Basic Cost Management Concepts and Accounting for Mass Customization
Operations
True / False Questions
1. Inventoriable costs are expensed when
... [Show More] incurred.
True False
2. Finished goods inventory is ordinarily held for sale by a manufacturing company.True
False
3. Indirect labor is not a component of manufacturing overhead.True
False
4. The following equation -- Beginning finished goods + cost of goods manufactured - endingfinished
goods -- is used to calculate cost of goods sold during the period.
True False
5. A suitable cost driver for the amount of direct materials used is the number of direct laborhours
worked.
True False
Multiple Choice Questions
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6. Which of the following statements is true?
A. The word "cost" has the same meaning in all situations in which it is used.
B. Cost data, once classified and recorded for a specific application, are appropriate for use inany
application.
C. Different cost concepts and classifications are used for different purposes.
D. All organizations incur the same types of costs.
E. Costs incurred in one year are always meaningful in the following year.
7. Product costs are:
A. expensed when incurred.
B. inventoried.
C. treated in the same manner as period costs.
D. treated in the same manner as advertising costs.
E. subtracted from cost of goods sold.
8. Which of the following is a product cost?
A. Glass in an automobile.
B. Advertising.
C. The salary of the vice president-finance.
D. Rent on a factory.
E. Both "A" and "D."
9. Which of the following would not be classified as a product cost?
A. Direct materials.
B. Direct labor.
C. Indirect materials.
D. Insurance on a manufacturing plant.
E. Sales commissions.
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10. The accounting records of Georgia Company revealed the following costs: direct materialsused,
$250,000; direct labor, $425,000; manufacturing overhead, $375,000; and selling and administrative
expenses, $220,000. Georgia's product costs total:
A. $1,050,000.
B. $830,000.
C. $895,000.
D. $1,270,000.
E. some other amount.
11. Costs that are expensed when incurred are called:
A. product costs.
B. direct costs.
C. inventoriable costs.
D. period costs.
E. indirect costs.
12. Which of the following is a period cost?
A. Direct material.
B. Advertising expense.
C. Indirect Labor.
D. Miscellaneous supplies used in production activities.
E. Both "B" and "C."
13. Which of the following is not a period cost?
A. Legal costs.
B. Public relations costs.
C. Sales commissions.
D. Wages of assembly-line workers.
E. The salary of a company's chief financial officer (CFO).
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14. The accounting records of Reynolds Corporation revealed the following selected costs:Sales
commissions, $65,000; plant supervision, $190,000; and administrative expenses,
$185,000. Reynolds's period costs total:
A. $250,000.
B. $440,000.
C. $375,000.
D. $255,000.
E. $185,000.
15. Yang Corporation recently computed total product costs of $567,000 and total period costsof
$420,000, excluding $35,000 of sales commissions that were overlooked by the company's
administrative assistant. On the basis of this information, Yang's income statement should reveal
operating expenses of:
A. $35,000.
B. $420,000.
C. $455,000.
D. $567,000.
E. $602,000.
16. Which of the following entities would most likely have raw materials, work in process,and
finished goods?
A. Exxon Corporation.
B. Macy's Department Store.
C. Wendy's.
D. Southwest Airlines.
E. Columbia University.
17. Selling and administrative expenses would likely appear on the balance sheet of:
A. The Gap.
B. Texas Instruments.
C. Turner Broadcasting System.
D. All of these firms.
E. None of these firms.
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18. Which of the following inventories would a discount retailer such as Wal-Mart report asan asset?
A. Raw materials.
B. Work in process.
C. Finished goods.
D. Merchandise inventory.
E. All of these.
19. Which of the following inventories would a company ordinarily hold for sale?
A. Raw materials.
B. Work in process.
C. Finished goods.
D. Raw materials and finished goods.
E. Work in process and finished goods.
20. Godfrey Corporation engages in mass customization and direct sales, the latter by
accepting customer orders over the Internet. As a result, Godfrey:
A. would probably begin the manufacturing process upon receipt of a customer's order.
B. would typically have fairly low inventory levels for the amount of sales revenue generated.
C. would typically have fairly high inventory levels for the amount of sales revenue
generated.
D. would likely find choices "A" and "B" to be applicable.
E. would likely find choices "A" and "C" to be applicable.
21. Companies that engage in mass customization:
A. tend to have a relatively low production volume.
B. tend to have a high production volume that involves highly standardized end-products.
C. tend to have a high production volume, many standardized components, and customerspecified combinations of components.
D. tend to have a high production volume, many unique components, and customer-specified
combinations of components.
E. could be typified by the refining operations of Shell Oil.
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22. Mideast Motors manufactures automobiles. Which of the following would not beclassified
as direct materials by the company?
A. Wheel lubricant.
B. Tires.
C. Interior leather.
D. CD player.
E. Sheet metal used in the automobile's body.
23. Which of the following employees of a commercial printer/publisher would be classifiedas direct
labor?
A. Book binder.
B. Plant security guard.
C. Sales representative.
D. Plant supervisor.
E. Payroll supervisor.
24. Lake Appliance produces washers and dryers in an assembly-line process. Labor costs incurred
during a recent period were: corporate executives, $500,000; assembly-line workers,
$180,000; security guards, $45,000; and plant supervisor, $110,000. The total of Lake's directlabor cost
was:
A. $110,000.
B. $180,000.
C. $155,000.
D. $235,000.
E. $735,000.
25. Which of the following employees would not be classified as indirect labor?
A. Plant Custodian.
B. Salesperson.
C. Assembler of wooden furniture.
D. Plant security guard.
E. Choices "B" and "C."
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26. Depreciation of factory equipment would be classified as:
A. operating cost.
B. "other" cost.
C. manufacturing overhead.
D. period cost.
E. administrative cost.
27. Which of the following costs is not a component of manufacturing overhead?
A. Indirect materials.
B. Factory utilities.
C. Factory equipment.
D. Indirect labor.
E. Property taxes on the manufacturing plant.
28. The accounting records of Diego Company revealed the following costs, among others:
Costs that would be considered in the calculation of manufacturing overhead total:A.
$149,000.
B. $171,000.
C. $186,000.
D. $442,000.
E. some other amount.
29. Which of the following statements is (are) correct?
A. Overtime premiums should be treated as a component of manufacturing overhead.
B. Overtime premiums should be treated as a component of direct labor.
C. Idle time should be treated as a component of direct labor.
D. Idle time should be accounted for as a special type of loss.
E. Both "B" and "C" are correct.
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30. Conversion costs are:
A. direct material, direct labor, and manufacturing overhead.
B. direct material and direct labor.
C. direct labor and manufacturing overhead.
D. prime costs.
E. period costs.
31. Prime costs are comprised of:
A. direct materials and manufacturing overhead.
B. direct labor and manufacturing overhead.
C. direct materials, direct labor, and manufacturing overhead.
D. direct materials and direct labor.
E. direct materials and indirect materials.
32. Which of the following statements is true?
A. Product costs affect only the balance sheet.
B. Product costs affect only the income statement.
C. Period costs affect only the balance sheet.
D. Neither product costs nor period costs affect the Statement of Retained Earnings. This canalso be
a true statement if the period costs were prepaid (i.e., prepaid advertising, depreciation).
E. Product costs eventually affect both the balance sheet and the income statement.
33. In a manufacturing company, the cost of goods completed during the period would includewhich of
the following elements?
A. Raw materials used.
B. Beginning finished goods inventory.
C. Marketing costs.
D. Depreciation of delivery trucks.
E. All of the above.
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34. Which of the following equations is used to calculate cost of goods sold during theperiod?
A. Beginning finished goods + cost of goods manufactured + ending finished goods.
B. Beginning finished goods - ending finished goods.
C. Beginning finished goods + cost of goods manufactured.
D. Beginning finished goods + cost of goods manufactured - ending finished goods.
E. Beginning finished goods + ending finished goods - cost of goods manufactured.
35. Work-in-process inventory is composed of:
A. direct material and direct labor.
B. direct labor and manufacturing overhead.
C. direct material and manufacturing overhead.
D. direct material, direct labor, and manufacturing overhead.
E. direct material only.
36. Holden Industries began July with a finished-goods inventory of $48,000. The finished- goods
inventory at the end of July was $56,000 and the cost of goods sold during the monthwas $125,000.
The cost of goods manufactured during July was:
A. $104,000.
B. $125,000.
C. $117,000.
D. $133,000.
E. some other amount.
37. Carolina Plating Company reported a cost of goods manufactured of $520,000, with thefirm's
year-end balance sheet revealing work in process and finished goods of $70,000 and
$134,000, respectively. If supplemental information disclosed raw materials used in production of
$80,000, direct labor of $140,000, and manufacturing overhead of $240,000,the company's
beginning work in process must have been:
A. $130,000.
B. $10,000.
C. $66,000.
D. $390,000.
E. some other amount.
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2-11
38. The accounting records of Bronco Company revealed the following information:
Bronco's cost of goods manufactured is:
A. $519,000.
B. $522,000.
C. $568,000.
D. $571,000.
E. some other amount.
39. The accounting records of Dolphin Company revealed the following information:
Dolphin's cost of goods sold is:A.
$508,000.
B. $529,000.
C. $531,000.
D. $553,000.
E. some other amount.
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2-12
40. The accounting records of Brownwood Company revealed the following information:
Brownwood's cost of goods sold is:
A. $721,000.
B. $730,000.
C. $778,000.
D. $787,000.
E. some other amount.
41. For the year just ended, Cole Corporation's manufacturing costs (raw materials used, direct labor,
and manufacturing overhead) totaled $1,500,000. Beginning and ending work-in-process inventories
were $60,000 and $90,000, respectively. Cole's balance sheet also revealed respective beginning and
ending finished-goods inventories of $250,000 and
$180,000. On the basis of this information, how much would the company report as cost ofgoods
manufactured (CGM) and cost of goods sold (CGS)?
A. CGM, $1,430,000; CGS, $1,460,000.
B. CGM, $1,470,000; CGS, $1,540,000.
C. CGM, $1,530,000; CGS, $1,460,000.
D. CGM, $1,570,000; CGS, $1,540,000.
E. Some other amounts.
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42. If purchases of raw materials were $135,000 during the year, what was the amount of raw
materials used during the year?
A. $129,200.
B. $140,800.
C. $135,000.
D. $146,600.
E. some other amount.
43. If raw materials used during the year were $135,000 what was the amount of raw
materials purchased during the year?
A. $129,200.
B. $140,800.
C. $135,000.
D. $146,600.
E. some other amount.
44. If direct materials used during the year were $135,000, what was cost of goods
manufactured?
A. $140,500.
B. $539,000.
C. $409,500.
D. $544,500.
E. some other amount.
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2-14
45. If the cost of goods manufactured for the year was $565,000, what was the amount of
direct materials used during the year?
A. $155,500.
B. $140,500.
C. $150,000.
D. $145,500.
E. some other amount.
46. If the cost of goods manufactured for the year was $385,000, what was the cost of goods
sold for the year?
A. $395,400.
B. $385,000.
C. $390,200.
D. $400,600.
E. some other amount.
47. If the cost of goods sold for the year was $427,500, what was the cost of goods
manufactured for the year?
A. $402,100.
B. $422,300.
C. $417,100.
D. $427,500.
E. some other amount.
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2-15
48. Glass Industries reported the following data for the year just ended: sales revenue,
$1,750,000; cost of goods sold, $980,000; cost of goods manufactured, $560,000; and selling
and administrative expenses, $170,000. Glass' gross margin would be:
A. $940,000.
B. $1,190,000.
C. $1,020,000.
D. $380,000.
E. $770,000.
49. Pumpkin Enterprises began operations on January 1, 20x1, with all of its activities
conducted from a single facility. The company's accountant concluded that the year's building
depreciation should be allocated as follows: selling activities, 20%; administrative activities,
35%; and manufacturing activities, 45%. If Pumpkin sold 60% of 20x1 production during that
year, what percentage of the depreciation would appear (either directly or indirectly) on the
20x1 income statement?
A. 27%.
B. 45%.
C. 55%.
D. 82%.
E. 100%. [Show Less]