Midterm

Which of the following statements is (are) false? (1). In general, the term expense is used for managerial purposes, while the term cost refers to external financial reports. (2). An opportunity cost is the benefit forgone by selecting one alternative over another. A. Only (1) is false. B. Only (2) is false. C. Both (1) and (2) are false. D. Neither (1) nor (2) are false.

A. Only (1) is false.

Which of the following statements is (are) true? (1). An asset is a cost that will be matched with revenues in a future accounting period. (2). Opportunity costs are recorded as intangible assets in the current accounting period. A. Only (1) is true. B. Only (2) is true. C. Both (1) and (2) are true. D. Neither (1) nor (2) are true.

A. Only (1) is true.

Which of the following statements is(are) true? (1). The term full cost refers to the cost of manufacturing and selling a unit of product and includes both fixed and variable costs. (2). The fixed cost per unit is considered constant despite changes in volume of activity within the relevant range. A. Only (1) is true. B. Only (2) is true. C. Both (1) and (2) are true. D. Neither (1) nor (2) are true.

A. Only (1) is true.

Which one of the following costs is classified as a period cost? (CIA adapted) A. The wages of the workers on the shipping docks who load completed products onto outgoing trucks. B. The wages of a worker paid for idle time resulting from a machine breakdown in the molding department. C. The payments for employee (fringe) benefits paid on behalf of the workers in the manufacturing plant. D. The wages paid to workers for reworking defective products that failed the quality inspection upon completion.

A. The wages of the workers on the shipping docks who load completed products onto outgoing trucks.

For a manufacturing company, which of the following is an example of a period cost rather than a product cost? A. Wages of salespersons. B. Salaries of machine operators. C. Insurance on factory equipment. D. Depreciation of factory equipment.

A. Wages of salespersons.

Manufacturing overhead: A. can be either a variable cost or a fixed cost. B. includes the costs of shipping finished goods to customers. C. includes all factory labor costs. D. includes all fixed costs.

A. can be either a variable cost or a fixed cost.

A ___________________ is any end to which a cost is assigned. A. cost object B. cost pool C. cost allocation D. opportunity cost

A. cost object

Prime cost consists of direct materials combined with: A. direct labor. B. manufacturing overhead. C. indirect materials. D. cost of goods manufactured.

A. direct labor.

Tallon Company manufactures a single product. The product's prime costs consist of A. direct material and direct labor. B. direct material and factory overhead. C. direct labor and factory overhead. D. direct material, direct labor and factory overhead.

A. direct material and direct labor.

The cost of fire insurance for a manufacturing plant is generally considered to be a: A. product cost. B. period cost. C. variable cost. D. all of these.

A. product cost.

A product cost is deducted from revenue when A. the finished goods are sold. B. the expenditure is incurred. C. the production process takes place. D. the production process is completed.

A. the finished goods are sold.

How would property taxes paid on a factory building be classified in a manufacturing company? A. Fixed, period cost. B. Fixed, product cost. C. Variable, period cost. D. Variable, product cost.

B. Fixed, product cost.

A company which manufactures custom-made machinery routinely incurs sizable telephone costs in the process of taking sales orders from customers. Which of the following is a proper classification of this cost? A. Product cost B. Period cost C. Conversion cost D. Prime cost

B. Period cost

The difference between variable costs and fixed costs is (CMA adapted) A. Unit variable costs fluctuate and unit fixed costs remain constant. B. Unit variable costs are fixed over the relevant range and unit fixed costs are variable. C. Total variable costs are constant over the relevant range, while fixed costs change in the long-term. D. Total variable costs are variable over the relevant range but fixed in the long-term, while fixed costs never change.

B. Unit variable costs are fixed over the relevant range and unit fixed costs are variable.

The Work-in-Process Inventory of the Model Fabricating Corp. was $3,000 higher on December 31, 2016 than it was on January 1, 2016. This implies that in 2016: A. cost of goods manufactured was higher than cost of goods sold. B. cost of goods manufactured was less than total manufacturing costs. C. manufacturing costs were higher than cost of goods sold. D. manufacturing costs were less than cost of goods manufactured.

B. cost of goods manufactured was less than total manufacturing costs.

Which of the following costs is both a prime cost and a conversion cost? A. direct materials B. direct labor C. manufacturing overhead D. administrative costs

B. direct labor

An opportunity cost is A. a cost that is charged against revenue in an accounting period. B. the foregone benefit from the best alternative course of action. C. the excess of operating revenues over operating costs. D. the cost assigned to the products sold during the period.

B. the foregone benefit from the best alternative course of action.

Which of the following is not a name for indirect resources? A. Overhead costs B. Burden C. Direct costs D. Common costs

C. Direct costs

Which of the following should be considered part of a manufacturing company's direct labor cost? A. Factory supervisor's salary B. Forklift operator's hourly wages C. Employer-paid health insurance on factory assemblers' wages D. Cost of idle time

C. Employer-paid health insurance on factory assemblers' wages

Transportation costs incurred by a manufacturing company to ship its product to its customers would be classified as which of the following? A. Product cost B. Manufacturing overhead C. Period cost D. Administrative cost

C. Period cost

Which of the following is not a product cost under full-absorption costing? A. Direct materials used in the current period B. Rent for the warehouse used to store direct materials C. Salaries paid to the top management in the company D. Vacation pay accrued for the production workers

C. Salaries paid to the top management in the company

Absorption costing measures contribution to profit as: A. Sales less unit level costs spent of goods sold B. Sales less variable costs of goods sold C. Sales less absorption cost of goods sold D. Sales less all costs including operating expenses

C. Sales less absorption cost of goods sold

How would a 5% sales commission paid to sales personnel be classified in a manufacturing company? A. Fixed, period cost. B. Fixed, product cost. C. Variable, period cost. D. Variable, product cost.

C. Variable, period cost.

The corporate controller's salary would be considered a(n): A. manufacturing cost. B. product cost. C. administrative cost. D. selling expense.

C. administrative cost.

The process of assigning indirect costs to products, services, people, business units, etc., is A. cost object. B. cost pool. C. cost allocation. D. opportunity cost.

C. cost allocation.

The term "gross margin" for a manufacturing firm refers to the excess of sales over: A. cost of goods sold, excluding fixed indirect manufacturing costs. B. all variable costs, including variable marketing and administrative costs. C. cost of goods sold, including fixed indirect manufacturing costs. D. variable costs, excluding variable marketing and administrative costs.

C. cost of goods sold, including fixed indirect manufacturing costs.

The amount of direct materials issued to production is found by A. subtracting ending work in process from total work in process during the period. B. adding beginning direct materials inventory and the delivered cost of direct materials. C. subtracting ending direct materials from direct materials available for production. D. adding delivered cost of materials, labor, and manufacturing overhead.

C. subtracting ending direct materials from direct materials available for production.

The beginning Work-in-Process inventory plus the total of the manufacturing costs equals A. total finished goods during the period. B. cost of goods sold for the period. C. total work-in-process during the period. D. cost of goods manufactured for the period.

C. total work-in-process during the period.

Under full absorption costing, which of the following are included in product costs? A. Only direct materials and direct labor. B. Only variable manufacturing costs. C. Only conversion costs. D. All fixed and variable manufacturing costs.

D. All fixed and variable manufacturing costs.

Which of the following accounts would be a period cost rather than a product cost? A. Depreciation on manufacturing machinery. B. Maintenance on factory machines. C. Production manager's salary. D. Freight out.

D. Freight out.

Marketing costs include all of the following except: A. Advertising. B. Shipping costs. C. Sales commissions. D. Legal and accounting fees.

D. Legal and accounting fees.

Which of the following best distinguishes an opportunity cost from an outlay cost? A. Opportunity costs are recorded, whereas outlay costs are not. B. Outlay costs are speculative in nature, whereas opportunity costs are easily traceable to products. C. Opportunity costs have very little utility in practical applications, whereas outlay costs are always relevant. D. Opportunity costs are sacrifices from foregone alternative uses of resources, whereas outlay costs are cash outflows.

D. Opportunity costs are sacrifices from foregone alternative uses of resources, whereas outlay costs are cash outflows.

Doran Technical Company has set up a toll-free telephone line for customer inquiries regarding computer hardware produced by the company. The cost of this toll-free line would be classified as which of the following? A. Product cost B. Manufacturing overhead C. Direct labor D. Period cost

D. Period cost

How would miscellaneous supplies used in assembling a product be classified for a manufacturing company? A. Fixed, period cost. B. Fixed, product cost. C. Variable, period cost. D. Variable, product cost.

D. Variable, product cost.

Direct labor would be part of the cost of the ending inventory for which of these accounts? A. Work-in-Process. B. Finished Goods. C. Direct Materials and Work-in-Process. D. Work-in-Process and Finished Goods.

D. Work-in-Process and Finished Goods.

Inventoriable costs: A. include only the prime costs of manufacturing a product. B. include only the conversion costs of providing a service. C. exclude fixed manufacturing costs. D. are regarded as assets until the units are sold.

D. are regarded as assets until the units are sold.

The beginning Finished Goods Inventory plus the cost of goods manufactured equals A. ending finished goods inventory. B. cost of goods sold for the period. C. total work-in-process during the period. D. cost of goods available for sale for the period.

D. cost of goods available for sale for the period.

A cost allocation rule is the method or process used to assign the costs in the _________ to the ______________. A. cost allocation; cost pool B. cost pool; opportunity cost C. cost object; cost pool D. cost pool; cost object

D. cost pool; cost object

The three basic elements of manufacturing cost are direct materials, direct labor, and: A. cost of goods manufactured. B. cost of goods sold. C. work in process. D. manufacturing overhead.

D. manufacturing overhead

The cost of the direct labor will be treated as an expense on the income statement when the resulting: A. payroll costs are paid. B. payroll costs are incurred. C. products are completed. D. products are sold.

D. products are sold.

An example of a period cost is: A. fire insurance on a factory building. B. salary of a factory supervisor. C. direct materials. D. rent on a headquarters building.

D. rent on a headquarters building.

Classifying a cost as either direct or indirect depends upon A. whether an expenditure is unavoidable because it cannot be changed regardless of any action taken. B. whether the cost is expensed in the period in which it is incurred. C. the behavior of the cost in response to volume changes. D. the cost object to which the cost is being related.

D. the cost object to which the cost is being related.