Question 1

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.

Question 2

Play Time 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:  The average cost per student when 16 students enroll in the school is:

Accepted Answer

A) $100. 
B) $125. 
C) $175. 
D) $300. 
E) $400.

Question 3

As the activity level increases, total ﬁxed cost remains constant and unit ﬁxed cost remains the same.

Accepted Answer

A) True 
 B)False

Question 4

Amaz-a-nation reported the following data for the year just ended: sales revenue, $1,750,000; cost of goods sold, $980,000; cost of goods manufactured, $560,000; and selling and administrative expenses, $170,000.Amaz-a-nation's gross margin would be:

Accepted Answer

A) $940,000. 
B) $1,190,000. 
C) $1,020,000. 
D) $380,000. 
E) $770,000.

Question 5

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

Accepted Answer

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

Question 6

The tuition that will be paid next semester by a college student who pursues a degree is a(n):

Accepted Answer

A) sunk cost. 
B) out-of-pocket cost. 
C) indirect cost. 
D) average cost. 
E) marginal cost.

Question 7

Manufacturing costs are classiﬁed into four categories.

Accepted Answer

A) True 
 B)False

Question 8

Guaranteed Appliance Co.produces washers and dryers in an assembly-line process.Labor costs incurred during a recent period were: corporate executives, $500,000; assembly-line workers, $180,000; security guards, $45,000; and plant supervisor, $110,000.The total of Guaranteed's direct labor cost was:

Accepted Answer

A) $110,000. 
B) $180,000. 
C) $155,000. 
D) $235,000. 
E) $735,000.

Question 9

Product costs are:

Accepted Answer

A) expensed when incurred. 
B) inventoried. 
C) treated in the same manner as period costs. 
D) treated in the same manner as advertising costs. 
E) subtracted from cost of goods sold.

Question 10

How would a 5% sales commission paid to sales personnel be classiﬁed in a manufacturing company?

Accepted Answer

A) Fixed, period cost. 
B) Fixed, product cost. 
C) Variable, period cost. 
D) Variable, product cost. 
E) Direct labor, product cost.

Question 11

Which of the following employees would not be classiﬁed as indirect labor?

Accepted Answer

A) Plant Custodian. 
B) Salesperson. 
C) An employee that packs products for shipment. 
D) Plant security guard. 
E) A line employee that produces parts for chairs using a saw and template.

Question 12

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.

Question 13

Sunk costs are irrelevant to all future decisions.

Accepted Answer

A) True 
 B)False

Question 14

The Enrique Company recorded the following transactions for February 20x1:  Sales were $560,000, with sales prices determined by adding a 40% markup to the ﬁrm's manufacturing cost.The total cost of direct materials used, direct labor, and manufacturing overhead during the month was $285,000. Note: The materials account includes both direct materials and indirect materials. Required: Calculate the missing values.

Accepted Answer

The answer of The Enrique Company recorded the following transactions...

Question 15

Which of the following is not an example of a variable cost?

Accepted Answer

A) Straight-line depreciation on a machine that has a ﬁve-year service life. 
B) Wages of manufacturing workers whose pay is based on hours worked. 
C) Tires used in the production of tractors. 
D) Aluminum used to make patio furniture. 
E) Commissions paid to sales personnel.

Question 16

The accounting records of Upton Company revealed the following information:  Upton's cost of goods sold is:

Accepted Answer

A) $721,000. 
B) $730,000. 
C) $778,000. 
D) $787,000. 
E) None of the answers is correct.

Question 17

The ﬁxed costs per unit are $10 when a company produces 10,000 units of product.What are the ﬁxed costs per unit when 8,000 units are produced?

Accepted Answer

A) $12.50. 
B) $10.00. 
C) $8.00. 
D) $6.50. 
E) $5.50.

Question 18

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 19

Which of the following is a period cost?

Accepted Answer

A) Direct material. 
B) Advertising expense. 
C) Indirect labor. 
D) Miscellaneous supplies used in production activities. 
E) Factory foreman salary for the motor production line.

Question 20

Peyton Manufacturing has the following data:  If direct materials used during the year were $135,000, what was cost of goods manufactured?

Accepted Answer

A) $140,500. 
B) $539,000. 
C) $409,500. 
D) $544,500. 
E) None of the answers is correct.

Exam 2: Basic Cost Management Concepts

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

Play Time 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: The average cost per student when 16 students enroll in the school is:

As the activity level increases, total ﬁxed cost remains constant and unit ﬁxed cost remains the same.

Amaz-a-nation reported the following data for the year just ended: sales revenue, $1,750,000; cost of goods sold, $980,000; cost of goods manufactured, $560,000; and selling and administrative expenses, $170,000.Amaz-a-nation's gross margin would be:

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

The tuition that will be paid next semester by a college student who pursues a degree is a(n) :

Manufacturing costs are classiﬁed into four categories.

Guaranteed Appliance Co.produces washers and dryers in an assembly-line process.Labor costs incurred during a recent period were: corporate executives, $500,000; assembly-line workers, $180,000; security guards, $45,000; and plant supervisor, $110,000.The total of Guaranteed's direct labor cost was:

Product costs are:

How would a 5% sales commission paid to sales personnel be classiﬁed in a manufacturing company?

Which of the following employees would not be classiﬁed as indirect labor?

Fixed costs are costs that:

Sunk costs are irrelevant to all future decisions.

Which of the following is not an example of a variable cost?

The accounting records of Upton Company revealed the following information: Upton's cost of goods sold is:

The ﬁxed costs per unit are $10 when a company produces 10,000 units of product.What are the ﬁxed costs per unit when 8,000 units are produced?

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

Which of the following is a period cost?

Peyton Manufacturing has the following data: If direct materials used during the year were $135,000, what was cost of goods manufactured?