Question 1

Use the following to answer questions:
  
-The absorption ending inventory is:

Accepted Answer

A)  $40,000 
B)  $24,000 
C)  $36,000 
D)  $8,000 
A)  $40,000 
B)  $24,000 
C)  $36,000 
D)  $8,000

Question 2

Product costs are costs assigned to goods that were either purchased or manufactured for resale.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not a relevant cost for a decision?

Accepted Answer

A)  Variable cost 
B)  Opportunity cost 
C)  Direct cost 
D)  Sunk cost 
A)  Variable cost 
B)  Opportunity cost 
C)  Direct cost 
D)  Sunk cost

Question 4

Which of the following is an example of a batch-level cost?

Accepted Answer

A)  Factory maintenance 
B)  Customer service 
C)  Direct materials 
D)  Set-up 
A)  Factory maintenance 
B)  Customer service 
C)  Direct materials 
D)  Set-up

Question 5

Batch-level costs are incurred for each line of product service.

Accepted Answer

A) True 
 B)False

Question 6

Idle time caused by equipment breakdown should be accounted for as:

Accepted Answer

A)  A period cost 
B)  Direct labor cost 
C)  A selling expense 
D)  A manufacturing overhead cost 
A)  A period cost 
B)  Direct labor cost 
C)  A selling expense 
D)  A manufacturing overhead cost

Question 7

Product costs become expenses in the period they are purchased.

Accepted Answer

A) True 
 B)False

Question 8

Lubricants used for production machinery should be considered a direct material cost at General Motors Corporation.

Accepted Answer

A) True 
 B)False

Question 9

If a manager can control or heavily influence the level of a cost, then that cost is classified as a controllable cost.

Accepted Answer

A) True 
 B)False

Question 10

Tracing costs means attaching or assigning indirect costs by some reasonable but imprecise method of averaging.

Accepted Answer

A) True 
 B)False

Question 11

Maintenance workers in the factory are considered a direct labor cost at Hewlett-Packard, a leading manufacturer of computers and computer equipment.

Accepted Answer

A) True 
 B)False

Question 12

If units produced are greater than units sold:

Accepted Answer

A)  Variable costing will have a higher profit than absorption costing 
B)  Throughput costing will have a higher profit than absorption costing 
C)  Absorption costing will have a higher profit than throughput costing but a lower profit than variable costing 
D)  Absorption costing will have a higher profit than both throughput costing and variable costing 
A)  Variable costing will have a higher profit than absorption costing 
B)  Throughput costing will have a higher profit than absorption costing 
C)  Absorption costing will have a higher profit than throughput costing but a lower profit than variable costing 
D)  Absorption costing will have a higher profit than both throughput costing and variable costing

Question 13

Period costs are recognized as expenses by retailers, but are included in inventory by manufacturers.

Accepted Answer

A) True 
 B)False

Question 14

The following description appeared in the 2005 annual report of McCormick & Company:
McCormick is a global leader in the manufacture, marketing and distribution of spices, herbs, seasonings and other flavors to the entire food industry. Customers range from retail outlets and food service providers to food manufacturers. Founded in 1889 and built on a culture of Multiple Management, McCormick has approximately 8,000 employees."
(McCormick & Company- 2005 Annual report)
Required: For each of the cost terms listed below, define the term and give an example of a cost that might fit into that category at McCormick & Company.
(a) Unit- level costs
(b) Product costs
(c) Direct costs
(d) Manufacturing overhead costs
(e) Period costs
(f) Batch-level costs

Accepted Answer

Students answers may vary.
a) Unit level

Question 15

Prime costs are the same as:

Accepted Answer

A)  Manufacturing overhead costs 
B)  Indirect labor costs 
C)  Direct labor and direct materials used 
D)  Direct labor and direct materials purchased 
A)  Manufacturing overhead costs 
B)  Indirect labor costs 
C)  Direct labor and direct materials used 
D)  Direct labor and direct materials purchased

Question 16

Nonmanufacturing costs include selling and adminstrative costs, which are not used to produce products.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following would be considered an indirect product cost?

Accepted Answer

A)  Depreciation on sales staff automobiles 
B)  President's salary 
C)  Maintenance on factory equipment 
D)  Direct Materials used in production 
A)  Depreciation on sales staff automobiles 
B)  President's salary 
C)  Maintenance on factory equipment 
D)  Direct Materials used in production

Question 18

The costs of equipment, buildings, and purchased technology should be considered when making production decisions.

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer questions:
Crowley Company has gathered the following data related to its production process of two of its products for the week ended April 30:
  
-The costs above that appear to be allocated rather than traced are:

Accepted Answer

A)  Unit level material costs 
B)  Variable conversion costs 
C)  Indirect production costs only 
D)  All indirect costs 
A)  Unit level material costs 
B)  Variable conversion costs 
C)  Indirect production costs only 
D)  All indirect costs

Question 20

Which of the following describes an opportunity cost?

Accepted Answer

A)  A cost is not intended to vary with production or sales volume 
B)  Foregone benefit that could have been realized from the best alternative use of resources 
C)  Past payments for resources that cannot be changed by any current or future decision 
D)  Costs that can be changed quickly and easily 
A)  A cost is not intended to vary with production or sales volume 
B)  Foregone benefit that could have been realized from the best alternative use of resources 
C)  Past payments for resources that cannot be changed by any current or future decision 
D)  Costs that can be changed quickly and easily

Use the following to answer questions: -The absorption ending inventory is:

Product costs are costs assigned to goods that were either purchased or manufactured for resale.

Which of the following is not a relevant cost for a decision?

Which of the following is an example of a batch-level cost?

Batch-level costs are incurred for each line of product service.

Idle time caused by equipment breakdown should be accounted for as:

Product costs become expenses in the period they are purchased.

Lubricants used for production machinery should be considered a direct material cost at General Motors Corporation.

If a manager can control or heavily influence the level of a cost, then that cost is classified as a controllable cost.

Tracing costs means attaching or assigning indirect costs by some reasonable but imprecise method of averaging.

Maintenance workers in the factory are considered a direct labor cost at Hewlett-Packard, a leading manufacturer of computers and computer equipment.

If units produced are greater than units sold:

Period costs are recognized as expenses by retailers, but are included in inventory by manufacturers.

Prime costs are the same as:

Nonmanufacturing costs include selling and adminstrative costs, which are not used to produce products.

Which of the following would be considered an indirect product cost?

The costs of equipment, buildings, and purchased technology should be considered when making production decisions.

Use the following to answer questions: Crowley Company has gathered the following data related to its production process of two of its products for the week ended April 30: -The costs above that appear to be allocated rather than traced are:

Which of the following describes an opportunity cost?

Cost Management and Strategic Decision Making Evaluating Opportunities and Leading Change

Cost Accumulation for Job-Shop and Batch Production Operations

Activity-Based Costing Systems

Activity-Based Management

Managing Customer Profitability

Managing Quality and Time to Create Value

Process-Costing Systems

Joint-Process Costing

Managing and Allocating Support-Service Costs

Cost Estimation

Financial and Cost-Volume-Profit Models

Cost Management and Decision Making

Strategic Issues in Making Long-Term Capital Investment Decisions

Budgeting and Financial Planning

Standard Costing, Variance Analysis, and Kaizen Costing

Flexible Budgets, Overhead Cost Management, and Activity-Based Budgeting

Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance

Transfer Pricing

Performance Measurement Systems Glossary Photo Credits

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Exam 2: Product Costing Systems: Concepts and Design Issues

Use the following to answer questions: -The absorption ending inventory is:

Product costs are costs assigned to goods that were either purchased or manufactured for resale.

Which of the following is not a relevant cost for a decision?

Which of the following is an example of a batch-level cost?

Batch-level costs are incurred for each line of product service.

Idle time caused by equipment breakdown should be accounted for as:

Product costs become expenses in the period they are purchased.

Lubricants used for production machinery should be considered a direct material cost at General Motors Corporation.

If a manager can control or heavily influence the level of a cost, then that cost is classified as a controllable cost.

Tracing costs means attaching or assigning indirect costs by some reasonable but imprecise method of averaging.

Maintenance workers in the factory are considered a direct labor cost at Hewlett-Packard, a leading manufacturer of computers and computer equipment.

If units produced are greater than units sold:

Period costs are recognized as expenses by retailers, but are included in inventory by manufacturers.

Prime costs are the same as:

Nonmanufacturing costs include selling and adminstrative costs, which are not used to produce products.

Which of the following would be considered an indirect product cost?

The costs of equipment, buildings, and purchased technology should be considered when making production decisions.

Use the following to answer questions: Crowley Company has gathered the following data related to its production process of two of its products for the week ended April 30: -The costs above that appear to be allocated rather than traced are:

Which of the following describes an opportunity cost?

Cost Management and Strategic Decision Making Evaluating Opportunities and Leading Change

Cost Accumulation for Job-Shop and Batch Production Operations

Activity-Based Costing Systems

Activity-Based Management

Managing Customer Profitability

Managing Quality and Time to Create Value

Process-Costing Systems

Joint-Process Costing

Managing and Allocating Support-Service Costs

Cost Estimation

Financial and Cost-Volume-Profit Models

Cost Management and Decision Making

Strategic Issues in Making Long-Term Capital Investment Decisions

Budgeting and Financial Planning

Standard Costing, Variance Analysis, and Kaizen Costing

Flexible Budgets, Overhead Cost Management, and Activity-Based Budgeting

Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance

Transfer Pricing

Performance Measurement Systems Glossary Photo Credits

Filters