Chapter 2 Cost Terms Concepts and Classifications Multiple Choice Questions 16. Indirect labor is a part of: A) Prime cost. B) Conversion cost. C) Period cost. D) Nonmanufacturing cost. 17. The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): A) period cost. B) direct material cost. C) indirect material cost. D) none of the above. 18. The salary paid to the president of King Company would be classified on the income statement as a(n): A) administrative expense. B) direct labor cost. C) manufacturing overhead cost. D) selling expense. 19. Direct labor cost is a part of: Conversion cost Prime cost A) No No B) No Yes C) Yes Yes D) Yes No Garrison Managerial Accounting 12th Edition 17 Chapter 2 Cost Terms Concepts and Classifications 20. Direct material cost is a: Conversion cost Prime cost A) No No B) No Yes C) Yes Yes D) Yes No 21. Prime cost and conversion cost share what common element of total cost? A) Direct materials. B) Direct labor. C) Variable overhead. D) Fixed overhead. 22. Prime cost consists of: A) direct labor and manufacturing overhead. B) direct materials and manufacturing overhead. C) direct materials and direct labor. D) direct materials direct labor and manufacturing overhead. 23. Wages paid to a timekeeper in a factory are a: Prime cost Conversion cost A) Yes No B) Yes Yes C) No No D) No Yes 24. Property taxes on a company’s factory building would be classified as a(n): A) product cost. B) opportunity cost. C) period cost. D) variable cost. 18 Garrison Managerial Accounting 12th Edition Chapter 2 Cost Terms Concepts and Classifications 25. Depreciation on a personal computer used in the marketing department of a manufacturing firm would be classified as: A) a product cost that is fixed with respect to the company’s output. B) a period cost that is fixed with respect to the company’s output. C) a product cost that is variable with respect to the company’s output. D) a period cost that is fixed with respect to the company’s output.
