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Exam 2: Basic Managerial Accounting Concepts

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Question 1

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Econo Company In July, Econo Company purchased materials costing $21,000 and incurred direct labour cost of $18,000. Manufacturing overhead totalled $32,000 for the month. Information on inventories was as follows: $\begin{array}{lrr}&\text { July } 1& \text { July } 31\\\text { Materials } & \$ 6,200 & \$ 7,100 \\\text { Work-in-process } & \$ 700 & \$ 1,200 \\\text { Finished goods } & \$ 3,300 & \$ 2,700\end{array}$ -Refer to Quest Company. What were the total product costs?

A) $100,000
B) $150,000
C) $190,000
D) $236,000

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Question 2

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What is opportunity cost?

A) a benefit that is difficult to accurately trace to a cost object
B) a cost that increases as output increases and decreases as output decreases
C) a cost that decreases as output increases and increases as output decreases
D) a benefit given up or sacrificed when one alternative is chosen over another

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Question 3

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Match each of the following terms with their correct description from the items listed below. -Number of units sold multiplied by product cost per unit

Research and development costs would generally be classified as period costs.

During the month of March, Cara, Inc. had total manufacturing costs of $130,000 and incurred $40,000 in direct labour costs and $30,000 in manufacturing overhead costs. The materials inventory on March 1 was $3,000 less than the materials inventory on March 31. What was the cost of materials purchased during the month?

Screws used in the manufacture of cabinets would normally be classified as a variable cost.

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Product shipping costs

What would generally NOT be found on the income statement of a service organization?

Katz Group Katz Group had the following income statement for the month of May. $\begin{array}{lr}\text { Sales revenue } & \$ 428,000 \\\text { Cost of goods sold } & 205,440 \\\text { Gross margin } & 222,560\\\text { Less: }\\\text { Selling expenses } & 81,32 0\\\text { Administrative expenses } & 72,760\\\text { Operating income }&\$68,480\end{array}$ -Refer to Katz Group. What was the administrative expense percentage?

All product costs other than direct materials and indirect labour are called manufacturing overhead.

Direct costs are those costs that can be easily and accurately traced to a cost object.

Select the appropriate classification of the output generated by each of the following industries.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -A&W Restaurant

Select the appropriate classification of the output generated by each of the following industries.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Law firm

Match each of the following terms with their correct description from the items listed below. -Marketing and distributing costs

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Cost of lubricating production machinery

Refer to TechCom Inc. What was the total per-unit prime cost last month?

What is the formula to calculate gross margin?

Katz Group Katz Group had the following income statement for the month of May. $\begin{array}{lr}\text { Sales revenue } & \$ 428,000 \\\text { Cost of goods sold } & 205,440 \\\text { Gross margin } & 222,560\\\text { Less: }\\\text { Selling expenses } & 81,32 0\\\text { Administrative expenses } & 72,760\\\text { Operating income }&\$68,480\end{array}$ -Refer to Katz Group. What was the gross margin percentage?

Indirect costs are costs that are easily and accurately traced to a cost object.

Select the appropriate classification of the output generated by each of the following industries.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Calgary Flames professional hockey team