Deck 19: Cost Concepts and Cost Allocation

Question 1

For a manufactured product, all costs incurred to get the product ready for sale are included in the inventory value of the product.

Answer 1

True

Question 2

Indirect costs can be conveniently traced to a cost object.

Answer 2

False

Question 3

Period cost and product cost are synonymous terms.

Answer 3

False

Question 4

Fixed costs per unit are constant along a defined range of activity.

Question 5

Direct labor is a fixed cost because it always occurs.

Question 6

Period costs are consumed entirely in the current reporting period.

Question 7

The two primary types of cost behavior are fixed and variable.

Question 8

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

Question 9

Variable costs per unit change in an inversely proportional rate to changes in volume.

Question 10

The two types of cost behavior are value-adding and nonvalue-adding.

Question 11

Period costs flow through three types of inventory accounts before becoming part of the cost of goods sold amount.

Question 12

Period costs are not considered when costing products for inventory.

Question 13

Product costs could be found on both the balance sheet and the income statement.

Question 14

Inventoriable cost is a synonym of period cost.

Question 15

The costs of marketing and delivering a product are not included in its inventory valuation.

Question 16

Some period costs can be found in inventory accounts on the balance sheet.

Question 17

Product costs for a manufacturing company consist of direct materials, direct labor, and overhead.

Question 18

Manufacturing costs behave as variable or fixed costs.

Question 19

Product costs could be reported as assets.

Question 20

Both product costs and period costs could appear on the income statement.

Question 21

Accounting personnel utilize estimates when deriving product unit costs in order to determine product pricing.

Question 22

The costs of labor for maintenance and inspections are examples of direct labor.

Question 23

Nonvalue-adding costs increase the cost of a product.

Question 24

Salaries of supervisory production personnel should be classified as direct labor costs.

Question 25

Product unit cost is computed by dividing cost of goods sold by the number of units sold.

Question 26

Property taxes and equipment depreciation are examples of indirect manufacturing costs.

Question 27

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

Question 28

All labor costs can be directly traced to finished products.

Question 29

Because it is invisible, direct labor cannot be traced to products.

Question 30

A cost is classified as an overhead cost if it is not directly traceable to an end product or a cost object.

Question 31

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

Question 32

Total fixed costs remain constant within a defined time period or range of activity.

Question 33

Lubrication used for machines is an example of a direct material.

Question 34

Sugar is an indirect cost in the manufacture of candy.

Question 35

Depreciation on factory equipment is a value-adding cost.

Question 36

Direct materials are the only materials in a product.

Question 37

Overhead can be traced to products once the products are completed.

Question 38

Both indirect materials and indirect labor are overhead costs.

Question 39

Product unit cost comprises only direct materials and direct labor costs.

Question 40

Overhead costs are traced to products in the same way that direct materials and direct labor are traced.

Question 41

The amount computed for cost of goods manufactured should be the same as the amount transferred from the materials inventory, direct labor, and overhead accounts into the Work in Process Inventory account.

Question 42

Materials costs flow from the Materials Inventory to the Work in Process Inventory to the Cost of Goods Sold account.

Question 43

Standard costing is based on actual direct materials and direct labor plus estimated overhead.

Question 44

Total manufacturing costs increase the balance of the Work in Process Inventory account.

Question 45

The key to the preparation of an income statement for a manufacturing company is proper determination of the cost of goods manufactured.

Question 46

The expressions total manufacturing costs and total cost of goods manufactured are not synonymous.

Question 47

The product costs that appear in the financial statements are actual product costs.

Question 48

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

Question 49

Overhead costs decrease the Work in Process Inventory account.

Question 50

Both direct labor and indirect labor are recorded in the Work in Process Inventory account as the product is being manufactured.

Question 51

Indirect costs incurred are charged directly to the Work in Process Inventory account.

Question 52

Factory employees' wages should be incorporated into the Work in Process Inventory account.

Question 53

At the end of an accounting period, the balance in the Finished Goods Inventory account is made up of the costs of products completed but not sold as of that date.

Question 54

(Direct Materials + Direct Labor + Overhead) / Total Number of Units Produced = Product Unit Cost.

Question 55

Normal costing is the sum of actual direct materials, actual direct labor, and actual overhead.

Question 56

A materials request form is prepared whenever the purchasing department orders materials.

Question 57

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

Question 58

The job order cost card reflects the product cost per unit.

Question 59

The costs of materials used in production are transferred from the Materials Inventory account directly to the Finished Goods Inventory account.

Question 60

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.

Question 61

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

Question 62

The Overhead account is used to accumulate actual overhead costs.

Question 63

Overhead is said to be underapplied when actual overhead costs exceed the amount applied to production.

Question 64

The cost of goods manufactured is added to the beginning balance of Finished Goods Inventory to obtain the total cost of goods available for sale during the period.

Question 65

The changes in Work in Process Inventory and total manufacturing costs for a period are used to compute cost of goods manufactured.

Question 66

Total manufacturing costs and the change in Finished Goods Inventory are used to compute cost of goods sold.

Question 67

If overhead has been overapplied during the period, the adjusting entry could include a credit to the Cost of Goods Sold account.

Question 68

As actual overhead costs are incurred, the Overhead account is debited.

Question 69

If Company G uses an overhead rate of $3.50 per direct labor dollar, and 63,500 hours of direct labor at $9.00 per hour are actually incurred, $222,250 of overhead costs are allocated for that period.

Question 70

The amount of underapplied or overapplied overhead is the difference between applied overhead and estimated overhead.

Question 71

The entry to record the application of overhead costs includes a debit to the Overhead account.

Question 72

Overhead costs generally are estimated as part of the normal budgeting function.

Question 73

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

Question 74

The amount for cost of goods manufactured should be the same as the amount transferred from the Work in Process Inventory account to the Finished Goods Inventory account during the year.

Question 75

By using a predetermined overhead rate and an allocation base, such as direct labor dollars or hours, one can assign overhead costs by debiting the Overhead account and crediting the Work in Process Inventory account.

Question 76

Total manufacturing costs include all direct materials used as well as all direct labor costs and overhead costs incurred for a period.

Question 77

Manufacturing costs incurred in an accounting period cannot be included in cost of goods sold for the subsequent accounting period.

Question 78

Actual overhead plus overapplied overhead equals applied overhead.

Question 79

Cost of goods manufactured appears on the income statement of a manufacturing company in a similar manner as purchases appear on the income statement of a merchandising company.

Question 80

The product is the cost object when assigning indirect product costs.