14.Indirect costs, such asmanufacturing overhead, are always fixed costs. True False
15.Discretionary fixedcosts arise from annual decisions by management to spend in certain fixed costareas. True False
16. Evenif operations are interrupted or cut back, committed fixed costs remain largelyunchanged in the short term because the costs of restoring them later arelikely to be far greater than any short-run savings that might be realized.
True False
18.Committed fixed costsare fixed costs that are not controllable. True False
19.A mixed cost is partially variable andpartially fixed.
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True False
20.Traditional formatincome statements are prepared primarily for external reporting purposes. TrueFalse
21.In a contributionformat income statement, sales minus cost of goods sold equals the grossmargin. True False22. Ina traditional format income statement for a merchandising company, the cost ofgoods sold reports the product costs attached to the merchandise sold duringthe period.
True False
23. Althoughthe contribution format income statement is useful for external reportingpurposes, it has serious limitations when used for internal purposes because itdoes not distinguish between fixed and variable costs.
True False
24. Ina contribution format income statement for a merchandising company, cost ofgoods sold is a variable cost that gets included in the “Variableexpenses” portion of the income statement.
True False
25.The traditional formatincome statement is used as an internal planning and decision-making tool. Itsemphasis on cost behavior aids cost-volume-profit analysis, managementperformance appraisals, and budgeting.
True False
26. Thefollowing would typically be considered indirect costs of manufacturing aparticular Boeing 747 to be delivered to Singapore Airlines: electricity to runproduction equipment, the factory manager’s salary, and the cost of the GeneralElectric jet engines installed on the aircraft.
True False
27. Thefollowing costs should be considered direct costs of providing delivery roomservices to a particular mother and her baby: the costs of drugs administeredin the operating room, the attending physician’s fees, and a portion of theliability insurance carried by the hospital to cover the delivery room.
True False
28.The following costsshould be considered by a law firm to be indirect costs of defending aparticular client in court: rent on the law firm’s offices, the law firm’s receptionist’swages, the costs of heating the law firm’s offices, and the depreciation on thepersonal computer in the office of the attorney who has been assigned theclient.
True False
29.In any decision makingsituation, sunk costs are irrelevant and should be ignored. True False