Exam 2: Cost Terms, Concepts, and Classifications

Which of the following would not be treated as a product cost for external financial reporting purposes?

What would be the classification of the transportation costs incurred by a manufacturing company to ship its product to its customers?

The following data pertain to Harriman Company's operations during July: Raw materials inventory \5 ,000 Work-in-process inventory ? \ 4,000 Finished goods inventory \ 12,000 ? Other data: Cost of goods manufactured \ 105,000 Rav materials used \ 40,000 Manufacturing overhead costs \ 20,000 Direct labour costs \ 39,000 Gross Margin \ 100,000 Sales \ 210,000 -What was the beginning work-in-process inventory?

In a manufacturing company,goods available for sale equals the sum of the cost of goods manufactured and the beginning finished goods inventory.

The following costs should be considered by a law firm to be indirect costs of defending a particular client in court: rent on the law firm's offices,the law firm's receptionist's wages,the costs of heating the law firm's offices,and the depreciation on the personal computer in the office of the attorney who has been assigned the client.

What does conversion cost consist of?

Manufacturing overhead is one of the three elements of manufacturing costs.Unlike direct materials and direct labour costs,assigning manufacturing overhead cost to products can be a very difficult task. Required: Do you agree with this aspect of manufacturing overhead? Why or why not?

Use the following information to determine the gross margin for Pacific States Manufacturing for the year just ended (all amounts are in thousands of dollars): Sales \ 31,800 Purchases of direct materials \ 7,000 Direct labour \ 5,000 Work-in-process inventory, 1/1 \ 800 Work-in-process inventory, 12/31 \ 3,000 Finished goods inventory, 1/1 \ 4,000 Finished goods inventory, 12/31 \ 5,300 Accounts payable, 1/1 \ 1,700 Accounts payable, 12/31 \ 1,500 Direct materials inventory, 1/1 \ 6,000 Direct materials inventory, 12/31 \ 1,000 Indirect labour \ 600 Indirect materials used \ 500 Utilities factory \ 1,900 Depreciation on factory equipment \ 3,500

Variable costs are costs whose per unit costs vary as the activity level rises and falls.

Geneva Steel Corporation produces large sheets of heavy gauge steel. The company showed the following amounts relating to its production for the year just completed: Direct materials used in production \ 110,000 Direct labour costs for the year \ 55,000 Work in process, beginning \ 22,000 Finished goods, beginning \ 45,000 Cost of goods available for sale \ 288,000 Cost of goods sold \ 238,000 Work in process, ending \ 16,000 -What was the balance of the finished goods inventory at the end of the year?

Which of the following costs is often important in decision making,but is omitted from conventional accounting records?

A manufacturing company prepays its insurance coverage for a three-year period.The premium for the three years is $2,700 and is paid at the beginning of the first year.Eighty percent of the premium applies to manufacturing operations and 20% applies to selling and administrative activities.What amounts should be considered product costs and period costs respectively for the first year of coverage? Period Costs A) \ 2,700 \ 0 B) \ 2,160 \ 540 C) \ 1,440 \ 360 D) \ 720 \ 180

Manufacturing overhead combined with direct materials is known as conversion cost.

Which of the following should NOT be included as part of manufacturing overhead at a company that makes office furniture?

Mary Tappin,an assistant Vice President at Galaxy Toys,was disturbed to find on her desk a memo from her boss,Gary Resnick,to the controller of the company.The memo appears below: Galaxy Toys Internal Memo Sept 15 To: Harry Wilson,Controller Fm: Gary Resnick,Executive Vice President As you know,we won't start recording many sales until October when stores start accepting shipments from us for the Christmas season.Meanwhile,we are producing flat-out and are building up our finished goods inventories so that we will be ready to ship next month.Unfortunately,we are in a bind right now since it looks like the net income for the quarter ending on Sept 30 is going to be pretty awful.This may get us in trouble with the bank since they always review the quarterly financial reports and may call in our loan if they don't like what they see.Is there any possibility that we could change the classification of some of our period costs to product costs--such as the rent on the finished goods warehouse? Please let me know as soon as possible.The President is pushing for results. Mary didn't know what to do about the memo.It wasn't intended for her,but its contents were alarming. Required: a.Why has Gary Resnick suggested reclassifying some period costs as product costs? b.Why do you think Mary was alarmed about the memo?

How should the cost of the fire insurance for a manufacturing plant be classified?

The following data pertain to Harriman Company's operations during July: Raw materials inventory \5 ,000 Work-in-process inventory ? \ 4,000 Finished goods inventory \ 12,000 ? Other data: Cost of goods manufactured \ 105,000 Rav materials used \ 40,000 Manufacturing overhead costs \ 20,000 Direct labour costs \ 39,000 Gross Margin \ 100,000 Sales \ 210,000 -What was the ending finished goods inventory?

To what does the term differential cost refer?

A cost that differs from one month to another is known as a differential cost.

How would the cost of rent for a manufacturing plant generally be classified?