Deck 2: Managerial Accounting and Cost Concepts

Question 1

A factory supervisor's salary would be classified as a direct cost of a unit of product.

Answer 1

False

Question 2

Differential costs can be either fixed or variable.

Answer 2

True

Question 3

Although depreciation is always a period cost in a merchandising firm, it can be a product cost in a manufacturing firm.

Answer 3

True

Question 4

In a manufacturing firm, all costs are product costs.

Question 5

Direct material cost combined with manufacturing overhead cost is known as conversion cost.

Question 6

Managerial accounting is primarily concerned with the organization as a whole rather than with segments of the organization.

Question 7

The cost of napkins put on each person's tray at a fast food restaurant is a fixed cost.

Question 8

Direct labor is a part of both prime cost and conversion cost.

Question 9

The cost of goods manufactured for a period is the amount transferred from work in process inventory to finished goods inventory during the period.

Question 10

Wages paid to production supervisors would be considered direct labor.

Question 11

If the finished goods inventory increases between the beginning and the end of a period, then the cost of goods manufactured for the period is larger than the cost of goods sold.

Question 12

The inventory of finished goods on hand at the end of a period is considered an asset, but inventories of raw materials and work-in-process are not considered assets until production is completed.

Question 13

Managerial accounting:

A) has its primary emphasis on the future.
B) is required by regulatory bodies such as the SEC.
C) focuses on the organization as a whole, rather than on the organization's segments.
D) Responses a, b, and c are all correct.

Question 14

A fixed cost is constant per unit of product.

Question 15

The cost of shipping parts from a supplier is considered a product cost.

Question 16

Managerial accounting places less emphasis on nonmonetary data than financial accounting.

Question 17

Which of the following IS a characteristic of financial accounting?

A) not mandatory
B) must follow GAAP
C) emphasis on relevance of data, rather than precision
D) both A and C above

Question 18

Advertising is a product cost as long as it promotes specific products.

Question 19

The variable cost per unit is constant and does not depend on how many units are produced.

Question 20

The plans of management are expressed formally in:

A) the annual report to shareholders.
B) Form 10-Q submitted to the Securities and Exchange Commission.
C) performance reports.
D) budgets.

Question 21

The three basic elements of manufacturing cost are direct materials, direct labor, and:

A) cost of goods manufactured.
B) cost of goods sold.
C) work in process.
D) manufacturing overhead.

Question 22

Which one of the following costs should NOT be considered an indirect cost of serving a particular customer at a Dairy Queen fast food outlet?

A) the cost of the hamburger patty in the burger they ordered.
B) the wages of the employee who takes the customer's order.
C) the cost of heating and lighting the kitchen.
D) the salary of the outlet's manager.

Question 23

The costs of direct materials are classified as:

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

Question 24

An example of a period cost is:

A) fire insurance on a factory building.
B) salary of a factory supervisor.
C) direct materials.
D) rent on a headquarters building.

Question 25

Which terms below correctly describe the cost of the black paint used to paint the dots on a pair of dice?

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

Question 26

Manufacturing overhead:

A) can be either a variable cost or a fixed cost.
B) includes the costs of shipping finished goods to customers.
C) includes all factory labor costs.
D) includes all fixed costs.

Question 27

Cost of goods manufactured will usually include:

A) only costs incurred during the current period.
B) only direct labor and direct materials costs.
C) some costs incurred during the prior period as well as costs incurred during the current period.
D) some period costs as well as some product costs.

Question 28

Which two terms below describe the wages paid to security guards that monitor a factory 24 hours a day?

A) variable cost and direct cost
B) fixed cost and direct cost
C) variable cost and indirect cost
D) fixed cost and indirect cost

Question 29

Rossiter Company failed to record a credit sale at the end of the year, although the reduction in finished goods inventories was correctly recorded when the goods were shipped to the customer. Which one of the following statements is correct?

A) Accounts receivable was not affected, inventory was not affected, sales were understated, and cost of goods sold was understated.
B) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of goods sold was overstated.
C) Accounts receivable was not affected, inventory was understated, sales were understated, and cost of goods sold was understated.
D) Accounts receivable was understated, inventory was not affected, sales were understated, and cost of goods sold was not affected.

Question 30

The corporate controller's salary would be considered a(n):

A) manufacturing cost.
B) product cost.
C) administrative cost.
D) selling expense.

Question 31

The cost of fire insurance for a manufacturing plant is generally considered to be a:

A) product cost.
B) period cost.
C) variable cost.
D) all of these.

Question 32

Each of the following would be classified as variable in terms of cost behavior except:

A) cost of shipping goods to customers via express mail.
B) sales commissions.
C) plant manager's salary.
D) direct materials.

Question 33

Prime cost consists of direct materials combined with:

A) direct labor.
B) manufacturing overhead.
C) indirect materials.
D) cost of goods manufactured.

Question 34

Transportation costs incurred by a manufacturing company to ship its product to its customers would be classified as which of the following?

A) Product cost
B) Manufacturing overhead
C) Period cost
D) Administrative cost

Question 35

Within the relevant range, the difference between variable costs and fixed costs is:

A) variable costs per unit fluctuate and fixed costs per unit remain constant.
B) variable costs per unit are constant and fixed costs per unit fluctuate.
C) both total variable costs and total fixed costs are constant.
D) both total variable costs and total fixed costs fluctuate.

Question 36

An opportunity cost is:

A) the difference in total costs which results from selecting one alternative instead of another.
B) the benefit forgone by selecting one alternative instead of another.
C) a cost which may be saved by not adopting an alternative.
D) a cost which may be shifted to the future with little or no effect on current operations.

Question 37

A lawnmower manufacturer computed a cost per unit of $53 by adding together last month's direct labor, direct materials, and manufacturing overhead and dividing that total by the 10,000 units produced last month. (There were no beginning or ending inventories.) If 9,000 units are going to be manufactured this month, we would expect that the:

A) cost per unit will remain the same.
B) cost per unit will decrease.
C) direction of change in unit costs cannot be determined.
D) cost per unit will increase.

Question 38

The following costs were incurred in August:
Conversion costs during the month totaled:

A) $127,000
B) $51,000
C) $52,000
D) $75,000

Question 39

Micro Computer Company has set up a toll-free telephone line for customer inquiries regarding computer hardware produced by the company. The cost of this toll-free line would be classified as which of the following?

A) Product cost
B) Manufacturing overhead
C) Direct labor
D) Period cost

Question 40

Buford Company rents out a small unused portion of its factory to another company for $1,000 per month. The rental agreement will expire next month, and rather than renew the agreement Buford Company is thinking about using the space itself to store materials. The term to describe the $1,000 per month is:

A) sunk cost.
B) period cost.
C) opportunity cost.
D) variable cost.

Question 41

Direct materials used in production totaled $330,000. Direct labor was $415,000 and manufacturing overhead was $220,000. What were the total manufacturing costs incurred for the month?

A) $530,000
B) $965,000
C) $745,000
D) $635,000

Question 42

Consider the following costs incurred in a recent period:
What was the total amount of the period costs listed above for the period?

A) $78,000
B) $71,000
C) $46,000
D) $37,000

Question 43

The following inventory balances relate to Bharath Manufacturing Corporation at the beginning and end of the year:
Bharath's cost of goods sold was $653,000. What was Bharath's cost of goods manufactured?

A) $660,000
B) $670,000
C) $682,000
D) $689,000

Question 44

Using the following data for August, calculate the cost of goods manufactured:
The cost of goods manufactured was:

A) $106,000
B) $92,000
C) $95,000
D) $89,000

Question 45

During August, the cost of goods manufactured was $73,000. The beginning finished goods inventory was $15,000 and the ending finished goods inventory was $21,000. What was the cost of goods sold for the month?

A) $79,000
B) $109,000
C) $67,000
D) $73,000

Question 46

Corcetti Company manufactures and sells prewashed denim jeans. Large rolls of denim cloth are purchased and are first washed in a giant washing machine. After the cloth is dried, it is cut up into jean pattern shapes and then sewn together. The completed jeans are sold to various retail chains.
Which of the following terms could be used to correctly describe the wages paid to the workers that cut up the cloth into the jean pattern shapes?

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

Question 47

Williams Company's direct labor cost is 25% of its conversion cost. If the manufacturing overhead for the last period was $45,000 and the direct materials cost was $25,000, the direct labor cost was:

A) $15,000
B) $60,000
C) $33,333
D) $20,000

Question 48

Walton Manufacturing Company gathered the following data for the month.
How much net operating income will be reported for the period?

A) $54,000
B) $17,000
C) $52,000
D) Cannot be determineD.

Question 49

Corcetti Company manufactures and sells prewashed denim jeans. Large rolls of denim cloth are purchased and are first washed in a giant washing machine. After the cloth is dried, it is cut up into jean pattern shapes and then sewn together. The completed jeans are sold to various retail chains.
Which of the following terms could be used to correctly describe the cost of the soap used to wash the denim cloth?

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

Question 50

In August direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000 and the direct materials cost was $34,000, the direct labor cost was:

A) $36,000
B) $22,667
C) $51,000
D) $81,000

Question 51

The following inventory balances relate to Lequin Manufacturing Corporation at the beginning and end of the year:
Lequin's total manufacturing cost was $543,000. What was Lequin's cost of goods sold?

A) $517,000
B) $545,000
C) $569,000
D) $567,000

Question 52

Gabrisch Inc. is a merchandising company. Last month the company's merchandise purchases totaled $90,000. The company's beginning merchandise inventory was $13,000 and its ending merchandise inventory was $22,000. What was the company's cost of goods sold for the month?

A) $90,000
B) $99,000
C) $125,000
D) $81,000

Question 53

Green Company's costs for the month of August were as follows: direct materials, $27,000; direct labor, $34,000; selling, $14,000; administrative, $12,000; and manufacturing overhead, $44,000. The beginning work in process inventory was $16,000 and the ending work in process inventory was $9,000. What was the cost of goods manufactured for the month?

A) $105,000
B) $132,000
C) $138,000
D) $112,000

Question 54

Haan Inc. is a merchandising company. Last month the company's cost of goods sold was $66,000. The company's beginning merchandise inventory was $14,000 and its ending merchandise inventory was $16,000. What was the total amount of the company's merchandise purchases for the month?

A) $68,000
B) $96,000
C) $64,000
D) $66,000

Question 55

During the month of August, direct labor cost totaled $13,000 and direct labor cost was 20% of prime cost. If total manufacturing costs during August were $88,000, the manufacturing overhead was:

A) $75,000
B) $23,000
C) $65,000
D) $52,000

Question 56

How much opportunity cost is represented in the following information concerning a machine?

A) $80,000
B) $14,000
C) $25,000
D) $68,000

Question 57

The Lyons Company's cost of goods manufactured was $120,000 when its sales were $360,000 and its gross margin was $220,000. If the ending inventory of finished goods was $30,000, the beginning inventory of finished goods must have been:

A) $20,000
B) $50,000
C) $110,000
D) $150,000

Question 58

The following costs were incurred in August:
Prime costs during the month totaled:

A) $39,000
B) $59,000
C) $96,000
D) $38,000

Question 59

The following data have been provided by a company for a recent accounting period:
The cost of goods manufactured for the period was:

A) $147,000
B) $151,000
C) $153,000
D) $154,000

Question 60

Last month a manufacturing company had the following operating results:
What was the cost of goods manufactured for the month?

A) $350,000
B) $385,000
C) $377,000
D) $323,000

Question 61

A partial listing of costs incurred during February at Urfer Corporation appears below:
The total of the manufacturing overhead costs listed above for February is:

A) $61,000
B) $595,000
C) $277,000
D) $33,000

Question 62

A partial listing of costs incurred at Peggs Corporation during September appears below:
The total of the period costs listed above for September is:

A) $389,000
B) $318,000
C) $71,000
D) $351,000

Question 63

Nadell Corporation reported the following data for the month of April:
If the raw materials purchased during April totaled $63,000, what was the cost of the raw materials used in production for the month?

A) $63,000
B) $61,000
C) $62,000
D) $65,000

Question 64

Corcetti Company manufactures and sells prewashed denim jeans. Large rolls of denim cloth are purchased and are first washed in a giant washing machine. After the cloth is dried, it is cut up into jean pattern shapes and then sewn together. The completed jeans are sold to various retail chains.
Which of the following terms could be used to correctly describe the wages paid to the data entry clerk who enters customer order information into the company's computer system?

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

Question 65

A partial listing of costs incurred during February at Urfer Corporation appears below:
The total of the product costs listed above for February is:

A) $277,000
B) $595,000
C) $318,000
D) $61,000

Question 66

A partial listing of costs incurred during February at Urfer Corporation appears below:
The total of the period costs listed above for February is:

A) $379,000
B) $277,000
C) $61,000
D) $318,000

Question 67

The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just completed year.
The cost of goods sold for the year (in thousands of dollars) was:

A) $670
B) $500
C) $540
D) $650

Question 68

A partial listing of costs incurred at Peggs Corporation during September appears below:
The total of the product costs listed above for September is:

A) $351,000
B) $669,000
C) $71,000
D) $318,000

Question 69

The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just completed year.
The cost of the raw materials used in production during the year (in thousands of dollars) was:

A) $180
B) $40
C) $120
D) $160

Question 70

The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just completed year.
The net operating income for the year (in thousands of dollars) was:

A) $410
B) $110
C) $40
D) $180

Question 71

The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just completed year.
The cost of goods manufactured (finished) for the year (in thousands of dollars) was:

A) $530
B) $520
C) $500
D) $460

Question 72

Management of Solman Corporation has asked your help as an intern in preparing some key reports for June. The beginning balance in the raw materials inventory account was $20,000. During the month, the company made raw materials purchases amounting to $69,000. At the end of the month, the balance in the raw materials inventory account was $32,000. Direct labor cost was $24,000 and manufacturing overhead was $71,000. The beginning balance in the work in process account was $24,000 and the ending balance was $19,000. The beginning balance in the finished goods account was $53,000 and the ending balance was $58,000. Selling expense was $20,000 and administrative expense was $35,000.
The prime cost for June was:

A) $95,000
B) $93,000
C) $81,000
D) $55,000

Question 73

Tart Corporation reported the following data for the month of September:
The prime cost for September was:

A) $50,000
B) $83,000
C) $86,000
D) $103,000

Question 74

Tart Corporation reported the following data for the month of September:
The conversion cost for September was:

A) $150,000
B) $103,000
C) $117,000
D) $86,000

Question 75

Lavell Corporation reported the following data for the month of February:
The cost of goods manufactured for February was:

A) $171,000
B) $174,000
C) $183,000
D) $159,000

Question 76

A partial listing of costs incurred at Peggs Corporation during September appears below:
The total of the manufacturing overhead costs listed above for September is:

A) $71,000
B) $351,000
C) $669,000
D) $40,000

Question 77

Management of Solman Corporation has asked your help as an intern in preparing some key reports for June. The beginning balance in the raw materials inventory account was $20,000. During the month, the company made raw materials purchases amounting to $69,000. At the end of the month, the balance in the raw materials inventory account was $32,000. Direct labor cost was $24,000 and manufacturing overhead was $71,000. The beginning balance in the work in process account was $24,000 and the ending balance was $19,000. The beginning balance in the finished goods account was $53,000 and the ending balance was $58,000. Selling expense was $20,000 and administrative expense was $35,000.
The conversion cost for June was:

A) $95,000
B) $140,000
C) $93,000
D) $152,000

Question 78

Nadell Corporation reported the following data for the month of April:
If the company transferred $234,000 of completed goods from work in process to finished goods inventory during April, what was the cost of goods sold for the month?

A) $234,000
B) $235,000
C) $220,000
D) $248,000

Question 79

Lavell Corporation reported the following data for the month of February:
The total manufacturing cost for February was:

A) $174,000
B) $171,000
C) $70,000
D) $108,000

Question 80

Corcetti Company manufactures and sells prewashed denim jeans. Large rolls of denim cloth are purchased and are first washed in a giant washing machine. After the cloth is dried, it is cut up into jean pattern shapes and then sewn together. The completed jeans are sold to various retail chains.
Which of the following terms could be used to correctly describe the cost of the thread used to sew the jeans together?

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