Question 1

Product costs are:

Accepted Answer

A) expensed when incurred. 
B) inventoried. 
C) treated in the same manner as period costs. 
D) treated in the same manner as advertising costs. 
E) subtracted from cost of goods sold. 
A) expensed when incurred. 
B) inventoried. 
C) treated in the same manner as period costs. 
D) treated in the same manner as advertising costs. 
E) subtracted from cost of goods sold.

Question 2

The accounting records of Perth Company revealed the following costs, among others: $\begin{array} { l r } 
\text { Factory insurance } & \$ 32,000 \
\text { Raw materials used } & 256,000 \
\text { Customer entertainment } & 15,000 \
\text { Indirect labour } & 45,000 \
\text { Depreciation on salespersons' cars } & 22,000 \
\text { Production equipment rental costs } & 72,000
\end{array}$ Costs that would be considered in the calculation of manufacturing overhead total:

Accepted Answer

A) $149,000. 
B) $171,000. 
C) $186,000. 
D) $420,000. 
E) $442,000. 
A) $149,000. 
B) $171,000. 
C) $186,000. 
D) $420,000. 
E) $442,000.

Question 3

Which of the following statements is correct?

Accepted Answer

A) Overtime premiums should be treated as a component of manufacturing overhead. 
B) Overtime premiums should be treated as a component of direct labour. 
C) Idle time should be treated as a component of direct labour. 
D) Idle time should be accounted for as a special type of loss. 
E) Overtime premiums should be treated as a component of manufacturing overhead and as a component of direct labour. 
A) Overtime premiums should be treated as a component of manufacturing overhead. 
B) Overtime premiums should be treated as a component of direct labour. 
C) Idle time should be treated as a component of direct labour. 
D) Idle time should be accounted for as a special type of loss. 
E) Overtime premiums should be treated as a component of manufacturing overhead and as a component of direct labour.

Question 4

Eastside Manufacturing produces small electric engines. Identify the following costs as direct materials (DM), direct labour (DL), manufacturing overhead (MOH), or a period cost (PC). Also indicate whether the cost is variable (V) or fixed (F) with respect to behaviour.
A. Commissions paid to salespeople
B. Straight-line depreciation on the factory building
C. Salary of the plant supervisor
D. Wages of the assembly-line workers
E. Machine lubricant used in production activities
F. Engine casings used in production activities
G. Advertising placed in trade journals
H. Lease payments for the president's automobile
I. Property taxes paid on the factory facilities

Accepted Answer

A. PC, V
B. MOH, F
C

Question 5

Which of the following is a period cost?

Accepted Answer

A) Direct materials. 
B) Direct labour. 
C) Indirect materials. 
D) Insurance on a manufacturing plant. 
E) Sales commissions. 
A) Direct materials. 
B) Direct labour. 
C) Indirect materials. 
D) Insurance on a manufacturing plant. 
E) Sales commissions.

Question 6

The variable costs per unit are $4 when a company produces 10,000 units of product. What are the variable costs per unit when 8,000 units are produced?

Accepted Answer

A) $2.00. 
B) $4.00. 
C) $4.50. 
D) $5.00. 
E) $5.50. 
A) $2.00. 
B) $4.00. 
C) $4.50. 
D) $5.00. 
E) $5.50.

Question 7

Indirect costs:

Accepted Answer

A) can be traced to a cost object. 
B) cannot be traced to a particular cost object. 
C) are always fixed. 
D) are always variable. 
E) may be indirect with respect to Disney World but direct with respect to one of its major components, Epcot Center. 
A) can be traced to a cost object. 
B) cannot be traced to a particular cost object. 
C) are always fixed. 
D) are always variable. 
E) may be indirect with respect to Disney World but direct with respect to one of its major components, Epcot Center.

Question 8

Which of the following entities would most likely have raw materials, work in process, and finished goods?

Accepted Answer

A) Ultramar Corporation. 
B) Leon's Furniture Store. 
C) Harvey's. 
D) West Jet Airlines. 
E) Memorial University. 
A) Ultramar Corporation. 
B) Leon's Furniture Store. 
C) Harvey's. 
D) West Jet Airlines. 
E) Memorial University.

Question 9

An employee accidentally understated the year's advertising expense by $150,000. Which of the following correctly depicts the effect of this error?

Accepted Answer

A) Cost of goods manufactured will be overstated by $150,000. 
B) Cost of goods sold will be overstated by $150,000. 
C) Both cost of goods manufactured and cost of goods sold will be overstated by $150,000. 
D) Cost of goods sold will be overstated by $150,000, and cost of goods manufactured will be understated by $150,000. 
E) Income will be overstated by $150,000. 
A) Cost of goods manufactured will be overstated by $150,000. 
B) Cost of goods sold will be overstated by $150,000. 
C) Both cost of goods manufactured and cost of goods sold will be overstated by $150,000. 
D) Cost of goods sold will be overstated by $150,000, and cost of goods manufactured will be understated by $150,000. 
E) Income will be overstated by $150,000.

Question 10

Sedgwick Corporation sold 12,500 units of its single product during the year, reporting a cost of goods sold that totaled $250,000. A review of the company's accounting records disclosed the following information. $\begin{array}{lr}
\text { Cost of goods sold as a percentage }\
\text { of sales revenue } & 40 \% \
\text { Finished goods inventory - Jan 1 } & \$ 87,000 \
\text { Work in process - Dec 31 } & 55,000 \
\text { Cost of goods manufactured } & 241,000 \
\text { Raw materials used } & 40,000 \
\text { Direct labour } & 74,000 \
\text { Manufacturing overhead } & 122,000 \
\text { Selling \& administrative expenses } & 310,000\
\text { Sedgwick is subject to a } 30 \% \text { income tax rate. }\
\end{array}$ Required:
A. Determine the selling price per unit.
B. Management established a goal at the beginning of the year to reduce the company's investment in finished-goods inventory and work-in-process inventory.
1. Analyze cost of goods sold and determine if management's goal was achieved with respect to finished-goods inventory. Show computations.
2. Analyze the firm's manufacturing costs and determine if management's goal was achieved with respect to work-in-process inventory. Show computations.
C. Is the company profitable? Show calculations.

Accepted Answer

A. Let X = sales revenue
0.4X = $250,000

Product costs are:

Which of the following statements is correct?

Which of the following is a period cost?

The variable costs per unit are $4 when a company produces 10,000 units of product. What are the variable costs per unit when 8,000 units are produced?

Indirect costs:

Which of the following entities would most likely have raw materials, work in process, and finished goods?

An employee accidentally understated the year's advertising expense by $150,000. Which of the following correctly depicts the effect of this error?

The Changing Role of Managerial Accounting

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behaviour, and Cost Estimation

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing and Flexible Budgeting

Cost Management Tools

Responsibility Accounting, Investment Centres, and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

Filters

Exam 2: Basic Cost Management Concepts

Product costs are:

Which of the following statements is correct?

Which of the following is a period cost?

The variable costs per unit are $4 when a company produces 10,000 units of product. What are the variable costs per unit when 8,000 units are produced?

Indirect costs:

Which of the following entities would most likely have raw materials, work in process, and finished goods?

An employee accidentally understated the year's advertising expense by $150,000. Which of the following correctly depicts the effect of this error?

The Changing Role of Managerial Accounting

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behaviour, and Cost Estimation

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing and Flexible Budgeting

Cost Management Tools

Responsibility Accounting, Investment Centres, and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

Filters