Multiple Choice Questions
1. Direct materials are not usually easily traced to a product.
A) True
B) False
2. Product costs can be classified as one of three types: direct materials, direct labor, or overhead.
A) True
B) False
3. Indirect materials are accounted for as factory overhead because they are not easily traced to specific units or batches of production.
A) True
B) False
4. Direct costs are incurred for the benefit of more than one cost object.
A) True
B) False
5. An out-of-pocket cost requires a future cash outlay and is relevant for decision making.
A) True
B) False
6. Period costs are incurred by purchasing merchandise or manufacturing finished goods.
A) True
B) False
7. Cost concepts such as variable, fixed, mixed, direct and indirect apply only to manufacturers and not to service companies.
A) True
B) False
8. Selling and administrative expenses are normally product costs.
A) True
B) False
9. Raw materials that become part of a product and are identified with specific units or batches of a product are called direct materials.
A) True
B) False
10. Raw materials inventory includes only direct materials.
A) True
B) False