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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 is an inventoriable cost?

A) manufacturing overhead cost
B) customer service costs
C) distribution costs
D) marketing costs

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Question 102

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________ sector companies purchase materials and components and convert them into finished goods.

A) Merchandising
B) Service
C) Manufacturing
D) Professional

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Question 103

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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.

A company reported revenues of $375,000,cost of goods sold of $118,000,selling expenses of $11,000,and total operating costs of $70,000.Gross margin for the year is ________.

Comparing budgeted costs to actual costs helps managers to improve ________.

The most likely cost driver of distribution costs is the ________.

A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.

Eigen Manufacturing Corp.provided the following information for last month: $\begin{array} { l r } \text { Sales } & \$ 40,000 \\\text { Variable costs } & 14,000 \\\text { Fixed costs } & 10,000 \\\text { Operating income } & \$ 16,000\end{array}$ If sales reduce to half of the amount in the next month,what is the projected operating income?

Management accountants help managers identify what information is relevant and what information is irrelevant that help in decision making.

The following information pertains to Alleigh's Mannequins: $\begin{array}{ll}\text { Manufacturing costs } & \$ 1,500,000 \\\text { Units manufactured } & 30,000 \\\text { Units sold } & 29,500 \text { units sold for } \$ 85 \text { per unit } \\\text { Beginning inventory } & 0 \text { units }\end{array}$ What is the amount of gross margin?

Inventoriable costs are expensed on the income statement ________.

Budgeting often plays a major role in affecting behavior and decisions.

The income statement of a manufacturing firm reports ________.

If each motorcycle requires a belt that costs $20 and 2,000 motorcycles are produced for the month,the total cost for belts is ________.

An actual cost is the cost incurred-a historical or past cost.

Which one of the following items is a direct cost?

Budgeted costs are ________.

Answer the following questions using the information below: The East Company manufactures several different products. Unit costs associated with Product ORD210 are as follows: $\begin{array}{lr}\text { Direct materials } & \$ 54 \\\text { Direct manufacturing labor } & 8 \\\text { Variable manufacturing overhead } & 11 \\\text { Fixed manufacturing overhead } & 25 \\\text { Sales commissions (2\% of sales) } & 5 \\\text { Administrative salaries } & 12 \\\quad \text { Total } & \$ 115\end{array}$ -What are the period costs per unit associated with Product ORD203?

Which of the following statements is true?

Acquisition costs of direct materials include freight-in charges,sales taxes,and custom duties.