Question 1

The income statement of a service-sector firm reports:
A)period and inventoriable costs but at different times;the reporting varies.
B)inventoriable costs only.
C)both period and inventoriable costs.
D)period costs only.

Accepted Answer

Service-sector firms do not have inventories, as they do not sell physical products. Therefore, they only report period costs, which are the expenses incurred in operating the business.

Question 2

Direct manufacturing ________ costs include the compensation of all manufacturing labour that can be traced to the cost object (work in process and then finished goods)in an economically feasible way.
A)material
B)labour
C)overhead
D)projected

Accepted Answer

Direct manufacturing costs specifically refer to the compensation of all manufacturing labor that can be traced to the cost object (work in process and then finished goods) in an economically feasible way. Material costs refer to the costs of raw materials or components used in production, overhead costs refer to all indirect costs associated with producing goods, and projected costs refer to estimated future costs.

Question 3

Which of the following do manufacturing companies report?
A)Only finished goods inventory
B)No inventory accounts
C)Direct materials inventory,work-in-process inventory,finished goods inventory
D)Only direct materials inventory

Accepted Answer

Manufacturing companies report all three types of inventory: direct materials inventory, work-in-process inventory, and finished goods inventory.

Question 4

A retailer's inventory would normally include:
A)goods partially worked on but not yet fully completed.
B)direct materials in stock and awaiting use in the manufacturing process.
C)goods fully completed by the firm but not yet sold.
D)products in their original form intended to be sold without changing their basic form.

Accepted Answer

The answer of A retailer's inventory would normally include:
A)goods partially...

Question 5

________ costs are the acquisition costs of all materials that eventually become part of the cost object (work in process and then finished goods)and can be traced to the cost object in an economically feasible way.
A)Direct materials
B)Indirect materials
C)Fixed
D)Variable

Accepted Answer

Direct materials are the materials that can be directly traced to the cost object (work in process and finished goods) in an economically feasible way. These materials can be easily identified and are a part of the final product cost. Indirect materials, fixed costs and variable costs are not necessarily directly traceable to the cost object.

Question 6

________ sector companies purchase materials and components and convert them into various finished goods.
A)Service
B)Manufacturing
C)Professional
D)Retail

Accepted Answer

Manufacturing sector companies purchase raw materials and convert them into finished goods through various processes. Service sector companies provide intangible services, professional sector companies provide specialized knowledge and expertise, and retail sector companies sell finished goods directly to consumers.

Question 7

Service sector companies report:
A)only finished goods inventory.
B)direct materials inventory.
C)no inventory accounts.
D)only work-in-process inventory.

Accepted Answer

Service sector companies do not typically hold inventory, so they do not have inventory accounts.

Question 8

Manufacturing costs include all of the following EXCEPT:
A)both inventoriable and period costs.
B)both direct and indirect costs.
C)both variable and fixed costs.
D)costs incurred inside the factory.

Accepted Answer

Manufacturing costs typically include direct and indirect costs, variable and fixed costs, and costs incurred inside the factory. However, they do not encompass both inventoriable costs and period costs simultaneously. Inventoriable costs are those that are capitalized as inventory on the balance sheet until the product is sold, at which point they become cost of goods sold. Period costs, on the other hand, are all the other costs that are not capitalized as inventory but are expensed in the period they are incurred, such as selling, general, and administrative expenses.

Question 9

Finished goods inventory would normally include:
A)direct materials in stock and awaiting use in the manufacturing process.
B)goods fully completed but not yet sold.
C)products in their original form intended to be sold without changing their basic form.
D)goods partially worked on but not yet fully completed.

Accepted Answer

Finished goods inventory refers to products that have been fully completed but have not yet been sold. Therefore, choice B is the best option for this question. Choices A, C, and D are not considered finished goods inventory as they either have not been completed or are not intended for sale in their original form.

Question 10

________ costs are all costs of a product that are considered as assets in the balance sheet when they are incurred and that become cost of goods sold only when the product is sold.
A)Direct
B)Indirect
C)Variable
D)Inventoriable

Accepted Answer

Inventoriable costs are also known as product costs because they are associated with creating and holding inventory. These costs become cost of goods sold only when the product is sold. Examples of inventoriable costs include direct materials, direct labor, and manufacturing overhead.

Question 11

Work-in-process inventory would normally include:
A)direct materials in stock and awaiting use in the manufacturing process.
B)products in their original form intended to be sold without changing their basic form.
C)goods fully completed by the firm but not yet sold.
D)goods partially worked on but not yet fully completed.

Accepted Answer

Work-in-process inventory refers to goods that are in the middle of the manufacturing process. Therefore, direct materials in stock and awaiting use (option A) and goods fully completed (option C) are not considered work-in-process inventory. Products in their original form intended to be sold without changing their basic form (option B) are considered finished goods inventory. Therefore, the best choice is option D, goods that are partially worked on but not yet fully completed.

Question 12

For manufacturing sector companies,period costs in the income statement are all:
A)prime costs.
B)non-manufacturing costs.
C)fixed costs.
D)indirect costs.

Accepted Answer

Period costs in the income statement refer to non-manufacturing costs, such as selling, general, and administrative expenses. These costs are not directly related to the production of goods and are incurred over a period of time rather than tied to a specific production run.

Question 13

Retail sector companies purchase ________ products and then sell them without changing their
Basic form.
A)tangible
B)intangible
C)packaged
D)popular

Accepted Answer

Retail sector companies purchase tangible products, such as clothing, electronics, and groceries, and sell them to consumers without altering their basic form. Intangible products, such as services, cannot be sold in their basic form as they require some level of customization and personalization for each customer. "Packaged" and "popular" are not accurate descriptions of products in the retail sector.

Question 14

Period costs are all costs in the income statement other than:
A)prime costs.
B)indirect costs.
C)fixed costs.
D)cost of goods sold.

Accepted Answer

Period costs are all costs in the income statement other than cost of goods sold. Cost of goods sold are considered product costs and are included in the cost of producing a product or service.

Question 15

Inventoriable costs:
A)are particularly useful in management accounting.
B)are also referred to as nonmanufacturing costs.
C)include administrative and marketing costs.
D)are expensed in the accounting period in which the products are sold.

Accepted Answer

Inventoriable costs are costs associated with the production of goods and are capitalized as inventory on the balance sheet until the goods are sold, at which point they are expensed on the income statement. Choices A, B, and C are incorrect because they do not accurately describe inventorial costs.

Question 16

________ sector companies provide intangible products.
A)Professional
B)Service
C)Retail
D)Manufacturing

Accepted Answer

Service sector companies provide intangible products such as consulting, banking, education, and healthcare services.

Question 17

Inventoriable costs are expensed on the income statement:
A)after the products are manufactured.
B)when the products are sold.
C)when direct materials for the product are purchased.
D)not at any particular time,it varies.

Accepted Answer

Inventoriable costs, such as direct materials, direct labor, and factory overhead, are all only expensed on the income statement when the finished products are sold. This is because these costs are initially recorded as assets on the balance sheet until the products are sold, at which point they become expenses on the income statement in the form of cost of goods sold.

Question 18

Manufacturing overhead costs in a motor car manufacturing plant MOST likely include:
A)steering wheel costs.
B)labour costs of the painting department.
C)sales commissions.
D)indirect material costs such as lubricants.

Accepted Answer

Manufacturing overhead costs are indirect costs that are necessary for the production process but cannot be directly traced to the products being manufactured. Indirect material costs, such as the cost of lubricants used in the production process, are examples of manufacturing overhead costs. Steering wheel costs and labour costs of the painting department are direct costs that can be traced to the production of specific products, while sales commissions are a selling expense and not a manufacturing overhead cost.

Question 19

________ manufacturing costs are all manufacturing costs that are related to the cost object (work in process and then finished goods)but cannot be traced to that cost object in an economically feasible way.
A)Fixed
B)Unit
C)Indirect
D)Direct

Accepted Answer

Indirect manufacturing costs are incurred during the manufacturing process but cannot be traced to a specific cost object in an economically feasible way. These costs are typically overhead expenses, such as rent, utilities, and maintenance. Direct manufacturing costs, on the other hand, are costs that can be easily traced to a specific cost object, such as materials and labor. Fixed and unit manufacturing costs are subcategories of direct and indirect costs, respectively.

Question 20

________ include the compensation of all manufacturing labour that can be traced to the cost object.
A)Indirect manufacturing costs
B)Direct manufacturing labour costs
C)Direct material costs
D)Manufacturing overhead costs

Accepted Answer

Direct manufacturing labour costs include the compensation of all manufacturing labour that can be traced to the cost object, such as wages of workers who directly work on the production of the cost object. Indirect manufacturing costs refer to manufacturing costs that cannot be directly traced to the cost object, while direct material costs refer to the costs of material that can be directly traced to the cost object. Manufacturing overhead costs refer to all manufacturing costs other than direct materials and direct labour.

Quiz 2: Different Costs for Different Purposes

The income statement of a service-sector firm reports:

Direct manufacturing ________ costs include the compensation of all manufacturing labour that can be traced to the cost object (work in process and then finished goods) in an economically feasible way.

Which of the following do manufacturing companies report?

A retailer's inventory would normally include:

________ costs are the acquisition costs of all materials that eventually become part of the cost object (work in process and then finished goods) and can be traced to the cost object in an economically feasible way.

________ sector companies purchase materials and components and convert them into various finished goods.

Service sector companies report:

Manufacturing costs include all of the following EXCEPT:

Finished goods inventory would normally include:

________ costs are all costs of a product that are considered as assets in the balance sheet when they are incurred and that become cost of goods sold only when the product is sold.

Work-in-process inventory would normally include:

For manufacturing sector companies,period costs in the income statement are all:

Retail sector companies purchase ________ products and then sell them without changing their Basic form.

Period costs are all costs in the income statement other than:

Inventoriable costs:

________ sector companies provide intangible products.

Inventoriable costs are expensed on the income statement:

Manufacturing overhead costs in a motor car manufacturing plant MOST likely include:

________ manufacturing costs are all manufacturing costs that are related to the cost object (work in process and then finished goods) but cannot be traced to that cost object in an economically feasible way.

________ include the compensation of all manufacturing labour that can be traced to the cost object.