26. The nursing station on the fourth floor of Central Hospital is responsible for the care of patients who have undergone orthopedic surgery. The costs of drugs administered by the nursing station to patients would be classified as: A) direct costs of the patients. B) indirect costs of the patients. C) overhead costs of the nursing station. D) period costs of the hospital. 27. All of the following would be classified as product costs except: A) property taxes on production equipment. B) insurance on factory machinery. C) salaries of the advertising staff. D) wages of machine operators. 28. Product costs appear on the balance sheet: A) only if goods are partially completed at the end of the period. B) only if goods are unsold at the end of a period. C) only if goods are partially completed or are unsold at the end of a period. D) only in merchandising firms. Garrison Managerial Accounting 12th Edition 19 Chapter 2 Cost Terms Concepts and Classifications 29. Ross Corporation shipped finished goods to a customer on credit but the sale was not recorded and the costs of the finished goods were incorrectly included on the period’s balance sheet as part of the finished goods inventory. Which one of the following statements is correct concerning the effects of this error? A) Accounts receivable was not affected inventory was overstated sales were understated and cost of goods sold was understated. B) Accounts receivable was understated inventory was not affected sales were understated and cost of goods sold was understated. C) Accounts receivable was understated inventory was overstated sales were understated and cost of goods sold was overstated. D) Accounts receivable was understated inventory was overstated sales were understated and cost of goods sold was understated. 30. Data for Cost A and Cost B are as follows: Number of Units Produced Unit Cost Total Cost Cost A 1 ? $10 10 ? $100 100 ? $1 000 1 000 ? $10 000 Cost B 1 $5 000 ? 10 $500 ? 100 $50 ? 1 000 $5 ? Which of the above best describes the behavior of Costs A and B? A) Cost A is fixed Cost B is variable. B) Cost A is variable Cost B is fixed. C) Both Cost A and Cost B are variable. D) Both Cost A and Cost B are fixed. 20 Garrison Managerial Accounting 12th Edition Chapter 2 Cost Terms Concepts and Classifications 31. Fixed costs expressed on a per unit basis: A) will increase with increases in activity. B) will decrease with increases in activity. C) are not affected by activity. D) should be ignored in making decisions since they cannot change. 32. The costs of staffing and operating the accounting department at Central Hospital would be considered by the Department of Surgery to be: A) direct costs. B) indirect costs. C) incremental costs. D) opportunity costs. 33. A cost incurred in the past that is not relevant to any current decision is classified as a(n): A) period cost. B) opportunity cost. C) sunk cost. D) differential cost. 34. Differential costs can: A) only be fixed costs. B) only be variable costs. C) be either fixed or variable. D) be incremental but not decremental. 35. John Johnson decided to leave his former job where he earned $12 per hour to go to a new job where he will earn $13 per hour. In the decision process the former wage of $12 per hour would be classified as a(n): A) sunk cost. B) direct cost. C) fixed cost. D) opportunity cost.
