Which of the following is not an example of an indirect cost incurred in manufacturing automobiles?

81) Place the letter for the appropriate value chain activity on the line in front of each item. Letters may be used more than once or not at all. Assume a manufacturer.

A.    research and development    D.    marketing
B.    design    E.    distribution
C.    production or purchases    F.    customer service

____    depreciation expense on equipment in factory
____    delivery expense
____    toll free line for customer orders
____    customer support hot line
____    assembly line workers' wages
Answer:  C, E, D, F, C
Diff: 2
LO:  2-2
EOC:  S2-3
AACSB:  Reflective Thinking
Learning Outcome:  Define and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a company's profits
82) Name and briefly describe the activities that make up the value chain.
Answer:  The value chain consists of research and development, design, production or purchase, marketing, distribution, and customer service. Research and development refers to researching and developing new or improved products or services and the processes for producing them. Design involves the detailed engineering of products and services and the processes for producing them. Production or purchases refers to the resources used to produce a product or service or to purchase finished merchandise intended for resale. Marketing is the promotion and advertising of products or services. Distribution is the delivery of products or services to customers and customer service provides support for customers after the sale.
Diff: 2
LO:  2-2
EOC:  S2-3
AACSB:  Reflective Thinking
Learning Outcome:  Define and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a company's profits

83) Classify each of the following business costs into one of the six value chain elements.

A.    cost of a commercial during a TV program
B.    cost of shipping goods to customers
C.    costs associated with repairing products under warranty
D.    costs of developing a new product
E.    cost of making a prototype of a new product
F.    cost of labor for machine operator in factory
Answer:  A.    marketing
B.    distribution
C.    customer service
D.    research and development
E.    design
F.    production
Diff: 3
LO:  2-2
EOC:  S2-3
AACSB:  Reflective Thinking
Learning Outcome:  Define and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a company's profits

84) The total cost of a cost object can only include the direct costs that are directly traced to that cost object.
Answer:  FALSE
Diff: 2
LO:  2-3
EOC:  E2-20
AACSB:  Reflective Thinking
Learning Outcome:  Define and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a company's profits

85) If a company wants to determine a product's cost, it must assign both direct and indirect costs.
Answer:  TRUE
Diff: 2
LO:  2-3
EOC:  E2-20A
AACSB:  Reflective Thinking
Learning Outcome:  Define and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a company's profits

86) Costs can be either direct or indirect, depending upon the cost object.
Answer:  TRUE
Diff: 1
LO:  2-3
EOC:  E2-20A
AACSB:  Reflective Thinking
Learning Outcome:  Define and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a company's profits

87) Direct costs can be traced to specific units.
Answer:  TRUE
Diff: 1
LO:  2-3
EOC:  E2-21A
AACSB:  Reflective Thinking
Learning Outcome:  Define and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a company's profits

88) Indirect costs cannot be traced to the cost objects, so they are allocated.
Answer:  TRUE
Diff: 1
LO:  2-3
EOC:  E2-21A
AACSB:  Reflective Thinking
Learning Outcome:  Define and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a company's profits

89) Which of the following items could be an example of a cost object?
A) A manufacturing plant
B) An international plant
C) The accounting department
D) All of the above are examples of potential cost objects.
Answer:  D
Diff: 2
LO:  2-3
EOC:  S2-4
AACSB:  Analytical Thinking
Learning Outcome:  Define and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a company's profits
90) Which of the following is not an example of an indirect cost incurred in manufacturing automobiles?
A) Plant supervisor salary
B) Machinery depreciation in the factory
C) Plant utilities
D) Cost of the automobile engines
Answer:  D
Diff: 2
LO:  2-3
EOC:  S2-4
AACSB:  Analytical Thinking
Learning Outcome:  Define and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a company's profits