7. Assigning costs
a.
involves the way that a cost is linked to some cost object.
b.
tells the company why the money was spent.
c.
to a cost object using a reasonable and convenient method is allocation.
d.
all of these.
8. An opportunity cost is:
a.
the benefit given up or sacrificed when one alternative is chosen over another.
b.
the cost to market, distribute, and service a product or service.
c.
the total product cost of goods completed during the current period and transferred to
finished goods inventory.
d.
the difference between sales revenue and cost of goods sold.
9. Non-manufacturing costs include
a.
marketing and administration.
b.
direct materials.
c.
indirect materials.
d.
overhead.
10. Which of the following is an example of an intangible product?
a.
motorcycle
b.
eye exam
c.
stereo
d.
television
11. Which of the following is an example of a tangible product?
a.
lawn care
b.
accounting services
c.
customer service
d.
computer
12. Costs are subdivided into what two major functional categories?
a.
opportunity and allocation
b.
fixed and variable
c.
product and non-production
d.
direct and indirect
13. Product costs
a.
are costs that are included in the determining the value of the inventory.
b.
are manufacturing costs.
c.
include direct materials, direct labor, and overhead.
d.
are all of these.
14. Which of the following would not be a period cost?
a.
research and development
b.
direct materials
c.
advertising costs
d.
office supplies
15. Which of the following would be an example of a direct materials cost?
a.
engine on an airplane
b.
screws used to manufacture a lighting fixture
c.
glue used to build cabinets
d.
nails used to manufacture a table
16. Product costs consist of
a.
period costs.
b.
indirect materials, indirect labor, and administrative costs.
c.
direct materials, direct labor, and selling costs.
d.
direct materials, direct labor, and overhead.
17. Which of the following is not an example of a direct materials cost?
a.
shelves on a bookcase
b.
engine in a car
c.
tires on a bicycle
d.
nail used to manufacture a desk
18. Materials in the raw materials account do not become direct materials
a.
until they are withdrawn from inventory for use in production.
b.
until the finished product is sold.
c.
until they are purchased from a vendor.
d.
none of these are correct.
19. Which of the following is an example of direct labor?
a.
vice president of marketing
b.
assembly line worker for televisions
c.
staff accountant
d.
supervisor at a manufacturing plant
20. Direct labor is a(n)
a.
product cost.
b.
opportunity cost.
c.
administrative cost.
d.
fixed cost.
21. Overhead includes
a.
indirect labor.
b.
indirect materials.
c.
supplies.
d.
all of these.
22. Which of the following would not be included in overhead?
a.
marketing costs
b.
property taxes on the factory
c.
factory utility costs
d.
deprecation on factory machinery
23. Indirect labor would include
a.
salary of the vice-president of marketing.
b.
salary of CEO.
c.
salary of factory supervisor.
d.
none of these are correct.
24. The unit cost
a.
is the total product costs divided by the number of units produced.
b.
includes period costs.
c.
is the total prime costs divided by the number of units produced.
d.
is the total conversion costs divided by the number of units produced.
25. Prime cost is
a.
indirect materials cost and direct labor cost.
b.
direct materials cost and direct labor cost.
c.
direct labor cost and indirect labor cost.
d.
direct materials cost and indirect labor cost.
26. Conversion cost is the sum of
a.
product costs and period costs.
b.
selling cost and administrative costs.
c.
direct labor cost and direct materials costs.
d.
direct labor cost and overhead costs.
27. Period costs
a.
are selling costs and administrative costs.
b.
are used to compute product cost.
c.
can be included in overhead costs.
d.
are carried in inventory until the goods are sold.
28. Which of the following is an example of a period cost?
a.
research and development
b.
selling and marketing
c.
general accounting
d.
all of these
29. Cost of goods manufactured equals
a.
the cost of indirect materials used in production.
b.
the product cost of goods completed during the current period.
c.
the period costs for the current period.
d.
the cost of direct materials and direct labor used during the current period.
30. Cost of goods manufactured equals
a.
total product costs incurred during the current period + beginning work in process −
ending work in process.
b.
direct materials cost + direct labor cost + overhead cost.
c.
sales − cost of goods sold.
d.
none of these are correct.
31. The cost of the partially completed goods at the end of the period would be
a.
ending work in process inventory.
b.
cost of goods sold.
c.
beginning finished goods inventory.
d.
beginning work in process inventory.
32. Product costs are expensed
a.
when the product is finished.
b.
when the product unit cost is calculated.
c.
when the product is sold.
d.
all of these are correct.
33. Rancor Inc. had a per-unit conversion cost of $2.50 during April and incurred direct materials cost of
$100,000, direct labor costs of $75,000, and overhead costs of $45,000 during the month. How many
units did they manufacture during the month?
a.
70,000
b.
18,000
c.
48,000
d.
30,000
34. Lakeland Inc. manufactured 5,000 units during the month of March. They incurred direct materials
cost of $100,000 and overhead cost of $40,000. If their per-unit prime cost was $26.00 per unit how
much direct labor cost did they incur during March?
a.
$20,000
b.
$35,000
c.
$90,000
d.
$30,000
35. During the month of January, Enterprise Inc. had total manufacturing costs of $110,000. They incurred
$40,000 of direct labor cost and $30,000 of overhead cost during the month. If the materials inventory
on January 1 was $3,000 less that the materials inventory on January 31, what was the cost of
materials purchased during the month?
a.
$37,000
b.
$43,000
c.
$40,000
d.
none of these
36. Production costs that are not attached to units that are sold are reported as:
a.
selling expenses.
b.
cost of goods sold.
c.
administrative costs.
d.
inventory.
37. Information from the records of Cain Corporation for December 2011 are as follows:
Sales
$1,230,000
Selling and administrative expenses
210,000
Direct materials used
264,000
Direct labor
300,000
Factory overhead
405,000
Inventories
Dec. 1, 2011
Dec. 31, 2011
Direct materials
$36,000
$42,000
Work in process
75,000
84,000
Finished goods
69,000
57,000
The conversion costs are:
a.
$960,000.
b.
$1,179,000.
$ 40,000
$ 40,000
$ 30,000
$110,000
$ 43,000
$ 40,000
c.
$705,000.
d.
$564,000.
38. Information from the records of Cain Corporation for December 2011 are as follows:
Sales
$1,230,000
Selling and administrative expenses
210,000
Direct materials used
264,000
Direct labor
300,000
Factory overhead
405,000
Inventories
Dec. 1, 2011
Dec. 31, 2011
Direct materials
$36,000
$42,000
Work in process
75,000
84,000
Finished goods
69,000
57,000
The prime costs are:
a.
$960,000.
b.
$564,000.
c.
$705,000.
d.
$969,000.
Figure 2-1.
Concam Inc. manufactures television sets. Last month direct materials (electronic components, etc.)
costing $500,000 were put into production. Direct labor of $800,000 was incurred, overhead equaled
$450,000, and selling and administrative costs totaled $360,000. The company manufactured 8,000
television sets during the month. Assume that there were no beginning or ending work in process
balances.
39. Refer to Figure 2-1. The per-unit conversion cost was:
a.
$218.75
b.
$156.25
c.
$162.50
d.
$100.00
40. Refer to Figure 2-1. The total product costs for last month were:
a.
$1,750,000
b.
$2,110,000
c.
$1,300,000
d.
$1,250,000
41. Refer to Figure 2-1. The total per unit prime cost was:
a.
$263.75
b.
$62.50
c.
$162.50
d.
$156.25
42. Refer to Figure 2-1. What was the amount of cost of goods manufactured last month?
a.
$1,750,000
b.
$1,250,000
c.
$1,300,000
d.
$2,110,000
43. Refer to Figure 2-5. What was the cost of direct materials used in July?
a.
$21,000
b.
$20,100
c.
$21,900
d.
$20,500
44. Refer to Figure 2-5. What were the total manufacturing costs in July?
a.
$71,000
b.
$50,000
c.
$69,600
d.
$70,100
45. Refer to Figure 2-5. What was the cost of goods manufactured for July?
a.
$70,500
b.
$70,700
c.
$69,600
d.
$69,100
46. Refer to Figure 2-5. What was the cost of goods sold for July?
a.
$70,200
b.
$69,600
c.
$71,300
d.
$71,100
47. Refer to Figure 2-5. If Econo Company sold 10,000 units during July and gross margin totaled
$29,800, what was the sales price per unit?
a.
$9.94
b.
$10.00
c.
$10.09
d.
$10.11
48. Refer to Figure 2-7. Prime cost per-unit was?
a.
$19
b.
$23
c.
$34
d.
$11
49. Refer to Figure 2-7. Cost of goods sold last year was?
a.
$47,500
b.
$25,500
c.
$14,250
d.
$51,000
50. Refer to Figure 2-7. Total operating income last year was?
a.
$29,000
b.
$51,000
c.
$25,500
d.
$3,500
Figure 2-8.
Last year Quest Company incurred the following costs:
Direct materials:
$40,000
Direct labor:
60,000
Overhead
90,000
Selling expenses
24,000
Administrative expenses
22,000
Quest produced and sold 2,000 units at a sales price of $125 each. Assume that beginning and ending
inventories of materials, work in process, and finished goods were zero.
51. Refer to Figure 2-8. Total period expense was?
a.
$24,000
b.
$190,000
c.
$46,000
d.
$250,000
52. Refer to Figure 2-8. Gross margin per-unit was?
a.
$125
b.
$7
c.
$95
d.
$30
Sales (2000 $125)
Cost of goods sold
Gross margin
$ 60,000/2,000 units = $30
53. Refer to Figure 2-8. Total product costs were?
a.
$190,000
b.
$100,000
c.
$150,000
d.
$236,000
54. Refer to Figure 2-8. Conversion cost per unit was?
a.
$50
b.
$75
c.
$95
d.
$125
55. Cost of goods sold
a.
represents all costs associated with research, development, and general administration of
the organization.
b.
is found on the Balance Sheet.
c.
is the cost of the partially completed goods that are still on the factory floor at the end of
the period.
d.
is the total product cost for the units sold during a period.
56. Which of the following would not be found on the income statement of a manufacturer?
a.
cost of goods sold
b.
work in process
c.
sales revenue
d.
operating income
57. Which of the following would be found on the balance sheet of a manufacturer?
a.
work in process
b.
raw materials
c.
finished goods
d.
All of the these are correct
58. Which of the following would be found on the balance sheet of a manufacturer?
a.
sales revenue
b.
selling expenses
c.
factory equipment
d.
all of these are correct
59. Gross margin equals
a.
cost of goods sold − selling and administrative expenses.
b.
direct materials + direct labor + manufacturing overhead.
c.
sales revenue − cost of goods sold.
d.
cost of goods manufactured + selling and administrative expenses.
60. Operating income equals
a.
sales revenue − cost of goods sold − selling and administrative expense
b.
gross margin − selling expenses
c.
sales revenue − cost of goods sold
d.
sales revenue − selling and administrative expenses
61. Gross margin percent equals
a.
gross margin/cost of goods sold.
b.
operating income/sales revenue.
c.
gross margin/sales revenue.
d.
sales revenue/gross margin.
62. Which of the following would not be found on an income statement of a service organization?
a.
selling expenses
b.
cost of goods sold
c.
operating income
d.
sales revenue
63. Which of the following can be found on the income statements of both a manufacturing and service
organization?
a.
revenues
b.
operating income
c.
administrative expenses
d.
all of these can be found on both.
64. A manufacturer normally has
a.
one inventory account.
b.
four inventory accounts.
c.
three inventory accounts.
d.
none of these are correct.
65. An income statement of a manufacturer
a.
will show the ending balance of work in process.
b.
contains only manufacturing costs.
c.
will show the ending balance of materials inventory.
d.
covers a certain period of time.
66. On a manufacturer’s income statement expenses are separated into the following three categories:
a.
production, period, and indirect
b.
materials, work in process, and finished goods
c.
production, selling, and administrative
d.
variable, fixed, and direct
Figure 2-2.
Lonborg Co. had the following beginning and ending inventory balances for the year ended December
31, 2011:
January 1, 2011
December 31, 2011
Materials
$10,000
$ 8,000
Work in Process
$18,000
$17,000
Finished Goods
$21,000
$16,500
In addition, direct labor costs of $30,000 were incurred, overhead equaled $42,000, materials
purchased were $27,000 and selling and administrative costs were $22,000. Lonborg Co. sold 25,000
units of product during the year at a sales price of $5.00 per unit.
67. Refer to Figure 2-2. What was the amount of cost of goods manufactured for the year?
a.
$101,000
b.
$124,000
c.
$100,000
d.
$102,000
68. Refer to Figure 2-2. What was the amount of cost of goods sold for the year?
a.
$102,000
b.
$97,500
c.
$106,500
d.
$128,500
Cost of goods manufactured
Finished goods inventory 1/1
Finished goods inventory 12/31
Cost of goods sold
Materials 1/1
Purchases
Materials 12/31
Materials used
Direct labor
Overhead
Total manufacturing costs
Work in process 1/1
Work in process 12/31
Cost of goods manufactured
69. Refer to Figure 2-2. What were the total manufacturing costs for the year?
a.
$101,000
b.
$102,000
c.
$123,000
d.
$106,500
70. Refer to Figure 2-2. What was Lonborg’s operating income <loss> for the year?
a.
$18,500
b.
$125,000
c.
$<3,500>
d.
$5,500
71. During the month of June, Telecom Inc. had cost of goods manufactured of $112,000, direct materials
cost of $52,000, direct labor cost of $37,000 and overhead cost of $26,000. The work in process
balance at June 30 equaled $10,000. What was the work in process balance on June 1?
a.
$7,000
b.
$13,000
c.
$10,000
d.
$115,000
72. Talcum Inc. had materials inventory at July 1 of $12,000. The materials inventory at July 31 was
$15,000 and the cost of direct materials used in production was $20,000. What was the cost of
materials purchased during the month?
a.
$23,000
b.
$17,000
c.
$35,000
d.
$20,000
73. Kutlow Inc. had cost of goods sold of $112,000 for the year ended December 31, 2011. The finished
goods inventory on January 1, 2011 was $28,000 and the finished goods inventory on December 31,
2011 was $17,000. What was the amount of cost of goods manufactured for the year?
a.
$129,000
b.
$101,000
c.
$67,000
d.
$113,000
74. Andover Inc. had a gross margin for the month of February totaling $42,000. They sold 5,000 units
during the month at a sales price of $20 per unit. What was the amount of cost of goods sold for the
month?
a.
$100,000
b.
$42,000
c.
$58,000
d.
none of these are correct
Figure 2-3.
Bartlow, Inc. had the following income statement for the month of May.
Sales revenue
$428,000
Cost of goods sold
205,440
Gross margin
222,560
Less:
Selling expenses
81,320
Administrative expenses
72,760
Operating income
$ 68,480
75. Refer to Figure 2-3. What was the sales revenue percent?
a.
100%
b.
48%
c.
52%
d.
16%
76. Refer to Figure 2-3. What was the cost of goods sold percent?
a.
100%
b.
19%
c.
52%
d.
48%
Sales (5,000 $20)
Cost of goods sold
58,000
Gross margin
42,000