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Exam 2: Cost Concepts

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Question 41

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Reference: Frosting Corp. has provided the following relating to the most recent month (August 31, 2016) of operations, for their main product, cupcakes $\begin{array} { l r } \text { Baker's salaries } & 20,000 \\\text { Finished goods inventory, beginning } & 18,000 \\\text { Finished goods inventory, ending } & 20,000 \\\text { General \& administrative expenses } & 20,000 \\\text { Indirect materials } & 17,500 \\\text { Production Supervisor, Salary } & 21,000 \\\text { Purchases of raw materials } & 28,000 \\\text { Raw materials inventory, ending } & 19,000 \\\text { Raw materials inventory, beginning } & 18,000 \\\text { Rent on production factory } & 19,000 \\\text { Rent, retail store } & 18,000 \\\text { Sales } & 243,000 \\\text { Utilities on production factory } & 17,500 \\\text { Utilities, retail store } & 17,000 \\\text { Wages, retail staff } & 20,000 \\\text { WIP inventory, beginning } & 19,500 \\\text { WIP inventory, ending } & 21,500\end{array}$ -What was the cost of goods manufactured for the period?

A) $122,000
B) $124,000
C) $120,000
D) $138,000

E) A) and C)
F) None of the above

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Question 42

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All costs incurred in a merchandising firm are considered to be period costs.

A) True
B) False

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Question 43

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Reference: Tech Computer manufactures computers in its plant located in Toronto and then ships the computers directly to distributors and retailers. The company's accountant has enlisted you to classify the following company's expenses: -The delivery charges incurred when shipping the computer hard drives to be installed in the computer.

The following account balances has been extracted from Jimbob Co.'s general ledger: $\begin{array}{|l|r|}\hline \text { Direct materials used in production } & \$ 200,000 \\\hline \text { Depreciation factory building } & \$ 10,000 \\\hline \text { Depreciation factory equipment } & \$ 50,000 \\\hline \text { Depreciation sales department automobiles } & \$ 10,000 \\\hline \text { Direct wages factory employees } & \$ 200,000 \\\hline \text { Sales department salaries and commissions } & \$ 150,000 \\\hline \text { Factory manager's salary } & \$ 50,000 \\\hline \text { Utility costs factory } & \$ 50,000 \\\hline \text { Utility costs sales office } & \$ 20,000 \\\hline\end{array}$ What was the total of manufacturing overhead?

Prime cost consists of direct materials combined with:

The gross margin for Cushing Company for the first quarter of last year was $325,000 when sales were $700,000. The beginning inventory of finished goods was $60,000 and the ending inventory of finished goods was $85,000. The cost of goods manufactured for the first quarter would have been:

All the following would typically be considered indirect costs of manufacturing a particular Boeing 747 to be delivered to Singapore Airlines: electricity to run production equipment, the factory manager's salary, and the cost of the General Electric jet engines installed on the aircraft.

Reference: The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just completed year. $\begin{array} { | l | r | } \hline \text { Sales } & \$ 910 \\\hline \text { Raw materials inventory, beginning } & \$ 80 \\\hline \text { Raw materials inventory, ending } & \$ 20 \\\hline \text { Purchases of raw materials } & \$ 100 \\\hline \text { Direct labour } & \$ 130 \\\hline \text { Manufacturing overhead } & \$ 200 \\\hline \text { Administrative expenses } & \$ 160 \\\hline \text { Selling expenses } & \$ 140 \\\hline \text { Work in process inventory, beginning } & \$ 40 \\\hline \text { Work in process inventory, ending } & \$ 10 \\\hline \text { Finished goods inventory, beginning } & \$ 130 \\\hline \text { Finished goods inventory, ending } & \$ 150 \\\hline\end{array}$ -The cost of the raw materials used in production during the year (in thousands of dollars) was:

Reference: Bergeron Inc. reported the following data for last year: $\begin{array}{ll}\text { Work in process inventory, beginning } & \$ 100 \\\text { Work in process inventory, ending } & \$ 150 \\\text { Finished goods inventory, beginning } & \$ 180 \\\text { Finished goods inventory, en ding } & \$ 200 \\\text { Direct labour cost } & \$ 300 \\\text { Direct materials cost } & \$ 500 \\\text { Manufacturing overhead cost } & \$ 400\end{array}$ -The conversion cost was?

For a manufacturing company, which of the following is an example of a period rather than a product cost?

Which of the following statements regarding fixed costs is incorrect

Reference: 02-06 Geneva Steel Corporation produces large sheets of heavy gauge steel. The company showed the following amounts relating to its production for the year just completed: $\begin{array} { | l | r | } \hline \text { Direct materials used in production } & \$ 110,000 \\\hline \text { Direct labour costs for the year } & 55,000 \\\hline \text { Work in process, beginning } & 22,000 \\\hline \text { Finished goods, beginning } & 45,000 \\\hline \text { Cost of goods available for sale } & 288,000 \\\hline \text { Cost of goods sold } & 238,000 \\\hline \text { Work in process, ending } & 16,000 \\\hline\end{array}$ -The balance of the finished goods inventory at the end of the year was:

Reference: Frosting Corp. has provided the following relating to the most recent month (August 31, 2016) of operations, for their main product, cupcakes $\begin{array} { l r } \text { Baker's salaries } & 20,000 \\\text { Finished goods inventory, beginning } & 18,000 \\\text { Finished goods inventory, ending } & 20,000 \\\text { General \& administrative expenses } & 20,000 \\\text { Indirect materials } & 17,500 \\\text { Production Supervisor, Salary } & 21,000 \\\text { Purchases of raw materials } & 28,000 \\\text { Raw materials inventory, ending } & 19,000 \\\text { Raw materials inventory, beginning } & 18,000 \\\text { Rent on production factory } & 19,000 \\\text { Rent, retail store } & 18,000 \\\text { Sales } & 243,000 \\\text { Utilities on production factory } & 17,500 \\\text { Utilities, retail store } & 17,000 \\\text { Wages, retail staff } & 20,000 \\\text { WIP inventory, beginning } & 19,500 \\\text { WIP inventory, ending } & 21,500\end{array}$ -What was the amount of raw materials used in production?

The corporate controller's salary would be considered a(n) :

The following information was provided by Grand Company for the year just ended: $\begin{array} { | l | r | } \hline \text { Beginning finished goods inventory } & \$ 130,425 \\\hline \text { Ending finished goods inventory } & \$ 125,770 \\\hline \text { Sales } & \$ 500,000 \\\hline \text { Gross margin } & \$ 100,000 \\\hline\end{array}$ The cost of goods manufactured for the year was:

The cost of rent for a manufacturing plant is generally considered to be a: $\begin{array} { | l | l | l | } \hline & \text { Prime cost } & \text { Product cost } \\\hline \text { a. } & \text { No } & \text { Yes } \\\hline \text { b. } & \text { No } & \text { No } \\\hline \text { c. } & \text { Yes } & \text { No } \\\hline \text { d. } & \text { Yes } & \text { Yes } \\\hline\end{array}$

If the ending inventory of finished goods is understated, net income will be overstated.

Reference: The following data (in thousands of dollars) have been taken from the accounting records of Karlist Corporation for the just completed year. $\begin{array} { | l | r | } \hline \text { Sales } & \$ 800 \\\hline \text { Raw materials inventory, beginning } & \$ 60 \\\hline \text { Raw materials inventory, ending } & \$ 70 \\\hline \text { Purchases of raw materials } & \$ 180 \\\hline \text { Direct labour } & \$ 100 \\\hline \text { Manufacturing overhead } & \$ 190 \\\hline \text { Administrative expenses } & \$ 110 \\\hline \text { Selling expenses } & \$ 150 \\\hline \text { Work in process inventory, beginning } & \$ 70 \\\hline \text { Work in process inventory, ending } & \$ 80 \\\hline \text { Finished goods inventory, beginning } & \$ 120 \\\hline \text { Finished goods inventory, ending } & \$ 160 \\\hline\end{array}$ -The cost of goods manufactured or the year (in thousands of dollars) was:

Within the relevant range, the difference between variable costs and fixed costs is:

An accounting course is taught in two classes per week for one hour and fifty minutes each. The classes are held in a building with 36 classrooms that are used for a variety of courses. There are 15 other courses taught in the Accounting Department at this university. If the cost object is the accounting course, which of the following is a direct cost?