Deck 2: Cost Concepts and Behavior

Question 1

Variable marketing and administrative costs are included in determining full absorption costs.The two costs are included in full cost and not in determining full absorption costs.

Answer 1

False

Question 2

If the cost of goods manufactured during the period exceeds the cost of goods sold,the ending balance of Finished Goods Inventory account increased.Cost of goods sold = cost of goods manufactured + beginning finished goods inventory - ending finished goods inventory.

Answer 2

True

Question 3

An asset is a cost matched with revenues in a future accounting period.This statement is the definition of asset.

Answer 3

True

Question 4

The three categories of product costs are direct materials,direct labor,and manufacturing overhead.This statement is the definition of product cost.

Question 5

The primary goal of the cost accounting system is to provide managers with information to prepare their annual financial statements.The primary goal is to provide managers with information for decision making.

Question 6

Accounting systems typically record opportunity costs as assets and treat them as intangible items on the financial statements.Opportunity costs are not reflected in the accounting system-they are what did not happen.

Question 7

Revenue minus cost of goods sold equals contribution margin.Revenue minus cost of goods sold equals gross margin.

Question 8

The cost of an item is the sacrifice of resources made to acquire it.This statement is the definition of cost.

Question 9

Period costs are those costs assigned to units of production in the period in which they are incurred.This statement describes product costs,not period costs.

Question 10

The first step in determining whether a cost is direct or indirect is to specify the cost allocation rule.This is the first step to define the cost object.

Question 11

Only direct costs can be classified as product costs;indirect costs are classified as period costs.Product costs can include both direct and indirect costs.

Question 12

The range within which fixed costs remain constant as volume of activity varies is known as the relevant range.This statement is the definition of a relevant range.

Question 13

Cost of goods sold plus the ending finished goods inventory minus the beginning finished goods inventory equals the cost of goods manufactured.This statement works backwards from cost of goods sold to cost of goods manufactured.

Question 14

Fixed costs per unit change inversely with changes in the volume of activity.Fixed costs per unit would vary inversely with the volume of activity.

Question 15

Total work-in-process during the period is the sum of the beginning work-in-process inventory and the total manufacturing costs incurred during the period.This is the correct formula for total work-in-process.

Question 16

Total cost of goods purchased minus beginning merchandise inventory plus ending merchandise inventory equals cost of goods sold.Purchases plus beginning inventory minus ending inventory equals cost of goods sold.

Question 17

Cost of goods sold includes the actual costs of the goods sold and the cost of selling them to the customer.Cost of goods sold does not include selling costs.

Question 18

The term full cost refers to the cost of manufacturing and selling a unit of product and includes both fixed and variable costs.We need to distinguish between full cost (which includes selling costs)and full absorption cost (which does not include selling costs. )

Question 19

Total variable costs change inversely with changes in the volume of activity.Total variable costs are linear and vary directly with changes in the volume of activity,fixed costs vary inversely.

Question 20

An expense is an expired cost matched with revenues in a specific accounting period.This statement is the definition of expense.

Question 21

Which of the following accounts would be a period cost rather than a product cost?

A)Depreciation on manufacturing machinery.
B)Maintenance on factory machines.
C)Production manager's salary.
D)Direct Labor.
E)Freight out.

Question 22

Which of the following statements is (are)false? (1).In general,the term expense is used for managerial purposes,while the term cost refers to external financial reports.(2).An opportunity cost is the benefit forgone by selecting one alternative over another.

A)Only (1)is false.
B)Only (2)is false.
C)Both (1)and (2)are false.
D)Neither (1)nor (2)are false.

Question 23

Which of the following statements is (are)true? (1).An asset is a cost that will be matched with revenues in a future accounting period.(2).Opportunity costs are recorded as intangible assets in the current accounting period.

A)Only (1)is true.
B)Only (2)is true.
C)Both (1)and (2)are true.
D)Neither (1)nor (2)are true.

Question 24

Which of the following best distinguishes an opportunity cost from an outlay cost?

A)Opportunity costs are recorded,whereas outlay costs are not.
B)Outlay costs are speculative in nature,whereas opportunity costs are easily traceable to products.
C)Opportunity costs have very little utility in practical applications,whereas outlay costs are always relevant.
D)Opportunity costs are sacrifices from foregone alternative uses of resources,whereas outlay costs are cash outflows.

Question 25

Marketing costs include all of the following except:

A)Advertising.
B)Shipping costs.
C)Sales commissions.
D)Legal and accounting fees.

Question 26

The cost of the direct labor will be treated as an expense on the income statement when the resulting:

A)payroll costs are paid.
B)payroll costs are incurred.
C)products are completed.
D)products are solD.This solution supports the matching principle.

Question 27

The amount of direct materials issued to production is found by

A)subtracting ending work in process from total work in process during the period.
B)adding beginning direct materials inventory and the delivered cost of direct materials.
C)subtracting ending direct materials from direct materials available for production.
D)adding delivered cost of materials,labor,and manufacturing overheaD.

Question 28

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

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

Question 29

A product cost is deducted from revenue when

A)the finished goods are sold.
B)the expenditure is incurred.
C)the production process takes place.
D)the production process is completeD.

Question 30

Classifying a cost as either direct or indirect depends upon

A)whether an expenditure is unavoidable because it cannot be changed regardless of any action taken.
B)whether the cost is expensed in the period in which it is incurred.
C)the behavior of the cost in response to volume changes.
D)the cost object to which the cost is being relateD.This is the definition for classifying a cost as either direct or indirect.

Question 31

The beginning Work-in-Process inventory plus the total of the manufacturing costs equals

A)total finished goods during the period.
B)cost of goods sold for the period.
C)total work-in-process during the period.
D)cost of goods manufactured for the perioD.Total work-in-process during the period is equal to the beginning Work-in-Process inventory plus the total of the manufacturing costs.

Question 32

Which of the following costs is both a prime cost and a conversion cost?

A)direct materials
B)direct labor
C)manufacturing overhead
D)administrative costs

Question 33

The Work-in-Process Inventory of the Rapid Fabricating Corp.was $3,000 higher on December 31,2012 than it was on January 1,2012.This implies that in 2012

A)cost of goods manufactured was higher than cost of goods sold.
B)cost of goods manufactured was less than total manufacturing costs.
C)manufacturing costs were higher than cost of goods sold.
D)manufacturing costs were less than cost of goods manufactureD.

Question 34

Which of the following is not a product cost under full-absorption costing?

A)Direct materials used in the current period
B)Rent for the warehouse used to store direct materials
C)Salaries paid to the top management in the company
D)Vacation pay accrued for the production workers

Question 35

Direct labor would be part of the cost of the ending inventory for which of these accounts?

A)Work-in-Process.
B)Finished Goods.
C)Direct Materials and Work-in-Process.
D)Work-in-Process and Finished Goods.

Question 36

XYZ Company manufactures a single product.The product's prime costs consist of

A)direct material and direct labor.
B)direct material and factory overhead.
C)direct labor and factory overhead.
D)direct material,direct labor and factory overheaD.

Question 37

Inventoriable costs:

A)include only the prime costs of manufacturing a product.
B)include only the conversion costs of providing a service.
C)exclude fixed manufacturing costs.
D)are regarded as assets until the units are solD.

Question 38

A company which manufactures custom-made machinery routinely incurs sizable telephone costs in the process of taking sales orders from customers.Which of the following is a proper classification of this cost?

A)Product cost
B)Period cost
C)Conversion cost
D)Prime cost

Question 39

The beginning Finished Goods Inventory plus the cost of goods manufactured equals

A)ending finished goods inventory.
B)cost of goods sold for the period.
C)total work-in-process during the period.
D)total cost of goods manufactured for the perioD.
E)cost of goods available for sale for the period.

Question 40

The term "gross margin" for a manufacturing firm refers to the excess of sales over:

A)cost of goods sold,excluding fixed indirect manufacturing costs.
B)all variable costs,including variable marketing and administrative costs.
C)cost of goods sold,including fixed indirect manufacturing costs.
D)variable costs,excluding variable marketing and administrative costs.

Question 41

Seiler Company has the following information: What was the cost of goods available for sale for the period?

A)$16,800
B)$16,500
C)$16,100
D)$15,100

Question 42

Laner Company has the following data for the production and sale of 2,000 units. What is the full cost per unit of making and selling the product?

A)$430
B)$480
C)$530
D)$730

Question 43

Pete's Pizza Place has four pizza makers and ten other employees who take orders from customers and perform other tasks.The four pizza makers and the other employees are paid an hourly wage.How would one classify (1)the wages paid to the pizza makers and other employees and (2)materials (e.g. ,cheeses,sauce,etc. )used to make the pizza? Assume the activity is the number of pizzas made.

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

Question 44

A company had beginning inventories as follows: Direct Materials,$300;Work-in-Process,$500;Finished Goods,$700.It had ending inventories as follows: Direct Materials,$400;Work-in-Process,$600;Finished Goods,$800.Material Purchases (net including freight)were $1,400,Direct Labor $1,500,and Manufacturing Overhead $1,600.What is the Cost of Goods Sold for the period?

A)$4,100.
B)$4,200.
C)$4,300.
D)$4,400.

Question 45

How would miscellaneous supplies used in assembling a product be classified for a manufacturing company?

A)Fixed,period cost.
B)Fixed,product cost.
C)Variable,period cost.
D)Variable,product cost.

Question 46

The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows: What are the estimated prime costs per unit?

A)$73
B)$32
C)$67
D)$52

Question 47

Laner Company has the following data for the production and sale of 2,000 units. What is the total manufacturing cost per unit?

A)$380
B)$430
C)$480
D)$730

Question 48

Compute the Cost of Goods Sold for 2008 using the following information:

A)$244,000
B)$234,000
C)$211,000
D)$198,000

Question 49

Calculate the conversion costs from the following information:

A)$3,000
B)$4,000
C)$4,500
D)$5,000

Question 50

Which of the following statements is (are)true? (1).The term full cost refers to the cost of manufacturing and selling a unit of product and includes both fixed and variable costs.(2).The fixed cost per unit is considered constant despite changes in volume of activity within the relevant range.

A)Only (1)is true.
B)Only (2)is true.
C)Both (1)and (2)are true.
D)Neither (1)nor (2)are true.

Question 51

The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows: What are the estimated conversion costs per unit?

A)$35
B)$41
C)$44
D)$48

Question 52

The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows: What are the estimated variable costs per unit?

A)$70
B)$38
C)$67
D)$52

Question 53

How would a 5% sales commission paid to sales personnel be classified in a manufacturing company?

A)Fixed,period cost.
B)Fixed,product cost.
C)Variable,period cost.
D)Variable,product cost.

Question 54

Seiler Company has the following information: What was the direct labor for the period?

A)$5,500.
B)$5,800.
C)$6,300.
D)$6,800.

Question 55

Laner Company has the following data for the production and sale of 2,000 units. What is the variable manufacturing cost per unit?

A)$380
B)$430
C)$480
D)$730

Question 56

Given the following information for a retail company,what is the total cost of goods purchased for the period?

A)$298,800
B)$290,800
C)$282,100
D)$304,000

Question 57

The student health center employs one doctor,three nurses,and several other employees.How would you classify (1)the nurses' salary and (2)film and other materials used in radiology to give X-rays to students? Assume the activity is the number of students visiting the health center.

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

Question 58

During the year,a manufacturing company had the following operating results: What is the cost of goods manufactured for the year?

A)$1,011,000
B)$1,134,000
C)$1,033,000
D)$1,112,000

Question 59

During April,the CJG Manufacturing Company had the following operating results: What is the cost of goods manufactured for April?

A)$900,000
B)$875,000
C)$925,000
D)$905,000

Question 60

How would property taxes paid on a factory building be classified in a manufacturing company?

A)Fixed,period cost.
B)Fixed,product cost.
C)Variable,period cost.
D)Variable,product cost.

Question 61

Sarasota Company, (a merchandising Co. )has the following data pertaining to the year ended December 31,2006: (CPA adapted) What is the cost of goods sold for the year?

A)$385,000
B)$460,000
C)$485,000
D)$536,000

Question 62

Laner Company has the following data for the production and sale of 2,000 units. What is the contribution margin per unit?

A)$70
B)$320
C)$370
D)$430

Question 63

A ___________________ is any end to which a cost is assigned.

A)cost object
B)cost pool
C)cost allocation
D)opportunity cost

Question 64

Makwa Industries has developed two new products but has only enough plant capacity to introduce one product during the current year.The following data will assist management in deciding which product should be selected.Makwa's fixed overhead includes rent and utilities,equipment depreciation,and supervisory salaries.Selling and administrative expenses are not allocated to individual products. The difference between the $100 estimated selling price for Product W and its total cost of $88 represents

A)Contribution margin per unit.
B)Gross margin per unit.
C)Variable cost per unit.
D)Operating profit per unit.

Question 65

Makwa Industries has developed two new products but has only enough plant capacity to introduce one product during the current year.The following data will assist management in deciding which product should be selected.Makwa's fixed overhead includes rent and utilities,equipment depreciation,and supervisory salaries.Selling and administrative expenses are not allocated to individual products. Research and development costs for Makwa's two new products are

A)Prime costs.
B)Conversion costs.
C)Opportunity costs.
D)Sunk costs.

Question 66

The process of assigning indirect costs to products,services,people,business units,etc. ,is

A)cost object.
B)cost pool.
C)cost allocation.
D)opportunity cost.

Question 67

A cost allocation rule is the method or process used to assign the costs in the _________ to the ______________.

A)cost allocation;cost pool
B)cost pool;opportunity cost
C)cost object;cost pool
D)cost pool;cost object

Question 68

Which one of the following costs is classified as a period cost? (CIA adapted)

A)The wages of the workers on the shipping docks who load completed products onto outgoing trucks.
B)The wages of a worker paid for idle time resulting from a machine breakdown in the molding department.
C)The payments for employee (fringe)benefits paid on behalf of the workers in the manufacturing plant.
D)The wages paid to workers for reworking defective products that failed the quality inspection upon completion.

Question 69

An opportunity cost is

A)a cost that is charged against revenue in an accounting period.
B)the foregone benefit from the best alternative course of action.
C)the excess of operating revenues over operating costs.
D)the cost assigned to the products sold during the perioD.

Question 70

The Southeastern Company's manufacturing costs for the third quarter of 2008 were as follows: (CPA adapted) What amount should be considered product costs for external reporting purposes?

A)$700,000
B)$800,000
C)$880,000
D)$898,000

Question 71

Under full absorption costing,which of the following are included in product costs?

A)Only direct materials and direct labor.
B)Only variable manufacturing costs.
C)Only conversion costs.
D)All fixed and variable manufacturing costs.

Question 72

Makwa Industries has developed two new products but has only enough plant capacity to introduce one product during the current year.The following data will assist management in deciding which product should be selected.Makwa's fixed overhead includes rent and utilities,equipment depreciation,and supervisory salaries.Selling and administrative expenses are not allocated to individual products. For Makwa's Product L,the costs for direct material,machining labor,and assembly labor represent

A)Conversion costs.
B)Period costs.
C)Prime costs.
D)Common costs.

Question 73

Makwa Industries has developed two new products but has only enough plant capacity to introduce one product during the current year.The following data will assist management in deciding which product should be selected.Makwa's fixed overhead includes rent and utilities,equipment depreciation,and supervisory salaries.Selling and administrative expenses are not allocated to individual products. The advertising costs for the product selected by Makwa will be

A)Prime costs.
B)Conversion costs.
C)Period costs.
D)Opportunity costs.

Question 74

Laner Company has the following data for the production and sale of 2,000 units. What is the prime cost per unit?

A)$100
B)$280
C)$300
D)$480

Question 75

Makwa Industries has developed two new products but has only enough plant capacity to introduce one product during the current year.The following data will assist management in deciding which product should be selected.Makwa's fixed overhead includes rent and utilities,equipment depreciation,and supervisory salaries.Selling and administrative expenses are not allocated to individual products. The total overhead cost of $27 for Makwa's Product W is a

A)Sunk cost.
B)Opportunity cost.
C)Variable cost.
D)Mixed cost.

Question 76

The difference between variable costs and fixed costs is (CMA adapted)

A)Unit variable costs fluctuate and unit fixed costs remain constant.
B)Unit variable costs are fixed over the relevant range and unit fixed costs are variable.
C)Total variable costs are constant over the relevant range,while fixed costs change in the long-term.
D)Total variable costs are variable over the relevant range but fixed in the long-term,while fixed costs never change.

Question 77

The following cost data for the month of May were taken from the records of the Paducah Manufacturing Company: (CIA adapted) Based upon this information,the manufacturing cost incurred during the month was:

A)$78,500.
B)$80,000.
C)$80,500.
D)$83,000.

Question 78

Waupun Company has the following unit costs: What cost per unit would be used for product costing under full absorption costing?

A)$29
B)$42
C)$52
D)$60

Question 79

The following information was collected from the accounting records of the CJG 65 for 3,000 units: What is CJG's total cost per unit?

A)$180.
B)$200.
C)$210.
D)$250.

Question 80

Laner Company has the following data for the production and sale of 2,000 units. What is the conversion cost per unit?

A)$100
B)$180
C)$280
D)$380