ACCT 202 Principles of Managerial Accounting
Practice Exam - Chapter 2
Cost Terms, Concepts, and Classifications
Dr. Fred Barbee

Part I: Multiple-Choice Questions
Select your answer by clicking on the button next to the appropriate alternative. You will receive immediate feedback.
1. Product costs are expensed when the product is
a.  Purchased
b.  Manufactured
c.  Inventoried
d.  Sold
2. Which of the following would most likely not be included as manufacturing overhead in a furniture factory?
a.  Glue in a chair.
b.  The amount paid to the individual who stains a chair.
c.  The workman's compensation insurance of the supervisor who oversees production.
d.  The factory utilities of the department in which production takes place.
3. Conversion costs consist of
a.  Direct Materials and Direct Labor
b.  Direct Labor and Manufacturing overhead
c.  Direct Materials and Manufacturing Overhead
d.  Fixed and Variable Costs
4. Direct materials cost is a:
a.  Period cost but not a product cost.
b.  Is neither a period cost nor a product cost.
c.  Is not a period cost but is a product cost.
d.  Is both a period cost and a product cost.
5. The salaries of the production supervisors would be an example of
a.  Direct Materials
b.  Indirect Materials
c.  Direct Labor
d.  Indirect Labor
6. Which of the following statements is correct in describing manufacturing overhead costs?
a.  Manufacturing overhead when combined with direct material cost forms conversion cost.
b.  Manufacturing overhead consists of all manufacturing cost except for prime cost.
c.  Manufacturing overhead is a period cost.
d.  Manufacturing overhead when combined with direct labor cost forms prime cost.
7. Goods that are ready for sale are classified as
a.  Raw Materials Inventory
b.  Work in Process
c.  Finished Goods Inventory
d.  Cost of Goods Sold
8. Prime costs consist of
a.  Direct Materials and Direct Labor
b.  Direct Labor and Manufacturing Overhead
c.  Direct Materials and Manufacturing Overhead
d.  Fixed and Variable Costs
9. The following information is provided for the Drew Company

Direct materials $55,000
Direct labor 115,000
Manufacturing overhead 210,000
Beginning work in process 70,000
Ending work in process 30,000

       Cost of Goods Manufactured would be:

a.  $340,000
b.  $380,000
c.  $420,000
d.  $480,000
1/. Within the relevant range:
a.  Variable cost per unit decreases as production decreases.
b.  Fixed cost per unit increases as production decreases.
c.  Fixed cost per unit decreases as production decreases.
d.  Variable cost per unit increases as production decreases.


Part II: Problems   (To see the answer, click on the solution button.)


Problem #1

Sandra Freestone has developed a new product that she has decided to produce and market. To proceed with this project, Sandra will quit her present job, which pays $3,000 a month. Sandra has found a small building to rent for $500 a month that will house the production facilities. One major piece of equipment that will be used to manufacture the product will be rented for $100 a month. Sandra purchased all of the other needed tools five years ago for $1,500. Material costs tomake the product are estimated at $3 per unit. Monthly advertising costs for the product are estimated at $600.

Required: Complete the chart below by placing an "X" under each heading that helps to identify the cost involved. There can be "X"s placed under more than one heading for a single cost; e.g., a cost might be a sunk cost, an overhead cost, and a product cost. There would be an "X" placed under each of these headings opposite the cost.

  Opportunity Cost Sunk Cost Variable Cost Fixed Cost Prime Cost Conversion Cost Mfg. OH Period Cost Differential Cost
Building Rent                  
Original cost of tools                  
Equipment Rented                  
Material Cost                  
Present Salary                  
Advertising                  


Problem 2: Statement of Cost of Goods Manufactured

Calvin and Company had the following beginning and ending inventories for the year 2000:

 
Beginning
Ending
Raw Materials
$48,000
$70,000
Work in Process
176,000
150,000
Finished Goods
128,000
104,000

During 2000, the following costs were incurred.
Purchase of Raw Materials
$240,000
Direct Labor Cost
360,000
Manufacturing Overhead
640,000

Required:

Prepare a Statement of Cost of Goods Manufactured.



Last Modified September 28, 2004