Question 1

Which of the following would not be classiﬁed as a product cost?
A)Direct materials.
B)Direct labor.
C)Indirect materials.
D)Insurance on a manufacturing plant.
E)Sales bonuses for meeting quota sales.

Accepted Answer

Sales bonuses for meeting quota sales would be considered an operating expense or period cost, rather than a product cost. Product costs include the direct materials, direct labor, and indirect costs (such as manufacturing overhead) required to produce a product, while operating expenses are incurred in the normal course of business, such as selling expenses or administrative expenses. Insurance on a manufacturing plant, on the other hand, would be considered an indirect cost and thus a product cost.

Question 2

Product costs are:
A)expensed when incurred.
B)inventoried.
C)treated in the same manner as period costs.
D)treated in the same manner as advertising costs.
E)subtracted from cost of goods sold.

Accepted Answer

Product costs, such as direct materials, direct labor, and manufacturing overhead, are inventoried as part of finished goods inventory until the goods are sold. At that point, the cost of goods sold is recognized as an expense.

Question 3

Which of the following entities would most likely have raw materials, work in process, and ﬁnished goods?
A)A petroleum reﬁner.
B)A national department store.
C)A carpet cleaning company.
D)A regional airline.
E)A state university.

Accepted Answer

A petroleum refiner is involved in manufacturing and would have raw materials (crude oil), work in process (refining stages), and finished goods (refined petroleum products).

Question 4

Ford Motor Company produces cars and trucks.Which type of production process is most likely used by Ford?
A)Batch.
B)Job Shop.
C)Continuous Flow.
D)Assembly.
E)None of these answers is correct.

Accepted Answer

Ford Motor Company most likely uses the assembly production process, where multiple parts are brought together on a production line to assemble a final product, such as a car or truck. This process is commonly used in the automotive industry.

Question 5

Cost data that are classiﬁed and recorded in a particular way for one purpose may be inappropriate for another use.For example, costs that would likely be noncontrollable by a department supervisor include
A)labor used in department production.
B)materials used in department production.
C)insurance on the plant where the department is housed.
D)overtime pay earned by workers in the department.
E)bonuses earned by department workers for on-time production.

Accepted Answer

Insurance on the plant where the department is housed is a cost that is not directly controllable by a department supervisor. Labor, materials, overtime pay, and bonuses are all costs that can be influenced by the supervisor's decisions and actions.

Question 6

Which of the following is a product cost?
A)Circuitry used in producing hard drives.
B)Monthly advertising in the newspaper.
C)The salary of the vice president-ﬁnance.
D)Sales commissions.
E)Research costs for new router development.

Accepted Answer

Circuitry used in producing hard drives is a direct cost that is incurred in the production of the product, and is therefore considered a product cost.

Question 7

Selling and administrative expenses would likely appear on the balance sheet of:
A)A clothing store.
B)A computer manufacturer.
C)A television network.
D)All of these ﬁrms.
E)None of these ﬁrms.

Accepted Answer

Selling and administrative expenses are considered operating expenses and would be shown on the income statement, not the balance sheet. Therefore, they would not appear on the balance sheet of any of these firms.

Question 8

The accounting records of Younkin Corporation revealed the following selected costs: Sales commissions, $65,000; plant supervision, $190,000; and administrative expenses, $185,000.Younkin's period costs total:
A)$250,000.
B)$440,000.
C)$375,000.
D)$255,000.
E)$185,000.

Accepted Answer

Period costs include all non-manufacturing costs, which are sales commissions and administrative expenses, totaling $65,000 + $185,000 = $250,000. Plant supervision is a product cost, not a period cost.

Question 9

Shu Corporation recently computed total product costs of $567,000 and total period costs of $420,000, excluding $35,000 of sales commissions that were overlooked by the company's administrative assistant.On the basis of this information, Shu's income statement should reveal operating expenses of:
A)$35,000.
B)$420,000.
C)$455,000.
D)$567,000.
E)$602,000.

Accepted Answer

Total operating expenses can be calculated by adding up total product costs and total period costs and then subtracting the sales commissions that were overlooked:
$567,000 (total product costs)
+ $420,000 (total period costs)
- $35,000 (overlooked sales commissions)
= $952,000

However, since the question is asking specifically for operating expenses, we only need to consider the total period costs (which include all operating expenses) and the overlooked sales commissions:
$420,000 (total period costs)
+ $35,000 (overlooked sales commissions)
= $455,000

Therefore, the answer is C) $455,000.

Question 10

Research and development costs are classiﬁed as:
A)product costs.
B)period costs.
C)inventoriable costs.
D)cost of goods sold.
E)labor costs.

Accepted Answer

Research and development costs are categorized as period costs because they are incurred in the current period and are expensed immediately rather than being added to the cost of goods sold or inventoried as an asset.

Question 11

At the most basic level, a cost may be deﬁned as a(n):
A)long-term asset.
B)data classiﬁed for a speciﬁc application.
C)sacriﬁce made to achieve a particular purpose.
D)useful information for planning.
E)suggestion for improvement.

Accepted Answer

A cost represents a sacrifice or an expense made to achieve a particular purpose, such as producing goods or providing services. It is not a long-term asset or a data classification, although it may provide useful information for planning or suggest areas for improvement.

Question 12

Which of the following inventories would a company ordinarily hold for sale?
A)Raw materials.
B)Work in process.
C)Finished goods.
D)Raw materials and ﬁnished goods.
E)Work in process and ﬁnished goods.

Accepted Answer

Finished goods are the products that are ready to be sold to customers. Raw materials are the basic materials that are used to produce products, and work in process are the products that are in the process of being produced but are not yet completed. Therefore, finished goods are the only inventory that a company normally holds for sale.

Question 13

Costs that are expensed when incurred are called:
A)product costs.
B)direct costs.
C)inventoriable costs.
D)period costs.
E)indirect costs.

Accepted Answer

Period costs are costs that are expensed when incurred, rather than being included in the cost of goods sold as inventoriable costs. Examples of period costs include selling and administrative expenses.

Question 14

Which of the following is not a period cost?
A)Legal costs.
B)Public relations costs.
C)Sales commissions.
D)Wages of assembly-line workers.
E)The salary of a company's chief ﬁnancial oﬃcer (CFO).

Accepted Answer

Wages of assembly-line workers are considered product costs because they are directly related to the production of goods. Period costs, on the other hand, are expenses that are not related to production, such as legal costs or public relations costs. The salary of a company's CFO could be either a period cost or a product cost depending on the role the CFO plays in the organization. Sales commissions are also considered period costs because they are not directly related to the production of goods.

Question 15

Which of the following statements is true?
A)The word "cost" has the same meaning in all situations in which it is used.
B)Cost data, once classiﬁed and recorded for a speciﬁc application, are appropriate for use in
C)Different cost concepts and classiﬁcations are used for different purposes.
D)All organizations incur the same types of costs.
E)Costs incurred in one year are always meaningful in the following year.

Accepted Answer

Different cost concepts and classifications are used for different purposes. Cost accounting is a diverse field that involves the accumulation, analysis, and interpretation of cost data. Cost concepts and classifications may differ based on the particular use of the cost information, such as financial reporting or decision-making. Therefore, it is important to choose the appropriate cost accounting method for a specific purpose.

Question 16

Which of the following would not be a period cost?
A)Sales salaries.
B)Sales commissions.
C)Tamper-proof packaging.
D)Legal costs.
E)Accounting costs.

Accepted Answer

Period costs are expenses that are not directly related to the production of goods or services, but instead are incurred over a period of time, often for general or administrative functions. Sales salaries, sales commissions, legal costs, and accounting costs can all be classified as period costs as they are not directly related to the production of goods or services. However, tamper-proof packaging is a product-related expense, as it directly relates to the product being produced and sold.

Question 17

Which of the following inventories would a discount retailer report as an asset?
A)Raw materials.
B)Work in process.
C)Finished goods.
D)Merchandise inventory.
E)All of the answers are correct.

Accepted Answer

A discount retailer primarily sells merchandise, so they would report their inventory of merchandise as an asset on their balance sheet. Raw materials, work in process, and finished goods are more commonly associated with manufacturing or production companies.

Question 18

Which of the following is a period cost?
A)Direct material.
B)Advertising expense.
C)Indirect labor.
D)Miscellaneous supplies used in production activities.
E)Factory foreman salary for the motor production line.

Accepted Answer

Advertising expense is a period cost because it is not directly related to the production of goods. Period costs are expenses that are not directly tied to the production process and are expensed in the period in which they are incurred. Direct materials (A), indirect labor (C), and miscellaneous supplies used in production activities (D) are all considered product costs because they are directly related to the production of goods. The factory foreman salary for the motor production line (E) is also a product cost because it is directly related to the production of a specific product line.

Question 19

The accounting records of Dixon Company revealed the following costs: direct materials used, $250,000; direct labor, $425,000; manufacturing overhead, $375,000; and selling and administrative expenses, $220,000.Dixon's product costs total:
A)$1,050,000.
B)$830,000.
C)$895,000.
D)$1,270,000.
E)None of the answers is correct.

Accepted Answer

The answer of The accounting records of Dixon Company revealed...

Question 20

Cost data that are classiﬁed and recorded in a particular way for one purpose may be inappropriate for another use.For example, which of the following costs would not be a reasonable measure of a plant manager's performance?
A)net income compared to other plants.
B)comparison of current period performance costs to planned performance costs of the plant.
C)the increase or decrease in depreciation costs for the plant and its equipment.
D)penalty costs during each period for orders not completed on time by the plant.
E)bonuses earned by plant workers for on-time production.

Accepted Answer

Depreciation costs are non-cash expenses and do not reflect the plant manager's performance.

Quiz 2: Basic Cost Management Concepts

Which of the following would not be classiﬁed as a product cost?

Product costs are:

Which of the following entities would most likely have raw materials, work in process, and ﬁnished goods?

Ford Motor Company produces cars and trucks.Which type of production process is most likely used by Ford?

Cost data that are classiﬁed and recorded in a particular way for one purpose may be inappropriate for another use.For example, costs that would likely be noncontrollable by a department supervisor include

Which of the following is a product cost?

Selling and administrative expenses would likely appear on the balance sheet of:

The accounting records of Younkin Corporation revealed the following selected costs: Sales commissions, $65,000; plant supervision, $190,000; and administrative expenses, $185,000.Younkin's period costs total:

Shu Corporation recently computed total product costs of $567,000 and total period costs of $420,000, excluding $35,000 of sales commissions that were overlooked by the company's administrative assistant.On the basis of this information, Shu's income statement should reveal operating expenses of:

Research and development costs are classiﬁed as:

At the most basic level, a cost may be deﬁned as a(n) :

Which of the following inventories would a company ordinarily hold for sale?

Costs that are expensed when incurred are called:

Which of the following is not a period cost?

Which of the following statements is true?

Which of the following would not be a period cost?

Which of the following inventories would a discount retailer report as an asset?

Which of the following is a period cost?

The accounting records of Dixon Company revealed the following costs: direct materials used, $250,000; direct labor, $425,000; manufacturing overhead, $375,000; and selling and administrative expenses, $220,000.Dixon's product costs total:

Cost data that are classiﬁed and recorded in a particular way for one purpose may be inappropriate for another use.For example, which of the following costs would not be a reasonable measure of a plant manager's performance?