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1.

LO 2.1Which of the following is the primary source of revenue for a service business?

  1. the production of products from raw materials
  2. the purchase and resale of finished products
  3. providing intangible goods and services
  4. the sale of raw materials to manufacturing firms
2.

LO 2.1Which of the following is the primary source of revenue for a merchandising business?

  1. the production of products from raw materials
  2. the purchase and resale of finished products
  3. the provision of intangible goods and services
  4. the sale of raw materials to manufacturing firms
3.

LO 2.1Which of the following is the primary source of revenue for a manufacturing business?

  1. the production of products from raw materials
  2. the purchase and resale of finished products
  3. the provision of intangible goods and services
  4. both the provision of services and the sale of finished goods
4.

LO 2.1Which of the following represents the components of the income statement for a service business?

  1. Sales Revenue – Cost of Goods Sold = gross profit
  2. Service Revenue – Operating Expenses = operating income
  3. Sales Revenue – Cost of Goods Manufactured = gross profit
  4. Service Revenue – Cost of Goods Purchased = gross profit
5.

LO 2.1Which of the following represents the components of the income statement for a manufacturing business?

  1. Sales Revenue – Cost of Goods Sold = gross profit
  2. Service Revenue – Operating Expenses = gross profit
  3. Service Revenue – Cost of Goods Manufactured = gross profit
  4. Sales Revenue – Cost of Goods Manufactured = gross profit
6.

LO 2.1Which of the following represents the components of the income statement for a merchandising business?

  1. Sales Revenue – Cost of Goods Sold = gross profit
  2. Service Revenue – Operating Expenses = gross profit
  3. Sales Revenue – Cost of Goods Manufactured = gross profit
  4. Service Revenue – Cost of Goods Purchased = gross profit
7.

LO 2.2Conversion costs include all of the following except:

  1. wages of production workers
  2. depreciation on factory equipment
  3. factory utilities
  4. direct materials purchased
8.

LO 2.2Which of the following is not considered a product cost?

  1. direct materials
  2. direct labor
  3. indirect materials
  4. selling expense
9.

LO 2.2Fixed costs are expenses that ________.

  1. vary in response to changes in activity level
  2. remain constant on a per-unit basis
  3. increase on a per-unit basis as activity increases
  4. remain constant as activity changes
10.

LO 2.2Variable costs are expenses that ________.

  1. remain constant on a per-unit basis but change in total based on activity level
  2. remain constant on a per-unit basis and remain constant in total regardless of activity level
  3. decrease on a per-unit basis as activity level increases
  4. remain constant in total regardless of activity level within a relevant range
11.

LO 2.2Total costs for ABC Distributing are $250,000 when the activity level is 10,000 units. If variable costs are $5 per unit, what are their fixed costs?

  1. $240,000
  2. $200,000
  3. $260,000
  4. Their fixed costs cannot be determined from the information presented.
12.

LO 2.2Which of the following would not be classified as manufacturing overhead?

  1. indirect materials
  2. indirect labor
  3. direct labor
  4. property taxes on factory
13.

LO 2.2Which of the following are prime costs?

  1. indirect materials, indirect labor, and direct labor
  2. direct labor, indirect materials, and indirect labor
  3. direct labor and indirect labor
  4. direct labor and direct materials
14.

LO 2.2Which of the following statements is true regarding average fixed costs?

  1. Average fixed costs per unit remain fixed regardless of level of activity.
  2. Average fixed costs per unit rise as the level of activity rises.
  3. Average fixed costs per unit fall as the level of activity rises.
  4. Average fixed costs per unit cannot be determined.
15.

LO 2.3The high-low method and least-squares regression are used by managers to ________.

  1. decide whether to make or buy a component part
  2. minimize corporate tax liability
  3. maximize output
  4. estimate costs
16.

LO 2.3Which of the following methods of cost estimation relies on only two data points?

  1. the high-low method
  2. account analysis
  3. least-squares regression
  4. SWOT analysis.
17.

LO 2.3In the cost equation Y = a + bx, Y represents which of the following?

  1. fixed costs
  2. variable costs
  3. total costs
  4. units of production
18.

LO 2.3A scatter graph is used to test the assumption that the relationship between cost and activity level is ________.

  1. curvilinear
  2. cyclical
  3. unpredictable
  4. linear
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