Question 1

If the ending work in process inventory is less than the beginning work in process inventory, then the cost of goods manufactured will be less than total manufacturing costs for the period.

Accepted Answer

If the ending work in process inventory is less than the beginning work in process inventory, it means that more units were completed and transferred out during the period. This would increase the cost of goods manufactured, as it includes the cost of the completed units. Therefore, the cost of goods manufactured would be higher than the total manufacturing costs for the period.

Question 2

Which of the following represents the correct order in which inventories are reported on a manufacturer's balance sheet?

Accepted Answer

Raw materials are the initial inventory item and are followed by work in process (items being manufactured) and finally finished goods (completed items ready for sale). This sequence represents the chronological order of production.

Question 3

The high-low method is a quick means of separating fixed and variable costs.

Accepted Answer

The high-low method involves analyzing the highest and lowest levels of activity to determine the variable cost per unit and the fixed cost. By using this method, it is possible to separate the fixed costs from the variable costs, making it easier to understand the cost behavior of a business.

Question 4

For future planning and predicting purposes, it is important for managerial accountants to separate fixed and variable costs within total mixed costs.

Accepted Answer

By separating fixed and variable costs within total mixed costs, managerial accountants can calculate the break-even point, determine the impact of changes in production levels, and make informed business decisions regarding pricing and resource allocation.

Question 5

Which one of the following costs would be included in manufacturing overhead of a lawn mower manufacturer?

Accepted Answer

Manufacturing overhead includes indirect costs related to the production process such as depreciation on equipment, factory rent, and utilities. Choices A, B, and D are direct costs or direct materials and labor, which are not part of manufacturing overhead.

Question 6

Which one of the following is indirect labour considered?

Accepted Answer

Indirect labour is considered a product cost because it is part of the manufacturing overhead, which is included in the cost of producing goods.

Question 7

For 2012, Sparkman Company has cost of goods manufactured of $500,000, beginning finished goods inventory of $25,000, and ending finished goods inventory of $20,000.How much is cost of goods sold?

Accepted Answer

Cost of Goods Sold (COGS) is calculated as: Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory. Therefore, $25,000 + $500,000 - $20,000 = $505,000.

Question 8

In calculating gross profit for a manufacturing company, the cost of goods sold is deducted from net sales.

Accepted Answer

This is the correct definition of gross profit for a manufacturing company. Gross profit = Net sales - Cost of goods sold.

Question 9

The work in process inventory appears on the balance sheet and the income statement of a manufacturing company.

Accepted Answer

The answer of The work in process inventory appears on...

Question 10

Which beginning and ending inventories appear on a cost of goods manufactured schedule?

Accepted Answer

A cost of goods manufactured schedule includes the cost of direct materials used, direct labor incurred, and manufacturing overhead applied to work in process. Since work in process involves both beginning and ending inventory, option D is incorrect (as it only includes ending inventory). Finished goods inventory is not included in the cost of goods manufactured schedule, so option C is also incorrect. Thus, option B is the best choice as it includes both beginning raw materials inventory and beginning work in process inventory.

Question 11

Raw materials inventory is not an asset until it is used to make a product.

Accepted Answer

Raw materials inventory is considered an asset on the balance sheet because it represents resources owned by the company that have future economic value.

Question 12

An electricity bill is an example of mixed costs.The fixed portion represents the cost of having the service available and the variable cost is reflective of actual customer usage.

Accepted Answer

An electricity bill typically includes a fixed base charge (representing the cost of having the service available) and a variable charge based on actual usage, making it an example of mixed costs.

Question 13

What the high-low method may lack in precision, it makes up for in efficiency and ease of use.

Accepted Answer

The high-low method is a quick and easy way to estimate fixed and variable costs, although it may not provide as precise results as other methods such as regression analysis.

Question 14

Finished goods inventory for a manufacturing company is equivalent to merchandise inventory for a merchandising company.

Accepted Answer

Finished goods inventory represents the completed products that are ready for sale, while merchandise inventory represents the goods purchased from suppliers and held for sale. In both cases, the inventory is considered a current asset on the balance sheet.

Question 15

Ending finished goods, work in process, and raw materials inventory appear on the balance sheet of a manufacturing company.

Accepted Answer

This is true. Manufacturing companies typically have all three types of inventory on their balance sheet as they are involved in the production process. Finished goods inventory refers to the completed products that are ready to be sold, work in process inventory refers to products that are currently being worked on but are not yet completed, and raw materials inventory refers to the materials that are used to make the finished products.

Question 16

Mixed costs change in total, but not proportionately with the change in activity level.

Accepted Answer

Mixed costs, which are composed of both fixed and variable components, will change in total as activity level changes, but the change will not be proportionate. The fixed portion of the cost will remain constant, while the variable portion will increase or decrease in proportion to the change in activity level. As a result, the total cost will not increase or decrease proportionally with the activity level.

Question 17

Finished goods inventory appears on a cost of goods manufactured schedule.

Accepted Answer

Finished goods inventory does not appear on a cost of goods manufactured schedule, as it is already a completed product and is considered as a part of the cost of goods sold. The cost of goods manufactured schedule shows the various costs incurred during the production process of goods, such as direct labor, direct materials, and manufacturing overhead, which are eventually reflected in the finished goods inventory.

Question 18

Into which one of the following accounts would the work of factory employees, that can be physically and directly associated with converting raw materials into finished goods, be categorized?

Accepted Answer

Factory employees who are directly involved in the production process, such as machine operators, assembly line workers, and technicians, are considered direct labour. Their wages and salaries are categorized as direct labour costs and are directly associated with converting raw materials into finished goods.

Question 19

In which of the following categories do indirect materials belong?

Accepted Answer

The answer of In which of the following categories do...

Question 20

Which of the following would most likely be included in manufacturing overhead?

Accepted Answer

Manufacturing overhead includes all indirect costs incurred during the production process. Rent on the company's factory would be considered as manufacturing overhead as it is an expense incurred for the manufacturing process. The other options such as insurance on a delivery truck and an oil change on a delivery truck would be included in either selling or administrative expenses.

Quiz 2: Managerial Cost Concepts and Cost Behaviour Analysis