Deck 4: Cost Management Systems

Question 1

Cost accounting is that part of the accounting system that measures costs for the purposes of management decision making and financial reporting.

Answer 1

True

Question 2

Absorption costing is more widely used than variable costing.

Answer 2

True

Question 3

The three major categories of manufacturing costs are direct materials, direct labour and factory overhead.

Answer 3

True

Question 4

Direct costs can be identified specifically and exclusively with a given cost objective in an economically feasible way.

Question 5

A production-volume variance is calculated as the applied volume minus the actual volume multiplied by the actual-overhead rate.

Question 6

Fixed manufacturing overhead is excluded from the cost of products under absorption costing.

Question 7

Period costs are inventoriable and are expensed when the inventory is sold.

Question 8

The term expense is used to describe both an inventory expenditure and a cost.

Question 9

Indirect costs can be identified specifically with a given cost objective in an uneconomical way.

Question 10

Product costs are identified with goods produced or purchased for resale.

Question 11

Absorption-costing income is not affected by production volume.

Question 12

A manufacturer has three inventories as compared to a merchandiser, which has only one.

Question 13

Prime costs include direct labour and factory overhead.

Question 14

Variable costing is also referred to as the contribution approach.

Question 15

There is no difference between variable-costing and absorption-costing income if the inventory level does not change.

Question 16

Absorption costing separates costs into manufacturing and non-manufacturing categories.

Question 17

Cost accounting system typically includes two processes, cost accumulation and cost determination.

Question 18

In variable costing, inventories are valued at standard variable costs.

Question 19

The contribution approach is a method of internal reporting that emphasizes the distinction between variable and fixed costs for the purpose of better decision making.

Question 20

In the contribution approach, all factory overhead is considered to be product costs that are expensed as incurred.

Question 21

Prime costs include

A) direct labour and factory overhead.
B) direct materials and indirect labour.
C) factory overhead and indirect materials.
D) direct labour and direct materials.

Question 22

Factory overhead includes

A) direct materials and direct labour.
B) prime costs.
C) indirect and direct labour.
D) indirect labour and indirect materials.

Question 23

Costs identified with goods produced or purchased for resale are called

A) product costs.
B) period costs.
C) prime costs.
D) conversion costs.

Question 24

A period cost

A) is identified with goods produced or purchased for resale.
B) is accumulated in work-in-process.
C) is shown on the balance sheet.
D) is expensed as incurred.

Question 25

Selling and general administrative costs are

A) period costs.
B) product costs.
C) prime costs.
D) conversion costs.

Question 26

The sum of direct labour and factory overhead costs is equal to

A) conversion costs.
B) prime costs.
C) period costs.
D) indirect costs.

Question 27

The part of the accounting system that measures costs for the purposes of management decision making and financial reporting is referred to as

A) period costing.
B) cost accounting.
C) system accounting.
D) product costing.

Question 28

An example of direct labour would be

A) janitor's wages.
B) factory foreman's wages.
C) machine operator's wages.
D) plant guard's wages.

Question 29

An activity for which a separate measurement of costs is desired is called a

A) cost objective.
B) period cost.
C) product cost.
D) cost accumulation system.

Question 30

Which of the following would probably NOT be considered a direct material?

A) Lumber
B) Steel
C) Glue
D) Subassemblies

Question 31

Which of the following statements is TRUE?

A) Indirect costs can be identified specifically with a given cost objective in an economically feasible way.
B) Managers prefer to classify costs as indirect rather than direct.
C) A cost may simultaneously be direct and indirect.
D) Direct costs cannot be identified specifically with a given cost objective in an economically feasible way.

Question 32

The three major categories of manufacturing costs are

A) prime costs, direct materials and factory overhead.
B) direct labour, factory overhead and direct materials.
C) indirect labour, indirect materials and conversion costs.
D) prime costs, period costs, and product costs.

Question 33

Which of the following is NOT a factor in determining whether a cost is direct or indirect?

A) The cost can be identified specifically with a given cost objective.
B) The identification of the cost is economically feasible.
C) The cost objective used.
D) The manager's preference.

Question 34

Which of the following statements is NOT true?

A) A cost may be defined as a sacrifice or giving up of resources for a particular purpose.
B) Costs are frequently measured by the monetary units that must be paid for goods and services.
C) Costs are shown on the income statement.
D) Costs are initially recorded in elementary form.

Question 35

Which of the following is NOT a factory overhead cost?

A) Wages of machine operators
B) Wages of supervisors
C) Amortization of the machinery
D) Factory utilities

Question 36

A cost accumulation system typically includes two processes:

A) cost accumulation and cost allocation.
B) cost objectives and cost accounting.
C) cost accumulation and cost accounting.
D) cost allocation and cost application.

Question 37

Which of the following would NOT be an example of a cost objective?

A) A department
B) A product
C) A territory
D) A parcel of land

Question 38

Manufacturing costs are eventually reported on

A) the income statement only.
B) the balance sheet only.
C) the income statement as cost of goods sold.
D) the balance sheet as cost of goods sold.

Question 39

All costs other than direct material and direct labour that are associated with the manufacturing process are called

A) prime costs.
B) factory-overhead costs.
C) conversion costs.
D) product costs.

Question 40

Which of the following statements is FALSE?

A) Product costs are inventoriable costs.
B) Product costs are automatically deducted as expenses during the current period.
C) Product costs become expenses when the inventory is sold.
D) Product costs show up on the income statement in cost of goods sold.

Question 41

When using the absorption approach to costing,

A) all variable costs are inventoriable.
B) all indirect manufacturing costs are inventoriable.
C) all fixed costs are treated as period costs.
D) all direct manufacturing costs are treated as period costs.

Question 42

Which of the following terms appears on an income statement prepared using the contribution approach but NOT on an income statement using absorption costing?

A) Operating income
B) Gross profit
C) Contribution margin
D) Sales

Question 43

The only difference between variable and absorption costing is the accounting for

A) direct labour.
B) fixed manufacturing overhead.
C) direct materials.
D) variable manufacturing overhead.

Question 44

Which of the following is NOT a product cost?

A) Indirect labour
B) Raw materials used
C) Insurance on the plant
D) Advertising expense

Question 45

Variable costing is commonly called

A) full costing.
B) direct costing.
C) traditional costing.
D) absorption costing.

Question 46

All of the following are inventoriable costs under variable costing EXCEPT

A) direct materials.
B) direct labour.
C) variable manufacturing overhead.
D) fixed manufacturing overhead.

Question 47

Absorption costing classifies costs as either product costs or

A) period costs.
B) fixed costs.
C) prime costs.
D) conversion costs.

Question 48

An example of a product cost is

A) advertising expense.
B) amortization on office equipment.
C) indirect materials.
D) store supplies expense.

Question 49

How many inventory accounts does a merchandiser usually have?

A) One
B) Two
C) Three
D) Four

Question 50

How many inventory accounts does a manufacturer usually have?

A) Three
B) Two
C) One
D) None

Question 51

Absorption costing is also known as all of the following EXCEPT

A) direct costing.
B) full costing.
C) traditional approach.
D) functional approach.

Question 52

The cost of goods purchased line on the income statement of a retailer is the equivalent to which line on a manufacturer's income statement?

A) Cost of raw materials purchased
B) Cost of goods sold
C) Cost of goods available for sale
D) Cost of goods manufactured

Question 53

Which of the following accounts would appear in the current asset section of a merchandiser's balance sheet?

A) Direct materials inventory
B) Finished goods inventory
C) Merchandise inventory
D) Work in process inventory

Question 54

Which of the following is NOT an inventory account?

A) Direct labour
B) Direct materials
C) Work in process
D) Finished goods

Question 55

When using the contribution approach to costing,

A) all factory overhead is inventoriable.
B) all indirect manufacturing costs are inventoriable.
C) all selling expenses are deducted from the contribution margin.
D) all fixed costs are treated as period costs.

Question 56

Which of the following is NOT a period cost?

A) Wages of clerical staff
B) Advertising expense
C) Factory supplies used
D) Amortization on salesperson's car

Question 57

Which of the following accounts would NOT be included in the current asset section of a manufacturer's balance sheet?

A) Work in process inventory
B) Merchandise inventory
C) Finished goods inventory
D) Direct materials inventory

Question 58

Variable costing regards fixed manufacturing overhead as

A) an unexpired cost.
B) an inventoriable cost.
C) a charge against sales.
D) a product cost.

Question 59

Which of the following would appear on an income statement of both a retailer and a manufacturer?

A) Direct labour
B) Selling expenses
C) Beginning finished goods inventory
D) Factory overhead

Question 60

Which of the following methods is required for external financial reporting?

A) Contribution approach
B) Variable costing
C) Direct costing
D) Absorption approach

Question 61

DeJager Company reported the following information about the production and sales of its only product:

The cost of producing one unit of product using variable costing would be

A) $32.
B) $40.
C) $45.
D) $26.

Question 62

Schultz Company reported the following information about the production and sales of its only product:

The cost of producing one unit of product using absorption costing would be

A) $64.
B) $52.
C) $90.
D) $80.

Question 63

DeJager Company reported the following information about the production and sales of its only product:

The operating income (loss) under variable costing would be

A) $14,200.
B) $ 8,200.
C) $(3,000).
D) $(7,800).

Question 64

A company has the following information:

Raw materials purchased during the current period were

A) $50,000.
B) $64,000.
C) $36,000.
D) not determinable.

Question 65

Schultz Company reported the following information about the production and sales of its only product:

The ending inventory under variable costing would be

A) $48,000.
B) $54,000.
C) $38,400.
D) $31,200.

Question 66

A company has the following information:

The total contribution margin under variable costing would be

A) $42,000.
B) $14,000.
C) $66,000.
D) $72,000.

Question 67

All manufacturing costs are assigned to the product under which method of product costing?

A) Direct costing
B) Variable costing
C) Absorption costing
D) Fixed costing

Question 68

Schultz Company reported the following information about the production and sales of its only product:

The ending inventory under absorption costing would be

A) $54,000.
B) $48,000.
C) $31,200.
D) $38,400.

Question 69

DeJager Company reported the following information about the production and sales of its only product:

The cost of goods sold under variable costing would be

A) $56,000.
B) $63,000.
C) $44,800.
D) $36,400.

Question 70

DeJager Company reported the following information about the production and sales of its only product:

The cost of producing one unit of product using absorption costing would be

A) $32.
B) $26.
C) $45.
D) $40.

Question 71

Schultz Company reported the following information about the production and sales of its only product:

The cost of goods sold under variable costing would be

A) $112,000.
B) $126,000.
C) $ 89,600.
D) $ 72,800.

Question 72

Which format does the CICA Handbook advocate for reporting income?

A) Direct costing
B) Variable costing
C) Indirect costing
D) Full costing

Question 73

A company has the following information:

The ending inventory under variable costing would be

A) $96,000.
B) $168,000.
C) $84,000.
D) $192,000.

Question 74

Schultz Company reported the following information about the production and sales of its only product:

The contribution margin under variable costing would be

A) $36,400.
B) $28,400.
C) $ 6,000.
D) $45,200.

Question 75

Schultz Company reported the following information about the production and sales of its only product:

The cost of producing one unit of product using variable costing would be

A) $64.
B) $80.
C) $90.
D) $52.

Question 76

A company has the following information:

The cost of goods sold under variable costing would be

A) $84,000.
B) $192,000.
C) $96,000.
D) $168,000.

Question 77

DeJager Company reported the following information about the production and sales of its only product:

The ending inventory under variable costing would be

A) $24,000.
B) $27,000.
C) $19,200.
D) $15,600.

Question 78

DeJager Company reported the following information about the production and sales of its only product:

The contribution margin under variable costing would be

A) $18,200.
B) $14,200.
C) $ 3,000.
D) $22,600.

Question 79

Schultz Company reported the following information about the production and sales of its only product:

The operating income (loss) under variable costing would be

A) $ 28,400.
B) $ 16,400.
C) $( 6,000).
D) $(15,600).

Question 80

DeJager Company reported the following information about the production and sales of its only product:

The ending inventory under absorption costing would be

A) $27,000.
B) $24,000.
C) $15,600.
D) $19,200.