Chapter 2

Common approaches for determining product costs discussed in the text do not include Blank______ costing. Multiple choice question. variable full absorption gross managerial

gross

To calculate net income, operating profit is adjusted for Blank______. Multiple select question. interest expense other required regulatory adjustments all taxes associated with operating the business extraordinary items

interest expense other required regulatory adjustments extraordinary items Most taxes are included in operating profit. Only income taxes are an adjustment.

Total fixed costs and unit variable costs do not change Blank______. Multiple choice question. for prime costs within the relevant range under any circumstances when using full absorption cost

within the relevant range

Costs that change in direct proportion with a change in volume within the relevant range are Blank______ costs. Multiple choice question. fixed variable indirect direct

variable Fixed costs remain unchanged as the volume of activity changes within the relevant range. Indirect costs are product costs that cannot be identified with units. Direct costs are product costs that can be identified with units.

Goods that have been started in production but are not yet completed are called Blank______. Multiple choice question. unfinished goods raw materials work in process production goods

work in process

Products in the production process but not yet complete are Blank______. Multiple choice question. raw materials work in process finished goods direct materials

work in process

Common approaches for determining product costs discussed in the text do not include Blank______ costing. Multiple choice question. gross managerial full absorption variable

gross

Cost allocation is the process of assigning what types of costs? Multiple select question. Direct labor Manufacturing overhead Direct materials Indirect costs

Manufacturing overhead Indirect costs Cost allocation is the process by which the indirect costs are distributed among different cost objects such as a project, a department, a branch, a customer, etc.

Which of the following reflect(s) relative efficiency in operating a retail and wholesale organization? Multiple choice question. Marketing and administrative costs Purchases Gross margin Cost of goods sold

Marketing and administrative costs

The difference between revenue and variable costs is Blank______. Multiple choice question. gross margin net income contribution margin operating profit

contribution margin

The way costs respond to changes in activity levels is called Blank______. Multiple choice question. cost driver cost object cost behavior cost pool

cost behavior

A company started the year with $185,000 of goods finished and ready for sale. During the year, a total of $700,000 of goods were started in production. Of the goods started, $550,000 were finished during the year. If total cost of goods sold for the year equals $625,000, the company's ending finished goods inventory equals Blank______. Multiple choice question. $110,000 $75,000 $150,000 $260,000

$110,000 Reason: Beginning finished goods ($185,000) + transferred to finished goods ($550,000) - cost of goods sold ($625,000) = ending finished goods inventory ($110,000)

Given the following, calculate cost of goods sold: Inventories: Beginning Ending Direct materials $300 $250 Work in process $400 $200 Finished goods $500 $350 Direct material purchases $4,200 Direct labor $3,000 Manufacturing overhead $5,000 Multiple choice question. $12,600 $12,450 $12,300 $12,200

$12,600 Reason: Cost of goods manufactured: Beginning WIP inventory ($400) + Direct materials put into production ($300 + $4,200 - $250 = $4,250) + Direct labor ($3,000) + O/H ($5,000) - Ending WIP inventory ($200) = $12,450. Cost of goods sold = Beginning FG inventory ($500) + COGM ($12,450) - Ending FG inventory ($350) = $12,600

A company had the following inventories during the year: Inventories: Beginning Ending Direct materials $200 $150 Work in process $300 $250 Finished goods $400 $350 If total direct materials purchased was $2,850, the direct materials put into production for the year were what amount? Multiple choice question. $2,900 $3,050 $2,500 $3,200

$2,900 Reason: Beginning direct materials ($200) + purchases ($2,850) - direct materials put into production = ending direct materials ($150) Direct materials put into production = $200 + $2,850 - $150 = $2,900

Given the following, calculate cost of materials put into production. Inventories: Beginning Ending Direct materials $300 $250 Work in process $400 $200 Finished goods $500 $350 Direct material purchases $4,200 Direct labor $3.000 Manufacturing overhead $5,000 Multiple choice question. $4,250 $4,450 $4,200 $4,150

$4,250 Reason: Direct materials put into production: $300 + $4,200 - $250 = $4,250

Which of the following are true of expenses? Multiple select question. An asset becomes an expense when it is consumed. Expenses are costs charge against revenue in an accounting period. All costs are recorded as expenses.

An asset becomes an expense when it is consumed. Expenses are costs charge against revenue in an accounting period. Costs may be recorded as expenses, assets or not at all.

Which of the following are true? Multiple select question. Any cost that can be unambiguously related to a cost object is a direct cost of that cost object. Costs may be direct to one cost object and indirect to another. Whether a cost is direct or indirect depends on the cost object. Indirect costs can be unambiguously related to a cost object.

Any cost that can be unambiguously related to a cost object is a direct cost of that cost object. Whether a cost is direct or indirect depends on the cost object. Costs may be direct to one cost object and indirect to another.

Which of the following are true of finished goods inventory? Multiple select question. Completed work can be transferred from the production department directly to the customer. Completed work can be transferred from the production department to finished goods. For a manufacturer, finished goods inventory is required. Finished goods inventory never has a beginning balance.

Completed work can be transferred from the production department directly to the customer. Completed work can be transferred from the production department to finished goods.

A sacrifice of resources is a(n)__________.

Cost

Which of the following statements are true? Multiple select question. Cost of goods manufactured and sold statements can be effective communication devices. Managerial reports are tailored to the individual company's needs. The cost of goods manufactured and sold statement focuses on both costs and inventories. A cost of goods manufactured and sold statement is published as part of GAAP external financial statements.

Cost of goods manufactured and sold statements can be effective communication devices. Managerial reports are tailored to the individual company's needs. The cost of goods manufactured and sold statement focuses on both costs and inventories.

Which of the following is NOT one of the four basic cost behavior categories? Multiple choice question. Fixed Variable Direct Step

Direct Reason: A direct cost is a type of cost, not a type of cost behavior.

Which of the following are true of expenses? Multiple select question. All costs are recorded as expenses. Expenses are costs charge against revenue in an accounting period. An asset becomes an expense when it is consumed.

Expenses are costs charge against revenue in an accounting period. An asset becomes an expense when it is consumed.

Which of the following statements are true? Multiple select question. Cost of goods sold for a wholesaler includes costs required to sell them, such as salaries of salespeople. Efficiency in operations is measured by considering a retailer's cost of goods sold. Gross margin reflects the ability of a wholesaler to price products. Retailers have an entire category of amounts that do not appear on service company income statements.

Gross margin reflects the ability of a wholesaler to price products. Retailers have an entire category of amounts that do not appear on service company income statements. Cost of goods sold includes only the actual cost of goods sold. Efficiency is reflected in marketing and administrative costs.

Which of the following statements are true? Multiple select question. All costs in a service organization are treated as marketing and administrative costs. Information technology represents the major cost for some service organizations. Service companies provide customers with a tangible product. Labor is the most important single cost for many service organizations.

Information technology represents the major cost for some service organizations. Labor is the most important single cost for many service organizations. Only costs that are not part of services billable to clients are treated this way. Service companies provide customers with an intangible product.

Which of the following are true of full absorption costing? Multiple select question. It is required by GAAP. All fixed and variable manufacturing costs are product costs and all other costs are period costs. Only variable manufacturing costs are product costs and all other costs are period costs. It is used in a contribution margin income statement. It assumes that management determines which costs are associated with the product and should be considered product costs.

It is required by GAAP. All fixed and variable manufacturing costs are product costs and all other costs are period costs.

Which of the following reflect(s) relative efficiency in operating a retail and wholesale organization? Multiple choice question. Marketing and administrative costs Cost of goods sold Purchases Gross margin

Marketing and administrative costs. Marketing costs are what is required to sell the goods such as the salaries of salespeople, and the administrative costs are the salaries of top executives. The cost of goods sold includes only the actual costs of the goods that were sold.

Which of the following statements are true? Multiple select question. Nonmanufacturing costs are expensed as incurred for financial accounting purposes. For managerial purposes, managers often assign nonmanufacturing costs to products. Marketing costs include costs to manage the operation and provide staff support. Distinguishing between manufacturing and nonmanufacturing costs can be difficult.

Nonmanufacturing costs are expensed as incurred for financial accounting purposes. For managerial purposes, managers often assign nonmanufacturing costs to products. Distinguishing between manufacturing and nonmanufacturing costs can be difficult. Administrative costs include costs to manage the operation and provide staff support.

Which of the following are costs that are recognized for financial reporting when incurred? Multiple select question. Manufacturing costs Product costs Period costs Nonmanufacturing costs

Period costs Nonmanufacturing costs

Those costs assigned to units of production and recognized when the product is sold are Blank______ costs. Multiple select question. Nonmanufacturing Product Manufacturing Period

Product Manufacturing Product costs are those costs assigned to units of production and recognized (expensed) when the product is sold. Product (manufacturing) costs follow the product through inventory.

Which of the following statements are true? Multiple select question. The cost of goods manufactured and sold statement focuses on both costs and inventories. Cost of goods manufactured and sold statements can be effective communication devices. A cost of goods manufactured and sold statement is published as part of GAAP external financial statements. Managerial reports are tailored to the individual company's needs.

The cost of goods manufactured and sold statement focuses on both costs and inventories. Cost of goods manufactured and sold statements can be effective communication devices. Managerial reports are tailored to the individual company's needs. This statement is for internal purposes and rarely published.

Which of the following are characteristics of direct manufacturing costs? Multiple select question. They are costs that can be identified with units at relatively low cost. They are product costs. They include manufacturing overhead. They are period costs.

They are costs that can be identified with units at relatively low cost. They are product costs.

Which of the following are characteristics of direct manufacturing costs? Multiple select question. They are product costs. They are period costs. They are costs that can be identified with units at relatively low cost. They include manufacturing overhead.

They are product costs. They are costs that can be identified with units at relatively low cost

Which of the following are characteristics of indirect manufacturing costs? Multiple select question. They are product costs. They are period costs. They are costs that can be identified with units at relatively low cost. They include manufacturing overhead.

They are product costs. They include manufacturing overhead.

Which of the following are true of direct costs? Multiple select question. They can be identified directly with the product at reasonable cost. They include materials and labor. They include manufacturing overhead.

They can be identified directly with the product at reasonable cost. They include materials and labor.

Which of the following are characteristics of indirect manufacturing costs? Multiple select question. They include manufacturing overhead. They are period costs. They are product costs. They are costs that can be identified with units at relatively low cost.

They include manufacturing overhead. They are product costs.

To calculate cost of goods sold during the year, take total cost of goods manufactured and Blank______. Multiple choice question. add ending work in process and subtract beginning work in process inventory add beginning finished goods and subtract ending finished goods inventory add beginning work in process and subtract ending work in process inventory add ending finished goods and subtract beginning finished goods inventory

add beginning finished goods and subtract ending finished goods inventory

To calculate cost of goods manufactured during the year, take total manufacturing costs and Blank______. Multiple choice question. add beginning work in process and subtract ending work in process inventory add ending work in process and subtract beginning work in process inventory add ending finished goods and subtract beginning finished goods inventory add beginning finished goods and subtract ending finished goods inventory

add beginning work in process and subtract ending work in process inventory

Under variable costing, Blank______. Multiple choice question. product costs only include direct materials and direct labor all costs except variable manufacturing costs are period costs all variable costs are considered product costs and all fixed costs are considered period costs management decides which costs should be considered product costs

all costs except variable manufacturing costs are period costs

The process of assigning indirect costs is called cost Blank______. Multiple choice question. pooling flow allocation diagramming

allocation

Product costs for unsold units are Blank______. Multiple choice question. expensed under both absorption and variable costing assigned to inventory under variable costing and expensed under absorption costing assigned to inventory under absorption costing and expensed under variable costing assigned to inventory under both absorption and variable costing

assigned to inventory under both absorption and variable costing

Expenses are Blank______. Multiple select question. deducted from revenue in an accounting period costs charged against revenue in an accounting period are the focus of cost accounting

deducted from revenue in an accounting period costs charged against revenue in an accounting period The focus of cost accounting is on cost, not expenses.

A cost that can be unambiguously related to a cost object at a reasonable cost is a(n) Blank______. Multiple choice question. direct cost indirect cost manufacturing overhead cost marketing cost

direct cost

A cost that can be unambiguously related to a cost object at a reasonable cost is a(n) Blank______. Multiple choice question. manufacturing overhead cost indirect cost marketing cost direct cost

direct cost

Prime costs are the sum of Blank______. Multiple choice question. direct labor and manufacturing overhead direct materials and manufacturing overhead direct materials and direct labor direct labor and period costs

direct materials and direct labor

Costs that remain unchanged as volume changes within the relevant range of activity are Blank______ costs. Multiple choice question. indirect fixed direct variable

fixed

The difference between full cost and full absorption cost is Blank______. Multiple choice question. nothing; full cost is equal to full absorption cost fixed and variable selling costs are included in full cost but not in full absorption cost full cost includes all costs (fixed and variable) but full absorption costing only includes variable costs fixed and variable selling costs are included in full absorption cost but not in full cost

fixed and variable selling costs are included in full cost but not in full absorption cost

Full absorption cost Blank______. Multiple select question. is required by GAAP is the inventoriable cost for external financial statements includes fixed, but not variable manufacturing overhead costs includes selling and administrative costs

is required by GAAP is the inventoriable cost for external financial statements. Both fixed and variable overhead is included in absorption costing. Selling and administrative costs are not inventoriable.

The full cost of a product equals all Blank______. Multiple choice question. manufacturing costs (both fixed and variable) variable manufacturing and selling costs but no fixed costs manufacturing and selling costs (both fixed and variable) variable manufacturing costs but no fixed costs

manufacturing and selling costs (both fixed and variable)

Major categories of product costs include Blank______. Multiple select question. manufacturing overhead direct materials direct labor marketing and administrative costs

manufacturing overhead direct materials direct labor

Select all that apply Assume total units produced equals total units sold. If the company prepares a gross margin income statement and a contribution margin income statement, Blank______. Multiple select question. marketing and administrative costs will be the same on both statements products costs will be the same on both statements gross margin equals contribution margin operating profit will be the same on both statements

marketing and administrative costs will be the same on both statements operating profit will be the same on both statements

Costs required to obtain customer orders are Blank______. Multiple select question. indirect labor marketing costs nonmanufacturing costs administrative costs

marketing costs nonmanufacturing costs Marketing costs are the costs required to obtain customer orders and provide customers with finished products. It includes adverting, sales commissions, shipping costs, and marketing departments building occupancy costs.

A cost ______. Multiple select question. is always recorded in the accounting records is the same as an expense may be recorded as an asset must be a cash outflow is a sacrifice of resources

may be recorded as an asset and is a sacrifice of resources. It's not always recorded in the accounting records because some cost ( Lost sales or opportunity costs) are not recorded in accounting records. Expenses are costs, but not all costs are expenses.

The excess of operating revenues over the operating costs necessary to generate those revenues is ______. Multiple choice question. prime cost opportunity cost operating profit cost of goods sold

operating profit

Cost of goods manufactured and sold statements are Blank______. Multiple choice question. prepared as part of a company's internal reporting system generally not prepared by manufacturing companies required by GAAP for all manufacturing companies

prepared as part of a company's internal reporting system

Companies with low overhead costs focus on managing Blank______ costs, whereas companies with high overhead costs focus on managing Blank______ costs. Multiple choice question. conversion, prime product, period period, product prime, conversion

prime, conversion Prime costs are the direct costs, namely, direct materials and direct labor. Prime cost can represent 80 to 90 percent of the total manufacturing cost. Conversion costs, which are the costs to convert direct materials into the final product. The costs for direct labor and manufacturing overhead.

Beginning work in process inventory plus total manufacturing costs equals Blank______. Multiple choice question. resources put into production during the year total cash paid for manufacturing costs during the year cost of goods sold for the year cost of goods manufactured for the year

resources put into production during the year Manufacturing costs may be paid for in cash or on credit and some expenses (i.e. depreciation) are non-cash. Cost of goods sold requires an adjustment of both ending work in process and finished goods inventory Ending work in process must be subtracted to calculate cost of goods manufactured.

A ______ company provides customers with an intangible product. Multiple choice question. manufacturing wholesale retail service

service Example consulting firms provide advice and analyses. Some service firms provide information and for these companies' information technology can represent the major cost.

Select all that apply Contribution margin is Blank______. Multiple select question. the difference between revenue and variable costs the full absorption cost per unit times the number of units sold the amount available to cover fixed costs and earn a profit the difference between revenue and cost of goods sold

the difference between revenue and variable costs the amount available to cover fixed costs and earn a profit

Within the relevant range, Blank______. Multiple choice question. unit variable costs do not change but fixed costs do total fixed costs and unit variable costs do not change unit fixed costs and total variable costs do not change total fixed costs do not change but unit variable costs do

total fixed costs and unit variable costs do not change

If a company is focused on trying to eliminate waste and reduce costs, financial statements can be developed that classify costs into - and - activities.

value added and nonvalue added activities

If a company is focused on trying to eliminate waste, income statement costs can be divided into Blank______. Multiple choice question. value-added vs. nonvalue-added activities fixed vs. variable costs direct vs. indirect costs product costs vs. period costs

value-added vs. nonvalue-added activities