Question 1

Inventoriable costs are expensed on the income statement ________.

Accepted Answer

A)  when direct materials for the product are purchased 
B)  after the products are manufactured 
C)  when the products are sold 
D)  when the goods move from work-in process to finished goods account 
A)  when direct materials for the product are purchased 
B)  after the products are manufactured 
C)  when the products are sold 
D)  when the goods move from work-in process to finished goods account

Question 2

Which of the following is an inventoriable cost?

Accepted Answer

A)  manufacturing overhead cost 
B)  customer service costs 
C)  distribution costs 
D)  marketing costs 
A)  manufacturing overhead cost 
B)  customer service costs 
C)  distribution costs 
D)  marketing costs

Question 3

The following information pertains to Alleigh's Mannequins: $\begin{array}{ll}
\text { Manufacturing costs } & \$ 1,500,000 \
\text { Units manufactured } & 30,000 \
\text { Units sold } & 29,500 \text { units sold for } \$ 85 \text { per unit } \
\text { Beginning inventory } & 0 \text { units }
\end{array}$ What is the amount of gross margin?

Accepted Answer

A)  $1,475,000 
B)  $1,500,000 
C)  $2,507,500 
D)  $1,032,500 
A)  $1,475,000 
B)  $1,500,000 
C)  $2,507,500 
D)  $1,032,500

Question 4

Which of the following statements is true?

Accepted Answer

A)  A direct cost of one cost object will always be a direct cost of another cost object. 
B)  Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs. 
C)  All fixed costs are indirect costs. 
D)  All direct costs are variable costs. 
A)  A direct cost of one cost object will always be a direct cost of another cost object. 
B)  Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs. 
C)  All fixed costs are indirect costs. 
D)  All direct costs are variable costs.

Question 5

If each motorcycle requires a belt that costs $20 and 2,000 motorcycles are produced for the month,the total cost for belts is ________.

Accepted Answer

A)  considered to be a direct fixed cost 
B)  considered to be a direct variable cost 
C)  considered to be an indirect fixed cost 
D)  considered to be an indirect variable cost 
A)  considered to be a direct fixed cost 
B)  considered to be a direct variable cost 
C)  considered to be an indirect fixed cost 
D)  considered to be an indirect variable cost

Question 6

An actual cost is the cost incurred-a historical or past cost.

Accepted Answer

A) True 
 B)False

Question 7

Answer the following questions using the information below:
The East Company manufactures several different products. Unit costs associated with Product ORD210 are as follows:
 $\begin{array}{lr}
\text { Direct materials } & \$ 54 \
\text { Direct manufacturing labor } & 8 \
\text { Variable manufacturing overhead } & 11 \
\text { Fixed manufacturing overhead } & 25 \
\text { Sales commissions (2\% of sales) } & 5 \
\text { Administrative salaries } & 12 \
\quad \text { Total } & \$ 115
\end{array}$
-What are the period costs per unit associated with Product ORD203?

Accepted Answer

A)  $5 
B)  $12 
C)  $17 
D)  $18 
A)  $5 
B)  $12 
C)  $17 
D)  $18

Question 8

Which one of the following items is a direct cost?

Accepted Answer

A)  Customer-service costs of a multiproduct firm; Product A is the cost object. 
B)  Printing costs incurred for payroll check processing; payroll check processing is the cost object. 
C)  The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object. 
D)  Utility costs of the administrative offices; the accounting department is the cost object. 
A)  Customer-service costs of a multiproduct firm; Product A is the cost object. 
B)  Printing costs incurred for payroll check processing; payroll check processing is the cost object. 
C)  The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object. 
D)  Utility costs of the administrative offices; the accounting department is the cost object.

Question 9

A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.

Accepted Answer

A)  average range 
B)  cost-allocation range 
C)  cost driver range 
D)  relevant range 
A)  average range 
B)  cost-allocation range 
C)  cost driver range 
D)  relevant range

Question 10

The most likely cost driver of distribution costs is the ________.

Accepted Answer

A)  number of parts within the product 
B)  number of miles driven 
C)  number of products manufactured 
D)  number of production hours 
A)  number of parts within the product 
B)  number of miles driven 
C)  number of products manufactured 
D)  number of production hours

Question 11

Comparing budgeted costs to actual costs helps managers to improve ________.

Accepted Answer

A)  coordination 
B)  control 
C)  implementation 
D)  planning 
A)  coordination 
B)  control 
C)  implementation 
D)  planning

Question 12

________ sector companies purchase materials and components and convert them into finished goods.

Accepted Answer

A)  Merchandising 
B)  Service 
C)  Manufacturing 
D)  Professional 
A)  Merchandising 
B)  Service 
C)  Manufacturing 
D)  Professional

Question 13

Budgeted costs are ________.

Accepted Answer

A)  the costs incurred this year 
B)  the costs incurred last year 
C)  planned or forecasted costs 
D)  competitor's costs 
A)  the costs incurred this year 
B)  the costs incurred last year 
C)  planned or forecasted costs 
D)  competitor's costs

Question 14

A company reported revenues of $375,000,cost of goods sold of $118,000,selling expenses of $11,000,and total operating costs of $70,000.Gross margin for the year is ________.

Accepted Answer

A)  $257,000 
B)  $246,000 
C)  $176,000 
D)  $252,000 
A)  $257,000 
B)  $246,000 
C)  $176,000 
D)  $252,000

Question 15

Although unit costs are regularly used in financial reports and for making product mix and pricing decisions,managers should think in terms of total costs rather than unit costs for making decisions.

Accepted Answer

A) True 
 B)False

Question 16

Acquisition costs of direct materials include freight-in charges,sales taxes,and custom duties.

Accepted Answer

A) True 
 B)False

Question 17

The income statement of a manufacturing firm reports ________.

Accepted Answer

A)  sales promotion costs only 
B)  inventoriable costs only 
C)  cost of goods sold 
D)  only manufacturing overhead costs 
A)  sales promotion costs only 
B)  inventoriable costs only 
C)  cost of goods sold 
D)  only manufacturing overhead costs

Question 18

Budgeting often plays a major role in affecting behavior and decisions.

Accepted Answer

A) True 
 B)False

Question 19

Eigen Manufacturing Corp.provided the following information for last month: $$\begin{array} { l r } 
\text { Sales } & \$ 40,000 \
\text { Variable costs } & 14,000 \
\text { Fixed costs } & 10,000 \
\text { Operating income } & \$ 16,000
\end{array}$$ If sales reduce to half of the amount in the next month,what is the projected operating income?

Accepted Answer

A)  $15,000 
B)  $6,000 
C)  $16,000 
D)  $3,000 
A)  $15,000 
B)  $6,000 
C)  $16,000 
D)  $3,000

Question 20

Management accountants help managers identify what information is relevant and what information is irrelevant that help in decision making.

Accepted Answer

A) True 
 B)False

Exam 2: An Introduction to Cost Terms and Purposes

Inventoriable costs are expensed on the income statement ________.

Which of the following is an inventoriable cost?

The following information pertains to Alleigh's Mannequins: Manufacturing costs \ 1,500,000 Units manufactured 30,000 Units sold 29,500 units sold for \ 85 per unit Beginning inventory 0 units What is the amount of gross margin?

Which of the following statements is true?

If each motorcycle requires a belt that costs $20 and 2,000 motorcycles are produced for the month,the total cost for belts is ________.

An actual cost is the cost incurred-a historical or past cost.

Which one of the following items is a direct cost?

A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.

The most likely cost driver of distribution costs is the ________.

Comparing budgeted costs to actual costs helps managers to improve ________.

________ sector companies purchase materials and components and convert them into finished goods.

Budgeted costs are ________.

A company reported revenues of $375,000,cost of goods sold of $118,000,selling expenses of $11,000,and total operating costs of $70,000.Gross margin for the year is ________.

Although unit costs are regularly used in financial reports and for making product mix and pricing decisions,managers should think in terms of total costs rather than unit costs for making decisions.

Acquisition costs of direct materials include freight-in charges,sales taxes,and custom duties.

The income statement of a manufacturing firm reports ________.

Budgeting often plays a major role in affecting behavior and decisions.

Eigen Manufacturing Corp.provided the following information for last month: Sales \ 40,000 Variable costs 14,000 Fixed costs 10,000 Operating income \ 16,000 If sales reduce to half of the amount in the next month,what is the projected operating income?

Management accountants help managers identify what information is relevant and what information is irrelevant that help in decision making.

The Manager and Management Accounting

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

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

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