Ch 2

Question 1

Manufacturing companies

Answer 1

generate revenue by converting them

need to understand how much it cost to make the product and get it ready to sell in order to earn an adequate profit

listed on balance sheet: raw materials
work in process
finished goods

Question 2

cost flow assumptions for a manufacturer

Answer 2

raw materials
work in process
finished goods

Question 3

prime costs

Answer 3

direct materials + direct labor

prime ingredients for a product

Question 4

conversion costs

Answer 4

direct labor + manufacturing overhead

costs to convert materials

Question 5

All of the following relate to part of the value chain for a clothing company except

Answer 5

administrative costs

things related are:

• cost of shipping products to retailers
• salaries of clothing designers
• cost of advertising new products

Question 6

Which of the following items is not used when calculating the cost of goods manufactured?

Answer 6

salesperson salaries

things used are:

• Direct labor
• Direct materials used
• Manufacturing overhead

Question 7

Which type of company typically produces its own inventory?

Answer 7

Manufacturer

Question 8

Direct labor for a company was $145,000; manufacturing overhead was $300,000; and direct materials were $270,000. Prime costs would total

Answer 8

415,000

Question 9

Which of the following is not an example of an indirect cost incurred in manufacturing automobiles?

Answer 9

Cost of the automobile engines

• Machinery depreciation in the factory
• Plant utilities
• Plant supervisor salary

Question 10

When deciding to buy a new computer, all of the following should be considered except for the

Answer 10

cost of the old computer

• warranty of the new computer
• cost of the new computer
• games that come with the new computer

Question 11

Which of the following is an example of a period cost when manufacturing products?

Answer 11

Advertising expense

Question 12

product cost examples

Answer 12

• Property taxes on the plant
• Depreciation expenses on factory equipment
• Indirect materials used in the factory

\ includes both, direct and indirect

Question 13

How do fixed costs per unit behave?

Answer 13

they decrease as production increases

Question 14

The cost of lighting the factory would be classified as ________ when determining the cost of a manufactured product

Answer 14

indirect cost

Question 15

Research and development is needed to improve products and to design new products.

Answer 15

true

Question 16

Schlabig & Associates, a public accounting firm that provides business consulting to a consumer, is what type of company?

Answer 16

service