Deck 3: Basic Cost Management Concepts

Question 1

Which of the following tend to be non-differential in the short term since they cannot be changed, but are more likely to be differential in the long term?

A)Fixed costs.
B)Variable costs.
C)Mixed costs.
D)Semivariable costs.

Answer 1

A

Question 2

Structural cost drivers are to executional cost drivers as:

A)Long-term is to short-term.
B)Fixed is to variable.
C)Total is to partial.
D)Direct is to indirect.

Answer 2

A

Question 3

How will unit (average) cost of manufacturing (materials, labor and overhead) usually change if the production level rises?

A)It will remain constant.
B)It will increase in direct proportion to the production increase.
C)It will increase, but inversely with the production increase.
D)It will decrease inversely and in direct proportion to the production increases.
E)It will decrease, but not in direct proportion to the production increase.

Answer 3

E

Question 4

Cost of goods manufactured is calculated to be:

A)$289,000.
B)$348,000.
C)$314,000.
D)$297,000.
E)$323,000.

Question 5

Which one of the following would not be found in a merchandising company?

A)Beginning inventory.
B)Cost of goods sold.
C)Ending inventory.
D)Gross profit.
E)Work-in-process.

Question 6

The cost of goods that were finished and transferred out of work-in-process during the current period is:

A)Cost of goods sold.
B)Cost of goods available for use.
C)Cost of goods manufactured.
D)Cost of goods available for sale.
E)Cost of goods purchased.

Question 7

Theoretically, a decision maker would probably be willing to buy cost management information if:

A)It is accurate.
B)It is consistent with management objectives.
C)It is timely.
D)Its value is equal to or greater than its cost.

Question 8

Variable costs within the relevant range for a firm are assumed:

A)Not to vary per unit.
B)Not to vary in total.
C)To be nonlinear.
D)To be curvilinear.
E)None of the above are correct.

Question 9

Any product, service, or organizational unit to which costs are assigned for some management purpose is a (n):

A)Cost object.
B)Direct cost.
C)Indirect cost.
D)Cost driver.
E)Allocation base.

Question 10

Direct labor used is calculated to be:

A)$306,000.
B)$26,000.
C)$110,000.
D)$84,000.
E)$111,000.

Question 11

Strategic analysis uses which of the following to help a firm improve its competitive position through an analysis of product and production complexity?

A)Differential cost drivers.
B)Discretionary cost drivers.
C)Structural cost drivers.
D)Marginal cost drivers.

Question 12

All indirect manufacturing costs are commonly combined into a single cost pool called:

A)Activity cost pools.
B)Value streams.
C)Resources.
D)Overhead.
E)Other manufacturing costs.

Question 13

The range of the cost driver in which the actual value of the cost driver is expected to fall is called the:

A)Actual cost range.
B)Driver range.
C)Activity range.
D)Expected cost range.
E)Relevant range.

Question 14

The additional cost incurred as the cost driver increases by one unit is:

A)Average cost.
B)Controllable cost.
C)Variable cost.
D)Unit cost.

Question 15

Which one of the following is not a type of cost driver?

A)Structural cost driver.
B)Executional cost driver.
C)Volume-Based cost driver.
D)Differential cost driver.
E)Activity-Based cost driver.

Question 16

Materials purchases are calculated to be:

A)$143,000.
B)$156,000.
C)$91,000.
D)$169,000.
E)$140,000.

Question 17

Factory overhead is calculated to be:

A)$306,000.
B)$26,000.
C)$110,000.
D)$84,000.
E)$111,000.

Question 18

Since indirect cost cannot be conveniently or economically traced directly to a cost pool or cost object, the management accountant will:

A)Assign them by means of cost allocation.
B)Assign them where needed.
C)Assign them randomly to even out these costs.
D)Not assign them at all.
E)None of the above.

Question 19

Total manufacturing cost is calculated to be:

A)$306,000.
B)$26,000.
C)$110,000.
D)$331,000.
E)$111,000.

Question 20

The change in total cost associated with each change in the quantity of the cost driver is:

A)Average cost.
B)Controllable cost.
C)Variable cost.
D)Unit cost.

Question 21

Which of the following is normally considered to be a product cost?

A)Insurance on a factory building.
B)Selling expenses.
C)President's salary.
D)Miscellaneous office expense.

Question 22

What is the amount of direct materials purchased?

A)$23,500.
B)$28,500.
C)$31,000.
D)$36,000.

Question 23

A manufacturer of machinery currently produces equipment for a single client. The client supplies all required raw material on a no-cost basis. The manufacturer contracts to complete the desired units from this raw material. The total production costs incurred by the manufacturer are correctly identified as:

A)Prime costs.
B)Conversion costs.
C)Variable production costs.
D)Factory overhead.

Question 24

Cost of goods manufactured is calculated to be:

A)$32,000.
B)$30,000.
C)$33,000.
D)$38,000.
E)$27,000.

Question 25

Cost of goods sold is calculated to be:

A)$32,000.
B)$30,000.
C)$33,000.
D)$38,000.
E)$27,000.

Question 26

What is the amount in the finished goods inventory at the beginning of the year?

A)$10,500.
B)$15,000.
C)$20,000.
D)$25,000.

Question 27

Selling and administrative expenses are calculated to be:

A)$4,000.
B)$9,000.
C)$11,000.
D)$12,000.
E)$16,000.

Question 28

For the month of April, conversion cost incurred was:

A)$75,000.
B)$66,000.
C)$70,000.
D)$39,000.

Question 29

The Gray Company has a staff of five clerks in its general accounting department. Three clerks who work during the day perform sundry accounting tasks; the two clerks who work in the evening are responsible for (1) collecting the cost data for the various jobs in process, (2) verifying manufacturing material and labor reports, and (3) supplying production reports to the supervisors by the next morning. The salaries of these two clerks who work at night should be classified as:

A)Period costs.
B)Direct costs.
C)Product costs.
D)Indirect costs.

Question 30

Certain workers are assigned the task of unpacking production materials received from suppliers. These workers place the material in a storage area pending subsequent use in the production process. The labor cost of such workers is normally classified as:

A)Direct labor.
B)Direct materials.
C)Indirect labor.
D)Indirect materials.

Question 31

The three attributes of cost information include accuracy, timeliness, and

A)reliability.
B)relevance.
C)cost-benefit.
D)understandability.

Question 32

Cost of goods sold is calculated to be:

A)$890,000.
B)$896,000.
C)$883,000.
D)$877,000.
E)$870,000.

Question 33

What is the amount of direct materials used?

A)$23,500.
B)$28,500.
C)$31,000.
D)$36,000.

Question 34

For the month of April, prime cost incurred was:

A)$75,000.
B)$66,000.
C)$65,000.
D)$62,000.

Question 35

If the volume of production is increased over the level planned, the cost per unit would be expected to:

A)Decrease for fixed costs and remain unchanged for variable costs.
B)Remain unchanged for fixed costs and increase for variable costs.
C)Decrease for fixed costs and increase for variable costs.
D)Increase for fixed costs and increase for variable costs.

Question 36

Prime cost and conversion cost share what common element of total cost?

A)Direct labor.
B)Direct materials.
C)Variable overhead.
D)Fixed overhead.

Question 37

Work in process inventory, beginning, is calculated to be:

A)$4,000.
B)$9,000.
C)$11,000.
D)$12,000.
E)$16,000.

Question 38

When production levels are expected to decline within a relevant range, what effects would be anticipated with respect to each of the following?

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

Question 39

When cost relationships are linear, total variable costs will vary in proportion to changes in:

A)Direct labor hours.
B)Total material cost.
C)Total overhead cost.
D)Volume of production.
E)Machine hours.

Question 40

The term relevant range as used in cost accounting means the range over which:

A)Costs may fluctuate.
B)Cost relationships are approximately linear.
C)Production may vary.
D)Relevant costs are incurred.

Question 41

What should be the amount of direct materials purchased?

A)$28,000.
B)$19,000.
C)$15,000.
D)$12,000.

Question 42

What should be the amount in the finished goods inventory at the beginning of the year?

A)$15,000.
B)$45,000.
C)$55,000.
D)$61,000.

Question 43

What should be the amount in the finished goods inventory at December 31, 2013?

A)$55,500.
B)$35,000.
C)$43,000.
D)$49,000.

Question 44

What should be the amount of total manufacturing cost?

A)$83,000.
B)$94,000.
C)$104,000.
D)$75,000.

Question 45

What is the amount of net sales?

A)$68,500.
B)$94,000.
C)$72,500.
D)$75,000.

Question 46

What should be the amount of direct materials used?

A)$112,000.
B)$183,000.
C)$189,000.
D)$204,000.

Question 47

Manufacturing firms use which of the following three inventory accounts?

A)Materials, Work-in-process, Transferred-out.
B)Materials, Work-in-process, Finished goods.
C)Materials, Finished goods, Transferred-out.
D)Work-in-process, Finished goods, Transferred-out.

Question 48

What is the amount of total manufacturing cost?

A)$50,500.
B)$52,000.
C)$56,400.
D)$58,500.

Question 49

Furniture Co. incurred the following costs during 2013: What was the amount of direct materials and direct labor used for the year?

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

Question 50

What should be the amount of direct materials used?

A)$15,000.
B)$29,000.
C)$20,000.
D)$24,000.

Question 51

Woodcarving Co. incurred the following costs during May: What was the amount of direct materials and direct labor used in May?

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

Question 52

Barnes Co. incurred the following costs during July: What was the amount of direct materials used and direct labor for July?

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

Question 53

What should be the amount of direct materials available for use?

A)$112,000.
B)$183,000.
C)$189,000.
D)$204,000.

Question 54

Factory overhead costs for a given period were 3 times as much as the direct material costs. Prime costs totaled $2,000. Conversion costs totaled $3,280. What are the direct labor costs for the period?

A)$1,220.
B)$1,360.
C)$1,410.
D)$1,540.

Question 55

What should be the amount of total manufacturing cost?

A)$340,000.
B)$350,000.
C)$380,000.
D)$395,000.

Question 56

Jeffrey's Bottling Co. incurred the following costs during November: If direct materials cost was $140,000 in November, what was the conversion cost for November?

A)$255,000
B)$240,000
C)$215,000
D)$235,000

Question 57

Consider the following for Columbia Street Manufacturing: What are the cost of goods manufactured and cost of goods sold?

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

Question 58

Factory overhead costs for a given period were 2 times as much as the direct material costs. Prime costs totaled $8,000. Conversion costs totaled $11,350. What are the direct labor costs for the period?

A)$4,650.
B)$3,560.
C)$4,200.
D)$3,860.

Question 59

Factory overhead costs for a given period were 1.5 times as much as the direct material costs. Prime costs totaled $15,500. Conversion costs totaled $22,725. What are the direct labor costs for the period?

A)$1,200.
B)$1,050.
C)$1,075.
D)$1,155.

Question 60

If finished goods inventory has increased during the period, which of the following is always true?

A)Cost of goods sold is less than cost of goods manufactured.
B)Cost of goods sold is more than cost of goods manufactured.
C)Cost of goods manufactured is more than total manufacturing costs.
D)Cost of goods manufactured is less than total manufacturing costs.

Question 61

Which of the following should be considered a structural cost driver?

A)Scale.
B)Experience.
C)Complexity.
D)Technology.
E)All of the above.

Question 62

The main objective(s) of internal accounting controls is/are:

A)To increase customer satisfaction.
B)To increase revenue.
C)To prevent or detect errors and fraudulent acts.
D)To facilitate new product lines.
E)To increase employee morale.

Question 63

Which of the following is an example of an indirect cost?

A)Cost of downtime
B)Cost of labor
C)Cost of materials
D)Cost of packaging materials

Question 64

A manager of a large retail firm is interested in knowing what the company's product costs are. Which of the following would be considered a product cost for the manager's company?

A)Direct materials.
B)Direct labor.
C)Factory overhead.
D)Transportation costs paid by the retailer to transport the purchased product to its distribution location.
E)None of the above.

Question 65

In order to assure that accounting information is accurate and to avoid potentially costly mistakes in the decision making process, firms should:

A)Design and monitor an effective system of internal accounting controls.
B)Have the internal auditors and controller each check the accounting data before it is released to management.
C)Purchase an accounting system that is designed specifically for the industry in which the firm conducts business.
D)None of the above.

Question 66

Consider the following for Guardian Manufacturing Company: What are the cost of goods manufactured and cost of goods sold?

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

Question 67

A group of related products may be referenced as:

A)Cost objects
B)Cost drivers
C)Value streams
D)Cost pools

Question 68

Which of the following best describes a fixed cost?

A)It may change in total when such change is unrelated to changes in production volume.
B)It may change in total when such change is related to changes in production volume.
C)It is constant per unit of change in production volume.
D)It may change in total when such change depends on production volume within the relevant range.

Question 69

Complete the inventory formula: Beginning Inventory + ______ = ________ + Ending Inventory

A)Cost added; cost transferred out
B)Cost transferred out; cost added
C)Cost of goods sold; cost added
D)Cost added; cost of goods manufactured

Question 70

Direct materials and direct labor costs total $70,000 and factory overhead costs total $100 per machine hour. If 200 machine hours were used for Job #333, what is the total manufacturing cost for Job #333?

A)$20,000
B)$70,200
C)$70,000
D)$90,000
E)$100,000

Question 71

A manager of a small manufacturing firm is interested in knowing what the company's product costs are. Which of the following would be considered a product cost for the manager's company?

A)Direct materials.
B)Product design cost.
C)Office expenses.
D)Selling expenses.
E)Advertising expense.

Question 72

The income statement for a manufacturing company includes:

A)Indirect Labor, Factory Overhead, and Total Manufacturing Cost
B)Total Manufacturing Cost and Cost of Goods Sold.
C)Indirect Materials, Factory Overhead, and Cost of Goods Manufactured.
D)Indirect Labor, Indirect Materials and Cost of Goods Sold.
E)None of the above.

Question 73

The total manufacturing cost consists of the costs for materials used, labor, and ________.

A)Overhead cost
B)Average cost
C)Step cost
D)Prime cost

Question 74

Which of the following would not be considered a cost pool?

A)Inventory manager
B)Revenue
C)Engineering department
D)Direct materials cost

Question 75

Which of the following is not a correct pair between the activity and the potential cost driver?

A)Provide cashier service-number of customers
B)Process loan applications-number of loan applications processed
C)Mail customer statements-number of accounts by customer type and size
D)Advise customers on banking services-number of ATM transactions

Question 76

Which of the following is not an example of a product cost?

A)Salary of manufacturing supervisor
B)Power for equipment
C)Depreciation on company-owned sales outlets
D)Depreciation on company-owned manufacturing plant

Question 77

Which of the following is not a product cost?

A)Direct materials costs
B)Selling costs
C)Direct labor costs
D)Factory overhead costs

Question 78

The income statement for a merchandising company includes:

A)Direct Labor.
B)Factory Overhead.
C)Total Manufacturing Cost.
D)Cost of Goods Sold.
E)None of the above.

Question 79

Direct materials and direct labor costs total $40,000 and factory overhead costs total $100 per machine hour. If 200 machine hours were used for Job #202, what is the total manufacturing cost for Job #202?

A)$95,000
B)$75,000
C)$65,000
D)$60,000
E)$55,000

Question 80

There is no convenient or economical way to trace a(n) _______ from the cost to the cost pool or from the cost pool to the cost object.

A)Direct cost
B)Indirect cost
C)Cost assignment
D)Cost allocation