Manufacturing costs or product costs consist of: A. factory overhead. B. direct
ID: 2452199 • Letter: M
Question
Manufacturing costs or product costs consist of:A. factory overhead.
B. direct materials and direct labor.
C. direct labor and factory overhead.
D. direct materials, direct labor, and factory overhead.
E. None of these.
Within a "relevant range," which of the following statements about fixed costs is true?
A. Fixed costs are constant per unit of production.
B. Fixed costs per unit will fall as production rises.
C. Total fixed costs change as production volume changes.
D. Fixed costs are costs which are paid uniformly over a year.
E. None of these.
Straight-line depreciation on a building would best be classified as a:
A. variable cost.
B. committed fixed cost.
C. discretionary fixed cost.
D. mixed cost.
E. None of these. Manufacturing costs or product costs consist of:
A. factory overhead.
B. direct materials and direct labor.
C. direct labor and factory overhead.
D. direct materials, direct labor, and factory overhead.
E. None of these.
Within a "relevant range," which of the following statements about fixed costs is true?
A. Fixed costs are constant per unit of production.
B. Fixed costs per unit will fall as production rises.
C. Total fixed costs change as production volume changes.
D. Fixed costs are costs which are paid uniformly over a year.
E. None of these.
Straight-line depreciation on a building would best be classified as a:
A. variable cost.
B. committed fixed cost.
C. discretionary fixed cost.
D. mixed cost.
E. None of these.
Explanation / Answer
Answer 1:
Manufacturing cost is the cost, which includes following items
1) Direct Material Cost
2) Direct Labor Cost
3) Manufacturing Overhead Cost which is also known as factory overhead
So, our answer will be option D
Answer 2
Fixed cost is that type of cost which is has no direct relation with production volume & as the name suggest fixed for the period. We will understand effect on fixed cost per unit in different type of volume.
Scenario 1
Total units produced = 5000
Total fixed cost = 10000
Fixed Cost per unit = Total fixed cost/Total units produced = 10000/5000 = 2 per unit
Scenario 2
Total units produced = 7000
Total fixed cost = 10000
Fixed Cost per unit = Total fixed cost/Total units produced = 10000/7000 = 1.42 per unit.
So, as we can see above when production of units rises per unit of fixed cost decreases, so, our answer will be option B
Answer 3
Depreciation is appropriation of cost of asset uniformly in useful life of asset. Depreciation do not change with production so it is neither a variable cost nor a mixed cost (mixed cost = fixed cost + variable cost). Depreciation cannot be considered as discretionary because it is a part of already incurred cost. So, we can consider depreciation as committed fixed cost our answer is option B.
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