Question 1

Which of the following is a product cost?

Accepted Answer

A)  Glass in an automobile. 
B)  Advertising. 
C)  The salary of the vice president-finance. 
D)  Rent on a factory. 
E)  Advertising and rent on a factory. 
A)  Glass in an automobile. 
B)  Advertising. 
C)  The salary of the vice president-finance. 
D)  Rent on a factory. 
E)  Advertising and rent on a factory.

Question 2

The costs that follow all have applicability for a manufacturing enterprise. Which of the choices listed correctly denotes the costs' applicability for a service provider? $\begin{array}{lll}\text { Period cost } & \text { Uncontrollable cost } & \text { Opportunity cost }\\hline
\text { A. Applicable } & \text { Applicable } & \text { Not applicable } \
\text { B. Applicable } & \text { Not applicable } & \text { Applicable } \
\text { C. Applicable } & \text { Applicable } & \text { Applicable } \
\text { D. Not applicable } & \text { Applicable } & \text { Applicable } \
\text { E. Not applicable } & \text { Applicable } & \text { Not applicable }
\end{array}$

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
E)  Choice E 
A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
E)  Choice E

Question 3

Manufacturers have established a cost classification called product costs. Define the term "product cost" and note where these costs appear in the financial statements. Be specific.

Accepted Answer

Product costs are costs that relate to t

Question 4

Fixed costs are costs that:

Accepted Answer

A)  vary directly with changes in activity. 
B)  vary inversely with changes in activity. 
C)  remain constant on a per-unit basis. 
D)  remain constant as activity changes. 
E)  increase on a per-unit basis as activity increases. 
A)  vary directly with changes in activity. 
B)  vary inversely with changes in activity. 
C)  remain constant on a per-unit basis. 
D)  remain constant as activity changes. 
E)  increase on a per-unit basis as activity increases.

Question 5

The income statements and balance sheets of service, retailing, and manufacturing businesses tend to differ.
Required:
A. Which of these businesses will disclose a cost-of-goods-sold figure on the income statement? Why?
B. Briefly describe the difference between a retailing firm and manufacturer's disclosure of inventories on the balance sheet.

Accepted Answer

A. Retailers and manufacturers will disc

Question 6

Aurora Muffler, Inc. operates an automobile service facility. The table below shows the cost incurred during a month when 500 mufflers were replaced.   
Required:
Fill in the missing amounts, labeled A through O, in the table above.

Accepted Answer

@#IMG-DLM& Explanatory notes:
A and C each equal $

Question 7

The true statement about cost behavior is that:

Accepted Answer

A)  variable costs are constant on a per-unit basis and change in total as activity changes. 
B)  fixed costs are constant on a per-unit basis and change in total as activity changes. 
C)  fixed costs are constant on a per-unit basis and constant in total as activity changes. 
D)  variable costs change on a per-unit basis and change in total as activity changes. 
E)  variable costs are constant on a per-unit basis and are constant in total as activity changes. 
A)  variable costs are constant on a per-unit basis and change in total as activity changes. 
B)  fixed costs are constant on a per-unit basis and change in total as activity changes. 
C)  fixed costs are constant on a per-unit basis and constant in total as activity changes. 
D)  variable costs change on a per-unit basis and change in total as activity changes. 
E)  variable costs are constant on a per-unit basis and are constant in total as activity changes.

Question 8

The accounting records of Reynolds Corporation revealed the following selected costs: Sales commissions, $65,000; plant supervision, $190,000; and administrative expenses, $185,000. Reynolds's period costs total:

Accepted Answer

A)  $250,000. 
B)  $440,000. 
C)  $375,000. 
D)  $255,000. 
E)  $185,000. 
A)  $250,000. 
B)  $440,000. 
C)  $375,000. 
D)  $255,000. 
E)  $185,000.

Question 9

Which of the following statements is true?

Accepted Answer

A)  Product costs affect only the balance sheet. 
B)  Product costs affect only the income statement. 
C)  Period costs affect only the balance sheet. 
D)  Neither product costs nor period costs affect the Statement of Retained Earnings. This can also be a true statement if the period costs were prepaid (i.e., prepaid advertising, depreciation). 
E)  Product costs eventually affect both the balance sheet and the income statement. 
A)  Product costs affect only the balance sheet. 
B)  Product costs affect only the income statement. 
C)  Period costs affect only the balance sheet. 
D)  Neither product costs nor period costs affect the Statement of Retained Earnings. This can also be a true statement if the period costs were prepaid (i.e., prepaid advertising, depreciation). 
E)  Product costs eventually affect both the balance sheet and the income statement.

Question 10

An employee accidentally overstated the year's advertising expense by $50,000. Which of the following correctly depicts the effect of this error?

Accepted Answer

A)  Cost of goods manufactured will be overstated by $50,000. 
B)  Cost of goods sold will be overstated by $50,000. 
C)  Both cost of goods manufactured and cost of goods sold will be overstated by $50,000. 
D)  Cost of goods sold will be overstated by $50,000, and cost of goods manufactured will be understated by $50,000. 
E)  None of the other answers are correct. 
A)  Cost of goods manufactured will be overstated by $50,000. 
B)  Cost of goods sold will be overstated by $50,000. 
C)  Both cost of goods manufactured and cost of goods sold will be overstated by $50,000. 
D)  Cost of goods sold will be overstated by $50,000, and cost of goods manufactured will be understated by $50,000. 
E)  None of the other answers are correct.

Question 11

Giraldo Systems began business on January 1 of the current year, producing a single product that is popular with home builders. Demand was very strong, allowing the company to sell its entire manufacturing output of 80,000 units. The following unit costs were incurred: $\begin{array}{lr}\text { Manufacturing costs: }\
\text { Direct materials } & \$ 15 \
\text { Direct labor } & 8 \
\text { Variable overhead } & 11 \
\text { Fixed overhead } & 6\
\text { Selling and administrative costs: }\
\text { Variable } & 5 \
\text { Fixed } & 2
\end{array}$ 
Giraldo anticipates an increase in productive output to 100,000 units and sales of 95,000 units in the next accounting period. The company uses appropriate drivers to determine cost behavior and estimates.
Required: 
A. Assuming that present cost behavior patterns continue, compute the total expected costs in the upcoming accounting period.
B. Ben Levy is about to prepare a graph that shows the unit cost behavior for variable selling and administrative cost. If the graph's horizontal axis is volume and the vertical axis is dollars, briefly describe what Levy's graph should look like.
C. Determine whether the following costs are variable or fixed in terms of behavior:
1. Yearly lease payments for a state-of-the-art cutting machine.
2. A fee paid to a consultant who provided advice about quality issues. The fee was based on the number of consulting hours provided.
3. Cost of an awards dinner for "star" salespeople.

Accepted Answer

A. @#IMG-DLM& B. The variable selling an

Question 12

Wee Care is a nursery school for pre-kindergarten children. The school has determined that the following biweekly revenues and costs occur at different levels of enrollment: $\begin{array}{rrr}\text { Number of }\
\text { Students Enrolled }&\text { Total Revenue } &\text { Total Costs }\
10 & \$ 3,000 & \$ 2,100 \
15 & 4,500 & 2,700 \
16 & 4,800 & 2,800 \
20 & 6,000 & 3,200 \
21 & 6,300 & 3,255
\end{array}$ The marginal cost when the twenty-first student enrolls in the school is:

Accepted Answer

A)  $55. 
B)  $155. 
C)  $300. 
D)  $3,045. 
E)  $3,255. 
A)  $55. 
B)  $155. 
C)  $300. 
D)  $3,045. 
E)  $3,255.

Question 13

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

Accepted Answer

A)  Exxon Corporation. 
B)  Macy's Department Store. 
C)  Wendy's. 
D)  Southwest Airlines. 
E)  Columbia University. 
A)  Exxon Corporation. 
B)  Macy's Department Store. 
C)  Wendy's. 
D)  Southwest Airlines. 
E)  Columbia University.

Question 14

The salary that is sacrificed by a college student who pursues a degree full time is a(n):

Accepted Answer

A)  sunk cost. 
B)  out-of-pocket cost. 
C)  opportunity cost. 
D)  differential cost. 
E)  marginal cost. 
A)  sunk cost. 
B)  out-of-pocket cost. 
C)  opportunity cost. 
D)  differential cost. 
E)  marginal cost.

Question 15

As activity decreases, unit variable cost:

Accepted Answer

A)  increases proportionately with activity. 
B)  decreases proportionately with activity. 
C)  remains constant. 
D)  increases by a fixed amount. 
E)  decreases by a fixed amount. 
A)  increases proportionately with activity. 
B)  decreases proportionately with activity. 
C)  remains constant. 
D)  increases by a fixed amount. 
E)  decreases by a fixed amount.

Question 16

The following equation-Beginning finished goods + cost of goods manufactured - ending finished goods-is used to calculate cost of goods sold during the period.

Accepted Answer

A) True 
 B)False

Question 17

Briefly define and discuss the terms in each of the pairs that follow.
A. Direct and indirect costs
B. Direct materials and indirect materials
C. Manufacturing overhead and direct labor

Accepted Answer

A. Direct costs are logically and practi

Question 18

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

Accepted Answer

A)  $149,000. 
B)  $171,000. 
C)  $186,000. 
D)  $442,000. 
E)  None of the other answers are correct. 
A)  $149,000. 
B)  $171,000. 
C)  $186,000. 
D)  $442,000. 
E)  None of the other answers are correct.

Question 19

Indirect labor is not a component of manufacturing overhead.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following inventories would a company ordinarily hold for sale?

Accepted Answer

A)  Raw materials. 
B)  Work in process. 
C)  Finished goods. 
D)  Raw materials and finished goods. 
E)  Work in process and finished goods. 
A)  Raw materials. 
B)  Work in process. 
C)  Finished goods. 
D)  Raw materials and finished goods. 
E)  Work in process and finished goods.

Which of the following is a product cost?

Manufacturers have established a cost classification called product costs. Define the term "product cost" and note where these costs appear in the financial statements. Be specific.

Fixed costs are costs that:

Aurora Muffler, Inc. operates an automobile service facility. The table below shows the cost incurred during a month when 500 mufflers were replaced. Required: Fill in the missing amounts, labeled A through O, in the table above.

The true statement about cost behavior is that:

The accounting records of Reynolds Corporation revealed the following selected costs: Sales commissions, $65,000; plant supervision, $190,000; and administrative expenses, $185,000. Reynolds's period costs total:

Which of the following statements is true?

An employee accidentally overstated the year's advertising expense by $50,000. Which of the following correctly depicts the effect of this error?

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

The salary that is sacrificed by a college student who pursues a degree full time is a(n):

As activity decreases, unit variable cost:

The following equation-Beginning finished goods + cost of goods manufactured - ending finished goods-is used to calculate cost of goods sold during the period.

Briefly define and discuss the terms in each of the pairs that follow. A. Direct and indirect costs B. Direct materials and indirect materials C. Manufacturing overhead and direct labor

Indirect labor is not a component of manufacturing overhead.

Which of the following inventories would a company ordinarily hold for sale?

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers 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

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters

Exam 2: Basic Cost Management Concepts

Which of the following is a product cost?

Manufacturers have established a cost classification called product costs. Define the term "product cost" and note where these costs appear in the financial statements. Be specific.

Fixed costs are costs that:

Aurora Muffler, Inc. operates an automobile service facility. The table below shows the cost incurred during a month when 500 mufflers were replaced. Required: Fill in the missing amounts, labeled A through O, in the table above.

The true statement about cost behavior is that:

The accounting records of Reynolds Corporation revealed the following selected costs: Sales commissions, $65,000; plant supervision, $190,000; and administrative expenses, $185,000. Reynolds's period costs total:

Which of the following statements is true?

An employee accidentally overstated the year's advertising expense by $50,000. Which of the following correctly depicts the effect of this error?

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

The salary that is sacrificed by a college student who pursues a degree full time is a(n):

As activity decreases, unit variable cost:

The following equation-Beginning finished goods + cost of goods manufactured - ending finished goods-is used to calculate cost of goods sold during the period.

Briefly define and discuss the terms in each of the pairs that follow. A. Direct and indirect costs B. Direct materials and indirect materials C. Manufacturing overhead and direct labor

Indirect labor is not a component of manufacturing overhead.

Which of the following inventories would a company ordinarily hold for sale?

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers 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

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters