Question 1

Manufacturing firms use which of the following three inventory accounts?

Accepted Answer

A) Materials, Work-in-process, Transferred-out. 
B) Materials, Work-in-process, Finished goods. 
C) Materials, Finished goods, Transferred-out. 
D) Work-in-process, Finished goods, Transferred-out. 
A) Materials, Work-in-process, Transferred-out. 
B) Materials, Work-in-process, Finished goods. 
C) Materials, Finished goods, Transferred-out. 
D) Work-in-process, Finished goods, Transferred-out.

Question 2

What should be the amount of total manufacturing cost?

Accepted Answer

A) $340,000. 
B) $350,000. 
C) $380,000. 
D) $395,000. 
A) $340,000. 
B) $350,000. 
C) $380,000. 
D) $395,000.

Question 3

Advanced Technical Services, Ltd. has many products and services in the medical field. The Clinical Division of the company does research and testing of consumer products on human participants in controlled clinical studies.
Required:
Determine for each cost below whether it is best classified as a fixed, variable, or step-fixed cost.
(1) Director's salary
(2) Part-time help
(3) Payment on purchase of medical equipment
(4) Allocation of company-wide advertising
(5) Patches used on participants' arms during the study
(6) Stipends paid to participants

Accepted Answer

Answer may vary
Feed

Question 4

Materials purchases are calculated to be:

Accepted Answer

A) $143,000. 
B) $156,000. 
C) $91,000. 
D) $169,000. 
E) $140,000. 
A) $143,000. 
B) $156,000. 
C) $91,000. 
D) $169,000. 
E) $140,000.

Question 5

How will unit (average) cost of manufacturing (materials, labor and overhead) usually change if the production level rises?

Accepted Answer

A) It will remain constant. 
B) It will increase in direct proportion to the production increase. 
C) It will increase, but inversely with the production increase. 
D) It will decrease inversely and in direct proportion to the production increases. 
E) It will decrease, but not in direct proportion to the production increase. 
A) It will remain constant. 
B) It will increase in direct proportion to the production increase. 
C) It will increase, but inversely with the production increase. 
D) It will decrease inversely and in direct proportion to the production increases. 
E) It will decrease, but not in direct proportion to the production increase.

Question 6

A manufacturer of machinery currently produces equipment for a single client. The client supplies all required raw material on a no-cost basis. The manufacturer contracts to complete the desired units from this raw material. The total production costs incurred by the manufacturer are correctly identified as:

Accepted Answer

A) Prime costs. 
B) Conversion costs. 
C) Variable production costs. 
D) Factory overhead. 
A) Prime costs. 
B) Conversion costs. 
C) Variable production costs. 
D) Factory overhead.

Question 7

The income statement for a manufacturing company includes:

Accepted Answer

A) Indirect Labor, Factory Overhead, and Total Manufacturing Cost 
B) Total Manufacturing Cost and Cost of Goods Sold. 
C) Indirect Materials, Factory Overhead, and Cost of Goods Manufactured. 
D) Indirect Labor, Indirect Materials and Cost of Goods Sold. 
E) None of the above. 
A) Indirect Labor, Factory Overhead, and Total Manufacturing Cost 
B) Total Manufacturing Cost and Cost of Goods Sold. 
C) Indirect Materials, Factory Overhead, and Cost of Goods Manufactured. 
D) Indirect Labor, Indirect Materials and Cost of Goods Sold. 
E) None of the above.

Question 8

The following costs are incurred by the Oakland Company, a manufacturer of furniture.
1) wood and fabric used in furniture
2) depreciation on machinery
3) property taxes on the factory
4) labor costs to manufacture the furniture
5) electricity cost to operate the machinery
6) factory rent
7) production supervisor's salary
8) sandpaper and other supplies
9) fire insurance on factory
10) commissions paid to salespersons
Required
Classify each cost as either variable or fixed.

Accepted Answer

Answer may vary
Feedback: (1)

Question 9

Factory overhead is calculated to be:

Accepted Answer

A) $306,000. 
B) $26,000. 
C) $110,000. 
D) $84,000. 
E) $111,000. 
A) $306,000. 
B) $26,000. 
C) $110,000. 
D) $84,000. 
E) $111,000.

Question 10

Dave's Lighting Inc. produces lamps for the construction industry. During the year, the company incurred the following costs:   Inventories for the year were:   Required:
Prepare a statement of cost of goods manufactured and cost of goods sold.

Accepted Answer

Answer may

Question 11

A portion of the costs incurred by business organizations is designated as direct labor cost. As used in practice, the term direct labor cost has a wide variety of meanings. Unless the meaning intended in a given context is clear, misunderstanding and confusion are likely to ensue. If a user does not understand the elements included in direct labor cost, erroneous interpretations of the numbers might occur and could result in poor management decisions. Measurement of direct labor costs has two aspects: (1) the quantity of labor effort that is to be included, that is, the types of hours or other units of time that are to be counted; and (2) the unit price by which each of these quantities is multiplied to arrive at a monetary cost.
Required:
1) Distinguish between direct labor and indirect labor.
2) Presented below are labor cost elements that a company has been classified as direct labor, factory overhead, or either direct labor or factory overhead depending upon the situation.
Direct labor-Included in the company's direct labor are cost production efficiency bonuses and certain benefits for direct labor workers such as FICA (employer's portion), group life insurance, vacation pay, and workers' compensation insurance.
Factory overhead-The company's calculation of manufacturing overhead includes the cost of the following: wage continuation plans, the company sponsored cafeteria, the personnel department, and recreational facilities.
Direct labor or factory overhead-The costs that the company includes in this category are maintenance expense, overtime premiums, and shift premiums.
Explain the reasoning used by the company in classifying the cost elements in each of the three categories.

Accepted Answer

Answer may vary
Feedback: (1) Direct lab

Question 12

What should be the amount of direct materials used?

Accepted Answer

A) $112,000. 
B) $183,000. 
C) $189,000. 
D) $204,000. 
A) $112,000. 
B) $183,000. 
C) $189,000. 
D) $204,000.

Question 13

When cost relationships are linear, total variable costs will vary in proportion to changes in:

Accepted Answer

A) Direct labor hours. 
B) Total material cost. 
C) Total overhead cost. 
D) Volume of production. 
E) Machine hours. 
A) Direct labor hours. 
B) Total material cost. 
C) Total overhead cost. 
D) Volume of production. 
E) Machine hours.

Question 14

Which of the following is an example of an indirect cost?

Accepted Answer

A) Cost of downtime 
B) Cost of labor 
C) Cost of materials 
D) Cost of packaging materials 
A) Cost of downtime 
B) Cost of labor 
C) Cost of materials 
D) Cost of packaging materials

Question 15

The cost of goods that were finished and transferred out of work-in-process during the current period is:

Accepted Answer

A) Cost of goods sold. 
B) Cost of goods available for use. 
C) Cost of goods manufactured. 
D) Cost of goods available for sale. 
E) Cost of goods purchased. 
A) Cost of goods sold. 
B) Cost of goods available for use. 
C) Cost of goods manufactured. 
D) Cost of goods available for sale. 
E) Cost of goods purchased.

Question 16

A manager of a small manufacturing firm is interested in knowing what the company's product costs are. Which of the following would be considered a product cost for the manager's company?

Accepted Answer

A) Direct materials. 
B) Product design cost. 
C) Office expenses. 
D) Selling expenses. 
E) Advertising expense. 
A) Direct materials. 
B) Product design cost. 
C) Office expenses. 
D) Selling expenses. 
E) Advertising expense.

Question 17

What should be the amount in the finished goods inventory at the beginning of the year?

Accepted Answer

A) $15,000. 
B) $45,000. 
C) $55,000. 
D) $61,000. 
A) $15,000. 
B) $45,000. 
C) $55,000. 
D) $61,000.

Question 18

Variable costs within the relevant range for a firm are assumed:

Accepted Answer

A) Not to vary per unit. 
B) Not to vary in total. 
C) To be nonlinear. 
D) To be curvilinear. 
E) None of the above are correct. 
A) Not to vary per unit. 
B) Not to vary in total. 
C) To be nonlinear. 
D) To be curvilinear. 
E) None of the above are correct.

Question 19

Lester-Sung, Inc. is a large general construction firm in the commercial building industry. The following is a list of costs incurred by this company:
1) The cost of an employee for 8 hours at $6.00 an hour.
2) The cost of insurance for the employees.
3) The cost of 1,000 board feet of 2 x 4 lumber.
4) The CEO's salary.
Required:
Classify each cost above using the following categories:
(a) General, selling and administrative cost
(b) Direct material
(c) Direct labor
(d) Overhead cost

Accepted Answer

Answer may

Question 20

Factory overhead costs for a given period were 2 times as much as the direct material costs. Prime costs totaled $8,000. Conversion costs totaled $11,350. What are the direct labor costs for the period?

Accepted Answer

A) $4,650. 
B) $3,560. 
C) $4,200. 
D) $3,860. 
A) $4,650. 
B) $3,560. 
C) $4,200. 
D) $3,860.

Manufacturing firms use which of the following three inventory accounts?

What should be the amount of total manufacturing cost?

Materials purchases are calculated to be:

How will unit (average) cost of manufacturing (materials, labor and overhead) usually change if the production level rises?

The income statement for a manufacturing company includes:

Factory overhead is calculated to be:

Dave's Lighting Inc. produces lamps for the construction industry. During the year, the company incurred the following costs: Inventories for the year were: Required: Prepare a statement of cost of goods manufactured and cost of goods sold.

What should be the amount of direct materials used?

When cost relationships are linear, total variable costs will vary in proportion to changes in:

Which of the following is an example of an indirect cost?

The cost of goods that were finished and transferred out of work-in-process during the current period is:

A manager of a small manufacturing firm is interested in knowing what the company's product costs are. Which of the following would be considered a product cost for the manager's company?

What should be the amount in the finished goods inventory at the beginning of the year?

Variable costs within the relevant range for a firm are assumed:

Factory overhead costs for a given period were 2 times as much as the direct material costs. Prime costs totaled $8,000. Conversion costs totaled $11,350. What are the direct labor costs for the period?

Short-Term Profit Planning: Cost-Volume-Profit CVP Analysis

Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map

Job Costing

Activity-Based Costing and Customer Profitability Analysis

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

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Exam 3: Basic Cost Management Concepts

Manufacturing firms use which of the following three inventory accounts?

What should be the amount of total manufacturing cost?

Materials purchases are calculated to be:

How will unit (average) cost of manufacturing (materials, labor and overhead) usually change if the production level rises?

The income statement for a manufacturing company includes:

Factory overhead is calculated to be:

Dave's Lighting Inc. produces lamps for the construction industry. During the year, the company incurred the following costs: Inventories for the year were: Required: Prepare a statement of cost of goods manufactured and cost of goods sold.

What should be the amount of direct materials used?

When cost relationships are linear, total variable costs will vary in proportion to changes in:

Which of the following is an example of an indirect cost?

The cost of goods that were finished and transferred out of work-in-process during the current period is:

A manager of a small manufacturing firm is interested in knowing what the company's product costs are. Which of the following would be considered a product cost for the manager's company?

What should be the amount in the finished goods inventory at the beginning of the year?

Variable costs within the relevant range for a firm are assumed:

Factory overhead costs for a given period were 2 times as much as the direct material costs. Prime costs totaled $8,000. Conversion costs totaled $11,350. What are the direct labor costs for the period?

Short-Term Profit Planning: Cost-Volume-Profit CVP Analysis

Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map

Job Costing

Activity-Based Costing and Customer Profitability Analysis

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

Filters