Question 1

A factory supervisor's salary would be classified as a direct cost of a unit of product.

Accepted Answer

A factory supervisor's salary is an indirect cost as it can't be traced back to a particular unit of product. Direct costs are expenses that are directly related to the production of a specific product or service, such as the cost of raw materials, labor directly involved in production, and any other expenses that are incurred directly in the production process.

Question 2

Differential costs can be either fixed or variable.

Accepted Answer

Differential costs can be either fixed or variable depending on the nature of the cost. Fixed differential costs remain constant regardless of the level of production or activity, whereas variable differential costs change with the level of production or activity.

Question 3

Although depreciation is always a period cost in a merchandising firm, it can be a product cost in a manufacturing firm.

Accepted Answer

In a manufacturing firm, depreciation can be considered a product cost because it is a cost incurred during the production process and is therefore included in the cost of goods sold. In contrast, in a merchandising firm, depreciation is not directly related to the cost of goods sold and is considered a period cost.

Question 4

In a manufacturing firm, all costs are product costs.

Accepted Answer

In a manufacturing firm, there are also non product costs such as overhead costs, administrative expenses, and marketing costs that are not directly associated with producing a product, but still contribute to the overall cost of running the company.

Question 5

Direct material cost combined with manufacturing overhead cost is known as conversion cost.

Accepted Answer

Conversion cost is the combination of direct labor cost and manufacturing overhead cost, not direct material cost.

Question 6

Managerial accounting is primarily concerned with the organization as a whole rather than with segments of the organization.

Accepted Answer

Managerial accounting is concerned with all aspects of the organization, including segments or departments within it. In fact, one of the main purposes of managerial accounting is to provide information for decision-making and performance evaluation at the segment level, allowing managers to identify areas for improvement and make strategic business decisions.

Question 7

The cost of napkins put on each person's tray at a fast food restaurant is a fixed cost.

Accepted Answer

The cost of napkins is a variable cost because it changes with the number of customers served.

Question 8

Direct labor is a part of both prime cost and conversion cost.

Accepted Answer

Direct labor is the cost of the wages and benefits paid to employees who directly work on a product or service. It is a component of both prime cost (which includes direct materials and direct labor) and conversion cost (which includes direct labor and manufacturing overhead).

Question 9

The cost of goods manufactured for a period is the amount transferred from work in process inventory to finished goods inventory during the period.

Accepted Answer

The cost of goods manufactured represents the total cost of products that were completed in a particular period, and it includes the direct materials, direct labor, and overhead costs incurred to manufacture those products. This cost figure is then transferred from work in process inventory to finished goods inventory at the end of the period. Therefore, the statement is true.

Question 10

Wages paid to production supervisors would be considered direct labor.

Accepted Answer

Wages paid to production supervisors are considered indirect labor because supervisors do not directly work on the production of goods.

Question 11

If the finished goods inventory increases between the beginning and the end of a period, then the cost of goods manufactured for the period is larger than the cost of goods sold.

Accepted Answer

If finished goods inventory increases, it means more goods were produced than sold, indicating that the cost of goods manufactured is greater than the cost of goods sold.

Question 12

The inventory of finished goods on hand at the end of a period is considered an asset, but inventories of raw materials and work-in-process are not considered assets until production is completed.

Accepted Answer

All types of inventory, including raw materials, work-in-process, and finished goods, are considered assets on a company's balance sheet.

Question 13

Managerial accounting:
A) has its primary emphasis on the future.
B) is required by regulatory bodies such as the SEC.
C) focuses on the organization as a whole, rather than on the organization's segments.
D) Responses a, b, and c are all correct.

Accepted Answer

Managerial accounting primarily focuses on providing information for future decision-making rather than historical data.

(Note: Options B and C are incorrect as managerial accounting is not required by regulatory bodies and it does focus on segments of an organization.)

Question 14

A fixed cost is constant per unit of product.

Accepted Answer

A fixed cost is a cost that remains constant regardless of the level of production or sales. Therefore, it is not constant per unit of product but rather constant in total.

Question 15

The cost of shipping parts from a supplier is considered a product cost.

Accepted Answer

The cost of shipping parts from a supplier is considered a direct cost that is incurred in producing a product, hence it is considered a product cost.

Question 16

Managerial accounting places less emphasis on nonmonetary data than financial accounting.

Accepted Answer

Managerial accounting places more emphasis on nonmonetary data than financial accounting. Managerial accounting is focused on providing information to internal users for decision-making and planning purposes, while financial accounting is primarily concerned with reporting financial information to external users such as investors and creditors. Therefore, managerial accounting considers both monetary and nonmonetary data such as customer satisfaction, employee morale, and market trends in addition to financial data.

Question 17

Which of the following IS a characteristic of financial accounting?
A) not mandatory
B) must follow GAAP
C) emphasis on relevance of data, rather than precision
D) both A and C above

Accepted Answer

Financial accounting is mandatory and must follow Generally Accepted Accounting Principles (GAAP) to ensure consistency and comparability among financial statements. The emphasis is on providing accurate and precise financial information for decision-making purposes. Therefore, option A and C are incorrect.

Question 18

Advertising is a product cost as long as it promotes specific products.

Accepted Answer

Advertising is typically considered a period cost, not a product cost, because it is not directly tied to the production of a specific product but rather to selling and administrative expenses.

Question 19

The variable cost per unit is constant and does not depend on how many units are produced.

Accepted Answer

Variable costs are those costs which vary with the level of production. Examples include direct materials, direct labor, and variable overhead costs. The variable cost per unit remains the same irrespective of the number of units produced.

Question 20

The plans of management are expressed formally in:
A) the annual report to shareholders.
B) Form 10-Q submitted to the Securities and Exchange Commission.
C) performance reports.
D) budgets.

Accepted Answer

The plans of management are expressed formally in budgets, which outline the allocation of resources and financial goals for a specific period of time. The other options listed may contain information about management plans, but they are not the primary formal expression of these plans.

Quiz 2: Managerial Accounting and Cost Concepts