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If a product required a great deal of electricity to produce, and crude oil prices increased, which of the following costs most likely increased?
Conversion costs include both direct labor and overhead. Increases in crude oil prices are likely to impact the costs of generating electricity which is significant in manufacturing costs.
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Which of the following costs includes all the product costs?
Product costs consist of direct materials, direct labor, and factory overhead. Materials and labor together are prime costs, while labor and overhead are conversion costs. Direct materials and conversion costs together are product costs.
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Which of the following best describes direct labor?
Direct labor is a prime cost, a conversion costs, and a product cost.
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Which of the following is assigned to goods that were either purchased or manufactured for resale?
Product cost is assigned to goods that were either purchased or manufactured for resale.
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Conversion costs do not include:
Conversion costs consist of direct labor and overhead. Thus, conversion costs include all product costs except direct materials.
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Of the following, which would be not included as period expenses?
Normal spoilage is an inventory cost rather than a period cost.
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Which inventory costing method would a company that wishes to maximize profits in a period of rising prices use?
In a period of rising prices, the oldest inventory, or the inventory used in FIFO would be the least expensive. Thus, the profit margin would be the largest here.
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Assuming constant inventory quantities, which of the following inventory costing methods will produce a lower inventory turnover ratio in an inflationary economy?
In a period of rising prices, the oldest inventory, or the inventory used in FIFO would be the least expensive. Thus, the profit margin would be the largest here.
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During periods of inflation, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system under which of the following inventory valuation methods?
Only under FIFO would the use of a perpetual system result in the same dollar amount of ending inventory as a periodic system.
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Which of the following costing methods will yield the lowest inventory value?
Variable costing typically produces the lowest inventory values since only variable costs are capitalized.
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Which of the following costs is deducted from revenues of a manufacturing company in order to determine gross margin, but not deducted from revenues to determine contribution margin?
Under the absorption approach, all fixed and variable manufacturing overhead is part of cost of goods sold to determine an entity's gross margin.
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The equivalent units of production method can be calculated by using either:
Using the FIFO method accounts for work to be finished and using the weighted average method blends the units.
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A cost that is fixed per unit is an example of a:
A variable cost is one that varies in total but is fixed per unit.
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There are a variety of ways of classifying costs of an object as either fixed or variable. The most accurate method is considered to be:
The most accurate method and method mentioned within the AICPA text is the regression analysis method.
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An example of an internal failure cost is:
Rework is an internal failure cost.
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Which of the following statements is correct regarding the difference between the absorption costing and variable costing methods?
When production is greater than sales, absorption costing income is greater than variable costing income.
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Using the variable costing method, which of the following costs are assigned to inventory?
A: Variable selling and admin costs B: Variable factory overhead costs
Under variable costing, only the variable manufacturing costs are assigned to inventory.
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Which of the following would be classified as a fixed cost?
No matter how much production occurs at the warehouse each year, insurance will remain fixed whereas the more production, the more direct materials cost.
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