Deck 2: Managerial Cost Concepts and Cost Behaviour Analysis

Question 1

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

A)raw materials only
B)raw materials and work in process only
C)raw materials, work in process, and finished goods
D)work in process only

Answer 1

B

Question 2

What criteria must be met in order to consider the work of factory employees to be direct labour?

A)It must be promptly associated with converting materials into products.
B)It must be physically associated with converting materials into products.
C)It must be materially associated with converting materials into products.
D)It must be periodically associated with converting materials into products.

Answer 2

B

Question 3

Which one of the following is a product cost?

A)indirect labour
B)office salaries
C)sales person's salaries
D)advertising costs

Answer 3

A

Question 4

Which one of the following would not be classified as manufacturing overhead?

A)indirect materials
B)insurance on factory building
C)indirect labour
D)direct materials

Question 5

A company incurred manufacturing costs that were product costs, but they are not classified as either direct materials or direct labour.What are these called?

A)manufacturing overhead
B)selling and administrative expenses
C)period costs
D)marketing costs

Question 6

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

A)raw materials, work in process, finished goods
B)work in process, finished goods raw materials
C)finished goods, work in process, raw materials
D)work in process, raw materials, finished goods

Question 7

Zirk, Inc.incurred cost of goods manufactured totalling $700,000, manufacturing overhead of $320,000, and direct materials totalling $40,000.How much is the amount of direct labour?

A)Cannot be determined from the information provided.
B)$340,000
C)$660,000
D)$700,000

Question 8

Which one of the following is classified as direct labour?

A)flour in a bakery
B)wages of factory janitors
C)bottlers of cola in a bottling company
D)copy machine costs at a copy shop

Question 9

Which product cost is most difficult to associate with a product?

A)direct labour
B)advertising
C)direct materials
D)manufacturing overhead

Question 10

In what category are lubricants that are used for wheel bearings on skateboards produced by a manufacturer categorized?

A)selling expense
B)indirect materials
C)miscellaneous expense
D)direct materials

Question 11

Inventoriable costs are also referred to as

A)product costs.
B)administrative costs.
C)period costs.
D)recorded costs.

Question 12

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

A)the cost of the wheels
B)the cost of the fuel lines that run from the motor to the gas tank
C)depreciation on the testing equipment
D)the wages earned by motor assemblers

Question 13

Which one of the following is indirect labour considered?

A)product cost
B)nonmanufacturing cost
C)period cost
D)raw material cost

Question 14

A company uses sandpaper in its production process.How is the cost of the sandpaper classified?

A)an insignificant expense that can be ignored
B)a direct material
C)a period cost
D)a product cost

Question 15

Which one of the following is not a manufacturing cost?

A)advertising costs
B)cost of goods sold
C)manufacturing overhead
D)direct materials

Question 16

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

A)rent on the company's store
B)insurance on a delivery truck
C)rent on the company's factory
D)an oil change on a delivery truck

Question 17

For 2020, 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?

A)$505,000
B)$495,000
C)$545,000
D)$455,000

Question 18

Which one of the following is not another name for the term manufacturing overhead?

A)period costs
B)factory overhead
C)indirect manufacturing costs
D)burden

Question 19

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?

A)direct labour
B)indirect labour
C)manufacturing overhead
D)indirect materials

Question 20

In which classification would the wages of a factory payroll clerk be classified?

A)raw materials
B)indirect labour
C)period cost
D)direct labour

Question 21

What must occur for inventoriable costs to become expenses under the matching principle?

A)The product must be completed and ready to sell.
B)The product must be sold.
C)All of the costs associated with manufacturing a product must be incurred.
D)The product must have incurred labour.

Question 22

Which of the following is considered manufacturing overhead?

A)depreciation on the press that moulds the plastic into work in process
B)the line worker's Christmas bonus designated by management
C)tools that were originally utilized for production but are currently being used by management to fix a copier in the upstairs corporate office
D)the courier charge for delivering a new ball bearing joint for a robotic paint arm

Question 23

Which one of the following is most likely a direct material?

A)sawdust used to soak up spills in a paint factory
B)lubricants for factory machinery
C)paper used in the photocopy machine in the sales office
D)circuit boards in a computer

Question 24

Which of the following could be considered either a product or a period cost depending on the purpose?

A)manufacturing overhead
B)direct labour
C)indirect materials
D)depreciation

Question 25

Salaries of sales people who only sell one product should best be shown as

A)fixed overhead.
B)variable overhead.
C)direct selling costs.
D)indirect selling costs.

Question 26

Where would you expect to find depreciation on factory equipment?

A)included with depreciation expense on the income statement
B)in the manufacturing overhead section of the Costs of Goods Manufactured schedule
C)only on the income statement as part of cost of goods sold
D)as a period cost in the operating expense section of the income statement

Question 27

Which one of the following is not considered a 'material' cost?

A)partially completed motor engines for a motorcycle plant
B)bolts used in manufacturing the compressor of an engine
C)rivets for the wings of a new commercial jet aircraft
D)lumber used to build tables

Question 28

Which of the following is a direct cost of a hotel?

A)meals in the restaurant
B)room cleaning
C)room service
D)cleaning the lobby

Question 29

As production manager, Mr.B is asked to track the manufacturing cost per unit on the factory floor.Total manufacturing costs were $100,000 before considering factory maintenance salaries of $12,000 and $50,000 of factory depreciation.How much is the calculation of manufacturing cost per unit if 500 units had been produced in the current quarter?

A)$224
B)$300
C)$200
D)$324

Question 30

Manufacturing overhead can be categorized as

A)a prime cost and a period cost.
B)a conversion cost and a period cost.
C)a prime cost and a product cost.
D)a conversion cost and a product cost.

Question 31

When are period costs recorded on the income statement?

A)when they occur
B)when the product that they are associated with is sold
C)at the discretion of management
D)none of the above

Question 32

Which of the following are period costs?

A)income taxes and indirect materials
B)selling and administrative expenses
C)indirect labour
D)advertising and factory depreciation

Question 33

Which of the following would most likely be viewed as indirect materials?

A)ball bearings associated with an industrial tractor wheel
B)axle grease associated with the suspension of a new car
C)new tires for a commercial truck
D)cost of boring a cylinder in assembly

Question 34

As plant controller, you are trying to determine the costs over which you have the most control on a day-to-day basis.Your goal is to achieve better profitability.The plant operations manager suggests that overhead is the easiest area to directly reduce costs.Which of the following items would be classified as manufacturing overhead?

A)factory janitor
B)general corporate liability insurance
C)cost of landscaping the corporate office
D)the western division's vice president's salary

Question 35

Ranger Company reported total manufacturing costs of $65,000, manufacturing overhead totalling $13,000, and direct materials totalling $16,000.How much is direct labour cost?

A)Cannot be determined from the information provided.
B)$94,000
C)$29,000
D)$36,000

Question 36

Which one of the following represents a period cost?

A)company advertisement
B)depreciation of plant equipment
C)production manager's salary
D)direct materials

Question 37

A company loses its opening financial records in a fire.During the following year, it incurred costs of production of $250,000 and sold $300,000 in merchandise.It took an inventory count and found that it had $100,000 in product on hand.What should the company's opening inventory show before the fire?

A)$50,000
B)$100,000
C)$150,000
D)Cannot be determined from the above information.

Question 38

Which of the following are considered product costs?

A)period costs and administrative expenses
B)selling and administrative expenses
C)inventoriable costs and plant assets
D)direct labour costs and manufacturing overhead

Question 39

How does a manufacturing company classify sales commissions?

A)as indirect labour
B)as product costs
C)as manufacturing overhead
D)as period costs

Question 40

Which one of the following is an example of a period cost?

A)a change in benefits for the union workers who work in the Toronto plant of a Fortune 1000 manufacturer
B)workers' compensation insurance on factory workers wages allocated to the factory
C)a processor used to produce computers
D)a manager's salary for work performed in the corporate head office

Question 41

Which of the following statements is true?

A)In real life, the curvilinear nature of variable costs is questionable.
B)In real life, fixed costs are fixed in total and do not change at various activity levels.
C)Within the relevant range, there is rarely a straight-line relationship for both variable and fixed costs.
D)Within the relevant range the linear assumption is valid and useful for cost behaviour analysis.

Question 42

Fees for office cleaning and maintenance in a factory are

A)neither direct nor indirect.
B)fixed product costs.
C)variable product costs.
D)fixed or variable product costs.

Question 43

Which of the following would most likely be considered direct material?

A)wood used to make a chair
B)lubrication for factory machines
C)glue used to make a chair
D)cleaning products used in a factory

Question 44

Variable costs

A)vary in total as activity varies.
B)vary on a per unit basis as activity varies.
C)are unpredictable.
D)none of the above.

Question 45

Which of the following is not true?

A)Mixed costs are comprised of both fixed costs and variable costs, and as a result, mixed costs increase proportionately with an increase in activity level.
B)Mixed costs change in total, but not proportionately with the change in activity level.
C)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.
D)Mixed costs are also known as semi-variable costs.

Question 46

The cost of the management accountant working in the front office of a company is a

A)direct, variable, product cost.
B)fixed period cost.
C)fixed product cost.
D)indirect period cost.

Question 47

The relevant range can be commonly understood to mean

A)the normal range of output (activity)within which the company operates.
B)the range wherein fixed costs are always fixed.
C)the range wherein variable costs are strictly curvilinear.
D)the range wherein fixed costs are strictly proportional to the level of activity.

Question 48

Mixed costs

A)change in proportion to changes in activity level.
B)change in total in response to changes in activity level.
C)change proportionately and in total as a result of changes in activity level.
D)none of these.

Question 49

A curvilinear relationship between variable costs and changes in activity levels suggests what?

A)A strictly linear relationship between fixed costs and activity levels is implausible.
B)A strictly curvilinear relationship between changes in activity levels and variable costs is possible only within the relevant range.
C)Since the relationship between activity levels and variable costs is linear within the relevant range and less linear at lower and higher levels outside the relevant range, the straight-line (linear)relationship takes on a curvature in the real world.
D)none of the above

Question 50

Manufacturing overhead is a

A)direct, variable, product cost.
B)direct, variable period costs.
C)indirect, variable, product cost.
D)indirect, fixed or variable, product cost.

Question 51

Fees for office telephones are

A)fixed period costs.
B)mixed period costs.
C)variable period costs.
D)direct, fixed, or variable period costs.

Question 52

Examples of fixed costs include all but one of the following:

A)cost of factory rent for the 12 month contract term.
B)cost of Janet's apartment rent during her 3^rd year of university.
C)cost of a car rental which includes a fee per km driven.
D)a one-week rental of a carpet cleaning machine.

Question 53

Where there is a linear relationship between two variables,

A)the change in the dependent variable yields a predictable, constant change in the independent variable.
B)the change in the independent variable yields a predictable, constant change in the dependent variable.
C)there is seldom a linear relationship between two variables.
D)a change in the "Y" variable yields a predictable, constant change in the "X" variable.

Question 54

Which of the following statements is true?

A)Advertising is a product cost and a plant manager's salary is a period cost.
B)Advertising is a period cost and a plant manager's salary is a manufacturing overhead cost.
C)Advertising is a period cost and a plant manager's salary is a period cost.
D)Advertising is a product cost and a plant manager's salary is a manufacturing overhead cost.

Question 55

Which of the following are period costs?

A)workers wages in the shipping department
B)factory workers wages paid for statutory holidays
C)workers wages in the plant maintenance department
D)workers wages on an assembly line

Question 56

Property taxes for the entire manufacturing facility, including the front office and factory area are

A)both fixed and variable product costs.
B)both direct and indirect costs.
C)both a product and a period cost.
D)none of the above.

Question 57

Outside of the relevant range, which of the following outcomes is unlikely?

A)It may be difficult for management to change all fixed costs.
B)Achieving cost efficiency may be difficult.
C)Total fixed costs will not change.
D)At a 0% activity level all fixed costs will cease.

Question 58

Indirect labour is a

A)direct, variable, product cost.
B)direct, variable, period cost.
C)indirect, variable, product cost.
D)indirect, fixed or variable, product cost.

Question 59

Mixed costs are

A)costs with both indirect and direct elements.
B)costs with both product and period elements.
C)costs with both fixed and variable elements.
D)none of these.

Question 60

Which of the following would most likely be considered direct labour?

A)a worker installing components in a computer
B)a maintenance worker
C)a security guard
D)a sales person

Question 61

Cost of goods sold applies to

A)only merchandisers' Income Statements.
B)only manufacturers' Income Statements.
C)both manufacturers' and merchandisers' Income Statements.
D)manufacturers, merchandisers, and service companies.

Question 62

Critical inputs in using the high-low method include all of the following except

A)actual activity levels (production levels)for an operating period.
B)actual mixed costs (total costs)corresponding to the various activity levels.
C)a calculator.
D)a hypothesis for the slope.

Question 63

Use the following information for questions
$\begin{array}{c}\begin{array}{l}\\\underline{\text { Month }} \\\text { Jan } \\\text { Feb } \\\text { Mar } \\\text { Apr } \\\text { May } \\\text { Jun } \\\text { Jul } \\\text { Aug }\end{array}\begin{array}{ll}\text { \# Machine } & \text { Maintenance } \\ \underline{\text { Hours (X)}} & \underline{ \text { Costs(Y) }}\\3,000 & \$ 440 \\4,500 & \$ 690 \\8,000 & \$ 510 \\ 7,000 & \$ 600 \\6,000 & \$ 550 \\9,000 & \$ 980 \\3,500 & \$ 840 \\5,500 & \$ 600 \end{array}\end{array}$



-Using the high-low method, what is the slope for this set of data?

A)$9
B)$0.09
C)$11.11
D)$540

Question 64

How is the cost of goods manufactured calculated?

A)beginning WIP + direct materials used + direct labour + manufacturing overhead + ending WIP
B)direct materials used + direct labour + manufacturing overhead - beginning WIP + ending WIP
C)beginning WIP + direct materials used + direct labour + manufacturing overhead - ending WIP
D)direct materials used + direct labour + manufacturing overhead - ending WIP - beginning WIP

Question 65

How does a manufacturing company report cost of goods manufactured?

A)as a current asset on the balance sheet
B)as a component of the raw materials inventory on the balance sheet
C)as a component in the calculation of cost of goods sold on the income statement
D)as an administrative expense on the income statement

Question 66

Use the following information for questions
$\begin{array}{c}\begin{array}{l}\\\text { Month } \\\text { Jan } \\\text { Feb } \\\text { Mar } \\\text { Apr } \\\text { May } \\\text { Jun } \\\text { Jul } \\\text { Aug }\end{array}\begin{array}{l}\text { Labour }&\text { Overhead } \\ \underline{\text { Hours (X)}}& \underline{\text { Costs (Y)}}\\200 & \$ 415 \\175 & \$ 385 \\290 & \$ 520 \\300 & \$ 534 \\185 & \$ 403 \\265 & \$ 490 \\160 & \$ 372 \\320 & \$ 564\end{array}\end{array}$


-What is the equation of the line using the high-low method and this data?

A)$564 = 180 + (1.2X)
B)X = 180+ ($1.20Y)
C)Y = $180 + ($1.2 X)
D)Y = $180 + (1.20 x 320)

Question 67

If you want to know the amounts a company used to calculate, 'cost of goods manufactured,' where would you look?

A)on the income statement
B)on the Balance Sheet
C)on both the Balance Sheet and income statement
D)only in the managerial accounting records

Question 68

Use the following information for questions
$\begin{array}{c}\begin{array}{l}\\\underline{\text { Month }} \\\text { Jan } \\\text { Feb } \\\text { Mar } \\\text { Apr } \\\text { May } \\\text { Jun } \\\text { Jul } \\\text { Aug }\end{array}\begin{array}{ll}\text { \# Machine } & \text { Maintenance } \\ \underline{\text { Hours (X)}} & \underline{ \text { Costs(Y) }}\\3,000 & \$ 440 \\4,500 & \$ 690 \\8,000 & \$ 510 \\ 7,000 & \$ 600 \\6,000 & \$ 550 \\9,000 & \$ 980 \\3,500 & \$ 840 \\5,500 & \$ 600 \end{array}\end{array}$



-What does the slope represent?

A)the rate at which the X variable changes as a result of the Y variable
B)the rate at which the Y variable changes as a result of the X variable
C)the rate at which the dependent variable changes as a result of the fixed cost component
D)the rate at which the independent variable changes as a result of changes in the dependent variable

Question 69

Which one of the following is the correct calculation of cost of goods sold for a manufacturing company?

A)beginning FG inventory - cost of goods manufactured - ending FG inventory
B)ending FG inventory - cost of goods manufactured + beginning FG inventory
C)beginning FG inventory + cost of goods purchased - ending FG inventory
D)beginning FG inventory + cost of goods manufactured - ending FG inventory

Question 70

During 2020, "cost of goods manufactured" was less than the amount of "Total manufacturing costs" for the period.Which statement is true?

A)Ending work in process inventory is greater than beginning work in process inventory.
B)Ending work in process is less than beginning work in process inventory.
C)Ending work in process is equal to the cost of goods manufactured.
D)Ending work in process is less than beginning finished goods inventory.

Question 71

A merchandising company includes cost of goods purchased in its calculation of cost of goods sold.What is the counterpart used by a manufacturing company?

A)ending inventory
B)beginning inventory
C)cost of goods available for sale
D)cost of goods manufactured

Question 72

A high-low approach to establishing fixed and variable components of costs is most effective when information available is

A)curvilinear.
B)erratic and highly fluctuating.
C)outside of the relevant range.
D)linear.

Question 73

Use the following information for questions
$\begin{array}{c}\begin{array}{l}\\\underline{\text { Month }} \\\text { Jan } \\\text { Feb } \\\text { Mar } \\\text { Apr } \\\text { May } \\\text { Jun } \\\text { Jul } \\\text { Aug }\end{array}\begin{array}{ll}\text { \# Machine } & \text { Maintenance } \\ \underline{\text { Hours (X)}} & \underline{ \text { Costs(Y) }}\\3,000 & \$ 440 \\4,500 & \$ 690 \\8,000 & \$ 510 \\ 7,000 & \$ 600 \\6,000 & \$ 550 \\9,000 & \$ 980 \\3,500 & \$ 840 \\5,500 & \$ 600 \end{array}\end{array}$



-Which of the following choices represents the highest and lowest respective coordinates of activity level and corresponding total costs?

A)(3,000 hours, $440), (9,000 hours, $980)
B)(9,000 hours, $980), (3,000 hours, $440)
C)($3,000, 440 hours), ($9,000, 980 hours)
D)($9,000, 980 hours), ($3,000, 440 hours)

Question 74

Use the following information for questions
$\begin{array}{c}\begin{array}{l}\\\text { Month } \\\text { Jan } \\\text { Feb } \\\text { Mar } \\\text { Apr } \\\text { May } \\\text { Jun } \\\text { Jul } \\\text { Aug }\end{array}\begin{array}{l}\text { Labour }&\text { Overhead } \\ \underline{\text { Hours (X)}}& \underline{\text { Costs (Y)}}\\200 & \$ 415 \\175 & \$ 385 \\290 & \$ 520 \\300 & \$ 534 \\185 & \$ 403 \\265 & \$ 490 \\160 & \$ 372 \\320 & \$ 564\end{array}\end{array}$


-What is the slope of this data, using the high-low method?

A)$1.76
B)$180
C)$1.20
D)$0.83

Question 75

Hardigan Manufacturing Company reported the following year-end information: beginning work in process inventory, $80,000; cost of goods manufactured, $980,000; beginning finished goods inventory, $50,000; ending work in process inventory, $70,000; and ending finished goods inventory, $40,000.How much is Haridgan's cost of goods sold for the year?

A)$980,000
B)$990,000
C)$970,000
D)$1,000,000

Question 76

Use the following information for questions
$\begin{array}{c}\begin{array}{l}\\\text { Month } \\\text { Jan } \\\text { Feb } \\\text { Mar } \\\text { Apr } \\\text { May } \\\text { Jun } \\\text { Jul } \\\text { Aug }\end{array}\begin{array}{l}\text { Labour }&\text { Overhead } \\ \underline{\text { Hours (X)}}& \underline{\text { Costs (Y)}}\\200 & \$ 415 \\175 & \$ 385 \\290 & \$ 520 \\300 & \$ 534 \\185 & \$ 403 \\265 & \$ 490 \\160 & \$ 372 \\320 & \$ 564\end{array}\end{array}$


-Which of the following choices represents the highest and lowest respective coordinates of activity level and corresponding total overhead costs?

A)($372, 160 labour hours), ($564, 320 labour hours)
B)($564, 320 labour hours), ($372, 160 labour hours)
C)(160 labour hours, $372), (320 labour hours, $564)
D)(320 labour hours, $564), (160 labour hours, $372)

Question 77

Use the following information for questions
$\begin{array}{c}\begin{array}{l}\\\underline{\text { Month }} \\\text { Jan } \\\text { Feb } \\\text { Mar } \\\text { Apr } \\\text { May } \\\text { Jun } \\\text { Jul } \\\text { Aug }\end{array}\begin{array}{ll}\text { \# Machine } & \text { Maintenance } \\ \underline{\text { Hours (X)}} & \underline{ \text { Costs(Y) }}\\3,000 & \$ 440 \\4,500 & \$ 690 \\8,000 & \$ 510 \\ 7,000 & \$ 600 \\6,000 & \$ 550 \\9,000 & \$ 980 \\3,500 & \$ 840 \\5,500 & \$ 600 \end{array}\end{array}$



-What is the equation of the line using the high-low method and this data?

A)$980 = 170 + (0.09X)
B)Y = $170 + (0.09 x 9,000)
C)Y = 170+ ($0.09 X)
D)X = 170+ ($0.09 Y)

Question 78

The high-low method

A)is a useful means of predicting the highest cost a company will incur in the operating period.
B)is a useful means of separating fixed and variable elements from a mixed cost.
C)is more time-consuming than the scatter diagram method.
D)is more complex than the use of linear regression analysis.

Question 79

Ending finished goods inventory
A)appears on a cost of goods manufactured schedule.

A)for a manufacturing company is equivalent to merchandise inventory for a merchandising company.
C)represents the cost of completed goods available for sale to customers.
D)is calculated by adding beginning finished goods inventory to cost of goods sold and subtracting cost of goods manufactured.

Question 80

To be useful to management accountants for planning and predictive purposes, mixed costs

A)must be classified into their fixed and variable elements.
B)must be classified into their direct and indirect elements.
C)must be classified into their product and period elements.
D)none of these.