Question 1

Direct materials, direct labor, and overhead costs will most likely become part of the Cost of Goods Sold account balance in case of manufacturing companies.

Accepted Answer

A) True 
 B)False  True

Question 2

Equipment depreciation is an example of a direct product cost in a manufacturing company.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following contains period costs?

Accepted Answer

A)  Work in Process 
B)  Finished Goods 
C)  Cost of Goods Sold 
D)  Selling and administrative expenses 
A)  Work in Process 
B)  Finished Goods 
C)  Cost of Goods Sold 
D)  Selling and administrative expenses D

Question 4

Minor materials and other production supplies that cannot be conveniently or economically traced to specific products are accounted for as indirect materials.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a typical example of a variable cost?

Accepted Answer

A)  Sales commissions 
B)  Rent 
C)  Depreciation 
D)  Salaries 
A)  Sales commissions 
B)  Rent 
C)  Depreciation 
D)  Salaries

Question 6

If overhead is applied on the basis of direct labor hours, and actual hours worked are less than budgeted, which of the following is true, assuming estimated overhead is correct?

Accepted Answer

A)  Overhead is probably overapplied. 
B)  Overhead is probably underapplied. 
C)  Applied overhead and actual overhead are equal. 
D)  None of these is true. 
A)  Overhead is probably overapplied. 
B)  Overhead is probably underapplied. 
C)  Applied overhead and actual overhead are equal. 
D)  None of these is true.

Question 7

Overhead costs decrease the Work in Process Inventory account.

Accepted Answer

A) True 
 B)False

Question 8

Wages of machine operators and other workers involved in actually shaping the product are classified as direct labor costs.

Accepted Answer

A) True 
 B)False

Question 9

The controller for Drisau Company has gathered the following overhead data on the company's two products: estimated total overhead, $180,000 (consisting of the $70,000 for setups and $110,000 for assembly); estimated direct labor hours (Product A, 6,000; Product B, 3,000); estimated number of setups (Product A, 750; Product B, 1,250); estimated number of machine hours used in assembly (Product A, 3,000; Product B, 5,000); estimated number of units produced (Product A, 500; Product B, 200).
Using the traditional approach:
a. Calculate the predetermined overhead rate using direct labor hours as the cost driver.
b. Compute the amount of overhead costs applied to each product in total and per unit.

Accepted Answer

a. $180,000 ÷ 9,000 direct labor hours =

Question 10

Direct materials are the only materials in a product.

Accepted Answer

A) True 
 B)False

Question 11

When a company uses a single predetermined overhead rate to assign overhead to production, only one cost pool is used.

Accepted Answer

A) True 
 B)False

Question 12

Cost of goods manufactured decreases the Work in Process Inventory account.

Accepted Answer

A) True 
 B)False

Question 13

Nonvalue-adding costs increase the cost of a product.

Accepted Answer

A) True 
 B)False

Question 14

As units are completed, their costs are transferred from the Work in Process Inventory account to the Finished Goods Inventory account.

Accepted Answer

A) True 
 B)False

Question 15

Recorded costs for the DC5 Division, which manufactured 6,000 units of Product DC5 during the month, are as follows:   The per-unit cost of manufacturing Product DC5 this month is

Accepted Answer

A)  $163. 
B)  $152. 
C)  $170. 
D)  $150. 
A)  $163. 
B)  $152. 
C)  $170. 
D)  $150.

Question 16

Which of the following financial statements is unique to a production-oriented company?

Accepted Answer

A)  Balance sheet 
B)  Statement of cash flows 
C)  Income statement 
D)  Statement of cost of goods manufactured 
A)  Balance sheet 
B)  Statement of cash flows 
C)  Income statement 
D)  Statement of cost of goods manufactured

Question 17

The following are costs for a selected period: direct materials put into production, $97,000.00; direct labor cost of converting materials into product, $200,000; total indirect costs of manufacturing the product, $40,000. What is the per unit cost of manufacturing 20,000 units in this period?

Accepted Answer

A)  $4.85 
B)  $16.85 
C)  $8.85 
D)  $12.85 
A)  $4.85 
B)  $16.85 
C)  $8.85 
D)  $12.85

Question 18

A cost pool is a collection of overhead costs related to a cost object.

Accepted Answer

A) True 
 B)False

Question 19

Total estimated overhead costs should be divided by actual direct labor hours to compute an overhead rate per direct labor hour.

Accepted Answer

A) True 
 B)False

Question 20

The beginning finished goods inventory for Boston Co. was $401,050. Goods completed during the year were costed at $783,700. The ending finished goods inventory was dangerously low, having been reduced to $124,400. The cost of goods sold for the year for Boston Co. was

Accepted Answer

A)  $803,450. 
B)  $1,060,350. 
C)  $659,300. 
D)  $931,900. 
A)  $803,450. 
B)  $1,060,350. 
C)  $659,300. 
D)  $931,900.

Exam 19: Cost Concepts and Cost Allocation

Direct materials, direct labor, and overhead costs will most likely become part of the Cost of Goods Sold account balance in case of manufacturing companies.

Equipment depreciation is an example of a direct product cost in a manufacturing company.

Which of the following contains period costs?

Minor materials and other production supplies that cannot be conveniently or economically traced to specific products are accounted for as indirect materials.

Which of the following is a typical example of a variable cost?

If overhead is applied on the basis of direct labor hours, and actual hours worked are less than budgeted, which of the following is true, assuming estimated overhead is correct?

Overhead costs decrease the Work in Process Inventory account.

Wages of machine operators and other workers involved in actually shaping the product are classified as direct labor costs.

Direct materials are the only materials in a product.

When a company uses a single predetermined overhead rate to assign overhead to production, only one cost pool is used.

Cost of goods manufactured decreases the Work in Process Inventory account.

Nonvalue-adding costs increase the cost of a product.

As units are completed, their costs are transferred from the Work in Process Inventory account to the Finished Goods Inventory account.

Recorded costs for the DC5 Division, which manufactured 6,000 units of Product DC5 during the month, are as follows: The per-unit cost of manufacturing Product DC5 this month is

Which of the following financial statements is unique to a production-oriented company?

The following are costs for a selected period: direct materials put into production, $97,000.00; direct labor cost of converting materials into product, $200,000; total indirect costs of manufacturing the product, $40,000. What is the per unit cost of manufacturing 20,000 units in this period?

A cost pool is a collection of overhead costs related to a cost object.

Total estimated overhead costs should be divided by actual direct labor hours to compute an overhead rate per direct labor hour.

The beginning finished goods inventory for Boston Co. was $401,050. Goods completed during the year were costed at $783,700. The ending finished goods inventory was dangerously low, having been reduced to $124,400. The cost of goods sold for the year for Boston Co. was

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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