Quiz 2: Cost Terminology and Cost Behaviors

A cost object is anything for which management wants to collect or accumulate costs.

A production plant could be a cost object.

A specific product cannot be a cost object.

The portion of an asset's value on the balance sheet is referred to as an expired cost.

The portion of an asset that was consumed during a period is referred to an expired cost.

A variable cost remains constant on a per-unit basis as production increases.

A fixed cost remains constant on a per-unit basis as production changes.

The relevant range is valid for all levels of activity.

An indirect cost can be easily traced to a cost object.

Both accountants and economists view variable costs as linear in nature.

Fixed cost per unit varies directly with production.

Variable cost per unit remains constant within the relevant range.

A cost that shifts upward or downward when activity changes by a certain interval is referred to as a mixed cost.

A cost that shifts upward or downward when activity changes by a certain interval is referred to as a step cost.

If the cost of an additive is $5,000 + $0.50 for every unit of solvent produced,the cost is classified as a mixed cost.

If the cost of an additive is $5,000 + $0.50 for every unit of solvent produced,the cost is classified as a step cost.

A predictor which has an absolute cause and effect relationship to a cost is referred to a cost driver.

A mixed cost will be an effective cost driver.

A variable cost will be an effective cost driver.

Unexpired costs are reflected on the balance sheet.

Expired costs are reflected on the balance sheet.

Distribution costs are an example of product costs.

Distribution costs are an example of period costs.

Retailers generally have a much higher degree of conversion than do manufacturing or professional firms.

Retailers generally have a much lower degree of conversion than do manufacturing or professional firms.

In a service industry,direct materials are usually insignificant in amount and can not easily be traced to a cost object.

In a service industry,direct materials are usually significant in amount and can be easily traced to a cost object.

There is typically an inverse relationship between prevention costs and failure costs.

There is typically a direct relationship between prevention costs and failure costs.

In an actual cost system,actual production overhead costs are typically accumulated in an Overhead Control account and assigned to Work in Process at the end of the period.

In a normal cost system,actual production overhead costs are typically accumulated in an Overhead Control account and assigned to Work in Process at the end of the period.

In a normal cost system,factory overhead is applied to Work in Process using a predetermined overhead rate.

In an actual cost system,factory overhead is applied to Work in Process using a predetermined overhead rate.

In an actual cost system,overhead is assigned to Work in Process Inventory with a debit entry to the account.

In an actual cost system,overhead is assigned to Work in Process Inventory with a credit entry to the account.

It is not necessary to prepare the Cost of Goods Manufactured statement prior to preparing the Cost of Goods Sold statement.

Anything for which management wants to accumulate or collect costs is known as a _________________________.

Costs that can be conveniently traced to a cost object are referred to as ____________________ costs.

Costs that cannot be conveniently traced to a cost object are known as ____________________ costs.

A cost that remains unchanged in total within the relevant range is known as a ____________________ cost.

A cost that varies in total in direct proportion to changes in activity is known as a ____________________ cost

The assumed range of activity that reflects the company's normal operating range is referred to as the ______________________________.

A cost that remains constant on a per unit basis within the relevant range is a ____________________ cost.

A cost that varies inversely with the level of production is known as a ____________________ cost.

A cost that has both fixed and variable components is known as a ____________________ cost.

A cost that shifts upward or downward when activity changes by a certain interval is referred to as a ____________________ cost.

Another name for inventoriable costs is ____________________ costs.

The three stages of production for a manufacturing firm are _________________________,______________________________,and _________________________.

Costs that are incurred to improve quality by precluding defects and improper processing are referred to as ____________________ costs.

Costs incurred for monitoring or inspecting products are known as ____________________ costs.

Costs that result from defective units,product returns,and complaints are referred to as ____________________ costs.

The term "relevant range" as used in cost accounting means the range over which A)costs may fluctuate. B)cost relationships are valid. C)production may vary. D)relevant costs are incurreD.

Which of the following defines variable cost behavior? A)remains constant remains constant B)remains constant increases C)increases increases D)increases remains constant

When cost relationships are linear,total variable prime costs will vary in proportion to changes in A)direct labor hours. B)total material cost. C)total overhead cost. D)production volume.

Which of the following would generally be considered a fixed factory overhead cost? A)no no no B)yes no yes C)yes yes no D)no yes no

An example of a fixed cost is A)total indirect material cost. B)total hourly wages. C)cost of electricity. D)straight-line depreciation.

A cost that remains constant in total but varies on a per-unit basis with changes in activity is called a(n) A)expired cost. B)fixed cost. C)variable cost. D)mixed cost.

A(n)____ cost increases or decreases in intervals as activity changes. A)historical cost B)fixed cost C)step cost D)budgeted cost

When the number of units manufactured increases,the most significant change in unit cost will be reflected as a(n) A)increase in the fixed element. B)decrease in the variable element. C)increase in the mixed element. D)decrease in the fixed element.

Which of the following always has a direct cause-effect relationship to a cost? A)yes yes B)yes no C)no yes D)no no

A cost driver A)causes fixed costs to rise because of production changes. B)has a direct cause-effect relationship to a cost. C)can predict the cost behavior of a variable,but not a fixed,cost. D)is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.

Product costs are deducted from revenue A)as expenditures are made. B)when production is completed. C)as goods are sold. D)to minimize taxable income.

A selling cost is a(n) A)yes yes no B)yes no no C)no yes no D)no yes yes

Which of the following is not a product cost component? A)rent on a factory building B)indirect production labor wages C)janitorial supplies used in a factory D)commission on the sale of a product

Period costs A)are expensed in the same period in which they are incurred. B)are always variable costs. C)remain unchanged over a given period of time. D)are associated with the periodic inventory methoD.

Period costs include A)yes no yes B)no yes yes C)no no no D)yes yes yes

The three primary inventory accounts in a manufacturing company are A)Merchandise Inventory,Supplies Inventory,and Finished Goods Inventory. B)Merchandise Inventory,Work in Process Inventory,and Finished Goods Inventory. C)Supplies Inventory,Work in Process Inventory,and Finished Goods Inventory. D)Raw Material Inventory,Work in Process Inventory,and Finished Goods Inventory.

Cost of Goods Sold is an A)unexpired product cost. B)expired product cost. C)unexpired period cost. D)expired period cost.

The indirect costs of converting raw material into finished goods are called A)period costs. B)prime costs. C)overhead costs. D)conversion costs.

Which of the following would need to be allocated to a cost object? A)direct material B)direct labor C)direct production costs D)indirect production costs

Conversion cost does not include A)direct labor. B)direct material. C)factory depreciation. D)supervisors' salaries.

The distinction between direct and indirect costs depends on whether a cost A)is controllable or non-controllable. B)is variable or fixed. C)can be conveniently and physically traced to a cost object under consideration. D)will increase with changes in levels of activity.

Hunnicutt Company is a construction company that builds greenhouses on special request.What is the proper classification of the carpenters' wages? A)yes yes no B)yes no yes C)no no no D)no yes yes

Hunnicutt Company is a construction company that builds greenhouses on special request.What is the proper classification of the cost of the cement building slab used? A)no no B)no yes C)yes yes D)yes no

Hunnicutt Company is a construction company that builds greenhouses on special request.What is the proper classification of indirect material used? A)no no no B)no yes yes C)yes yes yes D)yes no no

Which of the following costs would be considered overhead in the production of chocolate chip cookies? A)flour B)chocolate chips C)sugar D)oven electricity

All costs related to the manufacturing function in a company are A)prime costs. B)direct costs. C)product costs. D)conversion costs.

Prime cost consists of A)no yes no B)yes yes no C)yes no yes D)no yes yes

Plastic used to manufacture dolls is a A)no yes yes yes B)yes no yes no C)yes yes no yes D)yes yes yes no

The term "prime cost" refers to A)all manufacturing costs incurred to produce units of output. B)all manufacturing costs other than direct labor and raw material costs. C)raw material purchased and direct labor costs. D)the raw material used and direct labor costs.

Conversion of inputs to outputs is recorded in the A)Work in Process Inventory account. B)Finished Goods Inventory account. C)Raw Material Inventory account. D)both a and b.

In a perpetual inventory system,the sale of items for cash consists of two entries.One entry is a debit to Cash and a credit to Sales.The other entry is a debit to A)Work in Process Inventory and a credit to Finished Goods Inventory. B)Finished Goods Inventory and a credit to Cost of Goods Sold. C)Cost of Goods Sold and a credit to Finished Goods Inventory. D)Finished Goods Inventory and a credit to Work in Process Inventory.

The formula to compute cost of goods manufactured is A)beginning Work in Process Inventory plus purchases of raw material minus ending Work in Process Inventory. B)beginning Work in Process Inventory plus direct labor plus direct material used plus overhead incurred minus ending Work in Process Inventory. C)direct material used plus direct labor plus overhead incurred. D)direct material used plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

The final figure in the Schedule of Cost of Goods Manufactured represents the A)cost of goods sold for the period. B)total cost of manufacturing for the period. C)total cost of goods started and completed this period. D)total cost of goods completed for the perioD.

The formula for cost of goods sold for a manufacturer is A)beginning Finished Goods Inventory plus Cost of Goods Manufactured minus ending Finished Goods Inventory. B)beginning Work in Process Inventory plus Cost of Goods Manufactured minus ending Work in Process Inventory. C)direct material plus direct labor plus applied overhead. D)direct material plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

Which of the following replaces the retailing component "Purchases" in computing Cost of Goods Sold for a manufacturing company? A)direct material used B)cost of goods manufactured C)total prime cost D)cost of goods available for sale

Costs that are incurred to preclude defects and improper processing are: A)prevention costs B)detection costs C)appraisal costs D)failure costs

Costs that are incurred for monitoring and inspecting are: A)prevention costs B)detection costs C)appraisal costs D)failure costs

Costs that are incurred when customers complain are: A)prevention costs B)detection costs C)appraisal costs D)failure costs

Richards Company The following information has been taken from the cost records of Richards Company for the past year: Refer to Richards Company.The cost of raw material purchased during the year was A)$316. B)$336. C)$360. D)$411.

Richards Company The following information has been taken from the cost records of Richards Company for the past year: Refer to Richards Company.Direct labor cost charged to production during the year was A)$135. B)$216. C)$225. D)$360.

Richards Company The following information has been taken from the cost records of Richards Company for the past year: Refer to Richards Company.Cost of Goods Manufactured was A)$636. B)$716. C)$736. D)$766.

Richards Company The following information has been taken from the cost records of Richards Company for the past year: Refer to Richards Company.Cost of Goods Sold was A)$691. B)$716. C)$736. D)$801.

Bridges Corporation The following information has been taken from the cost records of Bridges Corporation for the past year: Refer to Bridges Corporation.The cost of raw material purchased during the year was A)$326. B)$346 C)$375 D)$426

Bridges Corporation The following information has been taken from the cost records of Bridges Corporation for the past year: Refer to Bridges Company.Direct labor cost charged to production during the year was A)$125 B)$188 C)$250 D)$375.

Bridges Corporation The following information has been taken from the cost records of Bridges Corporation for the past year: Refer to Bridges Company.Cost of Goods Manufactured was A)$651 B)$736 C)$771 D)$796

Bridges Corporation The following information has been taken from the cost records of Bridges Corporation for the past year: Refer to Bridges Company.Cost of Goods Sold was A)$711 B)$746 C)$796 D)$816

Jackson Company. Jackson Company manufactures wood file cabinets.The following information is available for June of the current year. The direct labor rate is $9.60 per hour and overhead for the month was $9,600. Refer to Jackson Company.Compute total manufacturing costs for June,if there were 1,500 direct labor hours and $21,000 of raw material was purchased. A)$58,500 B)$46,500 C)$43,500 D)$43,100

Jackson Company. Jackson Company manufactures wood file cabinets.The following information is available for June of the current year. The direct labor rate is $9.60 per hour and overhead for the month was $9,600. Refer to Jackson Company.What are prime costs and conversion costs,respectively if there were 1,500 direct labor hours and $21,000 of raw material was purchased? A)$29,100 and $33,900 B)$33,900 and $24,000 C)$33,900 and $29,100 D)$24,000 and $33,900

Jackson Company. Jackson Company manufactures wood file cabinets.The following information is available for June of the current year. The direct labor rate is $9.60 per hour and overhead for the month was $9,600. Refer to Jackson Company.If there were 1,500 direct labor hours and $21,000 of raw material purchased,Cost of Goods Manufactured is: A)$49,100. B)$45,000. C)$51,000. D)$49,500.

Jackson Company. Jackson Company manufactures wood file cabinets.The following information is available for June of the current year. The direct labor rate is $9.60 per hour and overhead for the month was $9,600. Refer to Jackson Company.If there were 1,500 direct labor hours and $21,000 of raw material purchased,how much is Cost of Goods Sold? A)$64,500. B)$59,800. C)$38,800. D)$53,800.

Davis Company manufactures desks.The beginning balance of Raw Material Inventory was $4,500;raw material purchases of $29,600 were made during the month.At month end,$7,700 of raw material was on hand.Raw material used during the month was A)$26,400. B)$34,100. C)$37,300. D)$29,600.

McCoy Company manufactures tables.The beginning balance of Raw Material Inventory was $5,500;raw material purchases of $31,500 were made during the month.At month end,$8,200 of raw material was on hand.Raw material used during the month was A)$28,800 B)$31,500 C)$37,000. D)$39,200

Parker Company manufactures tables.If raw material used was $80,000 and Raw Material Inventory at the beginning and end of the period,respectively,was $17,000 and $21,000,what was amount of raw material was purchased? A)$76,000 B)$118,000 C)$84,000 D)$101,000

Petrie Company manufactures chairs.If raw material used was $100,000 and Raw Material Inventory at the beginning and end of the period,respectively,was $27,000 and $31,000,what was amount of raw material was purchased? A)$ 96,000 B)$104,000 C)$158,000 D)$131,000

Denson Company manufactures computer stands.What is the beginning balance of Finished Goods Inventory if Cost of Goods Sold is $107,000;the ending balance of Finished Goods Inventory is $20,000;and Cost of Goods Manufactured is $50,000 less than Cost of Goods Sold? A)$70,000 B)$77,000 C)$157,000 D)$127,000

Wyman Enterprises Refer to Wyman Enterprises.For March,prime cost incurred was A)$75,000. B)$69,000. C)$45,000. D)$39,000.

Wyman Enterprises Refer to Wyman Enterprises.For March,conversion cost incurred was A)$30,000. B)$40,000. C)$70,000. D)$72,000.

Wyman Enterprises Refer to Wyman Enterprises.For March,Cost of Goods Manufactured was A)$118,000. B)$115,000. C)$112,000. D)$109,000.

Stayton Enterprises Refer to Stayton Enterprises.For April,prime cost incurred was A)$78,000. B)$84,000 C)$51,000. D)$45,000.

Stayton Enterprises Refer to Stayton Enterprises.For April,conversion cost incurred was A)$36,000 B)$45,000. C)$81,000. D)$84,000.

Stayton Enterprises Refer to Stayton Enterprises.For April,Cost of Goods Manufactured was A)$141,000 B)$133,000. C)$125,000. D)$121,000.

Define the relevant range and explain its significance.

Define a variable cost and a fixed cost.What causes changes in these costs? Give two examples of each.

What is the difference between a product cost and a period cost? Give three examples of each.What is the difference between a direct cost and indirect cost? Give two examples of each.

What are three reasons that overhead must be allocated to products?

Why should predetermined overhead rates be used?

List and explain three types of quality costs.

Given the following information for Simpson Corporation,prepare the necessary journal entries,assuming that the Raw Material Inventory account contains both direct and indirect material.

Given the following information for Gregg Corporation,prepare the necessary journal entries,assuming that the Raw Material Inventory account contains both direct and indirect material.

Using the information below,prepare a Schedule of Cost of Goods Manufactured (in good form)for the Gleason Company for June 20y0: Additional information: purchases of raw material were $46,700;19,700 direct labor hours were worked at $11.30 per hour;overhead costs were $33,300.

Using the information below,prepare a Schedule of Cost of Goods Manufactured (in good form)for the Cayton Company for June 20y0: Additional information: purchases of raw material were $51,900;21,560 direct labor hours were worked at $12.50 per hour;overhead costs were $39,800.

In June 20y0,the Johnson Company has Cost of Goods Manufactured of $296,000;beginning Finished Goods Inventory of $29,730;and ending Finished Goods Inventory of $19,990.Prepare an income statement in good form.(Ignore taxes. )The following additional information is available:

The following information is for the Bayway Manufacturing Company for November. Prepare in good form a Statement of Cost of Goods Manufactured and Statement of Cost of Goods Sold.

The following information is for the Pawnee Manufacturing Company for November. Prepare a statement of Cost of Goods Manufactured and a statement of Cost of Goods Sold in good form.

From the following information for the Bentwater Company,compute prime costs and conversion costs for the current period. Raw material purchased during the period cost $40,800;overhead incurred and paid or accrued for the period was $21,750;and 23,600 direct labor hours were incurred at a rate of $13.75 per hour.

The following miscellaneous data has been collected for Sawyers Manufacturing Company for the most recent year-end: Required: Prepare statements of cost of goods manufactured and cost of goods sold showing how all unknown amounts were determined.

The following information was taken from the records of the Slidell Corporation for the month of July.(There were no inventories of work in process or finished goods on July 1. ) Indirect manufacturing costs are applied on a direct labor cost basis.The under-applied balance is due to seasonal variations and will be carried forward.The following cost estimates have been submitted for the work in process inventory of July 31: material,$3,000;direct labor,$2,000. Required: a.Determine the number of units that were completed and transferred to finished goods during the month. b.Complete the estimate of the cost of work in process on July 31. c.Compute cost of goods manufactured for the month. d.Determine the cost of each unit completed during the month. e.Determine the total amount debited to the Overhead Control accounts during the month.

The Lakeview Corporation had the following account balances: Required: a.What was the cost of raw material put into production during the year? b.How much of the material from question 1 consisted of indirect material? c.How much of the factory labor cost for the year consisted of indirect labor? d.What was the cost of goods manufactured for the year? e.What was the cost of goods sold for the year (before considering under- or overapplied overhead)? f.If overhead is applied to production on the basis of direct material, what rate was in effect during the year? g.Was manufacturing overhead under- or overapplied? By how much? h.Compute the ending balance in the Work in Process Inventory account. Assume that this balance consists entirely of goods started during the year. If $32,000 of this balance is direct material cost, how much of it is direct labor cost? Manufacturing overhead cost?