Chapter 01 Managerial Accounting and Cos
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thelkokomg_294988315Chapter 01 Managerial Accounting and Cos
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thelkokomg_294988315Chapter 01 Managerial Accounting and Cost Concepts Answer Key
True / False Questions
1. Managerial accounting is primarily concerned with the organization as a whole rather than with segments of
the organization. FALSE
2. Managerial accounting places less emphasis on nonmonetary data than financial accounting. FALSE
3. Direct labor is a part of both prime cost and conversion cost. TRUE
4. Wages paid to production supervisors would be considered direct labor. FALSE
5. Direct material cost combined with manufacturing overhead cost is known as conversion cost. FALSE
6. Advertising is a product cost as long as it promotes specific products. FALSE
7. Although depreciation is always a period cost in a merchandising firm, it can be a product cost in a
manufacturing firm. TRUE
8. In a manufacturing firm, all costs are product costs.
FALSE
9. The cost of shipping parts from a supplier is considered a product cost. TRUE
10. If the finished goods inventory increases between the beginning and the end of a period, then the cost of
goods manufactured for the period is larger than the cost of goods sold. TRUE
11. The inventory of finished goods on hand at the end of a period is
considered an asset, but inventories of raw materials and work-in-process are not considered assets until
production is completed. FALSE
12. The cost of goods manufactured for a period is the amount transferred from work in process inventory to
finished goods inventory during the period. TRUE
13. Differential costs can be either fixed or variable.
TRUE
14. A fixed cost is constant per unit of product.
FALSE
15. The variable cost per unit is constant and does not depend on how many units are produced. TRUE
16. The cost of napkins put on each person's tray at a fast food restaurant is a fixed cost. FALSE
17. A factory supervisor's salary would be classified as a direct cost of a unit of product. FALSE
Multiple Choice Questions
18. Managerial accounting:
A. has its primary emphasis on the future.
B. is required by regulatory bodies such as the SEC.
C. focuses on the organization as a whole, rather than on the organization's segments. D. Responses a, b, and
c are all correct.
19. The plans of management are expressed formally in:
A. the annual report to shareholders.
B. Form 10-Q submitted to the Securities and Exchange Commission.
C. performance reports.
D. budgets.
20. Which of the following IS a characteristic of financial accounting?
A. not mandatory
B. must follow GAAP
C. emphasis on relevance of data, rather than precision
D. both A and C above
21. The corporate controller's salary would be considered a(n): A. manufacturing cost.
B. product cost.
C. administrative cost.
D. selling expense.
22. The costs of direct materials are classified as:
[pic]
A. A
B. B
C. C
D. D
23. Manufacturing overhead:
A. can be either a variable cost or a fixed cost.
B. includes the costs of shipping finished goods to customers. C. includes all factory labor costs.
D. includes all fixed costs.
24. The three basic elements of manufacturing cost are direct materials, direct labor, and: A. cost of goods
manufactured.
B. cost of goods sold.
C. work in process.
D. manufacturing overhead.
25. Prime cost consists of direct materials combined with:
A. direct labor.
B. manufacturing overhead.
C. indirect materials.
D. cost of goods manufactured.
26. Which terms below correctly describe the cost of the black paint used to paint the dots on a pair of dice?
[pic]
A. A
B. B
C. C
D. D
27. The cost of fire insurance for a manufacturing plant is generally considered to be a:
A. product cost.
B. period cost.
C. variable cost.
D. all of the above.
28. An example of a period cost is:
A. fire insurance on a factory building.
B. salary of a factory supervisor.
C. direct materials.
D. rent on a headquarters building.
29. 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 overhead
C. Period cost
D. Administrative cost
30. Micro Computer Company has set up a toll-free telephone line for customer inquiries regarding computer
hardware produced by the company. The cost of this toll-free line would be classified as which of the
following?
A. Product cost
B. Manufacturing overhead
C. Direct labor
D. Period cost