Question 1

You are thinking about taking a trip to Asia. The cost of the airplane ticket you have yet to purchase is a(n):

Accepted Answer

The cost of the airplane ticket is a differential cost because it represents a future cost that will change depending on the decision to take the trip.

Question 2

Costs that are directly traceable to a unit of business or segment being analyzed are called:

Accepted Answer

Direct costs are costs that can be directly attributed to a specific unit of business or segment being analyzed. Examples include labor costs directly associated with producing a specific product or materials used for a specific project.

Question 3

Cherry Company manufactures electronic yard tools. Costs for May were direct labor, $84,000; indirect labor, $51,000; direct materials, $69,000; indirect materials, $9,000; factory utilities, $6,900; and insurance on manufacturing equipment, $2,100. Cherry Company's total manufacturing costs for May are:

Accepted Answer

Total manufacturing costs include direct labor, direct materials, and manufacturing overhead (indirect labor, indirect materials, factory utilities, and insurance on manufacturing equipment). Adding these costs: $84,000 (direct labor) + $69,000 (direct materials) + $51,000 (indirect labor) + $9,000 (indirect materials) + $6,900 (factory utilities) + $2,100 (insurance) = $222,000.

Question 4

The cost of milk for an ice cream manufacturer would be considered all of the following EXCEPT:

Accepted Answer

The cost of milk for an ice cream manufacturer would not be considered an indirect cost because it is directly related to the production of the ice cream and can be traced back to the product. It would be considered a product cost, manufacturing cost, and variable cost because it is used in the production process and varies based on the amount of ice cream produced.

Question 5

The most important costs to consider when making a decision involving future action are:

Accepted Answer

The answer of The most important costs to consider when...

Question 6

Mackie Co. manufactures hunting clothing. The standard variable costs to produce one batch of the Big Mac vests are as follows: direct material average cost is $6 per yard; average yards per batch is 20; direct labor average rate per hour is $12; average hours per batch is 4; variable overhead average rate per hour is $8; average hours per batch is 4. The standard monthly fixed costs are as follows: manufacturing overhead is $3,200; selling and administrative costs are $1,900. Mackie Co. produces 100 batches per month. (Ten vests are produced in each batch.) What is the manufacturing cost per vest?

Accepted Answer

The answer of Mackie Co. manufactures hunting clothing. The standard...

Question 7

Costs incurred for the benefit of more than one segment of the business are called:

Accepted Answer

Common costs are incurred for the benefit of more than one segment of the business. These costs cannot be easily allocated to one particular segment and are shared by different segments. Examples of common costs include rent, utilities, and insurance.

Question 8

The only kind of costs that do NOT involve any outlay of cash are:

Accepted Answer

Opportunity costs refer to the value of the best alternative forgone when choosing one option over another. These costs do not involve any outlay of cash, but rather represent the benefits that could have been gained from choosing an alternative option. For example, the opportunity cost of attending college may be the potential earnings from a full-time job during that same period.

Question 9

Another name for joint costs is:

Accepted Answer

Joint costs are costs that are incurred in producing multiple products or services. These costs cannot be attributed to a specific product or service and are therefore considered indirect costs. Indirect costs are often also referred to as overhead costs or joint costs. Direct costs, variable costs, and fixed costs are all different types of costs that do not fall under the definition of joint costs.

Question 10

Cherry Company manufactures electronic yard tools. Costs for May were direct labor, $84,000; indirect labor, $51,000; direct materials, $69,000; indirect materials, $9,000; factory utilities, $6,900; and insurance on manufacturing equipment, $2,100. Cherry Company's manufacturing overhead for May is:

Accepted Answer

The answer of Cherry Company manufactures electronic yard tools. Costs...

Question 11

The Zig-Zag Company manufactures zippers for many clothing manufacturers. Costs for the year were direct materials, $5,000; indirect materials, $1,600; direct labor, $12,000; and indirect labor, $4,000. Additional expenses for the year were factory utilities $3,500; depreciation of factory equipment, $1,300; advertising expense, $900; delivery expense on sales to customers, $1,700; and property taxes on factory buildings, $5,200. Which amount is total manufacturing costs for the year?

Accepted Answer

Total manufacturing costs include all direct and indirect costs related to producing the zippers. This includes direct materials, direct labor, indirect materials, and indirect labor, for a total of $23,600 (($5,000 + $1,600) + ($12,000 + $4,000)). In addition, factory utilities, depreciation of factory equipment, and property taxes on factory buildings are considered manufacturing overhead costs, which add up to $10,000 ($3,500 + $1,300 + $5,200). Therefore, the total manufacturing costs for the year are $33,600 ($23,600 + $10,000). The closest answer choice is D, which is the correct answer.

Question 12

You want to go skiing for the day. The cost of the lift ticket would be considered a(n):

Accepted Answer

The cost of the lift ticket is an out-of-pocket cost, which is a direct expense that is paid for in exchange for a good or service. Sunk costs are costs that have already been incurred and cannot be recovered, opportunity costs are the value of the next best alternative foregone, and indirect costs are expenses that are indirectly related to the production of a good or service.

Question 13

You want to go skiing for the day. However, you realize you are scheduled to work. If you call in sick and do not go to work, the wages you will not earn (assuming you are an hourly employee) are considered a(n):

Accepted Answer

The wages you will not earn due to skipping work to go skiing represent an opportunity cost. This is because you are sacrificing the opportunity to earn those wages by choosing to go skiing instead of working. It is not a sunk cost (already incurred and irreversible), an out-of-pocket cost (you are not actually spending any money), or a differential cost (not related to any specific decision or comparison).

Question 14

The Zig-Zag Company manufactures zippers for many clothing manufacturers. Costs for the year were direct materials, $5,000; indirect materials, $1,600; direct labor, $12,000; and indirect labor, $4,000. Additional expenses for the year were factory utilities $3,500; depreciation of factory equipment, $1,300; advertising expense, $900; delivery expense on sales to customers, $1,700; and property taxes on factory buildings, $5,200. Which amount is the company's manufacturing overhead for the year?

Accepted Answer

Manufacturing overhead includes all indirect costs incurred in the manufacturing process, such as indirect materials, indirect labor, factory utilities, depreciation of factory equipment, and property taxes on factory buildings. The total of these expenses is $15,600.

Question 15

Costs that are NOT classified as direct materials or direct labor but are essential to the production of goods and services are:

Accepted Answer

Manufacturing overhead costs are indirect costs that cannot be traced to specific products or services but are necessary for the overall production process. Examples include rent, utilities, and depreciation of factory equipment.

Question 16

In constructing a custom cabinet, an indirect material would be:

Accepted Answer

Screws are an indirect material because they are not a major component of the cabinet and are used in small quantities.

Question 17

Which of the following types of costs would be allocated among segments rather than directly attributable to a segment?

Accepted Answer

Indirect costs are costs that cannot be directly traced to a specific segment or product. These costs are typically allocated based on some allocation method, such as activity-based costing or a predetermined percentage, among the different segments or products. Variable costs, fixed costs, and sunk costs can typically be directly attributed to a specific segment or product.

Question 18

Future costs that change as a result of a decision are:

Accepted Answer

Differential costs are future costs that change as a result of a decision. These costs are the difference between the costs of two alternative options. The other options listed are different types of costs, but do not necessarily reflect costs that would change as a result of a decision.

Question 19

Rhododendron Company offers yard maintenance services for residential clients. Costs for the year were direct labor, $80,000 and indirect labor, $5,000. Additional expenses for the year were supplies $6,000; depreciation of lawn maintenance equipment, $1,000; advertising expense, $500; receptionist payroll, $13,000 and fuel, $2,500. Which amount is Rhododendron's total service costs?

Accepted Answer

Total service costs include all direct and indirect costs related to providing the yard maintenance services. Therefore, the total service costs for Rhododendron Company would be calculated as follows:

Direct labor: $80,000
Indirect labor: $5,000
Supplies: $6,000
Depreciation: $1,000
Advertising: $500
Receptionist payroll: $13,000
Fuel: $2,500
Total Service Costs: $107,000

Therefore, the best choice is C - $94,500.

Question 20

Janet's Jewelry makes sterling silver jewelry. One of the most popular rings, the Love Knot, is produced in batches of 10. The standard variable costs to produce one batch are as follows: direct material average cost is $13 per ounce; average ounces per batch is 20; direct labor average rate per hour is $22; average hours per batch is 10; variable overhead average rate per hour is $10; average hours per batch is 10. The standard monthly fixed costs are as follows: fixed manufacturing overhead is $1,400; selling and administrative costs are $1,500. Janet's Jewelry produces 10 batches per month. What is the manufacturing cost per batch?

Accepted Answer

The answer of Janet's Jewelry makes sterling silver jewelry. One...

Quiz 15: Management Accounting and Cost Concepts

You are thinking about taking a trip to Asia. The cost of the airplane ticket you have yet to purchase is a(n) :