Exam 3 CH.16

Question 1

direct materials cost definition

Answer 1

Manufactured products begin with raw materials that are converted into
finished products

− An integral part of the finished product

− A significant portion of the total cost of the product

Question 2

− The cost of the wood used in producing a guitar

Answer 2

direct material

Question 3

− The cost of electronic components for a television

Answer 3

direct material

Question 4

− Silicon wafers for microcomputer chips

Answer 4

direct material

Question 5

− Tires for an automobile

Answer 5

direct material

Question 6

direct labor cost definition

Answer 6

The cost of employee wages that is an integral part of the finished product

− An integral part of the finished product

− A significant portion of the total cost of the product

Question 7

− The wages of employees who cut guitars out of raw lumber and assemble them

Answer 7

direct labor

Question 8

− Mechanics’ wages for repairing an automobile

Answer 8

direct labor

Question 9

− Machine operators’ wages for manufacturing tools

Answer 9

direct labor

Question 10

− Assemblers’ wages for assembling a laptop computer

Answer 10

direct labor

Question 11

factory overhead cost definition

Answer 11

Costs other than direct materials cost and direct labor that are incurred in the
manufacturing process are combined

All factory overhead costs are indirect costs of the product

Question 12

− Heating and lighting the factory

Answer 12

factory overhead

Question 13

− Repairing and maintaining factory equipment

Answer 13

factory overhead

Question 14

− Property taxes on factory buildings and land

Answer 14

factory overhead

Question 15

− Insurance on factory buildings

Answer 15

factory overhead

Question 16

− Depreciation on factory plant and equipment

Answer 16

factory overhead

Question 17

product cost definition

Answer 17

Product costs consist of manufacturing costs:

direct materials

direct labor

and factory
overhead

Question 18

period cost definition

Answer 18

Period costs consist of selling and administrative expenses.

Selling expenses are incurred in
marketing the product and delivering the product to customers. Administrative expenses are
incurred in managing the company and are not directly related to manufacturing or selling
functions.

Question 19

Salary of vice president of marketing

Answer 19

period (selling expense)

Question 20

Cost of advertising in a national magazine

Answer 20

period (selling expense)

Question 21

Attorney fees for drafting a new lease for headquarters office

Answer 21

period (administrative expense)

Question 22

Telephone charges for company controller’s office

Answer 22

period (administrative expense)

Question 23

Commissions paid to sales representatives, based on the number of lawn mowers sold

Answer 23

period (selling expense)