Question 1

Langley Company is a construction company that builds houses on special request. What is the proper classification of indirect material used? $\underline{\text { Prime }}\quad\underline{\text {Conversion }} \quad\underline{ \text { Variable} }$
A) no no no
B) no yes yes
C) yes yes yes
D) yes no no

Accepted Answer

Indirect materials are part of conversion costs as they are necessary for transforming raw materials into finished goods, and they are variable costs as they change with production levels. They are not prime costs, which include direct materials and direct labor.

Question 2

A selling cost is a(n) $\begin{array}{llcc}
 \underline{ \text {podiuct cost   }} &\underline{  \text { period cost  } }&\underline{  \text {  inventoriable cost} }\
\end{array}$

A) yes yes no
B) yes no no
C) no yes no
D) no yes yes

Accepted Answer

A selling cost is considered a period cost because it is not directly tied to the production process and is expensed in the period incurred. It is not a product or inventoriable cost.

Question 3

All costs related to the manufacturing function in a company are
A) prime costs.
B) direct costs.
C) product costs.
D) conversion costs.

Accepted Answer

Product costs include all costs directly related to the manufacturing process, including direct materials, direct labor, and overhead costs. Prime costs are only direct materials and direct labor, while conversion costs include direct labor and overhead costs. Direct costs are those that can be easily traced to a specific product, service, or department.

Question 4

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.

Accepted Answer

In a manufacturing company, the three primary inventory accounts are Raw Material Inventory (which includes all the materials that are purchased and used in the manufacturing process), Work in Process Inventory (which includes partially completed products that are in various stages of the manufacturing process), and Finished Goods Inventory (which includes completed products that are ready for sale). Therefore, option D - Raw Material Inventory, Work in Process Inventory, and Finished Goods Inventory - is the best choice.

Question 5

Period costs include $\begin{array}{llcc}
  \underline{\text {clistribution costs  }} & \underline{ \text {outsude processing costs  } }&\underline{  \text { sales commissions }} \
\end{array}$

A) yes no yes
B) no yes yes
C) no no no
D) yes yes yes

Accepted Answer

Period costs include distribution costs and sales commissions, but not outside processing costs, which are typically considered product costs.

Question 6

Langley Company is a construction company that builds houses on special request. What is the proper classification of the carpenters' wages? $\begin{array}{lll}
\underline{\text { Product }} & \underline{\text { Period }} & \underline{\text { Direct }}
\end{array}$

A) yes yes no
B) yes no yes
C) no no no
D) no yes yes

Accepted Answer

The carpenters' wages are a direct cost associated with the construction of houses, making them a product cost and a direct cost.

Question 7

Cost of Goods Sold is an
A) unexpired product cost.
B) expired product cost.
C) unexpired period cost.
D) expired period cost.

Accepted Answer

Cost of Goods Sold represents the expired product cost, which is the cost of inventory items that have been sold during a period of time. The unexpired product cost would be part of the inventory on hand, and unexpired period cost would be expenses that have not yet been recognized.

Question 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

Accepted Answer

Commission on the sale of a product is not a product cost component as it is a selling expense and is not directly related to the production of the product. Product cost components include direct material, direct labor, and manufacturing overhead expenses such as rent on a factory building, indirect production labor wages, and janitorial supplies used in a factory.

Question 9

Langley Company is a construction company that builds houses on special request. What is the proper classification of the cost of the cement building slab used? $\underline{\text { Direct }} \quad\underline{ \text { Fixed }}$
A) no no
B) no yes
C) yes yes
D) yes no

Accepted Answer

The cost of the cement building slab is a direct cost because it can be directly traced to a specific house being built. However, it is not a fixed cost because it varies with the number of houses constructed.

Question 10

Prime cost consists of $\begin{array}{llcc}
  \underline{\text { direct material } }&\underline{  \text { direct labor }} & \underline{ \text {overhead   }}\
\end{array}$

A) no yes no
B) yes yes no
C) yes no yes
D) no yes yes

Accepted Answer

Prime cost includes direct materials and direct labor, but not overhead.

Question 11

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

Accepted Answer

Overhead costs refer to indirect expenses that are not directly tied to the production process of a particular product or service. Oven electricity is an indirect cost and is not directly involved in the production of chocolate chip cookies. The cost of flour, chocolate chips, and sugar are direct costs as they are used in the production process.

Question 12

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.

Accepted Answer

Prime cost includes the raw material used and direct labor costs, but not overhead or indirect costs.

Question 13

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.

Accepted Answer

Direct costs can be conveniently and physically traced to a cost object under consideration, while indirect costs cannot be traced in the same manner.

Question 14

Plastic used to manufacture dolls is a $\begin{array}{llcc}
\underline{  \text { prime cost } }&\underline{  \text { product cost }}&\underline{  \text {  direct cost} }&\underline{  \text {fixed cost  }} \
\end{array}$

A) no yes yes yes
B) yes no yes no
C) yes yes no yes
D) yes yes yes no

Accepted Answer

Plastic used to manufacture dolls is a prime cost, product cost, and direct cost, but not a fixed cost.

Question 15

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

Accepted Answer

The answer of Which of the following would need to...

Question 16

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.

Accepted Answer

Period costs are expensed in the period in which they are incurred, as they are not directly tied to the production process and do not become part of the cost of goods sold.

Question 17

A cost driver
A) causes fixed costs to rise because of production changes.
B) has a direct cause-effect relationship to a cost.
C) can predict the cost behavior of a variable, but not a fixed, cost.
D) is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.

Accepted Answer

A cost driver has a direct cause-effect relationship to a cost. It is the activity or factor that influences the cost of a particular process or operation in a business. For example, the number of hours worked is a cost driver for labor costs, and the amount of raw materials used is a cost driver for material costs. Cost drivers help in predicting the cost behavior of both variable and fixed costs. It is not necessarily an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.

Question 18

The indirect costs of converting raw material into finished goods are called
A) period costs.
B) prime costs.
C) overhead costs.
D) conversion costs.

Accepted Answer

Overhead costs are the indirect costs associated with converting raw material into finished goods, including expenses such as utilities, depreciation, and salaries for management.

Question 19

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.

Accepted Answer

Product costs are deducted from revenue as goods are sold. This is known as the matching principle, which states that expenses should be matched with the revenues they helped to generate. By deducting product costs as goods are sold, the resulting net income reflects the revenue earned from sales minus the expenses incurred to produce those goods. This provides a more accurate and timely measure of profitability.

Question 20

Conversion cost does not include
A) direct labor.
B) direct material.
C) factory depreciation.
D) supervisors' salaries.

Accepted Answer

Conversion cost includes direct labor and factory overhead costs such as depreciation and supervisors' salaries, but it does not include direct material costs.

Quiz 1: Cost Terminology and Cost Behaviors

Langley Company is a construction company that builds houses on special request. What is the proper classification of indirect material used? $\underline{\text { Prime }}\quad\underline{\text {Conversion }} \quad\underline{ \text { Variable} }$

A selling cost is a(n) $\begin{array}{llcc} \underline{ \text {podiuct cost }} &\underline{ \text { period cost } }&\underline{ \text { inventoriable cost} }\\\end{array}$

All costs related to the manufacturing function in a company are

The three primary inventory accounts in a manufacturing company are

Period costs include $\begin{array}{llcc} \underline{\text {clistribution costs }} & \underline{ \text {outsude processing costs } }&\underline{ \text { sales commissions }} \\\end{array}$

Langley Company is a construction company that builds houses on special request. What is the proper classification of the carpenters' wages? $\begin{array}{lll}\underline{\text { Product }} & \underline{\text { Period }} & \underline{\text { Direct }}\end{array}$

Cost of Goods Sold is an

Which of the following is not a product cost component?

Langley Company is a construction company that builds houses on special request. What is the proper classification of the cost of the cement building slab used? $\underline{\text { Direct }} \quad\underline{ \text { Fixed }}$

Prime cost consists of $\begin{array}{llcc} \underline{\text { direct material } }&\underline{ \text { direct labor }} & \underline{ \text {overhead }}\\\end{array}$

Which of the following costs would be considered overhead in the production of chocolate chip cookies?

The term "prime cost" refers to

The distinction between direct and indirect costs depends on whether a cost

Plastic used to manufacture dolls is a $\begin{array}{llcc}\underline{ \text { prime cost } }&\underline{ \text { product cost }}&\underline{ \text { direct cost} }&\underline{ \text {fixed cost }} \\\end{array}$

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

Period costs

A cost driver

The indirect costs of converting raw material into finished goods are called

Product costs are deducted from revenue

Conversion cost does not include