. Indirect labor refers to the labor costs that cannot be easily attributed to a particular product, such as supervisors or maintenance workers. Indirect materials are materials that are not directly used in the production process but are necessary for the overall manufacturing operations, such as lubricants or cleaning supplies. These costs are considered part of the overhead expenses incurred in the manufacturing process.Rate this question:
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- 21.
Manufacturers consider selling and administrative costs to be:
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Prime costs
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Conversion costs
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Inventoriable costs
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Period costs
Correct Answer
A. Period costsExplanation
Selling and administrative costs are considered to be period costs. Period costs are expenses that are not directly related to the production process, but rather incurred over a specific period of time. These costs are expensed in the period they are incurred and are not included in the cost of inventory. Selling and administrative costs include expenses such as marketing, advertising, salaries of sales staff, rent for office space, and utilities. These costs are necessary for the overall operation of the business but do not directly contribute to the production of goods.Rate this question:
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- 22.
Period costs are:
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Always considered part of the inventory
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Always recorded as an expense
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Expensed only when the inventory is sold
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None of the above
Correct Answer
A. Always recorded as an expenseExplanation
Period costs are always recorded as an expense. This means that these costs are recognized and deducted from the company's revenue in the same accounting period in which they are incurred. Unlike product costs, which are associated with the production of goods and are included in the inventory value, period costs are not directly related to the production process and are expensed immediately. Examples of period costs include administrative expenses, marketing expenses, and rent.Rate this question:
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- 23.
Where would period costs be found on the financial statements?
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Under current assets on the balance sheet
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Under current liabilities on the balance sheet
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As operating expenses on the income statement for the previous period
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As operating expenses on the income statement in the period incurred
Correct Answer
A. As operating expenses on the income statement in the period incurredExplanation
Period costs are expenses that are not directly tied to the production of goods or services and are incurred over a specific period of time, such as rent, utilities, and salaries. These costs are expensed immediately and are not included in the cost of goods sold. As operating expenses, period costs are reported on the income statement in the period they are incurred. This allows for proper matching of expenses with the revenues generated during that period, providing a more accurate representation of the company's financial performance.Rate this question:
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- 24.
When manufacturing products, direct labor and direct materials are classified as:
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Period costs and expensed when incurred
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Period costs and expensed when the goods are sold
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Product costs and expensed when incurred
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Product costs and expensed when the goods are sold
Correct Answer
A. Product costs and expensed when the goods are soldExplanation
Direct labor and direct materials are classified as product costs because they are directly associated with the production of goods. These costs are incurred during the manufacturing process and are considered part of the cost of producing the goods. However, they are not expensed immediately when incurred. Instead, they are expensed when the goods are sold, as they are considered part of the cost of goods sold. This means that these costs are matched with the revenue generated from the sale of the goods, following the matching principle in accounting.Rate this question:
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- 25.
Certain materials used in a manufacturing plant cannot be traced to a specific unit. These materials are called _________ materials.
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General
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Direct
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Finished
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Indirect
Correct Answer
A. IndirectExplanation
Indirect materials are materials used in a manufacturing plant that cannot be traced to a specific unit. Unlike direct materials, which can be easily identified and allocated to a specific product or unit, indirect materials are used for various purposes and cannot be directly linked to a specific unit or product. These materials include items such as lubricants, cleaning supplies, or maintenance tools that are necessary for the manufacturing process but do not become part of the final product.Rate this question:
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- 26.
Rent on a factory building would be considered to be:
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A direct cost
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A period cost
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A product cost
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None of the above
Correct Answer
A. A product costExplanation
Rent on a factory building would be considered a product cost because it is directly associated with the production of goods. Product costs are expenses that are incurred during the manufacturing process and are directly attributable to the production of a specific product. Rent on a factory building is necessary for the production process and is therefore considered a product cost rather than a period cost, which are expenses that are not directly tied to the production process.Rate this question:
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- 27.
Which statement describes direct materials in a manufacturing setting?
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Direct materials are used to determine total inventoriable product costs.
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Direct materials are used to determine total manufacturing overhead.
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Direct materials connot be separately and conveniently traced.
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Direct materials do not become part of the finished product.
Correct Answer
A. Direct materials are used to determine total inventoriable product costs.Explanation
Direct materials are the raw materials or components that are directly used in the production of a finished product. These materials can be easily traced and directly associated with the final product. The cost of direct materials is an important component in determining the total inventoriable product costs, which includes all the costs incurred in manufacturing a product and can be assigned to the finished goods. Therefore, the statement "Direct materials are used to determine total inventoriable product costs" accurately describes the role of direct materials in a manufacturing setting.Rate this question:
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- 28.
Which of the following describes full product costs for a product?
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Full product costs are narrower in scope than inventoriable product costs.
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Full product costs consist of direct materials, direct labor and manufacturing overhead.
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Full product costs include all costs of the value chain
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Both A and B are correct
Correct Answer
A. Full product costs include all costs of the value chainExplanation
Full product costs include all costs of the value chain, which means they encompass not only the direct materials, direct labor, and manufacturing overhead, but also all other costs associated with the production and distribution of the product. This includes costs such as marketing expenses, research and development costs, and administrative costs. Therefore, option C is the correct answer as it accurately describes full product costs. Option A is incorrect because full product costs are not narrower in scope than inventoriable product costs, and option B is incorrect because it does not include all costs of the value chain.Rate this question:
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- 29.
Which of the followinng statements is correct concerning product costs?
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Product costs are expensed in the period incurred
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Product costs are expensed in the period the related product is sold.
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Product costs are shown with operating expenses on the income statement.
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Product costs are shown with current liabilities on the balance sheet.
Correct Answer
A. Product costs are expensed in the period the related product is sold.Explanation
Product costs are expensed in the period the related product is sold because according to the matching principle in accounting, expenses should be recognized in the same period as the revenue they help generate. Product costs, such as direct materials, direct labor, and manufacturing overhead, are incurred to produce the goods that are eventually sold. Therefore, it is appropriate to recognize these costs as expenses when the related product is sold and the revenue is recognized. This ensures that the expenses are matched with the revenue they help generate, providing a more accurate representation of the company's financial performance.Rate this question:
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- 30.
Which of the following is calculated before operating income can be determined for a manufacturer?
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Cost of goods available for sale
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Cost of goods manufactured
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Cost of goods sold
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All of the above
Correct Answer
A. All of the aboveExplanation
To determine operating income for a manufacturer, all of the mentioned costs need to be calculated. The cost of goods available for sale refers to the total cost of inventory that is available to be sold. The cost of goods manufactured is the total cost of producing the goods that are ready for sale. The cost of goods sold is the total cost of the goods that have been sold during a particular period. All of these costs are essential in calculating the operating income for a manufacturer.Rate this question:
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- 31.
The only difference in the balancing sheets of various types of businesses (for example, manufacturing vs. service) is:
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Current assets
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Current liabilities
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Investments
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Equity
Correct Answer
A. Current assetsExplanation
The only difference in the balancing sheets of various types of businesses is the current assets. This means that the amount of assets that can be easily converted into cash within a year may vary depending on the type of business. Other items such as current liabilities, investments, and equity may be similar or consistent across different types of businesses.Rate this question:
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- 32.
Which of the following would be on the income statement of a retailer?
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Value of inventory
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Cost of goods sold
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Accounts payable
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Accounts receivable
Correct Answer
A. Cost of goods soldExplanation
The cost of goods sold is an expense that represents the direct costs incurred in producing or purchasing the goods that a retailer sells to customers. It includes the cost of acquiring or producing the inventory, such as the purchase price, transportation costs, and any other costs directly related to bringing the goods to the point of sale. The cost of goods sold is subtracted from the retailer's revenue to determine the gross profit, making it an important component of the income statement.Rate this question:
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- 33.
Which of the following costs would appear on the income statements for both a merchandiser and manufacturer?
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Cost of goods manufactured
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Direct labor incurred
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Direct materials used
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Operating expenses
Correct Answer
A. Operating expensesExplanation
Operating expenses would appear on the income statements for both a merchandiser and manufacturer because they are incurred in the normal course of business operations. These expenses include rent, utilities, salaries, advertising, and other costs that are not directly related to the production of goods. Both merchandisers and manufacturers need to account for these expenses to calculate their net income or loss for a specific period.Rate this question:
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- 34.
Which of the following, in addition to cost of goods manufactured, is needed to compute the cost of goods sold for a manufacture?
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Beginning work in process inventory less ending work in process inventory.
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Ending work in process inventory less beginning work in process inventory.
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Beginning finished goods less ending finished goods
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Ending finished goods less beginning finished goods
Correct Answer
A. Beginning finished goods less ending finished goodsExplanation
To compute the cost of goods sold for a manufacturer, in addition to the cost of goods manufactured, the beginning finished goods inventory needs to be subtracted from the ending finished goods inventory. This is because the cost of goods sold represents the value of the finished goods that were sold during a specific period, and the beginning and ending finished goods inventories are used to calculate this value. By subtracting the ending finished goods inventory from the beginning finished goods inventory, we can determine the change in value of the finished goods and, ultimately, the cost of goods sold.Rate this question:
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- 35.
For a manufacturer, beginning work in process would be equal to:
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Cost of goods manufactured + ending work in process inventory - manufacturing costs incurred in the period.
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Cost of goods manufactured - ending work in process inventory + manufacturing costs incurred in the period.
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Ending work in process inventory + manufacturing costs incurred in the period.
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Manufacturing costs incurred in the period - ending work in process inventory.
Correct Answer
A. Cost of goods manufactured + ending work in process inventory - manufacturing costs incurred in the period.Explanation
The beginning work in process for a manufacturer is calculated by adding the cost of goods manufactured to the ending work in process inventory and then subtracting the manufacturing costs incurred in the period. This calculation takes into account the cost of goods that were in the process of being manufactured at the beginning of the period, the additional goods that were manufactured during the period, and any costs incurred in the manufacturing process.Rate this question:
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- 36.
Which of the following represents a sunk cost?
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A historical cost that is never relevant
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A historical cost that is always relevant
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An outlay expected to be incurred in the future
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A cost that is relevant to any decision
Correct Answer
A. A historical cost that is never relevantExplanation
A sunk cost refers to a historical cost that has already been incurred and cannot be recovered. It is irrelevant to decision-making because it has already been spent and cannot be changed. Therefore, it should not be considered when making future decisions as it cannot be influenced or altered.Rate this question:
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- 37.
Subtracting the costs of one alternative from the costs of the other alternative would be called the _________________cost.
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Sunk
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Imported
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Differential
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Alternative
Correct Answer
A. DifferentialExplanation
The term "differential cost" refers to the difference in costs between two alternatives. In this context, subtracting the costs of one alternative from the costs of the other alternative helps identify this difference. Therefore, the correct answer is "differential."Rate this question:
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- 38.
When deciding to buy a new computer, all of the following should be considered EXCEPT for the:
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Cost of the new computer
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Cost of the old computer (sunk costs)
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Games that come with the new computer
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Warranty on the new computer
Correct Answer
A. Cost of the old computer (sunk costs)Explanation
When deciding to buy a new computer, several factors need to be considered. The cost of the new computer is an obvious consideration as it directly affects the budget. The games that come with the new computer may be important for some individuals, especially if they are avid gamers. The warranty on the new computer is also crucial as it provides assurance and protection for potential repairs or malfunctions. However, the cost of the old computer, also known as sunk costs, should not be a factor in the decision-making process. Sunk costs are expenses that have already been incurred and cannot be recovered, so they should not influence future decisions.Rate this question:
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- 39.
A restaurant is facing a decision about whether it should bake its own dinner rolls or whether it should continue to purchase dinner rolls from a local bakery. Which of the following costs would be relevant to its decision.
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The salary of the restaurant manager
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The purchase price of the dinner rolls purchased from the local bakery
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The price the restaurant sells the dinner rolls for
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The original purchase price of the current machinery
Correct Answer
A. The purchase price of the dinner rolls purchased from the local bakeryExplanation
The purchase price of the dinner rolls purchased from the local bakery is relevant to the restaurant's decision because it directly affects the cost of acquiring the rolls. If the purchase price from the bakery is high, it may be more cost-effective for the restaurant to bake its own rolls instead.Rate this question:
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- 40.
Average variable costs (per unit)
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Remain the same as production decreases
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Remain the same as production increases
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Go down as production decreases
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Remain the same no matter if production increases or decreases
Correct Answer
A. Remain the same no matter if production increases or decreasesExplanation
The correct answer is that average variable costs remain the same no matter if production increases or decreases. This means that the cost of producing each unit of output does not change regardless of the level of production. This could be due to various factors such as fixed costs being spread out over a larger or smaller number of units, or economies of scale being fully realized at all levels of production. Regardless of the reason, it implies that the cost efficiency of production does not change with the level of output.Rate this question:
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- 41.
The cost of making one more unit is called:
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Marginal cost
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Unit cost
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Variable cost
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None of the above
Correct Answer
A. Marginal costExplanation
The cost of making one more unit is called the marginal cost. This term refers to the additional cost incurred in producing an extra unit of a product or service. It takes into account the increase in expenses such as materials, labor, and overhead that are required to produce the additional unit. The marginal cost is an important concept in economics as it helps businesses determine the optimal level of production and pricing strategies.Rate this question:
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- 42.
Which of the following is an example of a fixed cost for a manufacturer?
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Salary of the plant manager
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Sales commissions
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Direct materials
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Delivery costs
Correct Answer
A. Salary of the plant managerExplanation
The salary of the plant manager is an example of a fixed cost for a manufacturer because it remains constant regardless of the level of production or sales. Fixed costs are expenses that do not change with the volume of production or sales, such as rent, insurance, and salaries. In this case, the plant manager's salary is a fixed cost because it is a regular expense that the manufacturer incurs regardless of the amount of products being produced or sold.Rate this question:
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- 43.
Which of the following describes the way in which total fixed costs behave?
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They will remain the same throughout production levels.
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They will decrease as production decreases.
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They will decrease as production increases.
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They will increase as production decreases
Correct Answer
A. They will remain the same throughout production levels.Explanation
Total fixed costs remain the same throughout production levels because they do not vary with the level of production. Fixed costs are expenses that do not change regardless of the level of output or sales. These costs include rent, salaries, insurance, and other fixed expenses that a company must pay regardless of how much it produces. Therefore, regardless of whether production increases or decreases, the total fixed costs will remain constant.Rate this question:
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- 44.
Which of the following describes the way fixed costs per unit behave?
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They will remain the same throughout the production levels
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They will decrease as production decreases
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They will decrease as production increases
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They will increase as production decreases
Correct Answer
A. They will increase as production decreasesExplanation
Fixed costs per unit refer to the costs that do not change regardless of the level of production. These costs include expenses such as rent, insurance, and salaries. As production decreases, the total fixed costs remain the same but are spread over a smaller number of units. Therefore, the fixed costs per unit increase. This is because the same amount of fixed costs is being allocated to a smaller number of units, resulting in a higher cost per unit.Rate this question:
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- 45.
Varible costs:
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Are fixed in total as production levels change
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Are fixed per unit and vary in total as productions levels change.
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Decrease per unit as production volume increases
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Vary per unit of output as production levels change
Correct Answer
A. Are fixed per unit and vary in total as productions levels change.Explanation
Variable costs are costs that vary with the level of production. In this case, the answer states that variable costs are fixed per unit, meaning that the cost per unit remains constant regardless of the level of production. However, the total variable costs will vary as production levels change because the more units produced, the higher the total cost will be. This is because the fixed cost per unit is multiplied by the number of units produced, resulting in a varying total cost.Rate this question:
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- 46.
A company's total costs are calculated by:
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Subtracting total fixed costs from total variable costs
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Subtracting total variable costs from total fixed costs
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Adding total fixed costs to total variable costs
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Subtracting total fixed costs and total variable costs from sales.
Correct Answer
A. Adding total fixed costs to total variable costsExplanation
The correct answer is adding total fixed costs to total variable costs. This is because total costs are the sum of both fixed costs and variable costs. Fixed costs are expenses that remain constant regardless of the level of production or sales, such as rent or salaries. Variable costs, on the other hand, change in direct proportion to the level of production or sales, such as raw materials or labor costs. By adding these two components together, we can determine the total costs incurred by the company.Rate this question:
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