Question 1

Which of the following accounts would be a period cost rather than a product cost?
A)Depreciation on manufacturing machinery.
B)Maintenance on factory machines.
C)Production manager's salary.
D)Direct Labor.
E)Freight out.

Accepted Answer

Freight out is a period cost because it is related to the delivery of the finished product to the customer and is considered an operating expense. The other options are all related to the production of the product and would be included in the cost of goods sold as product costs.

Question 2

Which of the following statements is (are)false? (1).In general,the term expense is used for managerial purposes,while the term cost refers to external financial reports.(2).An opportunity cost is the benefit forgone by selecting one alternative over another.
A)Only (1)is false.
B)Only (2)is false.
C)Both (1)and (2)are false.
D)Neither (1)nor (2)are false.

Accepted Answer

Statement (1) is false because both expense and cost are used for managerial and external financial reporting purposes. Statement (2) is true as opportunity cost is the benefit forgone by selecting one alternative over another.

Question 3

Which of the following statements is (are)true? (1).An asset is a cost that will be matched with revenues in a future accounting period.(2).Opportunity costs are recorded as intangible assets in the current accounting period.
A)Only (1)is true.
B)Only (2)is true.
C)Both (1)and (2)are true.
D)Neither (1)nor (2)are true.

Accepted Answer

(1) is true. Assets are resources owned or controlled by a company with the expectation that it will provide future benefits, and these benefits will be matched with revenues in a future accounting period.
(2) is false. Opportunity costs are not recorded as intangible assets. They represent the forgone benefit that could have been obtained from the best alternative use of resources, and are not recognized in the financial statements.

Question 4

Which of the following best distinguishes an opportunity cost from an outlay cost?
A)Opportunity costs are recorded,whereas outlay costs are not.
B)Outlay costs are speculative in nature,whereas opportunity costs are easily traceable to products.
C)Opportunity costs have very little utility in practical applications,whereas outlay costs are always relevant.
D)Opportunity costs are sacrifices from foregone alternative uses of resources,whereas outlay costs are cash outflows.

Accepted Answer

Opportunity costs refer to the cost of the next best alternative foregone when a choice is made. This means that opportunity costs are the sacrifices incurred from giving up an opportunity in favor of another. On the other hand, outlay costs refer to the costs incurred as a result of making a financial transaction or investment, such as paying cash for a product or service. Thus, it can be seen that opportunity costs are related to foregone alternatives, while outlay costs are related to monetary expenses.

Question 5

Marketing costs include all of the following except:
A)Advertising.
B)Shipping costs.
C)Sales commissions.
D)Legal and accounting fees.

Accepted Answer

The answer of Marketing costs include all of the following...

Question 6

The cost of the direct labor will be treated as an expense on the income statement when the resulting:
A)payroll costs are paid.
B)payroll costs are incurred.
C)products are completed.
D)products are solD.This solution supports the matching principle.

Accepted Answer

The matching principle requires that expenses be recognized in the same period as the revenues they help to generate. Therefore, direct labor costs are expensed when the products are sold, aligning the cost with the revenue from the sale.

Question 7

The amount of direct materials issued to production is found by
A)subtracting ending work in process from total work in process during the period.
B)adding beginning direct materials inventory and the delivered cost of direct materials.
C)subtracting ending direct materials from direct materials available for production.
D)adding delivered cost of materials,labor,and manufacturing overheaD.

Accepted Answer

The amount of direct materials issued to production is the direct materials used in production during the period. This can be calculated by subtracting the ending inventory of direct materials from the direct materials available for production, which includes the beginning inventory of direct materials and any direct materials purchased or delivered during the period. Therefore, choice C is the best answer.

Question 8

For a manufacturing company,which of the following is an example of a period cost rather than a product cost?
A)Wages of salespersons.
B)Salaries of machine operators.
C)Insurance on factory equipment.
D)Depreciation of factory equipment.

Accepted Answer

Wages of salespersons are a period cost because they are not directly related to the production of a specific product. Instead, they are a cost of selling and promoting the company's products. Salaries of machine operators, insurance on factory equipment, and depreciation of factory equipment are examples of product costs because they are directly related to the production of goods.

Question 9

A product cost is deducted from revenue when
A)the finished goods are sold.
B)the expenditure is incurred.
C)the production process takes place.
D)the production process is completeD.

Accepted Answer

Product cost is only deducted from revenue when the finished goods are sold. The cost of producing the goods is initially recorded as an inventory asset and only expensed when the goods are sold.

Question 10

Classifying a cost as either direct or indirect depends upon
A)whether an expenditure is unavoidable because it cannot be changed regardless of any action taken.
B)whether the cost is expensed in the period in which it is incurred.
C)the behavior of the cost in response to volume changes.
D)the cost object to which the cost is being relateD.This is the definition for classifying a cost as either direct or indirect.

Accepted Answer

The classification of a cost as direct or indirect depends upon the cost object to which the cost is being related. Direct costs can be easily traced to a specific cost object while indirect costs cannot be easily traced and are allocated to cost objects based on a reasonable and consistent method. Therefore, the best choice is D.

Question 11

The beginning Work-in-Process inventory plus the total of the manufacturing costs equals
A)total finished goods during the period.
B)cost of goods sold for the period.
C)total work-in-process during the period.
D)cost of goods manufactured for the perioD.Total work-in-process during the period is equal to the beginning Work-in-Process inventory plus the total of the manufacturing costs.

Accepted Answer

The total work-in-process during the period is calculated by adding the beginning work-in-process inventory to the total manufacturing costs incurred during the period.

Question 12

Which of the following costs is both a prime cost and a conversion cost?
A)direct materials
B)direct labor
C)manufacturing overhead
D)administrative costs

Accepted Answer

The answer of Which of the following costs is both...

Question 13

The Work-in-Process Inventory of the Rapid Fabricating Corp.was $3,000 higher on December 31,2012 than it was on January 1,2012.This implies that in 2012
A)cost of goods manufactured was higher than cost of goods sold.
B)cost of goods manufactured was less than total manufacturing costs.
C)manufacturing costs were higher than cost of goods sold.
D)manufacturing costs were less than cost of goods manufactureD.

Accepted Answer

The answer of The Work-in-Process Inventory of the Rapid Fabricating...

Question 14

Which of the following is not a product cost under full-absorption costing?
A)Direct materials used in the current period
B)Rent for the warehouse used to store direct materials
C)Salaries paid to the top management in the company
D)Vacation pay accrued for the production workers

Accepted Answer

Salaries paid to the top management in the company are not considered a product cost under full-absorption costing as they are not directly related to the production process or the cost of producing a specific product. Instead, they are considered a period cost and are expensed in the period in which they are incurred. Direct materials used in the current period, rent for the warehouse used to store direct materials, and vacation pay accrued for the production workers are all examples of product costs as they are directly related to the production process and the cost of producing a specific product.

Question 15

Direct labor would be part of the cost of the ending inventory for which of these accounts?
A)Work-in-Process.
B)Finished Goods.
C)Direct Materials and Work-in-Process.
D)Work-in-Process and Finished Goods.

Accepted Answer

The answer of Direct labor would be part of the...

Question 16

XYZ Company manufactures a single product.The product's prime costs consist of
A)direct material and direct labor.
B)direct material and factory overhead.
C)direct labor and factory overhead.
D)direct material,direct labor and factory overheaD.

Accepted Answer

Prime costs are the sum of direct material and direct labor costs.

Question 17

Inventoriable costs:
A)include only the prime costs of manufacturing a product.
B)include only the conversion costs of providing a service.
C)exclude fixed manufacturing costs.
D)are regarded as assets until the units are solD.

Accepted Answer

Inventoriable costs refer to the costs incurred in the production of inventory or goods. These costs include direct materials, direct labor, and manufacturing overhead. They are treated as assets until the products are sold, at which point they are expensed as cost of goods sold. This means that option D is correct, as it states that inventoriable costs are regarded as assets until the units are sold. Option A is incorrect because inventoriable costs include both direct materials and direct labor, not just prime costs. Option B is incorrect because service companies do not have inventory, and therefore do not have inventoriable costs. Option C is incorrect because fixed manufacturing costs, such as rent and depreciation of equipment, are included in inventoriable costs.

Question 18

A company which manufactures custom-made machinery routinely incurs sizable telephone costs in the process of taking sales orders from customers.Which of the following is a proper classification of this cost?
A)Product cost
B)Period cost
C)Conversion cost
D)Prime cost

Accepted Answer

The telephone costs incurred in taking sales orders from customers is a period cost. Period costs are expenses that are not directly connected to the production of goods or services, but are associated with the passage of time. They are generally classified as operating expenses and are expensed in the period they are incurred, rather than being included in the cost of goods sold. Since the telephone costs are a cost of selling the product and not directly involved in the manufacturing process of the custom-made machinery, they are classified as period costs.

Question 19

The beginning Finished Goods Inventory plus the cost of goods manufactured equals
A)ending finished goods inventory.
B)cost of goods sold for the period.
C)total work-in-process during the period.
D)total cost of goods manufactured for the perioD.
E)cost of goods available for sale for the period.

Accepted Answer

The beginning Finished Goods Inventory represents the inventory of completed products that were not sold at the end of the previous period. The cost of goods manufactured represents the total cost of all products that were completed during the current period. Adding these two amounts together gives us the total cost of goods available for sale during the period. Therefore, the correct answer is E: cost of goods available for sale for the period.

Question 20

The term "gross margin" for a manufacturing firm refers to the excess of sales over:
A)cost of goods sold,excluding fixed indirect manufacturing costs.
B)all variable costs,including variable marketing and administrative costs.
C)cost of goods sold,including fixed indirect manufacturing costs.
D)variable costs,excluding variable marketing and administrative costs.

Accepted Answer

The answer of The term "gross margin" for a manufacturing...

Quiz 2: Cost Concepts and Behavior

Which of the following accounts would be a period cost rather than a product cost?

Which of the following statements is (are) false? (1) .In general,the term expense is used for managerial purposes,while the term cost refers to external financial reports.(2) .An opportunity cost is the benefit forgone by selecting one alternative over another.

Which of the following statements is (are) true? (1) .An asset is a cost that will be matched with revenues in a future accounting period.(2) .Opportunity costs are recorded as intangible assets in the current accounting period.

Which of the following best distinguishes an opportunity cost from an outlay cost?

Marketing costs include all of the following except:

The cost of the direct labor will be treated as an expense on the income statement when the resulting:

The amount of direct materials issued to production is found by

For a manufacturing company,which of the following is an example of a period cost rather than a product cost?

A product cost is deducted from revenue when

Classifying a cost as either direct or indirect depends upon

The beginning Work-in-Process inventory plus the total of the manufacturing costs equals

Which of the following costs is both a prime cost and a conversion cost?

The Work-in-Process Inventory of the Rapid Fabricating Corp.was $3,000 higher on December 31,2012 than it was on January 1,2012.This implies that in 2012

Which of the following is not a product cost under full-absorption costing?

Direct labor would be part of the cost of the ending inventory for which of these accounts?

XYZ Company manufactures a single product.The product's prime costs consist of

Inventoriable costs:

A company which manufactures custom-made machinery routinely incurs sizable telephone costs in the process of taking sales orders from customers.Which of the following is a proper classification of this cost?

The beginning Finished Goods Inventory plus the cost of goods manufactured equals

The term "gross margin" for a manufacturing firm refers to the excess of sales over: