Question 1

Any item for which a separate measurement of cost is desired is known as:

Accepted Answer

A) a cost object. 
B) an indirect cost. 
C) cost allocation. 
D) a direct cost. 
A) a cost object. 
B) an indirect cost. 
C) cost allocation. 
D) a direct cost.

Question 2

Absorption costing 'absorbs' only variable manufacturing costs.

Accepted Answer

A) True 
 B)False

Question 3

Answer the following questions using the information below:
Jindabyne Pillows produces and sells a decorative pillow for $75.00 per unit.In the first month of operation,
2000 units were produced and 1750 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:
 $\begin{array}{lr}
\text { Variable manufacturing costs } & \$ 20.00 \text { per unit } \
\text { Variable marketing costs } & \$ 3.00 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 7.00 \text { per unit } \
\text { Administrative expenses, all fixed } & \$ 15.00 \text { per unit }\\text { Ending inventories: }\
\text { Direct materials } & -0- \
\text { WIP } & -0- \
\text { Finished goods } & 250 \text { urits }
\end{array}$
-What is 'cost of goods sold' using variable costing?

Accepted Answer

A) $35 000 
B) $40 000 
C) $47 250 
D) $54 000 
A) $35 000 
B) $40 000 
C) $47 250 
D) $54 000

Question 4

What is the meaning of the term 'cost object?' Give an example of a cost object that would be used in a manufacturing company,a merchandising company,and a service sector company?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

A cost object is anything for which a me

Question 5

Product costs used for external reporting generally include:

Accepted Answer

A) design costs plus manufacturing costs. 
B) manufacturing costs only. 
C) all costs incurred along the value chain. 
D) All of these answers are correct. 
A) design costs plus manufacturing costs. 
B) manufacturing costs only. 
C) all costs incurred along the value chain. 
D) All of these answers are correct.

Question 6

Answer the following questions using the information below:
Pederson Company reported the following:
 $\begin{array}{ll}
\text { Manufacturing costs } & \$ 2,000,000 \
\text { Units manufactured } & 50,000 \
\text { Units sold } & 47000 \text { units sold for } \$ 75 \text { per unit } \
\text { Beginning inventory } & 0 \text { units }
\end{array}$
-What is the cost of ending finished goods inventory?

Accepted Answer

A) $105 000 
B) $120 000 
C) $225 000 
D) $1 880 000 
A) $105 000 
B) $120 000 
C) $225 000 
D) $1 880 000

Question 7

Inaccurate product costs will mislead managers about the profitability of different products.

Accepted Answer

A) True 
 B)False

Question 8

The production-volume variance only exists under absorption costing and not under variable costing.

Accepted Answer

A) True 
 B)False

Question 9

The gross-margin format of the income statement:

Accepted Answer

A) distinguishes between manufacturing and nonmanufacturing costs. 
B) calculates contribution margin. 
C) is used with variable costing. 
D) distinguishes variable costs from fixed costs. 
A) distinguishes between manufacturing and nonmanufacturing costs. 
B) calculates contribution margin. 
C) is used with variable costing. 
D) distinguishes variable costs from fixed costs.

Question 10

Answer the following questions using the information below:
Healesville Animates produces and sells a luxury animal pillow for $40.00 per unit.In the first month of operation,3000 units were produced and 2250 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:
 $\begin{array}{ll}
\text { Variable manufacturing costs } & \$ 19 \text { per unit } \
\text { Variable marketing costs } & \$ 1 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 30000 \text { per month } \
\text { Administrative expenses, all fixed } & \$ 6000 \text { per month } \
\text { Ending inventories: } &\text { Direct materials } & -0- \
\text { WIP } & -0- \
\text { Finished goods } & 750 \text { units }
\end{array}$
-What is cost of goods sold per unit when using absorption costing?

Accepted Answer

A) $19 
B) $20 
C) $29 
D) $32 
A) $19 
B) $20 
C) $29 
D) $32

Question 11

Joseph Davis worked 44 hours last week for Breakgood Manufacturing.Of the 44 hours,4 hours were considered overtime,and also Davis was idle for 5 of the 44 hours due to an equipment malfunction.Davis makes $20 per hour and is paid $30 an hour (time and a half)for overtime.Davis' total compensation for that week would be ________,and assuming Breakgood charges overtime premium and idle time to indirect labour,the amount of this compensation credited to indirect labour would be ________.

Accepted Answer

A) $920;$40 
B) $840;$140 
C) $840;$40 
D) $920;$140 
A) $920;$40 
B) $840;$140 
C) $840;$40 
D) $920;$140

Question 12

Answer the following questions using the information below:
Axle and Wheel Manufacturing currently produces 1000 axles per month.The following per unit data apply for sales to regular customers:
 $\begin{array}{lr}
\text { Direct materials } & \$ 30 \
\text { Direct manufacturing labour } & 5 \
\text { Variable manufacturing overhead } & 10 \
\text { Fixed manufacturing overhead } & \underline{40} \
{\text { Total manufacturing costs }} & \$ 85
\end{array}$
-The plant has capacity for 2000 axles and is considering expanding production to 1500 axles.What is the total cost of producing 1500 axles?

Accepted Answer

A) $170 000 
B) $85 000 
C) $107 500 
D) $102 500 
A) $170 000 
B) $85 000 
C) $107 500 
D) $102 500

Question 13

Why is it possible that a raw material such as glue will be considered as an indirect material for one furniture manufacturer and as a direct material for another furniture manufacturer?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Overall,the direct/indirect classificati

Question 14

If managers report inventories of zero at the start and end of each accounting period,operating profits under absorption costing and variable costing will be the same.

Accepted Answer

A) True 
 B)False

Question 15

________ are subtracted from sales to calculate gross margin.

Accepted Answer

A) Fixed manufacturing costs 
B) Variable marketing costs 
C) Variable manufacturing costs 
D) Both A and C are correct. 
A) Fixed manufacturing costs 
B) Variable marketing costs 
C) Variable manufacturing costs 
D) Both A and C are correct.

Question 16

Budgeting often plays a major role in affecting behaviour and decisions because managers strive to meet budget targets.

Accepted Answer

A) True 
 B)False

Question 17

Answer the following questions using the information below:
Pederson Company reported the following:
 $\begin{array}{ll}
\text { Manufacturing costs } & \$ 2,000,000 \
\text { Units manufactured } & 50,000 \
\text { Units sold } & 47000 \text { units sold for } \$ 75 \text { per unit } \
\text { Beginning inventory } & 0 \text { units }
\end{array}$
-What is the average manufacturing cost per unit?

Accepted Answer

A) $40.00 
B) $42.55 
C) $75.00 
D) $0.025 
A) $40.00 
B) $42.55 
C) $75.00 
D) $0.025

Question 18

Manufacturing overhead costs may include all of the following EXCEPT:

Accepted Answer

A) salaries of the plant cleaning staff. 
B) wages paid for unproductive time due to machine breakdowns. 
C) labour that can be traced to individual products. 
D) overtime premiums paid to plant workers. 
A) salaries of the plant cleaning staff. 
B) wages paid for unproductive time due to machine breakdowns. 
C) labour that can be traced to individual products. 
D) overtime premiums paid to plant workers.

Question 19

Surveys of practice repeatedly show that identifying a cost as variable or fixed provides valuable information for making management decisions and is an important input when evaluating performance.

Accepted Answer

A) True 
 B)False

Question 20

Many companies have switched from absorption costing to variable costing for internal reporting:

Accepted Answer

A) to increase bonuses for managers. 
B) so the denominator level is more accurate. 
C) to reduce the undesirable incentive to build up inventories. 
D) to comply with external reporting requirements. 
A) to increase bonuses for managers. 
B) so the denominator level is more accurate. 
C) to reduce the undesirable incentive to build up inventories. 
D) to comply with external reporting requirements.

Any item for which a separate measurement of cost is desired is known as:

Absorption costing 'absorbs' only variable manufacturing costs.

What is the meaning of the term 'cost object?' Give an example of a cost object that would be used in a manufacturing company,a merchandising company,and a service sector company? _ _

Product costs used for external reporting generally include:

Answer the following questions using the information below: Pederson Company reported the following: Manufacturing costs \ 2,000,000 Units manufactured 50,000 Units sold 47000 units sold for \ 75 per unit Beginning inventory 0 units -What is the cost of ending finished goods inventory?

Inaccurate product costs will mislead managers about the profitability of different products.

The production-volume variance only exists under absorption costing and not under variable costing.

The gross-margin format of the income statement:

Why is it possible that a raw material such as glue will be considered as an indirect material for one furniture manufacturer and as a direct material for another furniture manufacturer? _ _

If managers report inventories of zero at the start and end of each accounting period,operating profits under absorption costing and variable costing will be the same.

________ are subtracted from sales to calculate gross margin.

Budgeting often plays a major role in affecting behaviour and decisions because managers strive to meet budget targets.

Answer the following questions using the information below: Pederson Company reported the following: Manufacturing costs \ 2,000,000 Units manufactured 50,000 Units sold 47000 units sold for \ 75 per unit Beginning inventory 0 units -What is the average manufacturing cost per unit?

Manufacturing overhead costs may include all of the following EXCEPT:

Surveys of practice repeatedly show that identifying a cost as variable or fixed provides valuable information for making management decisions and is an important input when evaluating performance.

Many companies have switched from absorption costing to variable costing for internal reporting:

Management Accounting in Context

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

Exam 2: Different Costs for Different Purposes

Any item for which a separate measurement of cost is desired is known as:

Absorption costing 'absorbs' only variable manufacturing costs.

Product costs used for external reporting generally include:

Answer the following questions using the information below: Pederson Company reported the following: Manufacturing costs \ 2,000,000 Units manufactured 50,000 Units sold 47000 units sold for \ 75 per unit Beginning inventory 0 units -What is the cost of ending finished goods inventory?

Inaccurate product costs will mislead managers about the profitability of different products.

The production-volume variance only exists under absorption costing and not under variable costing.

The gross-margin format of the income statement:

If managers report inventories of zero at the start and end of each accounting period,operating profits under absorption costing and variable costing will be the same.

________ are subtracted from sales to calculate gross margin.

Budgeting often plays a major role in affecting behaviour and decisions because managers strive to meet budget targets.

Answer the following questions using the information below: Pederson Company reported the following: Manufacturing costs \ 2,000,000 Units manufactured 50,000 Units sold 47000 units sold for \ 75 per unit Beginning inventory 0 units -What is the average manufacturing cost per unit?

Manufacturing overhead costs may include all of the following EXCEPT:

Surveys of practice repeatedly show that identifying a cost as variable or fixed provides valuable information for making management decisions and is an important input when evaluating performance.

Many companies have switched from absorption costing to variable costing for internal reporting:

Management Accounting in Context

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters