Chapter 2 True or False Multiple Choice Questions PDF

Chapter 2: True or False 1- The cost of fire insurance for a manufacturing plant is generally considered to be product costs. a) TRUE b) FALSE 2- In a manufacturing firm, depreciation is always considered a product cost for external financial reporting purposes....

Chapter 2: True or False 1- The cost of fire insurance for a manufacturing plant is generally considered to be product costs. a) TRUE b) FALSE 2- In a manufacturing firm, depreciation is always considered a product cost for external financial reporting purposes. a) TRUE b) FALSE 3- In external financial reports, factory utilities costs may be included in an asset account on the balance sheet at the end period. a) TRUE b) FALSE 4- Advertising costs are considered product costs for external financial reports since they are incurred in order to promote specific products. a) TRUE b) FALSE 5- Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead. a) TRUE b) FALSE 6- Manufacturing overhead combined with direct materials in known as conversion cost. a) TRUE b) FALSE 7- If the ending inventory of finished goods is understated, net income will be overstated. a) TRUE b) FALSE 8- In a manufacturing company, goods available for sale equals the sum of the cost of goods manufactured and the beginning finished goods inventory. a) TRUE b) FALSE 9- Variable costs are costs whose per unit costs vary as the activity level rises and falls. a) TRUE b) FALSE 10- On a per unit basis, a fixed cost varies inversely with the level of activity. a) TRUE b) FALSE 11- How would the cost of rent for a manufacturing plant generally be classified? Prime Cost Product Cost a) No Yes b) No No c) Yes No d) Yes Yes 12- Which of the following would NOT be considered a period cost? a) The salary of the company president’s secretary b) The cost of a general accounting office. c) Depreciation of a machine used in manufacturing d) Sales Commissions. 13- Which of the following would be considered a product cost for external financial reporting purposes? a) Cost of a warehouse used to store finished goods. b) Cost of guided public tours through the company’s facilities. c) Cost of travel necessary to sell the manufactured product. d) Cost of sand spread on the factory floor to absorb oil from manufacturing machines. 14- Transportation costs incurred by a manufacturing company to ship its product to its customers would be classified as which of the following? a) Product Cost. b) Manufacturing Costs. c) Period Costs. d) Administrative Costs. 15- How would the wages of factory maintenance personnel usually be classified? Indirect Labor Manufacturing overhead a) No Yes b) yes No c) Yes Yes d) No No 16- Manufacturing overhead consists of which of the following? a) All manufacturing costs. b) All manufacturing costs, EXCEPT direct materials and direct labour. c) Indirect materials but NOT indirect labour. d) Indirect labour but NOT indirect materials. 17- Which of the following should NOT be included as part of manufacturing overhead at a company that makes office furniture? a) Sheet steel in a file cabinet made by the company.. b) Manufacturing equipment depreciation c) Idle time for direct labour. d) Taxes on a factory building. 18- What is the outcome if the cost of goods sold is greater than the cost of goods manufactured? a) Work-in-process inventory has decreased during the period. b) Finished goods inventory has increased during the period. c) Total manufacturing costs must be greater than cost of goods manufactured. d) Finished goods inventory has decreased during the period. 19- Last month, when 10,000 units of a product were manufactured, the cost per unit was $60. At this level of activity, variable costs are 50% of total unit costs. If 10,500 units are manufactured next month and cost behavior patterns remain unchanged, how will costs be affected? a) Total variable costs will remain unchanged.. b) Fixed costs will increase in total.. c) Variable cost per unit will increase. d) Total cost per unit will decrease. 20- Which of the following statements regarding variable cost is true? a) Variable cost increases on a per unit basis as the number of units produced increases. b) Variable cost remains constant on a per unit basis as the number of units produced increases. c) Variable cost remains the same in total as production increases. d) Variable cost decreases on a per unit basis as the number of units produced increases. 21- If the cost of goods manufactured is greater than the cost of goods sold, then: a) Work in process inventory has decreased during the period. b) Finished goods inventory has increased during the period. c) Total manufacturing costs must be greater than cost of goods manufactured. d) Finished goods inventory has decreased during the period. 22- Which of the following statements regarding fixed costs in INCORRECT? a) Expressing fixed costs on a per unit basis usually is the best approach for decision making. b) Fixed costs expressed on a per unit basis will change inversely with changes in activity. c) Assumptions by accountants regarding the behavior of fixed costs rest heavily on the concept of the relevant range. d) Fixed costs frequently represent long-term investments in property, plant, and equipment. 23- Which of the following best defines an opportunity cost? a) The difference in total costs that result from selecting one alternative instead of another. b) The benefit forgone by selecting one alternative instead of another. c) A cost that may be saved by not adopting an alternative. d) A cost that may be shifted to the future with little or no effect no current operations. 24- Which of the following costs is often important in decision making, but is omitted from conventional accounting records? a) Fixed cost b) Sunk cost. c) Opportunity cost. d) Indirect cost. 25- Green Company's costs for the month of August are as follows: Direct materials $27,000 Direct labour $34,000 Sales salaries $14,000 Indirect labour $10,000 Indirect materials $15,000 General corporate administrative cost $12,000 Taxes on manufacturing facility $ 2,000 Rent Factory $17,000 The beginning work-in-process inventory is $16,000 and the ending work in process inventory is $9,000. What is the cost of goods manufactured for the month? A) $105,000. B) $132,000 C) $138,000. D)$112,000 26- A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,700 and is paid at the beginning of the first year. Eighty percent of the premium applies to manufacturing operations and 20% applies to selling and administrative activities. What amounts should be considered product cost and period cost respectively for the first year of coverage? Product cost Period Cost a) $ 2,700 $0 b) $ 6,160 $ 540 c) $ 1,440 $ 360 d) $ 720 $ 180 27- You have the following data: Cost of goods sold $70 Direct labour $20 Direct material $15 Cost of goods manufactured $80 Work in process ending $10 Finished goods ending $15 Manufacturing overhead $30 Which of the following represents the beginning work in process inventory? A) $20. B) $15 C) $55. D)$25 28- During the month of May, Bennett Manufacturing Company $43,000 of raw materials. The manufacturing overhead totals $27,000 and the total manufacturing costs-are $106,000 assuming a beginning inventory of raw materials of $8;000 and an ending inventory of raw materials of $6,000, what must the total be for direct labour? A) $34,000. B) $38,000 C) $36,000. D)$45,000 29- You have the following data: Direct materials $38,000 Direct labour $24,000 Manufacturing overhead $17,000 Beginning Work in process inventory $10,000 Ending Work in process inventory $11,000 Which of the following represents the beginning work in process inventory? A) $89,000. B) $78,000 C) $79,000. D)$80,000 30- During the month of June, Reardon Company incurs $17,000 of direct labour and $8,500 of manufacturing overhead. and purchases $15,000 of raw materials. Between the beginning and the end of the month, the raw- materials inventor increase by $2,000, the finished goods inventory increases by $.1,500, and the work-in-process inventory decreases by $3,000. What is the cost of goods manufactured? A) $38,500. B) $40,500 C) $41,500. D)$43,500