Managerial Accounting 12Th Edition By Garrison -Test Bank

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Managerial Accounting 12Th Edition By Garrison -Test Bank

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COMPLETE TEST BANK WITH ANSWERS

 

Managerial Accounting 12Th Edition By Garrison Test Bank

 

Chapter 2 Cost Terms, Concepts, and Classifications

 

 

True/False Questions

 

  1. Manufacturing overhead is an indirect cost with respect to units of product. Answer: True Level: Medium LO: 1

 

  1. Depreciation on office equipment would not be included in the cost of goods manufactured.

 

Answer: True  Level: Easy  LO: 2,4

 

  1. Rent on a factory building used in the production process would be classified as a period cost and as a fixed cost.

 

Answer: False  Level: Medium  LO: 2,5

 

  1. Period costs are found only in manufacturing companies, not in merchandising companies.

 

Answer: False  Level: Medium  LO: 2

 

  1. Depreciation on equipment a company uses in its selling and administrative activities would be classified as a product cost.

 

Answer: False  Level: Medium  LO: 2

 

  1. If the finished goods inventory increases between the beginning and the end of a period, then the cost of goods manufactured is smaller than the cost of goods sold.

 

Answer: False  Level: Hard  LO: 3,4

 

  1. The cost of goods manufactured is calculated by adding the amount of work in process at the end of the year to the cost of raw materials used, direct labor worked, and manufacturing overhead incurred for the year and then subtracting work in process at the beginning of the year.

 

Answer: False  Level: Medium  LO: 4

 

  1. A publisher that sells its books through agents who are paid a constant percentage commission on each book sold would classify the commissions as a fixed cost.

 

Answer: False  Level: Medium  LO: 5

 

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              15


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Variable costs per unit are affected by changes in activity. Answer: False Level: Easy LO: 5
  2. A cost is either direct or indirect. The classification will not change if the cost object changes.

 

Answer: False  Level: Medium  LO: 6

 

  1. The amount that a manufacturing company could earn by renting unused portions of its warehouse is an example of an opportunity cost.

 

Answer: True  Level: Easy  LO: 7

 

  1. Labor fringe benefits may be charged to direct labor or manufacturing overhead while overtime premiums paid usually are considered a part of manufacturing overhead.

 

Answer: True  Level: Easy  LO: 8  Appendix: 2A

 

  1. The cost of idle time should be charged as direct labor of the job that is in process when the breakdown occurs.

 

Answer: False  Level: Medium  LO: 8  Appendix: 2A

 

  1. Internal failure costs result from identification of defects during the appraisal process. Such costs may include scrap, rejected products, rework, and downtime.

 

Answer: True  Level: Easy  LO: 9  Appendix: 2B

 

  1. ISO 9000 certification is relatively easy to achieve because little documentation on quality control procedures is needed.

 

Answer: False  Level: Easy  LO: 11  Appendix: 2B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

Multiple Choice Questions

 

  1. Indirect labor is a part of:

 

  1. Prime cost.
  2. Conversion cost.
  3. Period cost.

 

  1. Nonmanufacturing cost.

 

Answer: B  Level: Medium  LO: 1,2  Source: CPA, adapted

 

  1. The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n):
    1. period cost.
    2. direct material cost.
    3. indirect material cost.
    4. none of the above.

 

Answer: C  Level: Easy  LO: 1,2

 

  1. The salary paid to the president of King Company would be classified on the income statement as a(n):
    1. administrative expense.
    2. direct labor cost.
    3. manufacturing overhead cost.
    4. selling expense.

 

Answer: A  Level: Easy  LO: 1

 

  1. Direct labor cost is a part of:

 

  Conversion cost Prime cost
A) No No
B) No Yes
C) Yes Yes
D) Yes No

 

Answer: C  Level: Easy  LO: 1  Source: CPA, adapted

 

 

 

 

 

 

 

 

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              17


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Direct material cost is a:

 

  Conversion cost Prime cost
A) No No
B) No Yes
C) Yes Yes
D) Yes No

 

Answer: B  Level: Medium  LO: 1  Source: CPA, adapted

 

  1. Prime cost and conversion cost share what common element of total cost?

 

  1. Direct materials.
  2. Direct labor.
  3. Variable overhead.
  4. Fixed overhead.

 

Answer: B  Level: Easy  LO: 1  Source: CPA, adapted

 

  1. Prime cost consists of:

 

  1. direct labor and manufacturing overhead.
  2. direct materials and manufacturing overhead.
  3. direct materials and direct labor.
  4. direct materials, direct labor and manufacturing overhead.

 

Answer: C  Level: Easy  LO: 1

 

  1. Wages paid to a timekeeper in a factory are a:

 

  Prime cost Conversion cost
A) Yes No
B) Yes Yes
C) No No
D) No Yes

 

Answer: D  Level: Medium  LO: 1  Source: CPA, adapted

 

  1. Property taxes on a companys factory building would be classified as a(n):

 

  1. product cost.
  2. opportunity cost.
  3. period cost.
  4. variable cost.

 

Answer: A  Level: Easy  LO: 2,5,7

 

 

 

 

18                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Depreciation on a personal computer used in the marketing department of a manufacturing firm would be classified as:
    1. a product cost that is fixed with respect to the companys output.
    2. a period cost that is fixed with respect to the companys output.
    3. a product cost that is variable with respect to the companys output.
    4. a period cost that is fixed with respect to the companys output.

 

Answer: B  Level: Medium  LO: 2,5

 

  1. The nursing station on the fourth floor of Central Hospital is responsible for the care of patients who have undergone orthopedic surgery. The costs of drugs administered by the nursing station to patients would be classified as:

 

  1. direct costs of the patients.
  2. indirect costs of the patients.
  3. overhead costs of the nursing station.
  4. period costs of the hospital.

 

Answer: A  Level: Hard  LO: 2,6

 

  1. All of the following would be classified as product costs except:

 

  1. property taxes on production equipment.
  2. insurance on factory machinery.
  3. salaries of the advertising staff.
  4. wages of machine operators.

 

Answer: C  Level: Easy  LO: 2

 

  1. Product costs appear on the balance sheet:

 

  1. only if goods are partially completed at the end of the period.
  2. only if goods are unsold at the end of a period.
  3. only if goods are partially completed or are unsold at the end of a period.
  4. only in merchandising firms.

 

Answer: C  Level: Medium  LO: 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              19


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Ross Corporation shipped finished goods to a customer on credit, but the sale was not recorded and the costs of the finished goods were incorrectly included on the periods balance sheet as part of the finished goods inventory. Which one of the following statements is correct concerning the effects of this error?

 

  1. Accounts receivable was not affected, inventory was overstated, sales were understated, and cost of goods sold was understated.

 

  1. Accounts receivable was understated, inventory was not affected, sales were understated, and cost of goods sold was understated.
  2. Accounts receivable was understated, inventory was overstated, sales were understated, and cost of goods sold was overstated.
  3. Accounts receivable was understated, inventory was overstated, sales were understated, and cost of goods sold was understated.

 

Answer: D  Level: Easy  LO: 3  Source: CMA, adapted

 

  1. Data for Cost A and Cost B are as follows:

 

Number of    
Units    
Produced Unit Cost Total Cost
Cost A    
1 ? $10
10 ? $100
100 ? $1,000
1,000 ? $10,000
Cost B    
1 $5,000 ?
10 $500 ?
100 $50 ?
1,000 $5 ?

 

Which of the above best describes the behavior of Costs A and B?

 

  1. Cost A is fixed, Cost B is variable.
  2. Cost A is variable, Cost B is fixed.
  3. Both Cost A and Cost B are variable.
  4. Both Cost A and Cost B are fixed.

 

Answer: B  Level: Medium  LO: 5

 

 

 

 

 

 

 

 

20                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Fixed costs expressed on a per unit basis:

 

  1. will increase with increases in activity.
  2. will decrease with increases in activity.
  3. are not affected by activity.
  4. should be ignored in making decisions since they cannot change.

 

Answer: B  Level: Medium  LO: 5

 

  1. The costs of staffing and operating the accounting department at Central Hospital would be considered by the Department of Surgery to be:
    1. direct costs.
    2. indirect costs.
    3. incremental costs.
    4. opportunity costs.

 

Answer: B  Level: Hard  LO: 6,7

 

  1. A cost incurred in the past that is not relevant to any current decision is classified as a(n):
    1. period cost.
    2. opportunity cost.
    3. sunk cost.
    4. differential cost.

 

Answer: C  Level: Easy  LO: 7

 

  1. Differential costs can:

 

  1. only be fixed costs.
  2. only be variable costs.
  3. be either fixed or variable.
  4. be incremental but not decremental.

 

Answer: C  Level: Easy  LO: 7

 

  1. John Johnson decided to leave his former job where he earned $12 per hour to go to a new job where he will earn $13 per hour. In the decision process, the former wage of $12 per hour would be classified as a(n):

 

  1. sunk cost.
  2. direct cost.
  3. fixed cost.
  4. opportunity cost.

 

Answer: D  Level: Easy  LO: 7

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              21


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. The term that refers to costs incurred in the past that are not relevant to a decision is:

 

  1. marginal cost.
  2. indirect cost.
  3. period cost.
  4. sunk cost.

 

Answer: D  Level: Easy  LO: 7

 

  1. Lathe operators at KF Manufacturing are hourly employees who are paid time and a half for hours worked in excess of 40 hours per week. Lester is a lathe operator who worked 45 hours during the current week and had no idle time. The correct accounting for the amounts paid to Lester would be:

 

  1. charge only the overtime premium earned to the overhead account.
  2. charge the hourly wage earned plus the overtime premium earned to the overhead account.
  3. charge only the overtime premium earned to the direct labor cost for the project Lester was working on when the overtime was incurred.
  4. charge the hourly wage earned plus the overtime premium earned to the direct labor cost for the project Lester was working on when the overtime was incurred.

 

Answer: A  Level: Medium  LO: 8  Appendix: 2A

 

  1. The controller of the recently organized Crandall Company is considering the two methods listed below for accounting for labor fringe benefits. Which of the two methods is considered acceptable?

 

Method A:     Treat all labor fringe benefits as indirect labor by adding them in total to manufacturing overhead.

 

Method B:     Treat labor fringe benefits that relate to direct labor as additional direct labor cost and fringe benefits relating to indirect labor as part of manufacturing overhead.

 

  1. Only Method A is acceptable.

 

  1. Only Method B is acceptable.
  2. Both Method A and Method B are acceptable.
  3. Neither Method A nor Method B is acceptable; labor fringe benefits should be treated as period expenses and should be charged off as incurred.

 

Answer: C  Level: Medium  LO: 8  Appendix: 2A

 

 

 

 

 

 

 

 

22                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Which of the following would be classified as a prevention cost on a quality cost report?
    1. Disposal of defective products.
    2. Net cost of spoilage.
    3. Depreciation of test equipment.
    4. Technical support provided to suppliers.

 

Answer: D  Level: Medium  LO: 9,10  Appendix: 2B

 

  1. Which of the following would be classified as a prevention cost on a quality cost report?
    1. Debugging software errors.
    2. Quality training.
    3. Test and inspection of incoming materials.
    4. Cost of field servicing and handling complaints.

 

Answer: B  Level: Medium  LO: 9,10  Appendix: 2B

 

  1. Which of the following would be classified as a prevention cost on a quality cost report?
    1. Supplies used in testing and inspection.
    2. Debugging software errors.
    3. Quality improvement projects.
    4. Lost sales arising from a reputation for poor quality.

 

Answer: C  Level: Medium  LO: 9,10  Appendix: 2B

 

  1. Which of the following would be classified as an appraisal cost on a quality cost report?
    1. Final product testing and inspection.
    2. Net cost of spoilage.
    3. Repairs and replacements beyond the warranty period.
    4. Rework labor and overhead.

 

Answer: A  Level: Medium  LO: 9,10  Appendix: 2B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              23


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Which of the following would be classified as an appraisal cost on a quality cost report?
    1. Quality improvement projects.
    2. Supplies used in testing and inspection.
    3. Audits of the effectiveness of the quality system.
    4. Quality data gathering, analysis, and reporting.

 

Answer: B  Level: Medium  LO: 9,10  Appendix: 2B

 

  1. Which of the following would be classified as an appraisal cost on a quality cost report?
    1. Maintenance of test equipment.
    2. Re-entering data because of keying errors.
    3. Debugging software errors.
    4. Warranty repairs and replacements.

 

Answer: A  Level: Medium  LO: 9,10  Appendix: 2B

 

  1. Which of the following would be classified as an internal failure cost on a quality cost report?
    1. Quality improvement projects.
    2. Supervision of testing and inspection activities.
    3. Debugging software errors.
    4. Warranty repairs and replacements.

 

Answer: C  Level: Medium  LO: 9,10  Appendix: 2B

 

  1. Which of the following would be classified as an internal failure cost on a quality cost report?
    1. Final product testing and inspection.
    2. Warranty repairs and replacements.
    3. Depreciation of test equipment.
    4. Debugging software errors.

 

Answer: D  Level: Medium  LO: 9,10  Appendix: 2B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Which of the following would be classified as an internal failure cost on a quality cost report?
    1. Rework labor and overhead.
    2. Cost of field servicing and handling complaints.
    3. Technical support provided to suppliers.
    4. Lost sales arising from a reputation for poor quality.

 

Answer: A  Level: Medium  LO: 9,10  Appendix: 2B

 

  1. Which of the following would be classified as an external failure cost on a quality cost report?
    1. Reentering data because of keying errors.
    2. Customer returns arising from quality problems.
    3. Test and inspection of in-process goods.
    4. Rework labor and overhead.

 

Answer: B  Level: Medium  LO: 9,10  Appendix: 2B

 

  1. Which of the following would be classified as an external failure cost on a quality cost report?
    1. Repairs and replacements beyond the warranty period.
    2. Technical support provided to suppliers.
    3. Quality improvement projects.
    4. Rework labor and overhead.

 

Answer: A  Level: Medium  LO: 9,10  Appendix: 2B

 

  1. Which of the following would be classified as an external failure cost on a quality cost report?
    1. Final product testing and inspection.
    2. Disposal of defective products.
    3. Supervision of testing and inspection activities.
    4. Cost of field servicing and handling complaints.

 

Answer: D  Level: Medium  LO: 9,10  Appendix: 2B

 

  1. Inspection of products would be classified as a(n):

 

  1. prevention cost.
  2. appraisal cost.
  3. internal failure cost.
  4. external failure cost.

 

Answer: B  Level: Medium  LO: 9  Appendix: 2B

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              25


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. The cost of warranty repairs would be classified as a(n):

 

  1. prevention cost.
  2. appraisal cost.
  3. internal failure cost.
  4. external failure cost.

 

Answer: D  Level: Easy  LO: 9  Appendix: 2B

 

  1. The cost of quality training would be classified as a(n):

 

  1. prevention cost.
  2. appraisal cost.
  3. internal failure cost.
  4. external failure cost.

 

Answer: A  Level: Easy  LO: 9  Appendix: 2B

 

  1. The cost of labor time required to rework defective units would be classified as a(n):

 

  1. prevention cost.
  2. appraisal cost.
  3. internal failure cost.
  4. external failure cost.

 

Answer: C  Level: Easy  LO: 9  Appendix: 2B

 

  1. Which of the following is (are) categorized as internal failure cost(s)?

 

  1. Rework.

 

  1. Responding to customer complaints.

III. Statistical quality control procedures.

 

  1. I only.

 

  1. II only.
  2. III only.
  3. I, II, and III.

 

Answer: A  Level: Medium  LO: 9  Source: CPA, adapted  Appendix: 2B

 

 

 

 

 

 

 

 

 

 

 

 

 

26                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Adolphson Corporation has provided the following summary of its quality cost report for the last two years:

 

Summary of Quality Cost Report

 

(in thousands)

 

  This Year Last Year % Change
Prevention costs .. $ 300   $ 200   +50
Appraisal costs       315       210   +50
Internal failure costs .       114       190   -40
External failure costs       621       1,200   -48
.Totalqualitycosts $ 1,350     $ 1,800   -25
                     

 

On the basis of this report, which one of the following statements is most likely correct?

 

  1. An increase in prevention and appraisal costs resulted in fewer defects, and therefore, resulted in a decrease in internal and external failure costs.
  2. A decrease in internal and external failure costs resulted in less need for prevention and appraisal costs.
  3. Quality costs such as scrap and rework decreased by 48%.
  4. Quality costs such as returns and repairs under warranty decreased by 40%.

 

Answer: A  Level: Medium  LO: 10  Source: CMA, adapted  Appendix: 2B

 

  1. The following costs were incurred in January:

 

Direct materials .. $33,000
Direct labor $28,000
Manufacturing overhead . $69,000
Selling expenses . $16,000
Administrative expenses . $21,000

 

Conversion costs during the month totaled:

 

  1. $97,000
  2. $167,000
  3. $102,000
  4. $61,000

 

Answer: A  Level: Medium  LO: 1,2

 

 

 

 

 

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              27


Chapter 2 Cost Terms, Concepts, and Classifications


 

 

 

  1. The following costs were incurred in February:

 

 

Direct materials . $43,000
Direct labor . $16,000
Manufacturing overhead .. $37,000
Selling expenses $17,000
Administrative expenses .. $26,000

 

Conversion costs during the month totaled:

 

  1. $59,000
  2. $80,000
  3. $53,000
  4. $139,000

 

Answer: C  Level: Medium  LO: 1,2

 

  1. The following costs were incurred in March:

 

Direct materials .. $21,000
Direct labor $17,000
Manufacturing overhead . $67,000
Selling expenses . $16,000
Administrative expenses . $15,000

 

Conversion costs during the month totaled:

 

  1. $88,000
  2. $38,000
  3. $136,000
  4. $84,000

 

Answer: D  Level: Medium  LO: 1,2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications


 

 

 

  1. The following costs were incurred in January:

 

Direct materials .. $39,000
Direct labor $26,000
Manufacturing overhead . $21,000
Selling expenses . $14,000
Administrative expenses . $27,000

 

Prime costs during the month totaled:

 

  1. $86,000
  2. $65,000

 

  1. $47,000
  2. $127,000

 

Answer: B  Level: Medium  LO: 1,2

 

  1. The following costs were incurred in February:

 

Direct materials .. $39,000
Direct labor $18,000
Manufacturing overhead . $14,000
Selling expenses . $13,000
Administrative expenses . $29,000

 

Prime costs during the month totaled:

 

  1. $71,000
  2. $32,000
  3. $113,000
  4. $57,000

 

Answer: D  Level: Medium  LO: 1,2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              29


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. The following costs were incurred in March:

 

Direct materials .. $39,000
Direct labor $24,000
Manufacturing overhead . $14,000
Selling expenses . $11,000
Administrative expenses . $19,000

 

Prime costs during the month totaled:

 

  1. $63,000
  2. $107,000

 

  1. $38,000
  2. $77,000

 

Answer: A  Level: Medium  LO: 1,2

 

  1. Aable Companys manufacturing overhead is 20% of its total conversion costs. If direct labor is $45,000 and if direct materials are $53,000, the manufacturing overhead is:

 

  1. $11,250
  2. $13,250
  3. $180,000
  4. $24,500

 

Answer: A  Level: Hard  LO: 1

 

  1. Abair Companys manufacturing overhead is 20% of its total conversion costs. If direct labor is $38,000 and if direct materials are $35,000, the manufacturing overhead is:

 

  1. $18,250
  2. $9,500
  3. $8,750
  4. $152,000

 

Answer: B  Level: Hard  LO: 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Abbey Companys manufacturing overhead is 60% of its total conversion costs. If direct labor is $35,000 and if direct materials are $55,000, the manufacturing overhead is:

 

  1. $135,000
  2. $23,333
  3. $82,500

 

  1. $52,500

 

Answer: D  Level: Hard  LO: 1

 

  1. During the month of January, direct labor cost totaled $17,000 and direct labor cost was 60% of prime cost. If total manufacturing costs during January were $82,000, the manufacturing overhead was:

 

  1. $11,333
  2. $53,667
  3. $28,333
  4. $65,000

 

Answer: B  Level: Hard  LO: 1

 

  1. During the month of February, direct labor cost totaled $13,000 and direct labor cost was 40% of prime cost. If total manufacturing costs during February were $80,000, the manufacturing overhead was:

 

  1. $32,500
  2. $19,500
  3. $67,000
  4. $47,500

 

Answer: D  Level: Hard  LO: 1

 

  1. During the month of March, direct labor cost totaled $17,000 and direct labor cost was 70% of prime cost. If total manufacturing costs during March were $88,000, the manufacturing overhead was:

 

  1. $24,286
  2. $71,000
  3. $63,714
  4. $7,286

 

Answer: C  Level: Hard  LO: 1

 

 

 

 

 

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              31


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Knowel Companys direct labor is 40 percent of its conversion cost. If the manufacturing overhead cost for the last period was $60,000 and the direct materials cost was $30,000, the direct labor cost was:

 

  1. $90,000
  2. $20,000
  3. $60,000

 

  1. $40,000

 

Answer: D  Level: Hard  LO: 1

 

  1. In January direct labor was 40% percent of conversion cost. If the manufacturing overhead cost for the month was $78,000 and the direct materials cost was $22,000, the direct labor cost was:

 

  1. $14,667
  2. $52,000
  3. $33,000
  4. $117,000

 

Answer: B  Level: Hard  LO: 1

 

  1. In February direct labor was 60% percent of conversion cost. If the manufacturing overhead cost for the month was $78,000 and the direct materials cost was $22,000, the direct labor cost was:

 

  1. $52,000
  2. $14,667
  3. $117,000
  4. $33,000

 

Answer: C  Level: Hard  LO: 1

 

  1. In March direct labor was 60% percent of conversion cost. If the manufacturing overhead cost for the month was $38,000 and the direct materials cost was $32,000, the direct labor cost was:

 

  1. $21,333
  2. $48,000
  3. $25,333
  4. $57,000

 

Answer: D  Level: Hard  LO: 1

 

 

 

 

 

 

 

 

 

32                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Crossland Companys direct labor cost is 30% of its conversion cost. If the manufacturing overhead cost for the last period was $49,000 and the direct materials cost was $20,000, the direct labor cost was:

 

  1. $ 6,000
  2. $14,700
  3. $21,000

 

  1. $34,000

 

Answer: C  Level: Hard  LO: 1

 

  1. CF Company manufactures wooden rocking chairs. CF identified the following three material costs in its production process for July: $100,000 for springs for the rocking mechanism; two springs at a cost of $10 each are used in each chair; $1,700 for glue used as needed from one gallon containers; and $500 for stain used to touch up spots on the chairs. The total cost that should have been assigned to indirect material for July was:

 

  1. $102,200
  2. $500
  3. $2,200
  4. $1,700

 

Answer: C  Level: Medium  LO: 1

 

  1. Fab Co. manufactures textiles. Fabs manufacturing costs last year included the following salaries and wages:

 

Loom operators .. $120,000
Factory foremen $45,000
Machinery repairmen . $30,000

 

What is the amount of direct labor included in this list?

 

  1. $195,000
  2. $165,000
  3. $150,000
  4. $120,000

 

Answer: D  Level: Medium  LO: 1  Source: CPA, adapted

 

 

 

 

 

 

 

 

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              33


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. A manufacturing company has provided the following cost data for a recent period:

 

Direct materials .. $8,000
Manufacturing overhead . $12,000
Direct labor $10,000
Increase in work-in-process .. $4,000

 

Prime cost for the period was:

 

  1. $18,000
  2. $26,000
  3. $30,000
  4. $34,000

 

Answer: A  Level: Medium  LO: 1  Source: CIMA, adapted

 

  1. A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $3,000 and is paid at the beginning of the first year. Three-fourths of the premium applies to factory operations and one-fourth applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage?

 

Product    Period

 

  1. A) $1,000 $0
  2. $250 $750
  3. $2,250 $750
  4. $750 $250

 

Answer: D  Level: Hard  LO: 2

 

  1. Last month a manufacturing company had the following operating results:

 

Beginning finished goods inventory . $72,000
Ending finished goods inventory $66,000
Sales .. $465,000
Gross margin $88,000

 

What was the cost of goods manufactured for the month?

 

  1. $371,000
  2. $459,000
  3. $383,000

 

  1. $377,000

 

Answer: A  Level: Hard  LO: 3,4

 

 

 

 

34                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. Last month a manufacturing company had the following operating results:

 

Beginning finished goods inventory $74,000
Ending finished goods inventory .. $50,000
Sales . $438,000
Gross margin $63,000

 

What was the cost of goods manufactured for the month?

 

  1. $375,000
  2. $414,000
  3. $399,000
  4. $351,000

 

Answer: D  Level: Hard  LO: 3,4

 

  1. Gabert Inc. is a merchandising company. Last month the companys merchandise purchases totaled $68,000. The companys beginning merchandise inventory was $17,000 and its ending merchandise inventory was $13,000. What was the companys cost of goods sold for the month?

 

  1. $72,000

 

  1. $68,000
  2. $98,000
  3. $64,000

 

Answer: A  Level: Easy  LO: 3

 

  1. Haag Inc. is a merchandising company. Last month the companys cost of goods sold was $86,000. The companys beginning merchandise inventory was $20,000 and its ending merchandise inventory was $21,000. What was the total amount of the companys merchandise purchases for the month?

 

  1. $86,000
  2. $127,000
  3. $87,000
  4. $85,000

 

Answer: C  Level: Medium  LO: 3

 

 

 

 

 

 

 

 

 

 

 

 

 

Garrison, Managerial Accounting, 12th Edition                                                                                                              35


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. During February, the cost of goods manufactured was $83,000. The beginning finished goods inventory was $14,000 and the ending finished goods inventory was $13,000. What was the cost of goods sold for the month?

 

  1. $83,000
  2. $110,000
  3. $82,000

 

  1. $84,000

 

Answer: D  Level: Easy  LO: 3

 

  1. During March, the cost of goods manufactured was $62,000. The beginning finished goods inventory was $11,000 and the ending finished goods inventory was $19,000. What was the cost of goods sold for the month?

 

  1. $70,000
  2. $92,000
  3. $54,000
  4. $62,000

 

Answer: C  Level: Easy  LO: 3

 

  1. The following information is taken from the records of CL Company for last year:

 

Direct materials .. $5,000
Manufacturing overhead . $6,000
Total manufacturing costs . $17,000
Beginning work in process inventory .. $1,000
Cost of goods manufactured . $15,000

 

What are the correct amounts for direct labor and ending work in process inventory?

 

  Direct Ending Work
  Labor in Process
A) $12,000 $2,000
B) $11,000 $2,000
C) $6,000 $1,000
D) $6,000 $3,000

 

Answer: D  Level: Hard  LO: 4

 

 

 

 

 

 

 

 

 

 

 

36                                                                                                               Garrison, Managerial Accounting, 12th Edition


Chapter 2 Cost Terms, Concepts, and Classifications

 

 

 

  1. The following information is taken from the records of DW Company for last year:

 

Direct materials $8,000

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