ACC 350 Week 3 Quiz 2 Chapter 2 – Strayer

ACC 350 Week 3 Quiz – Strayer (All Possible Questions With Answers)

Click on the Link Below to Purchase A+ Graded Course Material

http://budapp.net/ACC-350-Week-3-Quiz-Strayer-340.htm

 

Chapter 2

An Introduction to Cost Terms and Purposes

1)

Products, services, departments, and customers may be cost objects.

2)

Costs are accounted for in two basic stages: assignment followed by accumulation.

3)

Actual costs and budgeted costs are two different terms referring to the same thing.

4)

Accountants define a cost as a resource to be sacrificed to achieve a specific objective.

5)

A cost object is always either a product or a service.

6)

A department could be considered a cost object.

7)

The same cost may be direct for one cost object and indirect for another cost object.

8)

Assigning direct costs poses more problems than assigning indirect costs.

9)

Improvements in information-gathering technologies are making it possible to trace more costs as direct.

10)

Misallocated indirect costs may lead to promoting products that are not profitable.

11)

The materiality of the cost is a factor in classifying the cost as a direct or indirect cost.

12)

The cost of a customized machine only used in the production of a single product would be classified as a direct cost.

13)

Some fixed costs may be classified as direct manufacturing costs.

14)

The distinction between direct and indirect costs is clearly set forth in Generally Accepted Accounting Principles (GAAP).

15)

Fixed costs have no cost driver in the short run, but may have a cost driver in the long run.

16)

Costs that are difficult to change over the short run are always variable over the long run.

17)

A decision maker cannot adjust capacity over the short run.

18)

Fixed costs vary with the level of production or sales volume.

19)

Currently, most administrative personnel costs would be classified as fixed costs.

20)

Fixed costs depend on the resources used, not the resources acquired.

21)

The variable cost per unit of a product should stay the same throughout the relevant range of production.

22)

An appropriate cost driver for shipping costs might be the number of units shipped.
23)

When making decisions using fixed costs, the focus should be on total costs and not unit costs.

24)

When 50,000 units are produced the fixed cost is $10 per unit. Therefore, when 100,000 units are produced fixed costs will remain at $10 per unit.

25)

A unit cost is computed by dividing total cost by the number of units.

26)

Unit costs and average costs are really the same thing.

27)

Service-sector companies provide services or intangible products to their customers.

28)

America on Line (AOL) would be an example of a merchandising company.

29)

Merchandising companies purchase products and sell them to customers without changing their basic form.

30)

Merchandising companies only hold two types of inventories: merchandise inventory, and direct material.

31)

Manufacturing sector firms normally hold three types of inventory: direct materials inventory, work-in-process inventory, and finished goods inventory.

32)

Work-in-process inventory are goods partially worked on but not yet completed.

33)

Direct material costs are the acquisition costs of all materials that eventually become part of the cost object and cannot be traced to the cost object in an economically feasible way.
34)

Acquisition costs of direct materials include freight-in charges, sales taxes, and custom duties.

35)

Indirect manufacturing costs include the compensation of all manufacturing labor that can be traced to the cost object in an economically feasible way.

36)

Direct manufacturing labor includes wages and fringe benefits paid to machine operators.

37)

Inventoriable costs are reported as an asset when incurred and expensed on the income statement when the product is sold.

38)

Cost of goods sold refers to the products brought to completion, whether they were started before or during the current accounting period.

39)

Operating income is sales revenue minus cost of goods manufactured.

40)

All manufacturing costs are inventoriable costs.

41)

All costs reported on the income statement of a service-sector company are period costs.

42)

Period costs are never included as part of inventory.

43)

Conversion costs include all direct manufacturing costs.

44)

Inventory of a manufacturing firm includes goods partially worked on but not yet fully completed.
45)

The wages of a plant supervisor would be classified as a period cost.

46)

For external reporting, GAAP requires that costs be classified as either variable or fixed.

47)

Depreciation can be classified as either an inventoriable cost or a period cost, depending on what is being depreciated.

48)

Insurance on a factory can be classified as a period cost.

49)

Overtime premium consists of the wages paid to all workers (for both direct labor and indirect labor) in excess of their straight-time wage rates.

50)

A product cost that is useful for one decision may not be useful information for another decision.

51)

For external reporting purposes, indirect manufacturing costs must be allocated to individual units.

52)

Overtime premium is normally considered as a component of direct labor.

53)

If a worker is paid for 8 hours, but is idle for 1 of those 8 hours, the 1 hour of idle time would be considered a component of direct labor.

54)

The role of the cost accountant is to tailor the cost calculation to fit the current decision situation.

55)

Cost accounting and cost management include calculating various costs, obtaining financial and nonfinancial information, and analyzing relevant information for decision making.

56)

A costing system traces direct costs and allocates indirect costs to products.

57)

Management accountants help managers identify which information is relevant to a particular decision.

58)

When making strategic decisions about which products to produce, managers do not need to know how revenues and costs vary with changes in output level.

59)

Cost objects include:
A)

products
B)

customers
C)

departments
D)

All of these answers are correct.

60)

Actual costs are:
A)

the costs incurred
B)

budgeted costs
C)

estimated costs
D)

forecasted costs

61)

The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is:
A)

cost accumulation
B)

cost assignment
C)

cost tracing
D)

conversion costing

62)

In order to make decisions, managers need to know:
A)

actual costs
B)

budgeted costs
C)

both costs
D)

neither cost

63)

The collection of accounting data in some organized way is:
A)

cost accumulation
B)

cost assignment
C)

cost tracing
D)

conversion costing

64)

Budgeted costs are:
A)

the costs incurred this year
B)

the costs incurred last year
C)

planned or forecasted costs
D)

competitor’s costs

65)

Cost assignment is:
A)

always arbitrary
B)

includes tracing and allocating
C)

the same as cost accumulation
D)

finding the difference between budgeted and actual costs

66)

A cost system determines the cost of a cost object by:
A)

accumulating and then assigning costs
B)

accumulating costs
C)

assigning and then accumulating costs
D)

assigning costs

67)

Which of the following does NOT affect the direct/indirect classification of a cost?
A)

the level of budgeted profit for the next year
B)

the materiality of the cost in question
C)

available technology to gather information about the cost
D)

the design of the operation

68)

Which of the following statements about the direct/indirect cost classification is NOT true?
A)

Direct costs are always traced.
B)

Direct costs are always allocated.
C)

The design of operations affects the direct/indirect classification.
D)

The direct/indirect classification depends on the choice of cost object.

69)

Cost tracing is:
A)

the assignment of direct costs to the chosen cost object
B)

a function of cost allocation
C)

the process of tracking both direct and indirect costs associated with a cost object
D)

the process of determining the actual cost of the cost object

70)

Cost allocation is:
A)

the process of tracking both direct and indirect costs associated with a cost object
B)

the process of determining the actual cost of the cost object
C)

the assignment of indirect costs to the chosen cost object
D)

a function of cost tracing

71)

The determination of a cost as either direct or indirect depends upon the:
A)

accounting system
B)

allocation system
C)

cost tracing system
D)

cost object chosen

72)

Classifying a cost as either direct or indirect depends upon:
A)

the behavior of the cost in response to volume changes
B)

whether the cost is expensed in the period in which it is incurred
C)

whether the cost can be easily identified with the cost object
D)

whether an expenditure is avoidable or not in the future

73)

A manufacturing plant produces two product lines: football equipment and hockey equipment. Direct costs for the football equipment line are the:
A)

beverages provided daily in the plant break room
B)

monthly lease payments for a specialized piece of equipment needed to manufacture the football helmet
C)

salaries of the clerical staff that work in the company administrative offices
D)

utilities paid for the manufacturing plant

74)

A manufacturing plant produces two product lines: football equipment and hockey equipment. An indirect cost for the hockey equipment line is the:
A)

material used to make the hockey sticks
B)

labor to bind the shaft to the blade of the hockey stick
C)

shift supervisor for the hockey line
D)

plant supervisor

75)

Which one of the following items is a direct cost?
A)

Customer-service costs of a multiproduct firm; Product A is the cost object.
B)

Printing costs incurred for payroll check processing; payroll check processing is the cost object.
C)

The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object.
D)

Utility costs of the administrative offices; the accounting department is the cost object.

76)

Indirect manufacturing costs:
A)

can be traced to the product that created the costs
B)

can be easily identified with the cost object
C)

generally include the cost of material and the cost of labor
D)

may include both variable and fixed costs

77)

All of the following are true EXCEPT that indirect costs:
A)

may be included in prime costs
B)

are not easily traced to products or services
C)

vary with the selection of the cost object
D)

may be included in manufacturing overhead

78)

Which statement is TRUE?
A)

All variable costs are direct costs.
B)

Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs.
C)

All fixed costs are indirect costs.
D)

All direct costs are variable costs.

79)

A mixed cost is:
A)

a fixed cost
B)

a cost with fixed and variable elements
C)

a variable cost
D)

always an indirect cost

80)

Which of the following is a mixed cost?
A)

monthly rent payment
B)

manager’s salary
C)

monthly telephone bill
D)

direct materials

81)

Which statement is TRUE?
A)

A direct cost of one cost object cannot be an indirect cost of another cost object.
B)

All variable costs are direct costs.
C)

A direct cost of one cost object can be an indirect cost of another cost object.
D)

All fixed costs are direct costs.

82)

Cost behavior refers to:
A)

how costs react to a change in the level of activity
B)

whether a cost is incurred in a manufacturing, merchandising, or service company
C)

classifying costs as either inventoriable or period costs
D)

whether a particular expense has been ethically incurred

83)

An understanding of the underlying behavior of costs helps in all of the following EXCEPT:
A)

costs can be better estimated as volume expands and contracts
B)

true costs can be better evaluated
C)

process inefficiencies can be better identified and as a result improved
D)

sales volume can be better estimated

84)

At a plant where a union agreement sets annual salaries and conditions, annual labor costs usually:
A)

are considered a variable cost
B)

are considered a fixed cost
C)

depend on the scheduling of floor workers
D)

depend on the scheduling of production runs

85)

Variable costs:
A)

are always indirect costs
B)

increase in total when the actual level of activity increases
C)

include most personnel costs and depreciation on machinery
D)

can always be traced directly to the cost object

86)

Fixed costs:
A)

may include either direct or indirect costs
B)

vary with production or sales volumes
C)

include parts and materials used to manufacture a product
D)

can be adjusted in the short run to meet actual demands

87)

Fixed costs depend on the:
A)

amount of resources used
B)

amount of resources acquired
C)

volume of production
D)

volume of sales

88)

Which one of the following is a variable cost for an insurance company?
A)

rent
B)

president’s salary
C)

sales commissions
D)

property taxes

89)

Which of the following is a fixed cost for an automobile manufacturing plant?
A)

administrative salaries
B)

electricity used by assembly-line machines
C)

sales commissions
D)

windows for each car produced

90)

If each furnace requires a hose that costs $20 and 2,000 furnaces are produced for the month, the total cost for hoses is:
A)

considered to be a direct fixed cost
B)

considered to be a direct variable cost
C)

considered to be an indirect fixed cost
D)

considered to be an indirect variable cost

91)

The MOST likely cost driver of distribution costs is the:
A)

number of parts within the product
B)

number of miles driven
C)

number of products manufactured
D)

number of production hours

92)

The MOST likely cost driver of direct material costs is the:
A)

number of parts within the product
B)

number of miles driven
C)

number of products manufactured
D)

number of production hours

93)

Which of the following statements is FALSE?
A)

There is a cause-and-effect relationship between the cost driver and the level of activity.
B)

Fixed costs have cost drivers over the short run.
C)

Over the long run all costs have cost drivers.
D)

Volume of production is a cost driver of direct manufacturing costs.

94)

A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the:
A)

average range
B)

cost-allocation range
C)

cost driver range
D)

relevant range

95)

Within the relevant range, if there is a change in the level of the cost driver, then:
A)

total fixed costs and total variable costs will change
B)

total fixed costs and total variable costs will remain the same
C)

total fixed costs will remain the same and total variable costs will change
D)

total fixed costs will change and total variable costs will remain the same

96)

Within the relevant range, if there is a change in the level of the cost driver, then:
A)

fixed and variable costs per unit will change
B)

fixed and variable costs per unit will remain the same
C)

fixed costs per unit will remain the same and variable costs per unit will change
D)

fixed costs per unit will change and variable costs per unit will remain the same

97)

Which of the following would be LEAST likely to be a cost driver for a company’s accounting costs?
A)

the number of employees in the accounting department
B)

the number of invoices processed
C)

the number of units sold
D)

the square footage of the office space used by the accounting department

98)

A unit cost is computed by:
A)

multiplying total cost by the number of units
B)

dividing total cost by the number of units
C)

dividing variable cost by the number of units
D)

adding variable cost to fixed cost

99)

In making product mix and pricing decisions, managers should focus on:
A)

total costs
B)

unit costs
C)

variable costs
D)

fixed costs

100)

When 10,000 units are produced, fixed costs are $14 per unit. Therefore, when 20,000 units are produced fixed costs will:
A)

increase to $28 per unit
B)

remain at $14 per unit
C)

decrease to $7 per unit
D)

total $280,000

101)

When 10,000 units are produced, variable costs are $6 per unit. Therefore, when 20,000 units are produced:
A)

variable costs will total $120,000
B)

variable costs will total $60,000
C)

variable unit costs will increase to $12 per unit
D)

variable unit costs will decrease to $3 per unit

102)

Christi Manufacturing provided the following information for last month:

Sales $10,000
Variable costs 3,000
Fixed costs 5,000
Operating income $2,000

If sales double next month, what is the projected operating income?
A)

$4,000
B)

$7,000
C)

$9,000
D)

$12,000

103)

Kym Manufacturing provided the following information for last month:

Sales $12,000
Variable costs 4,000
Fixed costs 1,000
Operating income $7,000

If sales double next month, what is the projected operating income?
A)

$14,000
B)

$15,000
C)

$18,000
D)

$19,000

104)

Wheel and Tire Manufacturing currently produces 1,000 tires per month. The following per unit data apply for sales to regular customers:

Direct materials $20
Direct manufacturing labor 3
Variable manufacturing overhead 6
Fixed manufacturing overhead 10
Total manufacturing costs $39

The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of producing 2,000 tires?
A)

$39,000
B)

$78,000
C)

$68,000
D)

$62,000

105)

XIAN Manufacturing produces a unique valve, and has the capacity to produce 50,000 valves annually. Currently XIAN produces 40,000 valves and is thinking about increasing production to 45,000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this change?
A)

Total manufacturing costs will increase and unit manufacturing costs will stay the same.
B)

Total manufacturing costs will increase and unit manufacturing costs will decrease.
C)

Total manufacturing costs will stay the same and unit manufacturing costs will stay the same.
D)

Total manufacturing costs will stay the same and unit manufacturing costs will decrease.

106)

Tire and Spoke Manufacturing currently produces 1,000 bicycles per month. The following per unit data apply for sales to regular customers:

Direct materials $50
Direct manufacturing labor 5
Variable manufacturing overhead 14
Fixed manufacturing overhead 10
Total manufacturing costs $79

The plant has capacity for 3,000 bicycles and is considering expanding production to 2,000 bicycles. What is the per unit cost of producing 2,000 bicycles?
A)

$79 per unit
B)

$158 per unit
C)

$74 per unit
D)

$134 per unit

107)

The plant has capacity for 2,000 axles and is considering expanding production to 1,500 axles. What is the total cost of producing 1,500 axles?
A)

$85,000
B)

$170,000
C)

$107,500
D)

$102,500

108)

What is the per unit cost when producing 1,500 axles?
A)

$71.67
B)

$107.50
C)

$85.00
D)

$170.00

109)

What is the average manufacturing cost per unit?
A)

$40.00
B)

$42.55
C)

$0.025
D)

$75.00

110)

What is the amount of ending finished goods inventory?
A)

$1,880,000
B)

$120,000
C)

$225,000
D)

$105,000

111)

________ – sector companies purchase materials and components and convert them into finished goods.
A)

Merchandising
B)

Service
C)

Manufacturing
D)

Professional

112)

________ – sector companies purchase and then sell tangible products without changing their basic form.
A)

Merchandising
B)

Professional
C)

Service
D)

Manufacturing

113)

________ – sector companies provide intangible products.
A)

Professional
B)

Manufacturing
C)

Merchandising
D)

Service

114)

What is the amount of gross margin?
A)

$1,750,000
B)

$3,525,000
C)

$5,405,000
D)

$1,645,000

115)

What is the average manufacturing cost per unit?
A)

$50.00
B)

$50.85
C)

$17.65
D)

$85.00

116)

What is the amount of ending finished goods inventory?
A)

$42,500
B)

$25,424
C)

$25,000
D)

$1,475,000

117)

What is the amount of gross margin?
A)

$1,475,000
B)

$1,500,000
C)

$2,507,500
D)

$1,032,500

118)

Which of the following companies is part of the service sector of our economy?
A)

Wal-Mart
B)

Bank of America
C)

General Motors
D)

Amazon.com

119)

Which of the following companies is part of the merchandising sector of our economy?
A)

General Motors
B)

Intel
C)

The GAP
D)

Robert Meyer Accounting Firm

120)

Which of the following companies is part of the manufacturing sector of our economy?
A)

Nike
B)

Barnes & Noble
C)

Corvette Law Firm
D)

Sears, Roebuck, and Company

121)

Google, an internet search firm, would be classified as:
A)

a manufacturing-sector company
B)

a merchandising-sector company
C)

a service sector company
D)

None of these answers are correct.

122)

Service-sector companies report:
A)

only merchandise inventory
B)

only finished goods inventory
C)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts
D)

no inventory accounts

123)

Manufacturing-sector companies report:
A)

only merchandise inventory
B)

only finished goods inventory
C)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts
D)

no inventory accounts

124)

For a manufacturing company, direct material costs may be included in:
A)

direct materials inventory only
B)

merchandise inventory only
C)

both work-in-process inventory and finished goods inventory
D)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts

125)

For a manufacturing company, direct labor costs may be included in:
A)

direct materials inventory only
B)

merchandise inventory only
C)

both work-in-process inventory and finished goods inventory
D)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts

126)

For a manufacturing company, indirect manufacturing costs may be included in:
A)

direct materials inventory only
B)

merchandise inventory only
C)

both work-in-process inventory and finished goods inventory
D)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts

127)

For a manufacturing-sector company, the cost of factory insurance is classified as a:
A)

direct material cost
B)

direct manufacturing labor cost
C)

manufacturing overhead cost
D)

period cost

128)

For a printing company, the cost of paper is classified as a:
A)

direct material cost
B)

direct manufacturing labor cost
C)

manufacturing overhead cost
D)

period cost

129)

Wages paid to machine operators on an assembly line are classified as a:
A)

direct material cost
B)

direct manufacturing labor cost
C)

manufacturing overhead cost
D)

period cost

130)

Manufacturing overhead costs in an automobile manufacturing plant MOST likely include:
A)

labor costs of the painting department
B)

indirect material costs such as lubricants
C)

sales commissions
D)

steering wheel costs

131)

Manufacturing overhead costs are also referred to as:
A)

indirect manufacturing costs
B)

prime costs
C)

period costs
D)

direct material

132)

Merchandising companies normally report:
A)

only merchandise inventory
B)

only finished goods inventory
C)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts
D)

no inventory accounts

133)

Direct materials inventory would normally include:
A)

direct materials in stock and awaiting use in the manufacturing process
B)

goods partially worked on but not yet fully completed
C)

goods fully completed but not yet sold
D)

products in their original form intended to be sold without changing their basic form

134)

Work-in-process inventory would normally include:
A)

direct materials in stock and awaiting use in the manufacturing process
B)

goods partially worked on but not yet fully completed
C)

goods fully completed but not yet sold
D)

products in their original form intended to be sold without changing their basic form

135)

Finished goods inventory would normally include:
A)

direct materials in stock and awaiting use in the manufacturing process
B)

goods partially worked on but not yet fully completed
C)

goods fully completed but not yet sold
D)

products in their original form intended to be sold without changing their basic form

136)

Merchandise inventory would normally include:
A)

direct materials in stock and awaiting use in the manufacturing process
B)

goods partially worked on but not yet fully completed
C)

goods fully completed but not yet sold
D)

products in their original form intended to be sold without changing their basic form

137)

________ are the acquisition costs of all materials that eventually become part of the cost object and can be traced to the cost object.
A)

Direct manufacturing labor costs
B)

Direct material costs
C)

Indirect manufacturing costs
D)

Manufacturing overhead costs

138)

________ include the compensation of all manufacturing labor that can be traced to the cost object.
A)

Direct manufacturing labor costs
B)

Indirect manufacturing costs
C)

Direct material costs
D)

Manufacturing overhead costs

139)

________ are all manufacturing costs that are related to the cost object but cannot be traced to that cost object.
A)

Direct material costs
B)

Period costs
C)

Indirect manufacturing costs
D)

Direct manufacturing labor costs

140)

The income statement of a manufacturing firm reports:
A)

period costs only
B)

inventoriable costs only
C)

both period and inventoriable costs
D)

period and inventoriable costs but at different times; the reporting varies

141)

The income statement of a service-sector firm reports:
A)

period costs only
B)

inventoriable costs only
C)

both period and inventoriable costs
D)

period and inventoriable costs but at different times; the reporting varies

142)

Manufacturing costs include all of the following EXCEPT:
A)

costs incurred inside the factory
B)

both direct and indirect costs
C)

both variable and fixed costs
D)

both inventoriable and period costs

143)

Inventoriable costs:
A)

include administrative and marketing costs
B)

are expensed in the accounting period in which the products are sold
C)

are particularly useful in management accounting
D)

are also referred to as nonmanufacturing costs
144)

Inventoriable costs are expensed on the income statement:
A)

when direct materials for the product are purchased
B)

after the products are manufactured
C)

when the products are sold
D)

not at any particular time, it varies

145)

Costs that are initially recorded as assets and expensed when sold are called:
A)

period costs
B)

inventoriable costs
C)

variable costs
D)

fixed costs

146)

For merchandising companies, inventoriable costs include:
A)

the cost of the goods themselves
B)

incoming freight costs
C)

insurance costs for the goods
D)

All of these answers are correct.

147)

For manufacturing firms, inventoriable costs include:
A)

plant supervisor salaries
B)

research and development costs
C)

costs of dealing with customers after the sale
D)

distribution costs

148)

A plant manufactures several different products. The wages of the plant supervisor can be classified as a(n):
A)

direct cost
B)

inventoriable cost
C)

variable cost
D)

period cost

149)

The cost of inventory reported on the balance sheet may include all of the following EXCEPT:
A)

customer-service costs
B)

wages of the plant supervisor
C)

depreciation of the factory equipment
D)

the cost of parts used in the manufacturing process

150)

For a computer manufacturer, period costs include the cost of:
A)

the keyboard
B)

labor used for assembly and packaging
C)

distribution
D)

assembly-line equipment

151)

Period costs:
A)

include only fixed costs
B)

seldom influence financial success or failure
C)

include the cost of selling, delivering, and after-sales support for customers
D)

should be treated as an indirect cost rather than as a direct manufacturing cost

152)

Period costs:
A)

are treated as expenses in the period they are incurred
B)

are directly traceable to products
C)

include direct labor
D)

are also referred to as manufacturing overhead costs

153)

Which of the following is NOT a period cost?
A)

marketing costs
B)

general and administrative costs
C)

research and development costs
D)

manufacturing costs

154)

Costs expensed on the income statement in the accounting period incurred are called:
A)

direct costs
B)

indirect costs
C)

period costs
D)

inventoriable costs

155)

Prime costs include:
A)

direct materials and direct manufacturing labor costs
B)

direct manufacturing labor and manufacturing overhead costs
C)

direct materials and manufacturing overhead costs
D)

only direct materials

156)

Conversion costs include:
A)

direct materials and direct manufacturing labor costs
B)

direct manufacturing labor and manufacturing overhead costs
C)

direct materials and manufacturing overhead costs
D)

only direct materials

157)

Total manufacturing costs equal:
A)

direct materials + prime costs
B)

direct materials + conversion costs
C)

direct manufacturing labor costs + prime costs
D)

direct manufacturing labor costs + conversion costs

158)

In the cost classification system used by manufacturing firms, assembly workers’ wages would be included in all of the following EXCEPT:
A)

product cost
B)

prime cost
C)

conversion cost
D)

period cost

159)

In the cost classification system used by manufacturing firms, total manufacturing costs would include all of the following EXCEPT:
A)

direct materials costs and conversion costs
B)

direct materials costs, direct manufacturing labor costs, and manufacturing overhead costs
C)

indirect materials costs, indirect manufacturing labor costs, and manufacturing overhead costs
D)

prime costs and manufacturing overhead costs

160)

Manufacturing overhead costs may include all of the following EXCEPT:
A)

salaries of the plant janitorial staff
B)

labor that can be traced to individual products
C)

wages paid for unproductive time due to machine breakdowns
D)

overtime premiums paid to plant workers

161)

Which of the following formulas determine cost of goods sold in a merchandising entity?
A)

Beginning inventory + Purchases + Ending inventory = Cost of goods sold
B)

Beginning inventory + Purchases – Ending inventory = Costs of goods sold
C)

Beginning inventory – Purchases + Ending inventory = Cost of goods sold
D)

Beginning inventory – Ending inventory – Purchases = Cost of goods sold

162)

Which of the following formulas determine cost of goods sold in a manufacturing entity?
A)

Beginning work-in-process inventory + Cost of goods manufactured – Ending work-in-process inventory = Cost of goods sold
B)

Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process inventory = Cost of goods sold
C)

Cost of goods manufactured – Beginning finished goods inventory – Ending finished goods inventory = Cost of goods sold
D)

Cost of goods manufactured + Beginning finished goods inventory – Ending finished goods inventory = Cost of goods sold

163)

Product cost for pricing and product-mix decisions may include all costs EXCEPT:
A)

research and development costs
B)

customer-service costs
C)

marketing costs
D)

design costs
E)

All of the above may be included

164)

Product cost for reimbursement under government contracts may include all costs EXCEPT:
A)

marketing costs
B)

design costs
C)

production costs
D)

research and development costs

165)

Product cost for financial statement purposes may include:
A)

all costs allowed by government agencies
B)

all costs included for pricing and product-mix decisions
C)

production costs
D)

all costs except marketing costs

166)

The following information pertains to the Cannady Corporation:

Beginning work-in-process inventory $ 50,000
Ending work-in-process inventory 48,000
Beginning finished goods inventory 180,000
Ending finished goods inventory 195,000
Cost of goods manufactured 1,220,000

What is cost of goods sold?
A)

$1,235,000
B)

$1,205,000
C)

$1,218,000
D)

$1,222,000

167)

The following information pertains to the Duggan Corporation:

Beginning work-in-process inventory $ 20,000
Ending work-in-process inventory 23,000
Beginning finished goods inventory 36,000
Ending finished goods inventory 34,000
Cost of goods manufactured 246,000

What is cost of goods sold?
A)

$244,000
B)

$248,000
C)

$243,000
D)

$249,000

168)

What is cost of goods manufactured for 20X3?
A)

$230,000
B)

$257,000
C)

$283,000
D)

$355,000

169)

What is gross margin for 20X3?
A)

$283,000
B)

$355,000
C)

$230,000
D)

$257,000

170)

What is operating income for 20X3?
A)

$85,000
B)

$112,000
C)

$62,000
D)

$230,000

171)

What is cost of goods manufactured for 20X5?
A)

$257,000
B)

$350,000
C)

$243,000
D)

$250,000

172)

What is gross margin for 20X5?
A)

$243,000
B)

$527,000
C)

$357,000
D)

$350,000

173)

What is operating income for 20X5?
A)

$230,000
B)

$123,000
C)

$107,000
D)

$157,000

174)

What are the variable costs per unit associated with Product ICT101?
A)

$18
B)

$22
C)

$88
D)

$92

175)

What are the fixed costs per unit associated with Product ICT101?
A)

$102
B)

$48
C)

$52
D)

$32

176)

What are the inventoriable costs per unit associated with Product ICT101?
A)

$120
B)

$140
C)

$50
D)

$88

177)

What are the period costs per unit associated with Product ICT101?
A)

$4
B)

$16
C)

$20
D)

$52

178)

What are the variable costs per unit associated with Product ORD203?
A)

$60
B)

$83
C)

$66
D)

$48

179)

What are the fixed costs per unit associated with Product ORD203?
A)

$23
B)

$32
C)

$35
D)

$44

180)

What are the inventoriable costs per unit associated with Product ORD203?
A)

$60
B)

$66
C)

$48
D)

$83

181)

What are the period costs per unit associated with Product ORD203?
A)

$15
B)

$6
C)

$9
D)

$27

182)

For last year, Wampum Enterprises reported revenues of $420,000, cost of goods sold of $108,000, cost of goods manufactured of $101,000, and total operating costs of $70,000. Operating income for that year was:
A)

$319,000
B)

$312,000
C)

$249,000
D)

$242,000

183)

For last year, Wampum Enterprises reported revenues of $420,000, cost of goods sold of $108,000, cost of goods manufactured of $101,000, and total operating costs of $70,000. Gross margin for last year was:
A)

$319,000
B)

$312,000
C)

$249,000
D)

$242,000

184)

For last year, Lewisburn Manufacturing reported the following:

Revenue $420,000
Beginning inventory of direct materials, January 1 22,000
Purchases of direct materials 146,000
Ending inventory of direct materials, December 31 16,000
Direct manufacturing labor 18,000
Indirect manufacturing costs 40,000
Beginning inventory of finished goods, January 1 35,000
Cost of goods manufactured 104,000
Ending inventory of finished goods, December 31 36,000
Operating costs 140,000

What was Lewisburn’s cost of goods sold?
A)

$103,000
B)

$152,000
C)

$268,000
D)

$317,000

185)

For last year, Lewisburn Manufacturing reported the following:

Revenue $420,000
Beginning inventory of direct materials, January 1 22,000
Purchases of direct materials 146,000
Ending inventory of direct materials, December 31 16,000
Direct manufacturing labor 18,000
Indirect manufacturing costs 40,000
Beginning inventory of finished goods, January 1 35,000
Cost of goods manufactured 104,000
Ending inventory of finished goods, December 31 36,000
Operating costs 140,000

What was Lewisburn’s gross margin (or gross profit)?
A)

$103,000
B)

$152,000
C)

$268,000
D)

$317,000

186)

For last year, Lewisburn Manufacturing reported the following:

Revenue $420,000
Beginning inventory of direct materials, January 1 22,000
Purchases of direct materials 146,000
Ending inventory of direct materials, December 31 16,000
Direct manufacturing labor 18,000
Indirect manufacturing costs 40,000
Beginning inventory of finished goods, January 1 35,000
Cost of goods manufactured 104,000
Ending inventory of finished goods, December 31 36,000
Operating costs 140,000

What was Lewisburn’s operating income?
A)

$76,000
B)

$128,000
C)

$177,000
D)

$280,000

187)

For last year, Lewisburn Manufacturing reported the following:

Revenue $420,000
Beginning inventory of direct materials, January 1 22,000
Purchases of direct materials 146,000
Ending inventory of direct materials, December 31 16,000
Direct manufacturing labor 18,000
Indirect manufacturing costs 40,000
Beginning inventory of finished goods, January 1 35,000
Cost of goods manufactured 104,000
Ending inventory of finished goods, December 31 36,000
Operating costs 140,000

How much of the above would be considered period costs for Lewisburn Manufacturing?
A)

$104,000
B)

$140,000
C)

$246,000
D)

$390,000

188)

Product costs may refer to:
A)

inventoriable costs for external reporting
B)

design costs plus manufacturing costs for government contracts
C)

all costs incurred along the value chain for pricing decisions
D)

All of these answers are correct.

189)

Product costs used for pricing and product-mix decisions generally include:
A)

manufacturing costs only
B)

design costs plus manufacturing costs
C)

all costs incurred along the value chain
D)

distribution costs only

190)

Product costs used for government contracts generally include:
A)

manufacturing costs only
B)

design costs plus manufacturing costs
C)

all costs incurred along the value chain
D)

distribution costs only

191)

Product costs used for external reporting generally include:
A)

manufacturing costs only
B)

design costs plus manufacturing costs
C)

all costs incurred along the value chain
D)

All of these answers are correct.

192)

Inventoriable costs for external reporting purposes are also called:
A)

product costs
B)

period costs
C)

variable costs
D)

direct manufacturing costs

193)

For external reporting:
A)

costs are classified as either inventoriable or period costs
B)

costs reflect current values
C)

there are no prescribed rules since no one is exactly sure how investors and creditors will use these numbers
D)

costs include amounts that reflect both current and future benefits

194)

Which of the following statements is FALSE?
A)

Product costs and inventoriable costs are interchangeable terms.
B)

Inventoriable costs are important for GAAP.
C)

Inventoriable costs are a special case of product costs.
D)

“Product costs” refers to the particular costs of a product for the purpose at hand.

195)

Debated items that some companies include as direct manufacturing labor include:
A)

fringe benefits
B)

vacation pay
C)

training time
D)

All of these answers are correct.

196)

Brenda Hicks is paid $10 an hour for straight-time and $15 an hour for overtime. One week she worked 42 hours, which included 2 hours of overtime. Compensation would be reported as:
A)

$400 of direct labor and $30 of manufacturing overhead
B)

$400 of direct labor and $0 of manufacturing overhead
C)

$420 of direct labor and $10 of manufacturing overhead
D)

$430 of direct labor and $0 of manufacturing overhead

197)

Rodney Worsham is paid $10 an hour for straight-time and $15 an hour for overtime. One week he worked 45 hours, which included 5 hours of overtime, and 3 hours of idle time caused by material shortages. Compensation would be reported as:
A)

$370 of direct labor and $105 of manufacturing overhead
B)

$420 of direct labor and $55 of manufacturing overhead
C)

$450 of direct labor and $25 of manufacturing overhead
D)

$445 of direct labor and $30 of manufacturing overhead

198)

Joseph Davis worked 44 hours last week for Breakgood Manufacturing. Of the 44 hours 4 hours were considered overtime, and also Davis was idle for 5 of the 44 hours due to an equipment malfunction. Davis makes $20 per hour and is paid $30 an hour (time and a half) for overtime. Davis’ total compensation for that week would be ________, and assuming Breakgood charges overtime premium and idle time to indirect labor, the amount of this compensation credited to indirect labor would be ________.
A)

$840; $40
B)

$840; $140
C)

$920; $40
D)

$920; $140

199)

When making decisions:
A)

it is best to use average costs
B)

it is best to use unit costs
C)

it is best to use total costs rather than unit costs
D)

All of these types of costs can be used for decision making; it varies depending on the decision required.

200)

Lucas Manufacturing has three cost objects that it uses to accumulate costs for its manufacturing plants. They are:

Cost object #1: The physical buildings and equipment
Cost object #2: The use of buildings and equipment
Cost object #3: The availability and use of manufacturing labor

The following manufacturing overhead cost categories are found in the accounting records:
a. Depreciation on buildings and equipment
b. Lubricants for machines
c. Property insurance
d. Supervisors’ salaries
e. Fringe benefits
f. Property taxes
g. Utilities

Required:

Assign each of the above costs to the most appropriate cost object.

201)

Archambeau Products Company manufactures office furniture. Recently, the company decided to develop a formal cost accounting system and classify all costs into three categories. Categorize each of the following items as being appropriate for (1) cost tracing to the finished furniture, (2) cost allocation of an indirect manufacturing cost to the finished furniture, or (3) as a nonmanufacturing item.

Cost Cost Nonmanu-
Item Tracing Allocation facturing

Carpenter wages ________ ________ ________
Depreciation – office building ________ ________ ________
Glue for assembly ________ ________ ________
Lathe department supervisor ________ ________ ________
Lathe depreciation ________ ________ ________
Lathe maintenance ________ ________ ________
Lathe operator wages ________ ________ ________
Lumber ________ ________ ________
Samples for trade shows ________ ________ ________
Metal brackets for drawers ________ ________ ________
Factory washroom supplies ________ ________ ________

202)

Butler Hospital wants to estimate the cost for each patient stay. It is a general health care facility offering only basic services and not specialized services such as organ transplants.

Required:

a. Classify each of the following costs as either direct or indirect with respect to each patient.
b. Classify each of the following costs as either fixed or variable with respect to hospital costs per day.

Direct Indirect Fixed Variable

Electronic monitoring ________ ________ ________ ________
Meals for patients ________ ________ ________ ________
Nurses’ salaries ________ ________ ________ ________
Parking maintenance ________ ________ ________ ________
Security ________ ________ ________ ________

203)

Springfield Manufacturing produces electronic storage devices, and uses the following three-part classification for its manufacturing costs: direct materials, direct manufacturing labor, and indirect manufacturing costs. Total indirect manufacturing costs for January were $300 million, and were allocated to each product on the basis of direct manufacturing labor costs of each line. Summary data (in millions) for January for the most popular electronic storage device, the Big Bertha, was:

Big Bertha
Direct manufacturing costs $9,000,000
Direct manufacturing labor costs $3,000,000
Indirect manufacturing costs $8,500,000
Units produced 40,000

Required:

a. Compute the manufacturing cost per unit for each product produced in January.

b. Suppose production will be reduced to 30,000 units in February. Speculate as to whether the unit costs in February will most likely be higher or lower than unit costs in January; it is not necessary to calculate the exact February unit cost. Briefly explain your reasoning.

204)

Whippany manufacturing wants to estimate costs for each product they produce at its Troy plant. The Troy plant produces three products at this plant, and runs two flexible assembly lines. Each assembly line can produce all three products.

Required:

a. Classify each of the following costs as either direct or indirect for each product.

b. Classify each of the following costs as either fixed or variable with respect to the number of units produced of each product.

Direct Indirect Fixed Variable

Assembly line labor wages ________ ________ ________ ________
Plant manager’s wages ________ ________ ________ ________
Depreciation on the assembly
line equipment ________ ________ ________ ________
Component parts for the product ________ ________ ________ ________
Wages of security personnel for the
factory ________ ________ ________ ________

205)

The list of representative cost drivers in the right column below are randomized with respect to the list of functions in the left column. That is, they do not match.

Function Representative Cost Driver
1. Purchasing A. Number of employees
2. Billing B. Number of shipments
3. Shipping C. Number of customers
4. Computer Support D. Number of invoices
5. Personnel E. Number of desktop computers
6. Customer Service F. Number of purchase orders

Required:

Match each business function with its representative cost driver.

Function Insert letter of appropriate driver (A through F)
1. Purchasing
2. Billing
3. Shipping
4. Computer Support
5. Personnel
6. Customer Service

206)

Combs, Inc., reports the following information for September sales:

Sales $15,000
Variable costs 3,000
Fixed costs 4,000
Operating income $ 8,000

Required:

If sales double in October, what is the projected operating income?

207)

Axle and Wheel Manufacturing currently produces 1,000 axles per month. The following per unit data apply for sales to regular customers:

Direct materials $200
Direct manufacturing labor 30
Variable manufacturing overhead 60
Fixed manufacturing overhead 40
Total manufacturing costs $330

The plant has capacity for 2,000 axles.

Required:

a. What is the total cost of producing 1,000 axles?
b. What is the total cost of producing 1,500 axles?
c. What is the per unit cost when producing 1,500 axles?

208)

The following information pertains to Ball Company:

Manufacturing costs $2,400,000
Units manufactured 40,000
Beginning inventory 0 units

39,800 units are sold during the year for $100 per unit.

Required:

a. What is the average manufacturing cost per unit?
b. What is the amount of ending finished goods inventory?
c. What is the amount of gross margin?

209)

During 2009, Favata Corporation incurred manufacturing expenses of $20,000,000 to produce 400,000 finished units. At year-end, it was determined that 370,000 units were sold while 30,000 units remained in ending inventory.

Required:

a. What is the cost of producing one unit?
b. What is the amount that will be reported on the income statement for cost of goods sold?
c. What is the amount that will be reported on the balance sheet for ending inventory?

210)

Evans Inc., had the following activities during 20X5:

Direct materials:
Beginning inventory $ 40,000
Purchases 123,200
Ending inventory 20,800
Direct manufacturing labor 32,000
Manufacturing overhead 24,000
Beginning work-in-process inventory 1,600
Ending work-in-process inventory 8,000
Beginning finished goods inventory 48,000
Ending finished goods inventory 32,000

Required:

a. What is the cost of direct materials used during 20X5?
b. What is cost of goods manufactured for 20X5?
c. What is cost of goods sold for 20X5?
d. What amount of prime costs was added to production during 20X5?
e. What amount of conversion costs was added to production during 20X5?

211)

Helmer Sporting Goods Company manufactured 100,000 units in 20X5 and reported the following costs:

Sandpaper $ 32,000 Leasing costs-plant $ 384,000
Materials handling 320,000 Depreciation-equipment 224,000
Coolants & lubricants 22,400 Property taxes-equipment 32,000
Indirect manufacturing labor 275,200 Fire insurance-equipment 16,000
Direct manufacturing labor 2,176,000 Direct material purchases 3,136,000
Direct materials, 1/1/X5 384,000 Direct materials, 12/31/X5 275,200
Finished goods, 1/1/X5 672,000 Sales revenue 12,800,000
Finished goods, 12/31/X5 1,280,000 Sales commissions 640,000
Work-in-process, 1/1/X5 96,000 Sales salaries 576,000
Work-in-process, 12/31/X5 64,000 Advertising costs 480,000
Administration costs 800,000

Required:

a. What is the amount of direct materials used during 20X5?
b. What manufacturing costs were added to WIP during 20X5?
c. What is cost of goods manufactured for 20X5?
d. What is cost of goods sold for 20X5?

212)

Messinger Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted:

Work-in-process inventory (January 1) $ 140,400
Work-in-process inventory (March 31) 171,000
Finished goods inventory (January 1) 540,000
Finished goods inventory (March 31) 510,000
Direct materials used 378,000
Indirect materials used 84,000
Direct manufacturing labor 480,000
Indirect manufacturing labor 186,000
Property taxes on manufacturing plant building 28,800
Salespersons’ company vehicle costs 12,000
Depreciation of manufacturing equipment 264,000
Depreciation of office equipment 123,600
Miscellaneous plant overhead 135,000
Plant utilities 92,400
General office expenses 305,400
Marketing distribution costs 30,000

Required:

a. Prepare a cost of goods manufactured schedule for the quarter.
b. Prepare a cost of goods sold schedule for the quarter.

213)

Using the following information find the unknown amounts. Assume each set of information is an independent case.

a. Merchandise Inventory Purchases $420,000
Cost of goods sold 446,000
Beginning balance 82,000
Ending balance ?

b. Direct Materials Beginning balance $ 14,000
Ending balance 28,000
Purchases 96,000
Direct materials used ?

c. Work-in-process Inventory Ending balance $ 44,000
Cost of goods manufactured 42,000
Beginning balance 16,000
Current manufacturing costs ?

d. Finished Goods Inventory Cost of goods manufactured $124,000
Ending balance 40,000
Cost of goods sold 122,000
Beginning balance ?

214)

Each of the following items pertains to one of these companies: Bedell Electronics (a manufacturing company), Gregory Food Retailers (a merchandising company), and Larson Real Estate (a service sector company). Classify each item as either inventoriable (I) costs or period (P) costs.

inventoriable (I) costs or period (P) costs
a. Salary of Bedell Electronics president
b. Depreciation on Bedell Electronics assembly equipment.
c. Salaries of Bedell’s assembly line workers
d. Purchase of frozen food for sale to customers by Gregory Food Retailers
e. Salaries of frozen food personnel at Gregory Food Retailing
f. Depreciation on freezers at Gregory Food Retailing
g. Salary of a receptionist at Larson Real Estate
h. Depreciation on a computer at Larson Real Estate
i. Salary of a real estate agent at Larson Real Estate

215)

On the assembly floor, Cynthia Evans is paid $20 an hour for straight-time and $30 an hour for overtime. One week she worked 43 hours, which included 3 hours of overtime.

Required:

a. What is Cynthia’s total compensation for the week?
b. What amount of compensation would be reported as direct manufacturing labor?
c. What amount of compensation would be reported as manufacturing overhead?

216)

In the manufacturing plant, Leslie Grant is paid $20 an hour for straight-time and $30 an hour for overtime. One week she worked 46 hours, which included 6 hours of overtime, and 4 hours of idle time caused by material shortages.

Required:

a. What is Leslie’s total compensation for the week?
b. What amount of compensation would be reported as direct manufacturing labor?
c. What amount of compensation would be reported as manufacturing overhead?

217)

Bosely Manufacturing Co. wants to classify costs for the product produced at its facility. The company produces only one product at the facility and operates continually. The cost categories are:

Product cost
Prime cost
Conversion cost
Period cost

The following costs are found in the accounting records:

a. Quality control inspection wages
b. Raw material purchases
c. Sales commissions
d. Factory depreciation
e. Assembly wages

Required:

Assign each of the above costs to the most appropriate cost categories.

218)

What is the meaning of the term “cost object”? Give an example of a cost object that would be used in a manufacturing company, a merchandising company, and a service sector company?

219)

Why is it possible that a raw material such as glue might be considered as an indirect material for one furniture manufacturer and as a direct material for another furniture manufacture?

220)

What are the differences between direct costs and indirect costs? Give an example of each.

221)

Describe a variable cost. Describe a fixed cost. Explain why the distinction between variable and fixed costs is important in cost accounting.

222)

Explain the difference between an inventoriable cost and a period cost. What potential problems does an inaccurate classification of product and period costs cause?

223)

When should the overtime premium of direct manufacturing labor be considered an indirect manufacturing cost? A direct manufacturing cost?

224)

In determining product cost, what concerns does a manufacturing firm have when contracting with a government agency?