Question 1

A company reported revenues of $382,000, cost of goods sold of $125,000, selling expenses of $16,000, and total operating costs of $74,000. Gross margin for the year is ________.

Accepted Answer

$382,000 - $125,000 = $257,000

Question 2

U.S. Systems Inc., had the following activities during 2018:
  
Required:
a.What is the cost of direct materials used during 2018?
b.What is cost of goods manufactured for 2018?
c.What is cost of goods sold for 2018?
d.What amount of prime costs was added to production during 2018?
e.What amount of conversion costs was added to production during 2018?

Accepted Answer

The answer of U.S. Systems Inc., had the following activities...

Question 3

Operating income is sales revenue minus operating expenses.

Accepted Answer

Operating income = sales revenue - cost of goods sold - operating expenses

Question 4

What is the cost of goods manufactured for 2018?

Accepted Answer

$259,000 + $36,000 - $47,000 = $248,000

Question 5

Since costs that are inventoried are not expensed until the units associated with them are sold, a manager can produce more units than are expected to be sold in a period without reducing a firm's net income.

Accepted Answer

This statement is true. When costs are inventoried, they are not immediately expensed. This means that a manager can produce more units than are expected to be sold in a period without reducing a firm's net income because the costs associated with those units will not be expensed until they are sold. However, this can have an impact on cash flow and inventory management.

Question 6

Designing, marketing, customer services, research and development expenses are all examples of operating costs.

Accepted Answer

Operating costs refer to the expenses that a company incurs in its day-to-day operations, including designing, marketing, customer services, research and development expenses.

Question 7

Indirect manufacturing costs such as rent, factory supervisor salary, and depreciation on production equipment are always costs of the period in which they are
incurred and are not associated with inventories.

Accepted Answer

When indirect costs are incurred in marketing or in corporate headquarters, they are period costs. However, when these costs are incurred in manufacturing, they are manufacturing overhead costs and are inventoriable.

Question 8

What is the gross margin for 2018?

Accepted Answer

$459,000 - $310,000 = $149,000

Question 9

Which of the following is a manufacturing overhead cost?

Accepted Answer

Manufacturing overhead costs are indirect costs incurred in the production process that cannot be directly traced to a specific product. Overtime premiums paid to plant workers are a manufacturing overhead cost. A is direct materials cost, B is direct labor cost, and C is direct materials cost that can be traced to individual products.

Question 10

Conversion costs include all direct manufacturing costs and some of the period costs including research and development costs and customer service.

Accepted Answer

Conversion costs are production costs necessary to convert materials to finished goods which include direct labor and manufacturing overhead (indirect production costs.)

Question 11

On the assembly floor, Jennifer is paid a regular rate of $25 an hour for straight-time assuming 8 working hours a day and five working days in a week. She is paid 1.5 times her regular rate for overtime hours. One week she worked 48 hours.
Required:
a.What is Jennifer's total compensation for the week?
b.What amount of compensation would be reported as direct manufacturing labor?
c.What amount of compensation would be reported as manufacturing overhead?

Accepted Answer

The answer of On the assembly floor, Jennifer is paid...

Question 12

Many government agency contracts exclude all but which of the following costs from reimbursement under cost-plus agreements?

Accepted Answer

Part of the research and development costs are excluded from reimbursement under cost-plus agreements.

Question 13

What is operating income for 2018?

Accepted Answer

$485,000 - $251,000 - $109,000 = $125,000

Question 14

Which of the following is included in product cost for pricing and product-mix decisions?

Accepted Answer

The answer of Which of the following is included in...

Question 15

In the manufacturing plant, Alex is paid $40 an hour for straight-time and $60 an hour for overtime. One week she worked 54 hours, which included 8 hours of overtime, and 6 hours of idle time caused by material shortages.
Required:
a.What is Alex's total compensation for the week?
b.What amount of compensation would be reported as direct manufacturing labor?
c.What amount of compensation would be reported as manufacturing overhead?

Accepted Answer

The answer of In the manufacturing plant, Alex is paid...

Question 16

What is gross margin for 2018?

Accepted Answer

$484,000 - $256,000 = $228,000

Question 17

Exceptional Manufacturing Co. wants to classify costs for the product produced at its facility. The company produces only one product at the facility and operates continually. The cost categories are:
Product cost
Prime cost
Conversion cost
Period cost
The following costs are found in the accounting records:
a.Quality control inspection wages
b.Raw material purchases
c.Sales commissions
d.Factory depreciation
e.Assembly wages
Required:
Assign each of the above costs to the most appropriate cost categories.

Accepted Answer

The answer of Exceptional Manufacturing Co. wants to classify costs...

Question 18

Under GAAP, only ________ can be assigned to inventories in the financial statements.

Accepted Answer

Under GAAP, only manufacturing costs, which include direct materials, direct labor, and manufacturing overhead, can be assigned to inventories in the financial statements.

Question 19

What is the operating income for 2018?

Accepted Answer

$456,000 - $306,000 - $101,000 = $49,000

Question 20

Which of the following statements is true?

Accepted Answer

The answer of Which of the following statements is true?
...

Quiz 2: An Introduction to Cost Terms and Purposes