Question 1

Scott Corporation engages in mass customization and direct sales, the latter by accepting customer orders over the Internet. As a result, Scott:
A)would probably begin the manufacturing process upon receipt of a customer's order.
B)would typically have fairly low inventory levels for the amount of sales revenue generated.
C)would typically have fairly high inventory levels for the amount of sales revenue generated.
D)would probably begin the manufacturing process upon receipt of a customer's order and typically have fairly low inventory levels for the amount of sales revenue generated.
E)would probably begin the manufacturing process upon receipt of a customer's order and typically have fairly high inventory levels for the amount of sales revenue generated.

Accepted Answer

Since Scott Corporation engages in mass customization and direct sales, it is likely that they would begin manufacturing the product upon receiving a customer's order. This means that they would have low inventory levels as they are producing products on demand. Therefore, the best option is D, which includes both of these factors.

Question 2

ElizabethtownMotors Ltd. manufactures all-wheel drive (AWD) automobiles. Which of the following would not be classified as direct materials by the company?
A)Sheet metal used in the automobile's body.
B)CD player.
C)Wheel lubricant.
D)Tires.
E)Interior leather.

Accepted Answer

Wheel lubricant is typically considered an indirect material because it is used in small amounts and is not directly traceable to a specific product.

Question 3

Should direct materials be classified as a part of any or all of the following: conversion cost, manufacturing cost, and prime cost?
A)Conversion cost and manufacturing cost.
B)Conversion cost and prime cost.
C)Manufacturing cost and prime cost.
D)Conversion cost, manufacturing cost, and prime cost.
E)Conversion cost only.

Accepted Answer

Direct materials are classified as part of manufacturing costs and prime costs. They are not part of conversion costs, which include direct labor and manufacturing overhead.

Question 4

Ranges Ltd. produces refrigerators and stoves in an assembly-line process. Labour costs incurred during a recent period were: corporate executives, $100,000; assembly-line workers, $80,000; security guards, $18,000. The total of Ranges' direct labour cost was:
A)$18,000
B)$80,000.
C)$98,000.
D)$118,000.
E)$198,000

Accepted Answer

The answer of Ranges Ltd. produces refrigerators and stoves in...

Question 5

Costs that are expensed when incurred are called:
A)product costs.
B)direct costs.
C)inventoriable costs.
D)period costs.
E)indirect costs.

Accepted Answer

Period costs are costs that are expensed when incurred and are not associated with the production of goods. They are typically considered operating expenses and include items such as selling, general, and administrative costs.

Question 6

Which of the following entities would most likely have raw materials, work in process, and finished goods?
A)Ultramar Corporation.
B)Leon's Furniture Store.
C)Harvey's.
D)West Jet Airlines.
E)Memorial University.

Accepted Answer

Ultramar Corporation, likely being a manufacturing company, would have raw materials, work in process, and finished goods as part of its inventory.

Question 7

Which of the following inventories would a company ordinarily hold for sale?
A)Raw-materials.
B)Work-in-process.
C)Finished-goods.
D)Raw materials and finished goods.
E)Work in process and finished goods.

Accepted Answer

Finished goods inventory is the inventory that has been fully manufactured and is ready to be sold to customers. Raw materials and work-in-process inventories are not yet completed products and are typically used within the production process or converted into finished goods.

Question 8

Which of the following is a period cost?
A)Direct materials.
B)Direct labour.
C)Indirect materials.
D)Insurance on a manufacturing plant.
E)Sales commissions.

Accepted Answer

Period costs are expenses that are not tied directly to the production process and are expensed in the period they are incurred. Sales commissions are considered period costs because they are related to selling activities, not manufacturing.

Question 9

The accounting records of Banff Corporation revealed the following selected costs: Sales commissions, $25,000; plant supervision, $88,600; and administrative expenses, $179,400. Banff Corporation's period costs total:
A)$25,000.
B)$88,600.
C)$179,400.
D)$204,400.
E)$293,000.

Accepted Answer

Period costs are the expenses that are not directly related to the production of goods or services. In this case, sales commissions, plant supervision, and administrative expenses are all period costs. To find the total period costs, we add these three costs:

$25,000 + $88,600 + $179,400 = $293,000

Therefore, the period costs of Banff Corporation are $293,000. The correct answer is option D.

Question 10

Which of the following inventories would a discount retailer such as Zellers report as an asset?
A)Raw-materials.
B)Work-in-process.
C)Finished-goods.
D)Merchandise inventory.
E)Direct materials.

Accepted Answer

A discount retailer such as Zellers sells finished goods to customers, hence they would report merchandise inventory as an asset. Raw materials, work-in-process, and direct materials are typically reported by manufacturing companies.

Question 11

Product costs are:
A)expensed when incurred.
B)inventoried.
C)treated in the same manner as period costs.
D)treated in the same manner as advertising costs.
E)subtracted from cost of goods sold.

Accepted Answer

Product costs include direct materials, direct labor and factory overhead. These costs are inventoried as they become a part of the cost of the product and are not expensed until the product is sold.

Question 12

Which of the following statements is true?
A)The word "cost" has the same meaning in all situations in which it is used.
B)Cost data, once classified and recorded for a specific application, are appropriate for use in any application.
C)Different cost concepts and classifications are used for different purposes.
D)All organizations incur the same types of costs.
E)Costs incurred in one year are always meaningful in the following year.

Accepted Answer

Different cost concepts and classifications are used for different purposes. Costs can be classified in different ways based on the organization's goals and objectives. For example, costs can be classified as direct and indirect costs for cost allocation or as fixed and variable costs for decision-making. Hence, the classification of costs depends on the purpose for which they are being used.

Question 13

Which of the following costs is not a component of manufacturing overhead?
A)Indirect materials.
B)Factory utilities.
C)Factory equipment.
D)Indirect labour.
E)Property taxes on the manufacturing plant.

Accepted Answer

Factory equipment is not a cost that falls under manufacturing overhead. It is classified as a direct cost and is included in the cost of goods sold.

Question 14

Which of the following is a period cost?
A)Direct material.
B)Manufacturing overhead.
C)Depreciation on cars driven by a firm's president and treasurer.
D)Miscellaneous supplies used in production activities.
E)Indirect labour.

Accepted Answer

The answer of Which of the following is a period...

Question 15

Chant Corporation recently computed total product costs of $647,000 and total period costs of $549,000. On the basis of this information, Chant's income statement should reveal operating expenses of:
A)$98,000.
B)$488,000.
C)$549,000.
D)$647,000.
E)$1,196,000.

Accepted Answer

Period costs are considered operating expenses on the income statement, so Chant's income statement should reveal operating expenses of $549,000.

Question 16

The accounting records of Perth Company revealed the following costs, among others: $\begin{array} { l r } 
\text { Factory insurance } & \$ 32,000 \
\text { Raw materials used } & 256,000 \
\text { Customer entertainment } & 15,000 \
\text { Indirect labour } & 45,000 \
\text { Depreciation on salespersons' cars } & 22,000 \
\text { Production equipment rental costs } & 72,000
\end{array}$ Costs that would be considered in the calculation of manufacturing overhead total:
A)$149,000.
B)$171,000.
C)$186,000.
D)$420,000.
E)$442,000.

Accepted Answer

The answer of The accounting records of Perth Company revealed...

Question 17

The accounting records of Niagara Manufacturing Company revealed the following costs: direct materials used, $120,000; direct labour, $275,000; manufacturing overhead, $350,000; and selling and administrative expenses, $400,000. Niagara's product costs total:
A)$395,000.
B)$400,000.
C)$625,000.
D)$745,000.
E)$1,145,000.

Accepted Answer

Product costs include direct materials, direct labor, and manufacturing overhead. Therefore, the total product costs are $120,000 (direct materials) + $275,000 (direct labor) + $350,000 (manufacturing overhead) = $745,000.

Question 18

Depreciation of factory equipment is classified as:
A)operating cost.
B)opportunity cost.
C)manufacturing overhead.
D)prime cost.
E)administrative cost.

Accepted Answer

Depreciation of factory equipment is a cost associated with the manufacturing process, and therefore is classified as manufacturing overhead. Operating cost refers to the cost of running day-to-day operations, opportunity cost is the cost of a missed opportunity, prime cost is the cost of direct materials and labor, and administrative cost is related to the management and administration of a business.

Question 19

Which of the following is a product cost for external financial reporting purposes?
A)Amortization of office equipment used by the CEO.
B)Advertising costs.
C)The salary paid to the Vice President of Finance.
D)Rent on a factory.
E)Sales commissions.

Accepted Answer

Rent on a factory is a product cost because it is directly related to the production of goods, which is a necessary expense for a business to generate revenue. This cost would be included in the calculation of cost of goods sold and inventory valuations for financial reporting purposes. The other choices are all period costs, which are not directly related to the production of goods and are expensed in the period they are incurred.

Question 20

Companies that engage in mass customization:
A)tend to have a relatively low production volume.
B)tend to have a high production volume that involves highly standardized end-products.
C)tend to have a high production volume, many standardized components, and customer-specified combinations of components.
D)tend to have a high production volume, many unique components, and customer-specified combinations of components.
E)could be typified by the refining operations of Shell Oil.

Accepted Answer

Mass customization involves producing high volumes of products, but with the ability to offer customizable options to customers. This typically involves standardized components that can be combined in different ways to meet specific customer specifications. Option C is the closest match to this description. Option A is incorrect because low production volumes would not typically allow for mass customization. Option B describes high production volumes but with highly standardized end-products, which is not the same as mass customization. Option D describes high production volumes with unique components, which is less common in mass customization. Option E is unrelated and not a valid choice.

Quiz 2: Basic Cost Management Concepts

Scott Corporation engages in mass customization and direct sales, the latter by accepting customer orders over the Internet. As a result, Scott:

ElizabethtownMotors Ltd. manufactures all-wheel drive (AWD) automobiles. Which of the following would not be classified as direct materials by the company?

Should direct materials be classified as a part of any or all of the following: conversion cost, manufacturing cost, and prime cost?

Ranges Ltd. produces refrigerators and stoves in an assembly-line process. Labour costs incurred during a recent period were: corporate executives, $100,000; assembly-line workers, $80,000; security guards, $18,000. The total of Ranges' direct labour cost was:

Costs that are expensed when incurred are called:

Which of the following entities would most likely have raw materials, work in process, and finished goods?

Which of the following inventories would a company ordinarily hold for sale?

Which of the following is a period cost?

The accounting records of Banff Corporation revealed the following selected costs: Sales commissions, $25,000; plant supervision, $88,600; and administrative expenses, $179,400. Banff Corporation's period costs total:

Which of the following inventories would a discount retailer such as Zellers report as an asset?

Product costs are:

Which of the following statements is true?

Which of the following costs is not a component of manufacturing overhead?

Which of the following is a period cost?

Chant Corporation recently computed total product costs of $647,000 and total period costs of $549,000. On the basis of this information, Chant's income statement should reveal operating expenses of:

The accounting records of Niagara Manufacturing Company revealed the following costs: direct materials used, $120,000; direct labour, $275,000; manufacturing overhead, $350,000; and selling and administrative expenses, $400,000. Niagara's product costs total:

Depreciation of factory equipment is classified as:

Which of the following is a product cost for external financial reporting purposes?

Companies that engage in mass customization: