COST CONCEPTS AND CLASSIFICATION QUIZZER

Maria Cristina P. Obeso, CPA, MBA

Multiple Choice . Write the letter of the correct answer in your answer sheets
1. The term "relevant range" as used in cost accounting means the range over which
a. costs may fluctuate.
b. cost relationships are valid.
c. production may vary.
d. relevant costs are incurred.

2. Which of the following would not generally be considered a fixed overhead

cost?

Straight-line Factory Units-of-production

depreciatio insurance depreciation
n

a. no no no
b. yes no yes
c. yes yes no
d. no yes no

3. A cost that remains constant in total but varies on a per-unit basis with changes in activity is
called a(n)
a. expired cost.
b. fixed cost.
c. variable cost.
d. mixed cost.

4. A ________ cost increases or decreases in intervals as activity changes.

a. historical cost
b. fixed cost
c. step cost
d. budgeted cost

5. When the number of units manufactured increases, the most significant

change in unit cost will be reflected as a(n)
a. increase in the fixed element.
b. decrease in the variable element.
c. increase in the mixed element.
d. decrease in the fixed element.

6. Product costs are deducted from revenue

a. as expenditures are made.
b. when production is completed.
c. as goods are sold.
d. to minimize taxable income.

7. A selling cost is a(n)

product period cost inventoriable cost

cost
 a. yes yes no
b. yes no no
c. no yes no
d. no yes yes

8. Which of the following is not a product cost component?

a. rent on a factory building
b. indirect production labor wages
c. janitorial supplies used in a factory
d. commission on the sale of a product

9. Period costs
a. are generally expensed in the same period in which they are incurred.
b. are always variable costs.
c. remain unchanged over a given period of time.
d. are associated with the periodic inventory method.

10. Period costs include

distribution costs outside processing costs sales

commissions

a. yes no yes
b. no yes yes
c. no no no
d. yes yes yes

11. The three primary inventory accounts in a manufacturing company are

a. Merchandise Inventory, Supplies Inventory, and Finished Goods Inventory.
b. Merchandise Inventory, Work in Process Inventory, and Finished Goods
Inventory.
c. Supplies Inventory, Work in Process Inventory, and Finished Goods Inventory.
d. Raw Material Inventory, Work in Process Inventory, and Finished Goods
Inventory.

12. Cost of Goods Sold is an

a. unexpired product cost.
b. expired product cost.
c. unexpired period cost.
d. expired period cost.

13. The indirect costs of converting raw material into finished goods are called
a. period costs.
b. prime costs.
c. overhead costs.
d. conversion costs.

.14. Which of the following would need to be allocated to a cost object?

a. direct material
b. direct labor
c. direct production costs
d. indirect production costs
15. Conversion cost does not include
a. direct labor.
b. direct material.
c. factory depreciation.
d. supervisors' salaries.

16. The distinction between direct and indirect costs depends on whether a
cost
a. is controllable or non-controllable.
b. is variable or fixed.
c. can be conveniently and physically traced to a cost object under consideration.
d. will increase with changes in levels of activity.

17. Broussard Company is a construction company that builds houses on special

request. What is the proper classification of the carpenters' wages?

Product Period Direct

a. yes yes no
b. yes no yes
c. no no no
d. no yes yes

18. Which of the following costs would be considered overhead in the production
of chocolate chip cookies?
a. flour
b. chocolate chips
c. sugar
d. oven electricity

19. All costs related to the manufacturing function in a company are

a. prime costs.
b. direct costs.
c. product costs.
d. conversion costs.

20. The term "prime cost" refers to

a. all manufacturing costs incurred to produce units of output.
b. all manufacturing costs other than direct labor and raw material costs.
c. raw material purchased and direct labor costs.
d. the raw material used and direct labor costs.

21. In a perpetual inventory system, the sale of items for cash consists of two entries. One entry
is a debit to Cash and a credit to Sales. The other entry is a debit to
a. Work in Process Inventory and a credit to Finished Goods Inventory.
b. Finished Goods Inventory and a credit to Cost of Goods Sold.
c. Cost of Goods Sold and a credit to Finished Goods Inventory.
d. Finished Goods Inventory and a credit to Work in Process Inventory.

22. The formula to compute cost of goods manufactured is

a. beginning Work in Process Inventory plus purchases of raw material minus ending
Work in Process Inventory.
b. beginning Work in Process Inventory plus direct labor plus direct material used
plus overhead incurred minus ending Work in Process Inventory.
c. direct material used plus direct labor plus overhead incurred.
d. direct material used plus direct labor plus overhead incurred plus beginning Work
in Process Inventory.

23. The formula for cost of goods sold for a manufacturer is

a. beginning Finished Goods Inventory plus Cost of Goods Manufactured minus
ending Finished Goods Inventory.
b. beginning Work in Process Inventory plus Cost of Goods Manufactured minus
ending Work in Process Inventory.
c. direct material plus direct labor plus applied overhead.
d. direct material plus direct labor plus overhead incurred plus beginning Work in
Process Inventory.

24. Which of the following replaces the retailing component "Purchases" in computing Cost
of Goods Sold for a manufacturing company?
a. direct material used
b. cost of goods manufactured
c. total prime cost
d. cost of goods available for sale

25. Costs that are incurred to preclude defects and improper processing are:
a. prevention costs c. appraisal costs
b. detection costs d. failure costs

26. Costs that are incurred for monitoring and inspecting are:
a. prevention costs c. appraisal costs
b. detection costs d. failure costs
27. Costs that are incurred when customers complain are:
a. prevention costs c. appraisal costs
b. detection costs d. failure costs

28. Manufacturing overhead: 
A. includes direct materials, indirect materials, indirect labor, and factory depreciation.
B. is easily traced to jobs.
C. includes all selling costs.
D. should not be assigned to individual jobs because it bears no obvious relationship to them.
E. is a pool of indirect production costs that must somehow be attached to each unit
manufactured

29. Which of the following statements regarding work in process is not correct? 
A. Work in process is partially completed inventory.
B. Work in process consists of direct labor, direct material, and manufacturing overhead.
C. Work-in-Process Inventory is debited to record direct material used and direct labor incurred.
D. Work-in-Process Inventory appears on the year-end balance sheet.
E. Work-in-Process Inventory is credited when goods are sold.

 30. A computer manufacturer recently shipped several laptops to a customer (cost: $25,000)
and billed the customer $30,000. Which of the following options correctly expresses the
accounts that are debited and credited to record this transaction? 
A. Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of
Goods Sold.
B. Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods
Inventory.
C. Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable, Finished-Goods
Inventory.
D. Debits: Sales Revenue, Finished-Goods Inventory; credits: Accounts Receivable, Cost of
Goods Sold.
E. Debits: Accounts Receivable; credits: Finished-Goods Inventory, Profit on Sale.

Problem 31 to 34.  Wilson Company

The following information has been taken from the cost records of Wilson Company for the
past year:

Raw material used in production $326

Total manufacturing costs charged to production during the year (includes 686
direct material, direct labor, and overhead equal to 60% of direct labor cost)
Cost of goods available for sale 826
Selling and Administrative expenses 25

Inventories Beginnin Ending

g
Raw Material $75 $ 85
Work in Process 80 30
Finished Goods 90 110
 31. Refer to Wilson Company. The cost of raw material purchased during the year
was
a. $316.
b. $336.
c. $360.
d. $411.

32. Refer to Wilson Company. Direct labor cost charged to production during the
year was
a. $135.
b. $216.
c. $225.
d. $360.

33. Refer to Wilson Company. Cost of Goods Manufactured was

a. $636.
b. $716.
c. $736.
d. $766.

34.. Refer to Wilson Company. Cost of Goods Sold was

a. $691.
b. $716.
c. $736.
d. $801.

Brandt Company.

Brandt Company manufactures wood file cabinets. The following information is available for
June 2001:

Beginning Ending
Raw Material Inventory $ 6,000 $
7,500
Work in Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300

35. Refer to Brandt Company. Direct labor is $9.60 per hour and overhead for the
month was $9,600. Compute total manufacturing costs for June, if there were 1,500 direct
labor hours and $21,000 of raw material was purchased.
a. $58,500
b. $46,500
c. $43,500
d. $43,100

36.Refer to Brandt Company. Direct labor is paid $9.60 per hour and overhead for the
month was $9,600. What are prime costs and conversion costs, respectively if there were 1,500
direct labor hours and $21,000 of raw material was purchased?
a. $29,100 and $33,900
b. $33,900 and $24,000
c. $33,900 and $29,100
d. $24,000 and $33,900

37. Refer to Brandt Company. Direct labor is paid $9.60 per hour and overhead for
the month was $9,600. If there were 1,500 direct labor hours and $21,000 of raw material
purchased, Cost of Goods Manufactured is:
a. $49,100.
b. $45,000.
c. $51,000.
d. $49,500.

38. Refer to Brandt Company. Direct labor is paid $9.60 per hour and overhead for the
month was $9,600. If there were 1,500 direct labor hours and $21,000 of raw material
purchased, how much is Cost of Goods Sold?
a. $64,500.
b. $59,800.
c. $38,800.
d. $53,800.

39. Davis Company manufacturers desks. The beginning balance of Raw Material Inventory
was $4,500; raw material purchases of $29,600 were made during the month. At month end,
$7,700 of raw material was on hand. Raw material used during the month was
a. $26,400.
b. $34,100.
c. $37,300.
d. $29,600.

40. Urban Company manufacturers tables. If raw material used was $80,000 and
Raw Material Inventory at the beginning and end of the period, respectively, was
$17,000 and $21,000, what was amount of raw material was purchased?
a. $76,000
b. $118,000
c. $84,000
d. $101,000

41. Putnam Company manufacturers computer stands. What is the beginning balance of
Finished Goods Inventory if Cost of Goods Sold is $107,000; the ending balance of Finished
Goods Inventory is $20,000; and Cost of Goods Manufactured is $50,000 less than Cost of
Goods Sold?
a. $70,000
b. $77,000
c. $157,000
d. $127,000

42. Sharp Enterprises

Inventories: March 1 March 31

Raw material $18,0 $15,00
00 0
Work in process 9,000 6,000
Finished goods 27,00 36,000
0
Additional information for March:
Raw material purchased $42,0
00
Direct labor payroll 30,00
0
Direct labor rate per hour 7.50
Overhead rate per direct labor hour 10.00

42. Refer to Sharp Enterprises. For March, prime cost incurred was
a. $75,000.
b. $69,000.
c. $45,000.
d. $39,000.
43. Refer to Sharp Enterprises. For March, conversion cost incurred was
a. $30,000.
b. $40,000.
c. $70,000.
d. $72,000.

44. Refer to Sharp Enterprises. For March, Cost of Goods Manufactured was
a. $118,000.
b. $115,000.
c. $112,000.
d. $109,000.

45. Rodney Worsham is paid $10 an hour for straight-time and $15 an hour for overtime. One
week he worked 45 hours, which included 5 hours of overtime, and 3 hours of idle time
caused by material shortages. Compensation would be reported as
a. $370 of direct labor and $105 of manufacturing overhead.
b. $420 of direct labor and $55 of manufacturing overhead.
c. $450 of direct labor and $25 of manufacturing overhead.
d. $445 of direct labor and $30 of manufacturing overhead.

46. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 46 THROUGH 49

The Singer Company manufactures several different products. Unit costs associated with
Product ICT101 are as follows:
Direct materials $ 60
Direct manufacturing labor 10
Variable manufacturing overhead 18
Fixed manufacturing overhead 32
Sales commissions (2% of sales) 4
Administrative salaries 16
Total $140

46. What are the variable costs per unit associated with Product ICT101?
a. $18
b. $22
c. $88
d. $92

47. What are the fixed costs per unit associated with Product ICT101?
a. $102
b. $48
c. $52
d. $32

48. What are the inventoriable costs per unit associated with Product ICT101?
a. $120
b. $140
c. $50
d. $88

49. What are the period costs per unit associated with Product ICT101?
a. $4
b. $16
c. $20
d. $52
50. Tire and Spoke Manufacturing currently produces 1,000 bicycles per month. The
following per unit data apply for sales to regular customers:

Direct materials $50

Direct manufacturing labor 5
Variable manufacturing overhead 14
Fixed manufacturing overhead 10
Total manufacturing costs $79

The plant has capacity for 3,000 bicycles and is considering expanding production to
2,000 bicycles. What is the per unit cost of producing 2,000 bicycles?
a. $79 per unit
b. $158 per unit
c. $74 per unit
d. $134 per unit

51. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 51 THROUGH 53.

Pederson Company reported the following:

Manufacturing costs $2,000,000

Units manufactured 50,000
Units sold 47,000 units sold for $75 per unit
Beginning inventory 0 units

51. What is the average manufacturing cost per unit?

a. $40.00
b. $42.55
c. $00.025
d. $75.00

.52. What is the amount of ending finished goods inventory?

a. $1,880,000
b. $120,000
c. $225,000
d. $105,000

.53. What is the amount of gross margin?

a. $1,750,000
b. $3,525,000
c. $5,405,000
d. $1,645,000

i
. 54. The Tanker Company estimated the following data for the coming year:
Fixed manufacturing costs P565,000
Variable production costs per peso of sales
Materials P 0.125
Direct labor 0.150
Variable overhead 0.075
Variable selling costs per peso of sales 0.150
Tanker estimates its sales for the coming year to be P2,000,000.

The expected cost of goods sold for the coming year is

A. P1,265,000 C. P1,565,000
B. P1,115,000 D. P 700,000
55. At the end of the year, Paola Company had the following account balances after applied factory
i

overhead had been closed to Factory Overhead Control:

Factory Overhead Control.................................................................P 1,000 CR
Cost of Goods Sold.............................................................................. 980,000DR
Work in Process................................................................................... 38,000DR
Finished Goods.................................................................................... 82,000DR

The most common treatment of the balance in Factory Overhead Control would be to:
A. carry it as a deferred credit on the balance sheet
B. report it as miscellaneous operating revenue on the income statement
C. credit it to Cost of Goods Sold
D. prorate it between Work in Process and Finished Goods
E. prorate it among Work in Process, Finished Goods, and Cost of Goods Sold

ANSWER KEY:

1. B
2. Bonus
3. B
4. C
5. D
6. C
7. C
8. D
9. A
10. A
11. D
12. B
13. C
14. D
15. B
16. C
17. B
18. D
19. C
20. D
21. C
22. B
23. A
24. B
25. A
26. C
27. D
28. E
29. E
30. B
31. B
32. C
33. C
34. B
35. C
36. B
37. A
38. D
39. A
40. C
41. A
42. A
43. C
44. A
45. B
46. D
47. B
48. A
49. C
50. C
51. A
52. B
53. D
54. A
55. E