Review Questions
2-1. Distinguish between product costs and period costs.
2-2. Why are product costs also called inventoriable costs?
2-3. What is the most important difference between a manufacturing firm and a
service industry firm, with regard to the classification of costs as product costs or
period costs?
2-4. List several product costs incurred in the production of a backpack.
2-5. List, describe, and give an example of each of the four different types of
production processes.
2-6. Why is the cost of idle time treated as manufacturing overhead?
2-7. Explain why an overtime premium is included in manufacturing overhead.
2-8. What is meant by the phrase "different costs for different purposes"?
2-9. Give examples to illustrate how the city of Tampa, Florida, could use cost
information in planning, controlling costs, and making decisions.
2-10. Distinguish between fixed costs and variable costs.
2-11. How does the fixed cost per unit change as the level of activity (or cost driver)
increases? Why?
2-12. How does the variable cost per unit change as the level of activity (or cost driver)
increases? Why?
2-13. Give three examples of cost drivers in the airline industry that could apply to a
particular flight.
2-14. Which of the following university cost drivers is likely to be associated with the
behavior of variable costs? (a) number of students, (b) number of disciplines
offered for study, and (c) urban versus rural location
