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Exam 2: An Introduction to Cost Terms and Purposes

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Question 101

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Which of the following companies is part of the merchandising sector of our economy?

A) Jaguar
B) Hewlett Packard
C) Whole Foods Market
D) KPMG

E) A) and B)
F) A) and C)

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Question 102

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At a plant where a union agreement sets annual salaries and conditions,annual labor costs usually ________.

A) are considered a variable cost
B) are considered a fixed cost
C) depend on the scheduling of floor workers
D) depend on the scheduling of production runs

E) B) and D)
F) A) and D)

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Question 103

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A lease for a store calls for a base monthly rent of $1,500 up to $10,000 of sales with a possible additional monthly cost of 2% of sales over $10,000.The rent is a fixed cost for the month for a relevant range of zero to $10,000 sales.

Overtime premium is normally considered as a component of direct labor.

Cost tracing is ________.

The income statement of a service-sector firm reports ________.

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 ________.

Cost accounting and cost management include calculating various costs,obtaining financial and nonfinancial information,and analyzing relevant information for decision making.

For external reporting purposes,indirect manufacturing costs must be allocated to individual units.

Which of the following is an inventoriable cost?

Within the relevant range,if there is a change in the level of the cost driver,then ________.

________ are all manufacturing costs that are related to the cost object but cannot be traced to that cost object in an economically feasible way.

Which one of the following is a variable cost for an insurance company?

Worcester Manufacturing produces electronic storage devices,and uses the following three-part classification for its manufacturing costs: direct materials,direct manufacturing labor,and indirect manufacturing costs.Total indirect manufacturing costs for January were $300 million,and were allocated to each product on the basis of direct manufacturing labor costs of each line.Summary data (in millions)for January for the most popular electronic storage device,the Big Brain,was: Required: a.Compute the manufacturing cost per unit for each product produced in January. b.Suppose production will be reduced to 30,000 units in February.Speculate as to whether the unit costs in February will most likely be higher or lower than unit costs in January;it is not necessary to calculate the exact February unit cost.Briefly explain your reasoning.

Accountants define a cost as the amount of money spent on a resource.

Service-sector companies ________.

Which of the following is a period cost?

Wonderful Products Manufacturing Corp.provided the following information for last month: If sales reduce to half of the amount in the next month,what is the projected operating income?

Cost of goods sold refers to the products brought to completion,whether they were started before or during the current accounting period.

Although unit costs are regularly used in financial reports and for making product mix and pricing decisions,managers should think in terms of total costs rather than unit costs for making decisions.