Deck 2: Cost Terms, Concepts, and Classifications

Question 1

What is the outcome if the cost of goods sold is greater than the cost of goods manufactured?

A) Work-in-process inventory has decreased during the period.
B) Finished goods inventory has increased during the period.
C) Total manufacturing costs must be greater than cost of goods manufactured.
D) Finished goods inventory has decreased during the perioD.

Answer 1

D

Question 2

Which of the following would NOT be treated as a product cost for external financial reporting purposes?

A) Depreciation on a factory building.
B) Salaries of factory workers.
C) Indirect labour in the factory.
D) Advertising expenses.

Answer 2

D

Question 3

The advertising costs incurred by Pepsi to air its commercials during the hockey season can best be described as a:

A) Variable cost.
B) Fixed cost.
C) Prime cost.
D) Conversion cost.

Answer 3

B

Question 4

A brewery produces many variety of beer.If the cost object is a particular brand of beer the factory supervisor salary is classified a/an _____________ cost of the brand of beer and a _____________ cost of the entire division.

A) Direct,Common
B) Indirect,Common
C) Direct,Prime
D) Fixed,Period

Question 5

Micro Computer Company has set up a toll-free telephone line for customer inquiries regarding computer hardware produced by the company.How would the cost of this toll-free line be classified?

A) Product cost.
B) Manufacturing overhead.
C) Direct labour.
D) Period cost.

Question 6

The Target store in your home town is one of many Target department stores across the province.Some of the costs associated with the store in your home town last month appear below:
The Shoe Department is one of many departments in the home town store.The direct costs of the Shoe Department total:

A) $80,000
B) $88,000
C) $97,000
D) $108,000

Question 7

What would be the classification of corporate controller's salary?

A) Manufacturing cost.
B) Product cost.
C) Administrative cost.
D) Selling cost.

Question 8

How would the cost of rent for a manufacturing plant generally be classified?

A) A product cost but not a prime cost.
B) Neither a product nor prime Cost.
C) A prime cost but not a product cost.
D) Both a prime cost and product cost.

Question 9

Which of the following would be considered a product cost for external financial reporting purposes?

A) Cost of a warehouse used to store finished goods.
B) Cost of guided public tours through the company's facilities.
C) Cost of travel necessary to sell the manufactured product.
D) Cost of sand spread on the factory floor to absorb oil from manufacturing machines.

Question 10

Which of the following statements regarding variable cost is true?

A) Variable cost increases on a per unit basis as the number of units produced increases.
B) Variable cost remains constant on a per unit basis as the number of units produced increases.
C) Variable cost remains the same in total as production increases.
D) Variable cost decreases on a per unit basis as the number of units produced increases.

Question 11

Within the relevant range,what is the difference between variable costs and fixed costs?

A) Variable costs per unit fluctuate and fixed costs per unit remain constant.
B) Variable costs per unit are constant and fixed costs per unit fluctuate.
C) Total variable costs and total fixed costs are constant.
D) Total variable costs and total fixed costs fluctuate.

Question 12

For a manufacturing company,which of the following is an example of a period cost rather than a product cost?

A) Depreciation of factory equipment.
B) Wages of salespersons.
C) Wages of machine operators.
D) Insurance on factory equipment.

Question 13

Rossiter Company failed to record a credit sale at the end of the year,although the reduction in finished goods inventories was correctly recorded when the goods were shipped to the customer.Which one of the following statements is correct?

A) Accounts receivable was not affected,inventory was not affected,sales were understated,and cost of goods sold was understated.
B) Accounts receivable was understated,inventory was overstated,sales were understated,and cost of goods sold was overstated.
C) Accounts receivable was not affected,inventory was understated,sales were understated,and cost of goods sold was understated.
D) Accounts receivable was understated,inventory was not affected,sales were understated,and cost of goods sold was not affecteD.

Question 14

Prime costs consist of:

A) Direct Labour and Manufacturing Overhead.
B) Direct Material and Direct Labour.
C) Direct Material and Manufacturing overhead.
D) Direct Material,Direct Labour and Manufacturing OverheaD.

Question 15

What would be the classification of the transportation costs incurred by a manufacturing company to ship its product to its customers?

A) Product cost.
B) Manufacturing overhead.
C) Period cost.
D) Administrative cost.

Question 16

For a lamp manufacturing company,the cost of the insurance on its vehicles that deliver lamps to customers is best described as a:

A) Prime cost.
B) Manufacturing overhead cost.
C) Period cost.
D) Differential cost of a lamp.

Question 17

How should the cost of the fire insurance for a manufacturing plant be classified?

A) Prime cost.
B) Product cost.
C) Period cost.
D) Variable cost.

Question 18

Last month,when 10,000 units of a product were manufactured,the cost per unit was $60.At this level of activity,variable costs were 50% of total unit costs.If 10,500 units are manufactured next month and cost behaviour patterns remain unchanged,how will costs be affected?

A) Total variable costs will remain unchanged.
B) Fixed costs will increase in total.
C) Variable cost per unit will increase.
D) Total cost per unit will decrease.

Question 19

What does manufacturing overhead cost consist of?

A) All manufacturing costs.
B) All manufacturing costs,EXCEPT direct materials and direct labour.
C) Indirect materials but NOT indirect labour.
D) Indirect labour but NOT indirect materials.

Question 20

How would the wages of factory maintenance personnel usually be classified?

A) Direct labour and manufacturing overhead.
B) Indirect labour and manufacturing overhead.
C) Direct labour and period cost.
D) Indirect labour and period cost

Question 21

During the month of May,Bennett Manufacturing Company purchases $43,000 of raw materials.The manufacturing overhead totals $27,000 and the total manufacturing costs are $106,000.Assuming a beginning inventory of raw materials of $8,000 and an ending inventory of raw materials of $6,000,what must be the total for direct labour?

A) $34,000.
B) $38,000.
C) $36,000.
D) $45,000.DL = 106,000 - 45,000 - 27,000 = $34,000.

Question 22

Williams Company's direct labour cost is 25% of its conversion cost.If the manufacturing overhead cost for the last period is $45,000 and the direct materials cost is $25,000,what is the direct labour cost?

A) $15,000.
B) $60,000.
C) $33,333.
D) $20,000.CC = DL + OHx = 60,000 Therefore DL 60,000 * .25 = $15,000

Question 23

To what does the term differential cost refer?

A) A difference in cost that results from selecting one alternative instead of another.
B) The benefit forgone by selecting one alternative instead of another.
C) A cost that does not entail any dollar outlay,but which is relevant to the decision-making process.
D) A cost that continues to be incurred even though there is no activity.

Question 24

Which of the following best defines an opportunity cost?

A) The difference in total costs from selecting one alternative instead of another.
B) The benefit forgone by selecting one alternative instead of another.
C) A cost that may be saved by NOT adopting an alternative.
D) A cost that may be shifted to the future with little or no effect on current operations.

Question 25

Which one of the following costs should NOT be considered an indirect cost of serving a particular customer at a Dairy Queen fast food outlet?

A) The cost of the hamburger patty in the burger the customer ordered.
B) The wages of the employee who takes the customer's order.
C) The cost of heating and lighting the kitchen.
D) The salary of the outlet's manager.

Question 26

During the month of June,Reardon Company incurs $17,000 of direct labour and $8,500 of manufacturing overhead,and purchases $15,000 of raw materials.Between the beginning and the end of the month,the raw-materials inventory increases by $2,000,the finished goods inventory increases by $1,500,and the work-in-process inventory decreases by $3,000.What is the cost of goods manufactured?

A) $38,500.
B) $40,500.
C) $41,500.
D) $43,500.

Question 27

Which of the following costs is often important in decision making,but is omitted from conventional accounting records?

A) Fixed cost.
B) Sunk cost.
C) Opportunity cost.
D) Indirect cost.

Question 28

Which one of the following costs should NOT be considered a direct cost of serving a particular customer who orders a customized personal computer by phone directly from the manufacturer?

A) The cost of the hard disk drive installed in the computer.
B) The cost of shipping the computer to the customer.
C) The cost of leasing a machine on a monthly basis that automatically tests hard disk drives before they are installed in computers.
D) The cost of packaging the computer for shipment.

Question 29

When a decision is made among a number of alternatives,the benefit that is lost by choosing one alternative over another is called what?

A) Realized cost.
B) Opportunity cost.
C) Conversion cost.
D) Accrued cost.

Question 30

Last month,a manufacturing company had the following operating results:
What was the cost of goods manufactured for the month?

A) $413,000
B) $411,000
C) $412,000
D) $463,000= (464,000 - 52,000)+ 73,000 - 74,000 = $411,000

Question 31

You have the following data:
Which of the following represents the beginning work-in-process inventory?

A) $20.
B) $15.
C) $55.
D) $25.

Question 32

Prime cost consists of direct materials and what?

A) Direct labour.
B) Manufacturing overhead.
C) Indirect materials.
D) Cost of goods manufactureD.

Question 33

What does conversion cost consist of?

A) Manufacturing overhead cost.
B) Direct materials and direct labour cost.
C) Direct labour cost.
D) Direct labour and manufacturing overhead cost.

Question 34

The following inventory valuation errors were discovered by Knox Corporation's new controller just after the annual financial statements were published at the end of Year 3.
The net income for Knox in each of these years was:
Assuming there were no income taxes,what was the adjusted net income in each year?

A) Option A
B) Option B
C) Option C
D) Option D

Question 35

The following information was provided by Grand Company for the year just ended:
What was the cost of goods manufactured for the year?

A) $95,345.
B) $104,655.
C) $395,345.
D) $404,655.CGM = (500,000 - 100,000)- 4,655 = $395,345

Question 36

Delta Merchandising,Inc. ,has provided the following information for the year just ended:
What was the ending inventory for the company at year-end?

A) $65,450.
B) $24,500.
C) $14,050.
D) $9,950.EI = 24,000 + 80,000 - (128,500 - 38,550)= $14,050

Question 37

The gross margin for Cushing Company for the first quarter of last year was $325,000 when sales were $700,000.The beginning inventory of finished goods was $60,000,and the ending inventory of finished goods was $85,000.What was the cost of goods manufactured for the first quarter?

A) $375,000.
B) $350,000.
C) $400,000.
D) $385,000.= (700,000 - 325,000)+ 85,000 - 60,000 = $400,000.

Question 38

You are given the following data for January:
Which of the following is the cost of goods manufactured?

A) $89,000.
B) $78,000.
C) $79,000.
D) $80,000.

Question 39

The following information was provided by Wilson Company for the year just ended:
What was the cost of goods manufactured for the year?

A) $314,725.
B) $335,275.
C) $325,000.
D) $464,725.(475,000 - 150,000)+ 140,475 - 150,750 = $314,725

Question 40

A manufacturing company prepays its insurance coverage for a three-year period.The premium for the three years is $2,700 and is paid at the beginning of the first year.Eighty percent of the premium applies to manufacturing operations and 20% applies to selling and administrative activities.What amounts should be considered product costs and period costs respectively for the first year of coverage?

A) Option A
B) Option B
C) Option C
D) Option D

Question 41

During the first week of April,Gillian worked a total of 50 hours assembling products and had no idle time.Gillian is paid $15 per hour for regular time,and is paid time-and-a-half for all hours in excess of a 40-hour week.How much of Gillian's wages for the week should be charged to direct labour?

A) $600.
B) $225.
C) $750.
D) $975.

Question 42

Haack Inc.is a merchandising company.Last month,the company's cost of goods sold was $84,000.The company's beginning merchandise inventory was $20,000,and its ending merchandise inventory was $18,000.What was the total amount of the company's merchandise purchases for the month?

A) $86,000.
B) $82,000.
C) $84,000.
D) $122,000.

Question 43

The beginning balance of the raw materials inventory account for May was $27,500.The ending balance for May was $28,750,and $128,900 of raw materials were used during the month.What was the cost of the materials purchased during the month?

A) $131,300.
B) $127,650.
C) $130,150.
D) $157,650.= 128,900 + 28,750 - 27,500 = $130,150

Question 44

What was the ending finished goods inventory?

A) $17,000.
B) $12,000.
C) $7,000.
D) $2,000.= 12,000 + 105,000 - (210,000 - 100,000)= $7,000

Question 45

Gabel Inc.is a merchandising company.Last month,the company's merchandise purchases totalled $63,000.The company's beginning merchandise inventory was $13,000,and its ending merchandise inventory was $15,000.What was the company's cost of goods sold for the month?

A) $91,000.
B) $63,000.
C) $65,000.
D) $61,000.

Question 46

Sally Smith is employed in the production of various electronic products,and she earns $8 per hour.She is paid time-and-a-half for work in excess of 40 hours per week.During a given week,she worked 45 hours and had no idle time.How much of her week's wages would be charged to manufacturing overhead?

A) $60.
B) $20.
C) $40.
D) $0.

Question 47

What was the cost of goods sold (in thousands of dollars)for the year?

A) $610.
B) $410.
C) $490.
D) $570.

Question 48

What was the cost of goods manufactured (finished)for the year (in thousands of dollars)?

A) $540.
B) $500.
C) $570.
D) $590.= 90 + 200 + 230 + 70 - 50 = $540

Question 49

Robert Smith earns $16 per hour assembling products.For each hour over 40 he works in a week he is paid time-and-a-half.During a given week,he worked 40 hours for which 3 hours were idle time.How much of his weekly wages would be charged to direct labour?

A) $640.
B) $592.
C) $688.
D) $48.

Question 50

What was the cost of goods sold (in thousands of dollars)for the year?

A) $700.
B) $500.
C) $660.
D) $580.

Question 51

What was the cost of goods manufactured (finished)for the year (in thousands of dollars)?

A) $530.
B) $520.
C) $500.
D) $460.= 160 + 130 + 200 + 40 - 10 = $520

Question 52

What was the net income (in thousands of dollars)for the year?

A) $150.
B) $200.
C) $490.
D) $250.= 990 - 500 - 150 - 140 = $200

Question 53

What was the cost (in thousands of dollars)of the raw materials used in production during the year?

A) $190.
B) $90.
C) $150.
D) $160.

Question 54

What was the beginning work-in-process inventory?

A) $10,000.
B) $14,000.
C) $1,000.
D) $4,000.= 105,000 + 4,000 - 40,000 - 39,000 - 20,000 = $10,000

Question 55

What was the cost of goods manufactured (finished)for the year (in thousands of dollars)?

A) $450.
B) $460.
C) $530.
D) $540.= 170 + 100 + 190 + 70 - 80 = $450

Question 56

What was the net income (in thousands of dollars)for the year?

A) $410.
B) $110.
C) $40.
D) $180.= 910 - (130 + 520 - 150)- 160 - 140 = $110

Question 57

During January,the cost of goods manufactured was $93,000.The beginning finished goods inventory was $16,000,and the ending finished goods inventory was $20,000.What was the cost of goods sold for the month?

A) $129,000.
B) $89,000.
C) $93,000.
D) $97,000.

Question 58

What was the cost of the raw materials used in production (in thousands of dollars)during the year?

A) $240.
B) $190.
C) $170.
D) $250.

Question 59

What was the cost of the raw materials used in production (in thousands of dollars)during the year?

A) $180.
B) $40.
C) $120.
D) $160.

Question 60

What was the Gross Margin (in thousands of dollars)for the year?

A) $350.
B) $130.
C) $390.
D) $190.

Question 61

What was the manufacturing overhead cost for the year?

A) $84,000.
B) $78,000.
C) $56,000.
D) $72,000.= 243,000 + 16,000 - 22,000 = $237,000Manufacturing overhead = 237,000 - 110,000 - 55,000 = $72,000

Question 62

Manufacturing overhead combined with direct materials is known as conversion cost.

Question 63

Advertising costs are considered product costs for external financial reports since they are incurred in order to promote specific products.

Question 64

If the ending inventory of finished goods is understated,net income will be overstated.

Question 65

Which of the following is the cost of goods manufactured?

A) $1,250.
B) $1,200.
C) $1,220.
D) $1,150.= 500 + 300 + 400 + 100 - 150 = $1,150

Question 66

All costs incurred in a merchandising firm are considered to be period costs.

Question 67

If raw materials costing $35,000 were purchased during January,what were the total manufacturing costs for the month?

A) $145,000.
B) $144,000.
C) $151,000.
D) $146,000.= (32,000 + 35,000 - 31,000)+ 40,000 + 70,000 = $146,000

Question 68

Which of the following is Boardman Company's total conversion cost for January?

A) $110,000.
B) $170,000.
C) $135,000.
D) $130,000.

Question 69

In a manufacturing company,goods available for sale equals the sum of the cost of goods manufactured and the beginning finished goods inventory.

Question 70

Assuming that cost of goods sold for January was $124,000,what was the net income for January?

A) $61,000.
B) $26,000.
C) $51,000.
D) $25,000.= 210,000 - 124,000 - 25,000 - 35,000 = $26,000.

Question 71

What was the balance of the finished goods inventory at the end of the year?

A) $95,000.
B) $50,000.
C) $193,000.
D) $45,000.= 288,000 - 238,000 = $50,000

Question 72

Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead.

Question 73

Variable costs are costs whose per unit costs vary as the activity level rises and falls.

Question 74

In a manufacturing firm,depreciation is always considered a product cost for external financial reporting purposes.

Question 75

In external financial reports,factory utilities costs may be included in an asset account on the balance sheet at the end of the period.

Question 76

Which of the following is the prime cost?

A) $900.
B) $800.
C) $1,200.
D) $700.

Question 77

Assuming that cost of goods sold for Boardman Company for January was $140,000,what was the cost of goods manufactured for the month?

A) $140,000
B) $135,000
C) $145,000
D) $139,000

Question 78

If CD Company sells 43,000 units,what is the total expected cost (Do not round your intermediate calculations)?

A) $146,000.
B) $166,625.
C) $144,625.
D) $124,000.Total Cost = VC + FC

Question 79

Which of the following is the conversion cost?

A) $700.
B) $800.
C) $900.
D) $1,200.

Question 80

If CD Company sells 50,000 units,what is the total expected cost per unit? (Do not round intermediate computations).Round final answer to the nearest cent.

A) $3.20.
B) $2.48.
C) $3.88.
D) $3.16.TC = VC + FC = 50,000 * 1.875 + 64,000 = $157,750