Managerial Accounting and Cost Concepts

Chapter 2: Managerial Accounting and Cost Concepts

1. 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

2. Which two terms below describe the wages paid to security guards that monitor a factory 24 hours a day? 

A. variable cost and direct cost

B. fixed cost and direct cost

C. variable cost and indirect cost

D. fixed cost and indirect cost

3. Each of the following would be classified as variable in terms of cost behavior except: 

A. cost of shipping goods to customers via express mail.

B. sales commissions

C. plant manager's salary

D. direct materials

4. The following costs were incurred in August:

Prime costs during the month totaled: 

A. $39,000

B. $59,000

C. $96,000

D. $38,000

5. In August direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000 and the direct materials cost was $34,000, the direct labor cost was?

A. $36,000

B. $22,667

C. $51,000

D. $81,000

0.60 x Conversion costs = Direct labor

0.40 x Conversion costs = Manufacturing overhead

0.40 x Conversion costs = $54,000

Conversion costs = $135,000

Conversion costs = Direct labor + Manufacturing overhead

$135,000 = Direct labor + $54,000

Direct labor = $81,000

6. Williams Company's direct labor cost is 25% of its conversion cost. If the manufacturing overhead for the last period was $45,000 and the direct materials cost was $25,000, the direct labor cost was?

A. $15,000

B. $60,000