Deck 2: Basic Managerial Accounting Concepts

Question 1

Indirect costs are costs that are easily and accurately traced to a cost object.

Answer 1

False

Question 2

The revenue per unit is called sales price.

Answer 2

True

Question 3

Reducing the cost required to achieve a given benefit means that a company is becoming less efficient.

Answer 3

False

Question 4

Costs incurred to produce future benefits would generally be categorized as liabilities.

Question 5

Cost is a dollar measure of the resources used to achieve a given benefit.

Question 6

While it is necessary to assign direct costs to cost objects, it is NOT necessary to assign indirect costs.

Question 7

Accumulating costs is the way that costs are measured and recorded.

Question 8

A cost object is any item, such as products, customers, departments, regions, and so on, for which costs are measured and assigned.

Question 9

Allocation means that an indirect cost is assigned to a cost object using a reasonable and convenient method.

Question 10

A fixed cost decreases in total as output decreases.

Question 11

Assigning costs involves the way that a cost is linked to some cost object.

Question 12

Expired costs are called assets.

Question 13

If a cost is classified as a variable cost in one situation, it may be appropriate to instead classify the same cost as a fixed cost in another situation.

Question 14

Assigning costs tells the accountant who spent the money.

Question 15

As costs are used up in the production of revenues, they are said to expire. Expired costs are called expenses.

Question 16

An opportunity cost is the benefit given up or sacrificed when one alternative is chosen over another.

Question 17

A variable cost is one that decreases in total as output increases and increases in total as output decreases.

Question 18

Sales price must be greater than cost in order for the firm to generate a profit.

Question 19

Costs may be directly or indirectly associated with cost objects.

Question 20

Direct costs are those costs that can be easily and accurately traced to a cost object.

Question 21

Services are most appropriately classified as intangible and perishable.

Question 22

Product costs are carried in inventory only until production of the goods is completed.

Question 23

Denim used when making jeans would normally be classified as a variable cost.

Question 24

All product costs other than direct materials and indirect labour are called manufacturing overhead.

Question 25

Indirect materials can be directly traced to the goods or services being produced.

Question 26

Screws used in the manufacture of cabinets would normally be classified as a variable cost.

Question 27

Sales revenue equals the sales price per unit times the number of units in inventory.

Question 28

Employees who convert direct materials into a product or who provide a service to customers are classified as indirect labour.

Question 29

Direct materials, direct labour, and manufacturing overhead are the three classifications of manufacturing costs.

Question 30

Period costs are those costs associated with the manufacture of goods or the providing of services over a period of time.

Question 31

Research and development costs would generally be classified as period costs.

Question 32

Prime cost is the sum of direct materials and direct labour.

Question 33

The cost of maintenance personnel in a factory building would be classified as direct labour.

Question 34

Any costs associated with storing, selling, and delivering a product are generally classified as period costs.

Question 35

A manufacturing business generally reports three types of inventory on its balance sheet.

Question 36

Cost of goods sold is the total product cost of the units manufactured during a period.

Question 37

Cost of goods manufactured represents the cost of direct materials, direct labour, and manufacturing overhead incurred relating to goods sold during the current accounting period.

Question 38

A fixed cost is a cost that increases in total as output increases and decreases in total as output decreases.

Question 39

Production costs include direct materials, direct labour, and manufacturing overhead.

Question 40

Research and development costs would generally be classified as manufacturing costs.

Question 41

What is an example of an intangible product?

A) computers
B) dental care
C) hamburgers
D) automobiles

Question 42

When do materials in the raw materials account become direct materials?

A) when they are put into production
B) when they are returned to the supplier
C) when the production process is complete
D) when they are received from the supplier

Question 43

What is the behaviour pattern of a variable cost?

A) It increases in total as output increases.
B) It increases per unit as output increases.
C) It decreases per unit as output increases.
D) It remains constant in total at all levels of output.

Question 44

What is an example of a tangible product?

A) furniture
B) funeral care
C) legal services
D) video rental

Question 45

Which of the following is an example of a direct materials cost?

A) glue used to build furniture
B) wood used to make furniture
C) nails used to construct furniture
D) screws used to manufacture furniture

Question 46

Which of the following is an example of a direct materials cost?

A) the engine in an airplane
B) the paint on a new bicycle
C) the nails in a dining room table
D) the glue used to manufacture furniture

Question 47

Which of the following is included in nonmanufacturing costs?

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

Question 48

What are expired costs?

A) assets
B) profit
C) expenses
D) revenues

Question 49

Which statement best describes sales price per unit?

A) It is equal to the revenue.
B) It is the same as total cost.
C) It is the same as cost per unit plus income per unit.
D) It must be less than cost for the firm to earn income.

Question 50

Which statement best describes a main purpose of assigning costs to cost objects?

A) It provides information on why money was spent.
B) It records the historical events of the organization.
C) It allows management to incorporate products in marketing.
D) It facilitates service businesses in following financial regulations.

Question 51

Which of the following best describes the term assigning costs?

A) the way costs are measured and recorded
B) the way companies can tell what money was spent
C) the benefit given up when one choice is made over another
D) the allocation applied to a cost object using a reasonable method

Question 52

Gross margin equals revenue minus cost of goods manufactured.

Question 53

Into which two major functional categories are costs subdivided?

A) prime and conversion
B) opportunity and direct
C) selling and administration
D) production and nonproduction

Question 54

What is opportunity cost?

A) a benefit that is difficult to accurately trace to a cost object
B) a cost that increases as output increases and decreases as output decreases
C) a cost that decreases as output increases and increases as output decreases
D) a benefit given up or sacrificed when one alternative is chosen over another

Question 55

In terms of managerial accounting, what is the best definition of cost?

A) the equivalent of the cost of goods sold
B) the asset incurred to produce future benefits
C) a dollar measure of the cash used to achieve a given benefit
D) the amount sacrificed for goods expected to bring future benefit to the organization

Question 56

Which of the following describes cost of goods manufactured?

A) the cost of direct materials used in production
B) the product cost of goods sold during the current period
C) the cost remaining in ending work-in-process inventory
D) the product cost of goods completed during the current period

Question 57

What type of organization is the Hudson Bay Company?

A) service organization
B) production organization
C) manufacturing organization
D) merchandising organization

Question 58

Which of the following are production costs?

A) direct materials, direct labour, and selling costs
B) selling costs, administrative costs, and period costs
C) indirect materials, indirect labour, and administrative costs
D) direct materials, direct labour, and manufacturing overhead

Question 59

Which statement best describes product costs?

A) Product costs are manufacturing costs.
B) Product costs do not include direct materials.
C) Product costs do not include manufacturing overhead.
D) Product costs are direct materials and direct labour costs only.

Question 60

Which statement best describes indirect costs?

A) Indirect costs include all labour.
B) Indirect costs should always be assigned to a cost object.
C) Indirect costs can be easily and accurately traced to a cost object.
D) Indirect costs are shared between or among more than one cost object.

Question 61

Book City had cost of goods sold of $140,000 for the year ended December 31. The finished goods inventory on January 1 was $35,000 and the finished goods inventory on December 31 was $17,000. What was the amount of cost of goods manufactured for the year?

A) $52,000
B) $157,000
C) $158,000
D) $122,000

Question 62

Ganz, Inc. had materials inventory at July 1 of $12,000. The materials inventory at July 31 was $15,000, and the cost of direct materials used in production was $20,000. What was the cost of materials purchased during the month?

A) $17,000
B) $20,000
C) $23,000
D) $35,000

Question 63

What type of cost is direct labour?

A) period cost
B) inventoriable cost
C) nonproduction cost
D) nonmanufacturing cost

Question 64

Which job position is an example of direct labour?

A) security guard
B) maintenance person
C) production line worker
D) management accountant

Question 65

Which expense is included in manufacturing overhead?

A) property taxes on the factory
B) utility costs at the head office
C) advertising and marketing costs
D) computers used at the head office

Question 66

During the month of March, Cara, Inc. had total manufacturing costs of $130,000 and incurred $40,000 in direct labour costs and $30,000 in manufacturing overhead costs. The materials inventory on March 1 was $3,000 less than the materials inventory on March 31. What was the cost of materials purchased during the month?

A) $37,000
B) $40,000
C) $63,000
D) $70,000

Question 67

How is the cost of goods manufactured calculated?

A) sales - cost of goods sold
B) gross margin - other expenses
C) direct materials cost + direct labour cost + manufacturing overhead cost
D) total product costs incurred during the current period + beginning work-in-process - ending work-in-process

Question 68

When are product costs expensed?

A) when the product is sold
B) when the product is finished
C) when the product begins production
D) when the product unit cost is calculated

Question 69

Which labour cost is included in indirect labour?

A) the salary of the CEO
B) the salary of the factory supervisor
C) the wages of the production line worker
D) the salary of the vice-president of marketing

Question 70

How is per-unit cost of goods manufactured calculated?

A) total prime costs divided by the number of units produced
B) period costs divided by the total number of units produced
C) total product costs divided by the number of units produced
D) total conversion costs divided by the number of units produced

Question 71

A company's beginning work-in-process inventory is $120,000, its ending work-in-process inventory is $160,000, its cost of goods manufactured is $400,000, and its direct materials used are $100,000. What are the conversion costs?

A) $140,000
B) $280,000
C) $300,000
D) $340,000

Question 72

Which expense is included in manufacturing overhead?

A) advertising for the product
B) production line worker wages
C) steel used to manufacture a car
D) production line supervisor salary

Question 73

Which of the following is a period cost?

A) indirect labour
B) direct materials
C) indirect materials
D) depreciation on an office building

Question 74

How is conversion cost calculated?

A) product costs plus period costs
B) direct materials cost plus prime costs
C) indirect labour cost plus opportunity costs
D) direct labour cost plus manufacturing overhead cost

Question 75

Global Inc. manufactured 6,000 units during the month of April and incurred a direct materials cost of $110,000 and a manufacturing overhead cost of $50,000. Suppose the per-unit prime cost was $30.00 per unit. How much direct labour cost did Global incur during April?

A) $20,000
B) $70,000
C) $85,000
D) $90,000

Question 76

Selected data concerning the past year's operations of the Intelligent Creatures Corporation are as follows: Selling and administrative expenses $225,000
Direct materials used 397,500
Direct labour 450,000
Inventories
Dec) 1 Dec. 31
Direct materials $36,000 $42,000
Work-in-process 75,000 84,000
Finished goods 69,000 57,000
What is the cost of direct materials purchased?

A) $367,500
B) $397,500
C) $403,500
D) $405,000

Question 77

HaulAll Inc. had a per-unit conversion cost of $4.00 during May and incurred a direct materials cost of $100,000, direct labour costs of $110,000, and manufacturing overhead costs of $50,000. How many units did HaulAll manufacture during May?

A) 18,000
B) 30,000
C) 40,000
D) 70,000

Question 78

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

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

Question 79

How is prime cost calculated?

A) direct materials cost plus direct labour cost
B) indirect materials cost plus indirect labour cost
C) direct labour cost plus manufacturing overhead cost
D) direct material cost plus manufacturing overhead cost

Question 80

Which statement best describes a period cost?

A) It is used to calculate product cost.
B) It includes selling costs and administrative costs.
C) It is carried in inventory until the goods are sold.
D) It can be included in manufacturing overhead costs.