Deck 16: Cost Concepts and Cost Allocation

Question 1

Inventoriable cost is a synonym of period cost.

Answer 1

False

Question 2

Period costs flow through three types of inventory accounts before becoming part of the cost of goods sold amount.

Answer 2

False

Question 3

The costs of marketing and delivering a product are not included in its inventory valuation.

Answer 3

True

Question 4

For a manufactured product,all costs incurred to get the product ready for sale are included in the inventory value of the product.

Question 5

Period cost and product cost are synonymous terms.

Question 6

The two types of cost behavior are value-adding and nonvalue-adding.

Question 7

Indirect costs can be conveniently traced to a cost object.

Question 8

Product costs could be reported as assets.

Question 9

Period costs are consumed entirely in the current reporting period.

Question 10

Equipment depreciation is an example of a direct product cost in a manufacturing company.

Question 11

Variable costs per unit change in an inversely proportional rate to changes in volume.

Question 12

Manufacturing costs behave as variable or fixed costs.

Question 13

Period costs are not considered when costing products for inventory.

Question 14

Some period costs can be found in inventory accounts on the balance sheet.

Question 15

Direct labor is a fixed cost because it always occurs.

Question 16

The two primary types of cost behavior are fixed and variable.

Question 17

Product costs could be found on both the balance sheet and the income statement.

Question 18

Product costs for a manufacturing company consist of direct materials,direct labor,and overhead.

Question 19

Both product costs and period costs could appear on the income statement.

Question 20

Fixed costs per unit are constant along a defined range of activity.

Question 21

Property taxes and equipment depreciation are examples of indirect manufacturing costs.

Question 22

Lubrication used for machines is an example of a direct material.

Question 23

A cost is classified as an overhead cost if it is not directly traceable to an end product or a cost object.

Question 24

Both indirect materials and indirect labor are overhead costs.

Question 25

Total fixed costs remain constant within a defined time period or range of activity.

Question 26

Sugar is an indirect cost in the manufacture of candy.

Question 27

Salaries of supervisory production personnel should be classified as direct labor costs.

Question 28

Accounting personnel utilize estimates when deriving product unit costs in order to determine product pricing.

Question 29

Overhead can be traced to products once the products are completed.

Question 30

All labor costs can be directly traced to finished products.

Question 31

Because it is invisible,direct labor cannot be traced to products.

Question 32

Minor materials and other production supplies that cannot be conveniently or economically traced to specific products are accounted for as indirect materials.

Question 33

The costs of labor for maintenance and inspections are examples of direct labor.

Question 34

Wages of machine operators and other workers involved in actually shaping the product are classified as direct labor costs.

Question 35

Overhead costs are traced to products in the same way that direct materials and direct labor are traced.

Question 36

Product unit cost is computed by dividing cost of goods sold by the number of units sold.

Question 37

Depreciation on factory equipment is a value-adding cost.

Question 38

Product unit cost comprises only direct materials and direct labor costs.

Question 39

Direct materials are the only materials in a product.

Question 40

Nonvalue-adding costs increase the cost of a product.

Question 41

The job order cost card reflects the product cost per unit.

Question 42

(Direct Materials + Direct Labor + Overhead)/ Total Number of Units Produced = Product Unit Cost.

Question 43

Overhead costs decrease the Work in Process Inventory account.

Question 44

Both direct labor and indirect labor are recorded in the Work in Process Inventory account as the product is being manufactured.

Question 45

Total manufacturing costs increase the balance of the Work in Process Inventory account.

Question 46

The key to the preparation of an income statement for a manufacturing company is proper determination of the cost of goods manufactured.

Question 47

The costs of materials used in production are transferred from the Materials Inventory account directly to the Finished Goods Inventory account.

Question 48

A materials request form is prepared whenever the purchasing department orders materials.

Question 49

The amount computed for cost of goods manufactured should be the same as the amount transferred from the materials inventory,direct labor,and overhead accounts into the Work in Process Inventory account.

Question 50

As units are completed,their costs are transferred from the Work in Process Inventory account to the Finished Goods Inventory account.

Question 51

Materials costs flow from the Materials Inventory to the Work in Process Inventory to the Cost of Goods Sold account.

Question 52

Factory employees' wages should be incorporated into the Work in Process Inventory account.

Question 53

Normal costing is the sum of actual direct materials,actual direct labor,and actual overhead.

Question 54

Standard costing is based on actual direct materials and direct labor plus estimated overhead.

Question 55

The expressions total manufacturing costs and total cost of goods manufactured are not synonymous.

Question 56

Cost of goods manufactured decreases the Work in Process Inventory account.

Question 57

At the end of an accounting period,the balance in the Finished Goods Inventory account is made up of the costs of products completed but not sold as of that date.

Question 58

Direct materials,direct labor,and overhead costs will most likely become part of the Cost of Goods Sold account balance in case of manufacturing companies.

Question 59

The product costs that appear in the financial statements are actual product costs.

Question 60

Indirect costs incurred are charged directly to the Work in Process Inventory account.

Question 61

The cost of goods manufactured is added to the beginning balance of Finished Goods Inventory to obtain the total cost of goods available for sale during the period.

Question 62

Actual overhead plus overapplied overhead equals applied overhead.

Question 63

Cost of goods manufactured appears on the income statement of a manufacturing company in a similar manner as purchases appear on the income statement of a merchandising company.

Question 64

If Company G uses an overhead rate of $3.50 per direct labor dollar,and 63,500 hours of direct labor at $9.00 per hour are actually incurred,$222,250 of overhead costs are allocated for that period.

Question 65

Overhead is said to be underapplied when actual overhead costs exceed the amount applied to production.

Question 66

Overhead costs generally are estimated as part of the normal budgeting function.

Question 67

A cost pool is a collection of overhead costs related to a cost object.

Question 68

The entry to record the application of overhead costs includes a debit to the Overhead account.

Question 69

Total manufacturing costs and the change in Finished Goods Inventory are used to compute cost of goods sold.

Question 70

The product is the cost object when assigning indirect product costs.

Question 71

The changes in Work in Process Inventory and total manufacturing costs for a period are used to compute cost of goods manufactured.

Question 72

By using a predetermined overhead rate and an allocation base,such as direct labor dollars or hours,one can assign overhead costs by debiting the Overhead account and crediting the Work in Process Inventory account.

Question 73

If overhead has been overapplied during the period,the adjusting entry could include a credit to the Cost of Goods Sold account.

Question 74

Total manufacturing costs include all direct materials used as well as all direct labor costs and overhead costs incurred for a period.

Question 75

As actual overhead costs are incurred,the Overhead account is debited.

Question 76

The Overhead account is used to accumulate actual overhead costs.

Question 77

Total estimated overhead costs should be divided by actual direct labor hours to compute an overhead rate per direct labor hour.

Question 78

The amount of underapplied or overapplied overhead is the difference between applied overhead and estimated overhead.

Question 79

Manufacturing costs incurred in an accounting period cannot be included in cost of goods sold for the subsequent accounting period.

Question 80

The amount for cost of goods manufactured should be the same as the amount transferred from the Work in Process Inventory account to the Finished Goods Inventory account during the year.