CHAPTER 2 QUIZ
1. Galway Co. management desires cost information regarding its Celtic brand. The Celtic
brand is a(n)
a. cost object.
b. cost driver.
c. cost assignment.
d. actual cost.
2. The cost of printer paper on a college campus would be a direct cost to the college but
would need to be allocated as an indirect cost to
a. departments.
b. buildings.
c. schools.
d. individual student instruction.
3. What is the total fixed cost of the shipping department of Elaine Co. if it has the
following information for 2011?
Salaries $800,000 75 percent of employees on guaranteed contracts
Packaging $400,000 depending on size of item(s) shipped
Postage $500,000 depending on weight of item(s) shipped
Rent of warehouse space $250,000 annual lease
a. $850,000
b. $900,000
c. $1,050,000
d. $1,950,000
4. Rosland Graphics successfully bid on a job printing standard notebook covers during the
year using last year’s price of $0.27 per cover. This amount was calculated from prior year
costs, noting that no changes in any costs had occurred from the past year to the current
year. At the end of the year, the company manager was shocked to discover that the
company had suffered a loss. “How could this be?” she exclaimed. “We had no increases
in cost and our price was the same as last year. Last year we had a healthy income.” What
could explain the company’s loss in income this current year?
a. Their costs were all variable costs and the amount produced and sold increased.
b. Their costs were mostly fixed costs and the amount produced this year was less than last
year.
c. They used a different cost object this year than the previous year.
d. Their costs last year were actual costs but they used budgeted costs to make their bids.
5. Which type of company converts raw materials into finished products?
a. Not-for-profit
b. Service
c. Merchandising
d. Manufacturing
6. The three categories of inventories commonly found in many manufacturing companies
are:
a. Direct materials, direct labor, and indirect manufacturing costs.
b. Purchased goods, period costs, and cost of goods sold.
c. Direct materials, work-in-process, and finished goods.
d. LIFO, FIFO, and weighted average.
7. Inventoriable costs are
a. only purchased goods for resale.
b. a category of costs used only for manufacturing companies.
c. recorded as expenses when incurred and later reclassified as assets.
d. recorded as assets when incurred.
8. Period costs are
a. all costs in the income statement other than cost of goods sold.
b. defined as manufacturing costs incurred this period on the schedule of cost of goods
manufactured.
c. always recorded as assets when first incurred.
d. those costs that benefit future periods.
9. The cost of a product can be measured as any of the following except as one
a. gathered from all areas of the value chain.
b. identified as period cost.
c. designated as manufacturing cost only.
d. explicitly defined by contract.
10. The primary focus of cost management is to
a. help managers make different decisions.
b. calculate product costs.
c. aid managers in budgeting.
d. distinguish between relevant and irrelevant information.
CHAPTER 2 QUIZ SOLUTIONS