Deck 2: Managerial Cost Concepts and Cost Behaviour Analysis

Question 1

Variable costs are fixed on a per-unit basis and variable in total.

Answer 1

True

Question 2

An activity level can be expressed in sales dollars, kilometres driven, units produced, number of dance classes taught, or percentage of rooms occupied.

Answer 2

True

Question 3

Raw materials are equal to direct materials.

Answer 3

False

Question 4

Raw materials that CANNOT be conveniently and directly associated with a finished product, but are used in production, are called indirect materials.

Question 5

Indirect materials and indirect labour are both period costs.

Question 6

Manufacturing costs that cannot be classified as direct material or direct labour are classified as operating expenses.

Question 7

The relevant range is reflective of the relevant range of products a company offers to its customers.

Question 8

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.

Question 9

Product costs are inventoriable costs.

Question 10

Fixed costs appear to vary on a per-unit basis but are fixed in total.

Question 11

Cost behaviour analysis is the study of how total costs concurrently are affected by changes in the level of business activity.

Question 12

Direct material costs and direct labour costs are prime costs.

Question 13

Direct labour costs plus prime costs equals manufacturing overhead costs.

Question 14

Variable costs vary exponentially with the changes in the company's activity level.

Question 15

Both direct material cost and indirect material cost are product costs.

Question 16

At the upper and lower limits of the relevant range of company activity, linearity of variable costs is a given.

Question 17

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

Question 18

Within the relevant range a valid argument can be made for the assumption of linearity of variable costs.

Question 19

Fixed costs may jump (rather than remaining fixed)at incremental levels of activity.

Question 20

The total cost of a finished product generally contains equal amounts of material, labour, and manufacturing overhead costs.

Question 21

For 2016, 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 22

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

Question 23

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

Question 24

Which one of the following is indirect labour considered?

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

Question 25

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

Question 26

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 27

Total product costs are deducted from total cost of work in process to calculate cost of goods manufactured.

Question 28

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

Question 29

In which of the following categories do indirect materials belong? $\quad$$\quad$$\begin{array}{cc} \text {Product } &\text {Manufacturing }&\text {Period }\\ \underline{\text { Cost}} &\underline{ \text {Overhead } } &\underline{\text { Cost} } \\\end{array}$
a) $\quad\quad\quad\mathrm{No} \quad\quad\quad\quad\quad \mathrm{No} \quad\quad\quad\quad \text { Yes }$
b) $\quad\quad\quad\mathrm{Yes} \quad\quad\quad\quad\quad \mathrm{No} \quad\quad\quad\quad \text { No }$
c) $\quad\quad\quad\mathrm{Yes} \quad\quad\quad\quad\quad \mathrm{Yes} \quad\quad\quad\quad \text { No }$
d) $\quad\quad\quad\mathrm{Yes} \quad\quad\quad\quad\quad \mathrm{Yes} \quad\quad\quad\quad \text { Yes }$

Question 30

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

Question 31

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

Question 32

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.

Question 33

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 34

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

Question 35

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.

Question 36

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

Question 37

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

Question 38

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 39

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 40

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

Question 41

Which one of the following is a product cost?

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

Question 42

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 43

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.

Question 44

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 45

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

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

Question 46

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 47

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 48

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 49

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 50

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 51

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 52

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 53

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 54

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 55

Inventoriable costs are also referred to as

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

Question 56

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 57

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 58

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 59

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 60

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 61

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 62

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 63

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 64

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 65

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 66

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 67

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 68

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 69

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 70

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 71

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 72

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 73

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 74

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 75

Which of the following are period costs?

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

Question 76

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 77

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 78

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 79

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 80

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