cost accounting test bank chapter 2

47) What are the inventoriable costs per unit associated with Product ORD210? A) $73 B) $87 C) $98 D) $62

Answer: C

Explanation: C) $54 + $8 + $11 + $25 = $98

Diff: 2

Objective: 5

AACSB: Application of knowledge

48) What are the period costs per unit associated with Product ORD203? A) $5 B) $12 C) $17 D) $18

Answer: C

Explanation: C) $5 + 12 = $17

Diff: 2

Objective: 5

AACSB: Application of knowledge

49) Leslie Manufacturing reported the following: Revenue $450,000 Beginning inventory of direct materials, January 1, 2015 20,000 Purchases of direct materials 156,000 Ending inventory of direct materials, December 31, 2015 18,000 Direct manufacturing labor 21,000 Indirect manufacturing costs 42,000 Beginning inventory of finished goods, January 1, 2015 40,000 Cost of goods manufactured 114,000 Ending inventory of finished goods, December 31, 2015 45,000 Operating costs 150,000 How much of the above would be considered period costs for Leslie Manufacturing? A) $104,000 B) $140,000 C) $150,000 D) $147,000 Answer: C

Explanation: C) $150,000

Diff: 3

Objective: 5

AACSB: Application of knowledge

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50) Insurance companies provide services or intangible products to their customers. Answer: TRUE

Diff: 1

Objective: 5

AACSB: Application of knowledge

51) Department stores, such as Target, are examples of a merchandising company. Answer: TRUE

Explanation: Google would be an example of a service-sector company.

Diff: 1

Objective: 5

AACSB: Application of knowledge

52) Merchandising companies purchase products and sell them to customers without changing their basic form.

Answer: TRUE

Diff: 1

Objective: 5

AACSB: Application of knowledge

53) Merchandising companies hold only one type of inventory: direct material. Answer: FALSE

Explanation: Merchandising companies normally hold only one type of inventory: merchandise inventory.

Diff: 1

Objective: 5

AACSB: Analytical thinking

54) Manufacturing sector firms normally hold three types of inventory: direct materials inventory, work-in-process inventory, and finished goods inventory. Answer: TRUE

Diff: 1

Objective: 5

AACSB: Analytical thinking

55) Work-in-process inventory are goods partially worked on but not yet completed. Answer: TRUE

Diff: 1

Objective: 5

AACSB: Analytical thinking

56) Direct material costs are the acquisition costs of all materials that eventually become part of the cost object and cannot be traced to the cost object in an economically feasible way. Answer: FALSE

Explanation: Direct material costs can be traced to the cost object.

Diff: 2

Objective: 5

AACSB: Analytical thinking

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57) Acquisition costs of direct materials include freight-in charges, sales taxes, and custom duties. Answer: TRUE

Diff: 2

Objective: 5

AACSB: Analytical thinking

58) Indirect manufacturing costs include the compensation of all manufacturing labor that can be traced to the cost object in an economically feasible way. Answer: FALSE

Explanation: Direct manufacturing labor costs include the compensation of all manufacturing labor that can be traced to the cost object.

Diff: 2

Objective: 5

AACSB: Analytical thinking

59) Direct manufacturing labor includes plant rent and salaries paid to plant supervisors. Answer: FALSE

Diff: 2

Objective: 5

AACSB: Application of knowledge

60) Inventoriable costs are reported as a liability in balance sheet when incurred and expensed on the income statement when the product is sold. Answer: FALSE

Explanation: Inventoriable costs are reported as an asset when incurred and expensed on the income statement when the product is sold.

Diff: 2

Objective: 5

AACSB: Application of knowledge

61) All manufacturing costs are period costs. Answer: FALSE

Diff: 2

Objective: 5

AACSB: Analytical thinking

62) All costs reported on the income statement of a service-sector company are inventoriable costs. Answer: FALSE

Diff: 1

Objective: 5

AACSB: Analytical thinking

63) Period costs are included in the cost of goods sold. Answer: FALSE

Diff: 2

Objective: 5

AACSB: Analytical thinking

39

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64) Indirect manufacturing costs are also referred to as manufacturing overhead costs or factory overhead costs.

Answer: TRUE

Diff: 1

Objective: 5

AACSB: Analytical thinking

65) Whippany manufacturing wants to estimate costs for each product they produce at its Troy plant. The Troy plant produces three products at this plant, and runs two flexible assembly lines. Each assembly line can produce all three products.

Required:

a. Classify each of the following costs as either direct or indirect for each product.

b. Classify each of the following costs as either fixed or variable with respect to the number of units produced of each product. Direct Indirect Fixed Variable

Assembly line labor wages ________ ________ ________ ________ Plant manager's wages ________ ________ ________ ________ Depreciation on the assembly line equipment ________ ________ ________ ________ Component parts for the product ________ ________ ________ ________ Wages of security personnel for the factory ________ ________ ________ ________ Answer: Direct Indirect Fixed Variable

Assembly line labor wages X X Plant manager's wages X X Depreciation on the assembly line equipment X X Component parts for the product X X Wages of security personnel for the factory X X

Diff: 2

Objective: 2, 4, 5

AACSB: Application of knowledge

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