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2-1 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Chapter 02 Basic Cost Management Concepts
True / False Questions
- Inventoriable costs are expensed when incurred.
True False
- Finished goods inventory is ordinarily held for sale by a manufacturing company.
True False
- Indirect labor is not a component of manufacturing overhead.
True False
- The following equation—Beginning finished goods + cost of goods manufactured - ending finished
goods—is used to calculate cost of goods sold during the period.
True False
- A suitable cost driver for the amount of direct materials used is the number of direct labor hours
worked.
True False
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2-2 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Multiple Choice Questions
- Which of the following statements is true?
- The word "cost" has the same meaning in all situations in which it is used.
- Cost data, once classified and recorded for a specific application, are appropriate for use in any
application.
- Different cost concepts and classifications are used for different purposes.
- All organizations incur the same types of costs.
- Costs incurred in one year are always meaningful in the following year.
7. Product costs are:
- expensed when incurred.
- inventoried.
- treated in the same manner as period costs.
- treated in the same manner as advertising costs.
- subtracted from cost of goods sold.
- Which of the following is a product cost?
- Glass in an automobile.
- Advertising.
- The salary of the vice president-finance.
- Rent on a factory.
- Advertising and rent on a factory.
2-3 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
- Which of the following would not be classified as a product cost?
- Direct materials.
- Direct labor.
- Indirect materials.
- Insurance on a manufacturing plant.
- Sales commissions.
- The accounting records of Georgia Company revealed the following costs: direct materials used,
$250,000; direct labor, $425,000; manufacturing overhead, $375,000; and selling and administrative
expenses, $220,000. Georgia's product costs total:
A. $1,050,000.
B. $830,000.
C. $895,000.
D. $1,270,000.
- None of the other answers are correct.
11. Costs that are expensed when incurred are called:
- product costs.
- direct costs.
- inventoriable costs.
- period costs.
- indirect costs.
2-4 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
- Which of the following is a period cost?
- Direct material.
- Advertising expense.
- Indirect labor.
- Miscellaneous supplies used in production activities.
- Advertising expense and indirect labor.
- Which of the following is not a period cost?
- Legal costs.
- Public relations costs.
- Sales commissions.
- Wages of assembly-line workers.
- The salary of a company's chief financial officer (CFO).
- The accounting records of Reynolds Corporation revealed the following selected costs: Sales
commissions, $65,000; plant supervision, $190,000; and administrative expenses, $185,000.
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