Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
49) The amount that a manufacturing company could earn by renting unused portions of its warehouse is an example of an opportunity cost.
Answer: TRUE
Difficulty: 1 Easy
Topic: Cost Classifications for Decision Making
Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
50) A cost that differs from one month to another is known as a sunk cost.
Answer: FALSE
Difficulty: 1 Easy
Topic: Cost Classifications for Decision Making
Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
51) In a traditional format income statement, the gross margin is sales minus cost of goods sold.
Answer: TRUE
Difficulty: 1 Easy
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
52) In a traditional format income statement for a merchandising company, cost of goods sold is a variable cost that is included in the "Variable expenses" portion of the income statement.
Answer: FALSE
Difficulty: 1 Easy
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
53) In a contribution format income statement for a merchandising company, the cost of goods sold reports the product costs attached to the merchandise sold during the period.
Answer: FALSE
Difficulty: 1 Easy
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
54) Contribution format income statements are prepared primarily for external reporting purposes.
Answer: FALSE
Difficulty: 1 Easy
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
55) Contribution margin and gross margin mean the same thing.
Answer: FALSE
Difficulty: 2 Medium
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
56) In a traditional format income statement, the gross margin minus selling and administrative expenses equals net operating income.
Answer: TRUE
Difficulty: 1 Easy
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
57) Most companies use the contribution approach in preparing financial statements for external reporting purposes.
Answer: FALSE
Difficulty: 2 Medium
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement