Name:
Class:
Date:
Indicate whether the statement is true or false.
1. A report analyzing how many products need to be sold to cover operating costs is not typically a managerial accounting
report.
a.
True
b.
False
2. A staff department or unit is one that provides services, assistance, and advice to the departments with line or other staff
responsibilities.
a.
True
b.
False
3. Prime costs are the combination of direct labor costs and factory overhead costs.
a.
True
b.
False
4. Horizontals are departments within a company that are responsible for developing products.
a.
True
b.
False
5. Direct costs can be specifically traced to a cost object.
a.
True
b.
False
6. Only the value of the inventory that is sold will appear on the income statement.
a.
True
b.
False
7. The functions reporting to the CFO sometimes are grouped together and referred to as corporate finance.
a.
True
b.
False
8. Period costs are operating costs that are expensed in the period in which the goods are sold.
a.
True
b.
False
9. Managerial accounting reports must be prepared according to generally accepted accounting principles.
a.
True
b.
False
10. The costs of materials and labor that do not enter directly into the finished product are classified as cost of goods sold.
a.
True
b.
False
11. The cost of materials entering directly into the manufacturing process is classified as factory overhead cost.
a.
True
Name:
Class:
Date:
b.
False
12. While no two company structures are identical, most large companies are organized in terms of verticals and
diagonals.
a.
True
b.
False
13. Verticals prepare their own income statements.
a.
True
b.
False
14. Managerial information is for external as well as internal stakeholders.
a.
True
b.
False
15. Product costs are not expensed until the product is sold.
a.
True
b.
False
16. Manufacturers use machinery and labor to convert direct materials into finished products.
a.
True
b.
False
17. The cost of oil used to lubricate factory machinery and equipment is an example of a direct materials cost.
a.
True
b.
False
18. Lower utilization rates are considered favorable, while higher utilization rates are considered unfavorable.
a.
True
b.
False
19. In smaller companies, the term controller may be used to refer to the chief financial officer.
a.
True
b.
False
20. Indirect costs can be specifically traced to a cost object.
a.
True
b.
False
21. A cost object indicates how costs are related or identified.
a.
True
b.
False
22. Goods that are partway through the manufacturing process, but not yet complete, are referred to as materials
inventory.
a.
True
Name:
Class:
Date:
b.
False
23. The costs of materials and labor that do not enter directly into the finished product are classified as factory overhead.
a.
True
b.
False
24. Managers use managerial information to evaluate performance of a company’s operation.
a.
True
b.
False
25. The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead
cost.
a.
True
b.
False
26. Planning is the process of developing the company’s objectives or goals and translating these objectives into courses
of action.
a.
True
b.
False
27. Conversion costs consist of product costs and period costs.
a.
True
b.
False
28. Although finance and accounting professionals often work within verticals and other horizontals, they do not normally
report directly to the heads of those units or departments.
a.
True
b.
False
29. The plant manager’s salary in a manufacturing business would be considered an indirect cost.
a.
True
b.
False
30. A performance report that identifies the amount of employee downtime is a financial accounting report.
a.
True
b.
False
31. Labor costs that are directly traceable to the product are part of factory overhead.
a.
True
b.
False
32. A cost is a sacrifice made to obtain some benefit.
a.
True
b.
False
33. Controlling deals with choosing goals and deciding how to achieve them.
Name:
Class:
Date:
a.
True
b.
False
34. Period costs can be found on both the balance sheet and the income statement.
a.
True
b.
False
35. For a construction contractor, the wages of carpenters would be classified as factory overhead cost.
a.
True
b.
False
36. Planning is the process of monitoring operating results and comparing actual results with the expected results.
a.
True
b.
False
37. A report analyzing the dollar savings of purchasing new equipment to speed up the production process is a managerial
accounting report.
a.
True
b.
False
38. Indirect labor would be included in factory overhead.
a.
True
b.
False
39. The statement of cost of goods manufactured is an extension of the income statement for a manufacturing company.
a.
True
b.
False
40. Factory overhead cost is sometimes referred to as factory burden.
a.
True
b.
False
41. Prime costs consist of direct materials, indirect materials, and direct labor.
a.
True
b.
False
42. Conversion cost is the combination of direct labor cost and factory overhead cost.
a.
True
b.
False
43. Controlling is the process of monitoring operating results and comparing actual results with the expected results.
a.
True
b.
False
44. Period costs include direct materials and direct labor.
a.
True
Name:
Class:
Date:
b.
False
45. Period (nonmanufacturing) costs are classified into two categories: selling and administrative.
a.
True
b.
False
46. Managerial accounting reports are designed to meet the specific needs of a company’s management.
a.
True
b.
False
47. Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are classified as
factory overhead cost.
a.
True
b.
False
48. Factory overhead is an example of a product cost.
a.
True
b.
False
49. Prime costs are the combination of direct materials and direct labor costs.
a.
True
b.
False
50. Operating expenses are product costs and are expensed when the product is sold.
a.
True
b.
False
51. The payment of dividends is an example of a cost.
a.
True
b.
False
52. If the cost of materials is not a significant portion of the total product cost, the materials may be classified as part of
factory overhead cost.
a.
True
b.
False
53. Prime costs consist of factory overhead and direct labor.
a.
True
b.
False
54. Conversion cost is the combination of direct materials cost and factory overhead cost.
a.
True
b.
False
55. For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.
a.
True
Name:
Class:
Date:
b.
False
56. Conversion costs are the combination of direct labor, direct material, and factory overhead costs.
a.
True
b.
False
57. Indirect labor and indirect materials would be part of factory overhead.
a.
True
b.
False
58. Depreciation on factory plant and equipment is an example of factory overhead cost.
a.
True
b.
False
59. A diagram of the operating structure of an organization is called an organization chart.
a.
True
b.
False
60. Factory overhead includes all manufacturing costs except direct materials and direct labor.
a.
True
b.
False
61. Managerial accounting provides useful information to managers on product costs.
a.
True
b.
False
62. Managerial accounting uses only past data in reports to aid management in the decision-making process.
a.
True
b.
False
63. Managerial accounting information includes both historical and estimated data.
a.
True
b.
False
64. On the balance sheet for a manufacturing business, the cost of direct materials, direct labor, and factory overhead are
categorized as either materials inventory, work in process inventory, or finished goods inventory.
a.
True
b.
False
65. The cost of wages paid to employees directly involved in converting materials to finished product is classified as
direct labor cost.
a.
True
b.
False
66. Product costs include direct labor and advertising expense.
a.
True
Name:
Class:
Date:
b.
False
67. If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as direct
materials cost.
a.
True
b.
False
68. Direct labor costs are included in the conversion costs of a product.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
69. A company sells goods for $150,000 that cost $54,000 to manufacture. Which of the following statements is true?
a.
The company will recognize sales on the balance sheet of $150,000.
b.
The company will recognize $96,000 in gross profit on the balance sheet.
c.
The company will decrease finished goods by $54,000.
d.
The company will increase finished goods by $54,000.
70. Which of the following individuals are charged with the responsibility for directing the day-to-day operations of a
business?
a.
investors
b.
managers
c.
shareholders
d.
customers
71. Work in process inventory increased by $20,000 during the current year. Cost of goods manufactured was
$180,000. Total manufacturing costs incurred are
a.
$198,000
b.
$160,000
c.
$189,000
d.
$200,000
72. Work in process inventory on December 31 of the current year is $44,000. Work in process inventory increased by
60% during the year. Cost of goods manufactured amounts to $275,000. The total manufacturing costs incurred in the
current year are
a.
$291,500
b.
$302,000
c.
$275,750
d.
$233,750
73. Which of the following is the primary criterion for the preparation of managerial accounting reports?
a.
relevance of the reports
b.
manager needs
c.
timing of the reports
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d.
cost of the reports
74. Managers use managerial information for all of the following purposes except
a.
to evaluate the company’s stock performance
b.
to analyze the performance of a company’s operations
c.
to support long-term planning decisions
d.
to determine the cost of manufacturing a product
75. In order to be useful to managers, managerial accounting reports should possess all of the following characteristics
except
a.
provide objective measures of past operations and subjective estimates about future decisions
b.
be prepared in accordance with generally accepted accounting principles
c.
be provided at any time management needs information
d.
be prepared to report information for any unit of the business to support decision making
76. Which of the following is an example of direct labor cost for a cell phone manufacturer?
a.
cost of oil lubricants for factory machinery
b.
cost of wages of assembly worker
c.
salary of plant supervisor
d.
cost of phone components
77. Darwin Company reports the following information:
Sales
$76,500
Direct materials used
7,300
Depreciation on factory equipment
4,700
Indirect labor
5,900
Direct labor
10,500
Factory rent
4,200
Factory utilities
1,200
Sales salaries expense
15,600
Office salaries expense
8,900
Indirect materials
1,200
Period costs are
a.
$24,500
b.
$30,300
c.
$29,200
d.
$35,000
78. Which of the following is not a factory overhead cost?
a.
materials used directly in the manufacturing process of the product
b.
insurance on factory equipment
c.
salaries of production supervisors
d.
property tax on factory building
Name:
Class:
Date:
79. Indirect costs incurred in a manufacturing environment that cannot be traced directly to a product are treated as
a.
period costs and expensed when incurred
b.
product costs and expensed when the goods are sold
c.
product costs and expensed when incurred
d.
period costs and expensed when the goods are sold
80. Which of the following is not a prime cost?
a.
plant janitor’s wages
b.
direct labor wages
c.
machine operator wages
d.
assembly line wages
81. All of the following would be reported on the balance sheet as current assets except
a.
factory overhead
b.
materials inventory
c.
finished goods inventory
d.
work in process inventory
82. The following are all product costs except
a.
direct materials
b.
sales and administrative expenses
c.
direct labor
d.
factory overhead
83. Cost of goods manufactured during the year is $240,000, and work in process inventory on December 31 is $50,000.
Work in process inventory during the year decreased by 60%. Total manufacturing costs incurred are
a.
$190,000
b.
$165,000
c.
$290,000
d.
$315,000
84. A company used $35,000 of direct materials, incurred $73,000 in direct labor cost, and had $114,000 in factory
overhead costs during the period. If beginning and ending work in process inventories were $28,000 and $32,000,
respectively, the cost of goods manufactured was
a.
$218,000
b.
$226,000
c.
$190,000
d.
$222,000
85. The following information is taken from the financial records of Gunner Manufacturing:
Cost of materials used $45,000
Direct labor costs 48,000
Factory overhead 39,000
Work in process, beginning 18,000
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Class:
Date:
Work in process, ending 28,000
What is the cost of goods manufactured?
a.
$178,000
b.
$132,000
c.
$122,000
d.
$142,000
86. The cost of a manufactured product generally consists of which of the following costs?
a.
direct materials cost and factory overhead cost only
b.
direct labor cost and factory overhead cost only
c.
direct labor cost, direct materials cost, and factory overhead cost
d.
direct materials cost and direct labor cost only
Jensen Company reports the following:
Direct materials used
$345,000
Direct labor incurred
250,000
Factory overhead incurred
400,000
Operating expenses
175,000
87. Jensen Company’s period costs are
a.
$345,000
b.
$250,000
c.
$400,000
d.
$175,000
88. Managerial accountants could prepare all of the following reports except a(n)
a.
performance report identifying amounts of scrap
b.
control report comparing direct material usage over time
c.
sales report targeting monthly sales and potential bonuses
d.
annual report for external regulators such as the SEC
89. Which of the following terms is used to describe the process of monitoring operating results and comparing actual
results with the expected results?
a.
improving
b.
controlling
c.
directing
d.
planning
90. Which of the following is most associated with financial accounting reports?
a.
can have both objective and subjective information
b.
can be prepared periodically, or as needed
c.
prepared in accordance with GAAP
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Class:
Date:
d.
can be prepared for the entity or segment
91. Direct labor and direct materials are
a.
product costs and expensed when the goods are sold
b.
product costs and expensed when incurred
c.
period costs and expensed when incurred
d.
period costs and expensed when the goods are sold
92. Goods that are partially completed by a manufacturer are
a.
merchandise inventory
b.
work in process inventory
c.
finished goods inventory
d.
materials inventory
93. Beginning work in process is equal to
a.
cost of goods manufactured plus ending work in process minus manufacturing costs incurred during the
current period
b.
cost of goods manufactured minus ending work in process plus manufacturing costs incurred during the
current period
c.
ending work in process plus manufacturing costs incurred during the current period
d.
manufacturing costs incurred during the current period minus ending work in process
94. Darwin Company reports the following information:
Sales
$76,500
Direct materials used
7,300
Depreciation on factory equipment
4,700
Indirect labor
5,900
Direct labor
10,500
Factory rent
4,200
Factory utilities
1,200
Sales salaries expense
15,600
Office salaries expense
8,900
Indirect materials
1,200
Product costs are
a.
$24,500
b.
$30,300
c.
$29,200
d.
$35,000
95. Period costs include
a.
current assets on the balance sheet
b.
current liabilities on the balance sheet
c.
operating costs that are shown on the income statement when products are sold
d.
operating costs that are shown on the income statement in the period in which they are incurred
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b.
balance sheet as a long-term asset
96. Which of the following statements is false?
a.
There is no overlap between financial and managerial accounting.
b.
Managerial accounting sometimes relies on past information.
c.
Managerial accounting does not need to conform to GAAP.
d.
Financial accounting must conform to GAAP.
97. Which of the following is an example of a factory overhead cost?
a.
repair and maintenance cost on the administrative building
b.
factory heating and lighting cost
c.
insurance premiums on salespersons’ automobiles
d.
president’s salary
98. Accounting designed to meet the needs of decision makers inside the business is
a.
general accounting
b.
financial accounting
c.
managerial accounting
d.
external accounting
99. Given the following data:
Beginning raw materials inventory
$30,000
Materials purchased
65,000
Ending raw materials inventory
40,000
What is the amount of raw materials used?
a.
$5,000
b.
$55,000
c.
$75,000
d.
$30,000
100. Which of the following is most associated with managerial accounting?
a.
must follow GAAP
b.
may rely on estimates and forecasts
c.
is prepared for users outside the organization
d.
always reports on the entire entity
101. Which of the following terms is used to describe the process of developing the organization’s objectives and
translating those into courses of action?
a.
supervising
b.
planning
c.
improving
d.
decision making
102. Finished goods inventory is reported on the
a.
income statement as a period cost
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Class:
Date:
c.
balance sheet as a current asset
d.
income statement as revenue
103. Another term for factory overhead is
a.
surplus
b.
period cost
c.
supervisory cost
d.
factory burden
104. Which of the following is not a characteristic of useful managerial accounting reports?
a.
accurate
b.
GAAP—adhering
c.
historical and estimated data
d.
prepared as needed
105. Compute conversion costs given the following data: direct materials, $347,500; direct labor, $196,300; factory
overhead, $187,900; and selling expenses, $45,290.
a.
$543,800
b.
$187,900
c.
$731,700
d.
$384,200
106. A company manufactured 50,000 units of a product at a cost of $450,000. It sold 45,000 units at $15 each. The
gross profit is
a.
$750,000
b.
$240,000
c.
$600,000
d.
$270,000
107. Which of the following terms refers to the cost of changing direct materials into a finished manufactured product?
a.
factory overhead cost
b.
period cost
c.
conversion cost
d.
direct labor cost
108. The cost of wages paid to employees directly involved in the manufacturing process in converting materials into
finished products is classified as
a.
factory overhead cost
b.
direct labor cost
c.
miscellaneous costs
d.
direct materials cost
109. Which of the following is not true with regard to direct materials for a bakery?
a.
Flour and sugar would probably be direct materials.
b.
Eggs would probably be a direct material.
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Copyright Cengage Learning. Powered by Cognero.
Page 14
c.
Oil to lubricate factory machines would not be a direct material.
d.
Paper cupcake liners, that become part of the product, must be accounted for as direct materials.
110. ShadyPalms Hotel has 100 rooms. During the month of February, it had 500 guests, each staying 5 nights. The
occupancy rate for ShadyPalms Hotel for the month of February (not a leap year) was closest to
a.
70%
b.
80%
c.
90%
d.
120%
111. Given the following data:
Cost of materials used $45,000
Direct labor costs 48,000
Factory overhead 39,000
Work in process, beginning 28,000
Work in process, ending 18,000
Finished goods, beginning 28,000
Finished goods, ending 18,000
What is cost of goods sold?
a.
$152,000
b.
$142,000
c.
$10,000
d.
$128,000
112. Which of the following will not be found on the balance sheet of a manufacturing company?
a.
cost of goods sold
b.
materials
c.
work in process
d.
finished goods
113. Which of the following is the principal reason for preparing managerial accounting reports?
a.
usefulness to management
b.
cost of preparation
c.
clarity
d.
GAAP
114. On the income statement of a manufacturing company, which of the following replaces purchases in the “Cost of
goods sold” section of a retail company?
a.
finished goods
b.
cost of merchandise available
c.
cost of goods manufactured
d.
work in process
115. Insurance expense incurred on a factory building would be treated as a
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Date:
a.
direct cost
b.
period cost
c.
product cost
d.
selling cost
116. Work in process inventory on December 31 is $42,000. Work in process inventory decreased by 40% during the
year. Total manufacturing costs incurred amount to $260,000. The cost of goods manufactured is
a.
$232,000
b.
$302,000
c.
$288,000
d.
$190,000
117. A product cost is
a.
expensed in the period in which the product is manufactured
b.
shown with current liabilities on the balance sheet
c.
shown with operating expenses on the income statement
d.
expensed in the period the product is sold
118. Given the following data:
Work in process, beginning
$14,000
Work in process, ending
20,000
Direct labor costs
4,000
Cost of goods manufactured
8,000
Factory overhead
8,000
Direct materials used is
a.
$2,000
b.
$4,000
c.
$8,000
d.
$14,000
119. Smith Company reports the following information:
Cost of goods manufactured
$68,250
Direct materials used
27,000
Direct labor incurred
25,000
Work in process inventory, January 1
11,000
Factory overhead is 75% of the cost of direct labor. Work in process inventory on December 31 is
a.
$16,250
b.
$8,500
c.
$18,750
d.
$13,500
120. The cost of goods sold for Michaels Manufacturing in the current year was $233,000. The January 1 finished goods
inventory balance was $31,600, and the December 31 finished goods inventory balance was $24,200. Cost of goods
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occupancy rate for SunnyRest Hotel for the month of March was closest to
manufactured during the period was
a.
$233,000
b.
$225,600
c.
$288,800
d.
$240,400
121. Which of the following costs are conversion costs?
a.
direct labor cost and factory overhead cost
b.
direct materials cost and direct labor cost
c.
factory overhead cost
d.
direct materials cost and factory overhead cost
122. Which of the following is an example of direct materials cost for an automobile manufacturer?
a.
cost of oil lubricants for factory machinery
b.
cost of wages of assembly worker
c.
salary of production supervisor
d.
cost of interior upholstery
123. An example of a period cost is
a.
advertising expense
b.
indirect materials
c.
depreciation on factory equipment
d.
property taxes on plant facilities
Jensen Company reports the following:
Direct materials used
$345,000
Direct labor incurred
250,000
Factory overhead incurred
400,000
Operating expenses
175,000
124. Jensen Company’s product costs are
a.
$995,000
b.
$920,000
c.
$825,000
d.
$770,000
125. Cost of goods manufactured is equal to
a.
total manufacturing costs plus ending materials inventory less beginning materials inventory
b.
cost of goods sold plus beginning work in process inventory less ending work in process inventory
c.
total manufacturing costs plus ending work in process inventory less beginning work in process inventory
d.
total manufacturing costs plus beginning work in process inventory less ending work in process inventory
126. SunnyRest Hotel has 300 rooms. During the month of March, it had 7,200 guests, each staying a single night. The
Name:
Class:
Date:
a.
70%
b.
80%
c.
90%
d.
120%
127. The income statement for both a merchandiser and a manufacturer would include
a.
operating expenses
b.
direct materials
c.
direct labor incurred
d.
cost of goods manufactured
128. In the hotel industry, the occupancy rate is a measure of
a.
risk
b.
solvency
c.
profitability
d.
utilization
129. Which of the following manufacturing costs is an indirect cost of producing a product?
a.
oil lubricants used for factory machinery
b.
commissions for sales personnel
c.
hourly wages of an assembly worker
d.
memory chips for a microcomputer manufacturer
130. Conversion costs are
a.
direct materials and direct labor
b.
direct materials and factory overhead
c.
factory overhead and direct labor
d.
direct materials and indirect labor
131. Which of the following must be true in order for materials to be classified as direct materials?
a.
They must be classified as both prime costs and conversion costs.
b.
They must be introduced into the process in both work in process inventories and finished goods inventories.
c.
They must be an integral part of the finished product, but can be an insignificant portion of the total product
cost.
d.
They must be an integral part of the finished product and be a significant portion of the total product cost.
132. Cost of goods sold for a manufacturer equals cost of goods manufactured plus
a.
beginning work in process inventory less ending work in process inventory
b.
ending work in process inventory less beginning work in process inventory
c.
beginning finished goods inventory less ending finished goods inventory
d.
ending finished goods inventory less beginning finished goods inventory
133. Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are classified as
a.
factory overhead cost
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b.
miscellaneous expense
c.
product costs
d.
period cost
134. All of the following are examples of indirect labor except
a.
maintenance personnel
b.
janitorial personnel
c.
machine operators
d.
plant managers
135. Prime costs are
a.
direct materials and factory overhead
b.
direct materials and direct labor
c.
direct labor and factory overhead
d.
period costs and factory overhead
136. Rent expense on a factory building would be treated as a(n)
a.
period cost
b.
product cost
c.
indirect cost
d.
direct materials cost
137. Which of the following is part of factory overhead cost?
a.
sales commissions
b.
depreciation of factory equipment and machines
c.
depreciation of sales person’s vehicle
d.
direct materials used
138. If the cost of a direct material is a small portion of total production cost, it may be classified as part of
a.
direct labor cost
b.
selling and administrative costs
c.
miscellaneous costs
d.
factory overhead cost
139. Which of the following accounts will be found on the income statement?
a.
Inventory
b.
Work in Process
c.
Finished Goods
d.
Cost of Goods Sold
140. The primary goal of managerial accounting is to provide information to
a.
investors
b.
creditors
c.
management
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d.
external auditors
141. All of the following could be considered a direct material except
a.
steel
b.
fabric
c.
glue
d.
lumber
142. Which of the following would be least likely to be considered a managerial accounting report?
a.
report to analyze potential efficiencies and savings for the purchase of new production equipment
b.
schedule of total manufacturing costs incurred
c.
statement of cost of goods manufactured
d.
statement of stockholders’ equity
143. Managerial accounting reports are
a.
prepared according to GAAP
b.
prepared according to management needs
c.
prepared periodically only
d.
related to the entire business entity only
144. Which of the following are basic phases of the management process?
a.
supervising and directing
b.
decision making and supervising
c.
organizing and directing
d.
planning and controlling
145. Indirect labor and indirect materials are classified as
a.
factory overhead and product costs
b.
factory overhead and period costs
c.
operating costs and period costs
d.
operating costs and product costs
146. Product costs
a.
appear only on the balance sheet
b.
appear only on the income statement
c.
are expensed as costs are incurred for direct labor, direct materials, and factory overhead
d.
appear on both the income statement and balance sheet
147. At the beginning of the current year, Grant Company’s work in process inventory account had a balance of $30,000.
During the year, $68,000 of direct materials were used in production, and $66,000 of direct labor costs were incurred.
Factory overhead for the year amounted to $90,000. Cost of goods manufactured is $230,000. The balance in work in
process inventory on December 31 is
a.
$24,000
b.
$44,000
c.
$66,000
Name:
Class:
Date:
d.
$36,000
148. Nearly _____ of U.S. economic activity is represented by services.
a.
40%
b.
50%
c.
60%
d.
80%
149. A plant manager’s salary is a(n)
a.
direct cost and an indirect cost
b.
direct cost
c.
indirect cost
d.
period cost
150. Factory overhead includes
a.
factory rent and direct labor
b.
direct materials and direct labor
c.
indirect materials and direct materials
d.
indirect labor and indirect materials
151. Which of the following items would not be classified as part of factory overhead?
a.
direct labor used
b.
amortization of manufacturing patents
c.
production supervisors’ salaries
d.
factory supplies used
Match the items below for a lawn mower manufacturer to the type of cost (a–d).
a.
Direct materials
b.
Direct labor
c.
Factory overhead
d.
Nonmanufacturing cost
152. Wheels
153. Depreciation on worker’s tools
154. Wages of assemblers
155. Grease for wheel axles
The following are some of the costs incurred by Cupcake Company. Identify them as either:
a.
Prime costs
b.
Conversion costs
c.
Both prime and conversion costs
Name:
Class:
Date:
d.
Neither prime nor conversion costs
156. Salesperson commissions
157. Factory rent
158. Depreciation expense—factory
159. Frosting
160. Baker’s wages
161. Depreciation expense—office
162. Cupcake mix
163. Sprinkles for decoration (indirect material)
Match the items below for a bakery to the type of cost (a–d).
a.
Direct materials
b.
Direct labor
c.
Factory overhead
d.
Nonmanufacturing cost
164. Salesperson commissions
165. Factory rent
166. Depreciation expense—factory
167. Frosting
168. Baker’s wages
169. Depreciation expense—office
170. Cupcake mix
171. Sprinkles for decoration (indirect material)
Match the items below for a cake factory to the type of cost (a–c).
a.
Prime cost
b.
Conversion cost
c.
Both prime cost and conversion cost
172. Frosting
173. Wages of the baker
174. Sprinkles for the topping (considered an indirect material)
Name:
Class:
Date:
175. Depreciation on oven
Match the items below to the appropriate term (a–d).
a.
Direct materials
b.
Selling and administrative expense
c.
Factory overhead
d.
Direct labor
176. Rent expense on factory building
177. Sales supplies used
178. Factory supplies used
179. Indirect materials used
180. Wages of assembly line personnel
181. Cost of primary material used to make a product
182. Depreciation on office equipment
183. Rent on office facilities
184. Insurance expired on factory equipment
185. Utilities incurred in the office
186. Advertising expense
Match the items below to the type of cost (a or b).
a.
Product cost
b.
Period cost
187. Direct materials used
188. Factory utilities
189. Salespersons’ commissions
190. Salary of plant manager
191. Indirect materials used
192. Depreciation on store equipment
193. Indirect labor incurred
194. Advertising expense
Name:
Class:
Date:
195. Direct labor incurred
196. Factory machinery repairs and maintenance
197. Depreciation on factory machinery
198. Plant insurance expired
Match each description below to the appropriate phase of the manufacturing process (a–e).
a.
Planning
b.
Directing
c.
Controlling
d.
Improving
e.
Decision making
199. Used by managers for continuous improvement
200. Managers must decide how to respond to unfavorable performances
201. Used by management to develop the organization’s objectives and goals
202. Monitoring the operating results of implemented plans and comparing actual results to expected results
203. Process by which managers run day-to-day operations
Match the items below for a cake factory to the type of cost (a or b).
a.
Product cost
b.
Period cost
204. Frosting
205. Baker’s wages
206. Advertising fees
207. Transportation out
Bartel Corporation produces bar stools for restaurants. For each of the following, indicate whether the cost would
typically be considered a direct or indirect cost for the cost object given.
a.
Direct
b.
Indirect
208. The production labor wages for the bar stool assemblers
209. The factory supervisor’s salary for the bar stool factory
210. Lubricants used on the bar stool manufacturing equipment
211. Manufacturing costs for wood and steel used in the bar stools
Name:
Class:
Date:
212. Nails and screws used in the production of the bar stools
Match the items below to the type of cost (a–c).
a.
Direct
b.
Indirect
c.
Neither direct nor indirect
213. Labor for machine maintenance
214. Factory equipment depreciation
215. Materials not traceable to specific products
216. Office equipment depreciation
217. Materials traceable to specific products
218. Insurance expired on administrative facilities
219. Product assembly labor incurred
220. Administrative office salaries
221. Salespersons’ salaries
222. Utilities on factory building
223. Utilities on administrative facilities
Bartow Company manufactures bicycles. For each of the following, indicate whether the cost would typically be
considered a product or period cost for the cost object given.
a.
Product
b.
Period
224. Tires for the bicycles
225. Electricity costs to run the factory
226. Selling costs for the period
227. Delivery costs to take the bicycles to stores
228. Accountant salaries
229. Zoe Corporation has the following information for the month of March:
Purchases
$ 92,000
Materials inventory, March 1
6,000
Name:
Class:
Date:
Materials inventory, March 31
8,000
Direct labor
25,000
Factory overhead
37,000
Work in process inventory, March 1
22,000
Work in process inventory, March 31
23,500
Finished goods inventory, March 1
21,000
Finished goods inventory, March 31
30,000
Sales
257,000
Sales and administrative expenses
79,000
Prepare (a) a statement of cost of goods manufactured, (b) an income statement for the month ended March 31, and (c) the
“Inventory” section of the balance sheet.
230. Keeton Company had the following data:
Cost of materials used
$60,000
Direct labor costs
58,000
Factory overhead
33,000
Work in process, beginning
29,000
Work in process, ending
18,000
Finished goods, beginning
32,000
Finished goods, ending
18,000
Determine the cost of goods sold.
231. Watson Company has the following data:
Work in process, beginning
$18,000
Work in process, ending
25,000
Direct labor costs incurred
5,000
Cost of goods manufactured
9,000
Factory overhead
7,000
Determine the amount of direct materials used.
232. Sienna Company has the following information for January:
Cost of materials used in production
$20,000
Direct labor
15,000
Factory overhead
24,000
Work in process inventory, January 1
2,900
Work in process inventory, January 31
3,500
Determine the cost of goods manufactured.
233. Differentiate between:
a. direct materials versus indirect materials
b. direct labor versus indirect labor
Name:
Class:
Date:
234. Differentiate between financial and managerial accounting, addressing such issues as users, nature of information,
guidelines for preparation, timeliness, and focus of reporting.
235. Laramie Technologies had the following data:
Cost of materials used
$50,000
Direct labor costs
56,000
Factory overhead
28,000
Work in process, beginning
45,000
Work in process, ending
32,000
Determine the cost of goods manufactured.
236. Allen Company used $71,000 of direct materials and incurred $37,000 of direct labor costs during the current
year. Indirect labor amounted to $2,700 while indirect materials used totaled $1,600. Other operating costs pertaining to
the factory included utilities of $3,100, maintenance of $4,500, supplies of $1,800, depreciation of $7,900, and property
taxes of $2,600. There was no beginning or ending finished goods inventory, but work in process inventory began the
year with a $5,500 balance and ended the year with a $7,500 balance.
Prepare a statement of cost of goods manufactured.
237. Magnus Industries has the following data:
Beginning raw materials inventory
$75,000
Materials purchased
40,000
Ending raw materials inventory
60,000
Determine the cost of raw materials used.
238. The following information is available for Carter Corporation:
1. Materials inventory decreased $4,000.
2. Materials inventory on December 31 was 50% of materials inventory on January 1.
3. Beginning work in process inventory was $145,000.
4. Ending finished goods inventory was $65,000.
5. Purchases of direct materials were $154,700.
6. Direct materials used were 2.5 times the cost of direct labor.
7. Total manufacturing costs incurred were $246,400, 80% of cost of goods manufactured and $156,000 less than cost of
goods sold.
Compute:
a. Finished goods inventory on January 1
b. Work in process inventory on December 31
c. Direct labor incurred
d. Factory overhead incurred
e. Materials inventory on January 1
f. Materials inventory on December 31
g. Direct materials used
239. Taylor Industries had a fire and some of its accounting records were destroyed. Available information is presented
below for the year ended December 31.
Name:
Class:
Date:
Materials inventory, December 31
$ 15,000
Direct materials purchased
28,000
Direct materials used
22,900
Cost of goods manufactured
135,000
Additional information:
Factory overhead is 150% of direct labor cost.
Finished goods inventory decreased by $18,000 during the year.
Work in process inventory increased by $12,000 during the year.
Determine:
a. Materials inventory, January 1
b. Direct labor cost
c. Factory overhead incurred
d. Cost of goods sold
240. Putney Company reports the following information:
Sales
$76,500
Direct materials used
7,300
Depreciation on factory equipment
4,700
Indirect labor
5,900
Direct labor
10,500
Factory rent
4,200
Factory utilities
1,200
Sales salaries expense
15,600
Office salaries expense
8,900
Indirect materials
1,200
Compute:
a. product costs
b. period costs
241. Davis Manufacturing Company had the following data:
January 1
December 31
Accounts receivable
$27,000
$33,000
Materials inventory
22,500
6,000
Work in process inventory
70,200
48,000
Finished goods inventory
3,000
15,000
Collections on account were $625,000.
Cost of goods sold was 68% of sales.
Direct materials purchased amounted to $90,000.
Factory overhead was 300% of the cost of direct labor.
Compute:
a. Sales revenue (all sales were on account)
b. Cost of goods sold
c. Cost of goods manufactured
d. Direct materials used
Name:
Class:
Date:
f. Factory overhead incurred
242. Zoe Corporation has the following information for the month of March. Determine the (a) cost of goods
manufactured and (b) cost of goods sold.
Cost of materials placed in production
$69,000
Direct labor
27,000
Factory overhead
34,000
Work in process, March 1
15,000
Work in process, March 31
19,500
Finished goods inventory, March 1
25,000
Finished goods inventory, March 31
23,000
243. The following data (in thousands of dollars) have been taken from the accounting records of Rayburn Corporation for
the current year.
Sales
$1,980
Selling expenses
280
Manufacturing overhead
460
Direct labor
400
Administrative expenses
300
Purchases of direct materials
240
Finished goods inventory, beginning
240
Finished goods inventory, ending
320
Direct materials inventory, beginning
80
Direct materials inventory, ending
140
Work in process inventory, beginning
140
Work in process inventory, ending
100
Required:
a. What was the cost of the direct materials used in production during the year?
b. What was the cost of goods manufactured for the year?
c. What was the cost of goods sold for the year?
d. What was the net income for the year?
Present all calculations in thousands of dollars.
244. Differentiate between verticals and horizontals.
245. What is decision making? Who is responsible for decision making in a managerial situation?
246. Differentiate between period and product costs and include examples of each type of cost.
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