Test Bank For Introduction to Managerial Accounting Canadian 5th Edition By Brewer

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Reference: 02-10
Charlie’s Chocolate Factory manufactures chocolate bars and ships them directly to wholesalers and retailers across the country. The company has two product lines: milk chocolate bars and chocolate covered almonds. Classify the following company’s expenses if the cost object is a single product line (either milk chocolate bars or chocolate covered almonds).

1) Advertising campaign for Charlie’s Chocolate Factory, no specific products were 1) mentioned in the campaign.

A) Indirect product cost.

C) Indirect period cost.

Answer: C Explanation: A)

B) C) D)

B) Direct period cost. D) Direct product cost.

2) A manufacturing company prepays its insurance coverage for a three-year period. The 2) premium for the three years is $2,700 and is paid at the beginning of the first year.
Eighty percent of the premium applies to manufacturing operations and 20% applies to selling and administrative activities. What amounts should be considered product and

period costs respectively for the first year of coverage?

a. b. c. d.

A) choice a.

Answer: D Explanation:

Product

$2,700 $2,160 $1,440 $ 720

A) B) C) D)

Period

$0 $540 $360 $180

B) choice b.

C) choice c.

D) choice d.

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3) An opportunity cost is: 3) A) the potential benefit forgone by selecting one alternative instead of another.

B) the difference in total costs which results from selecting one alternative instead of another.

C) a cost which may be saved by not adopting an alternative.
D) a cost which may be shifted to the future with little or no effect on current

operations.

Answer: A Explanation: A)

B) C) D)

4) Green Company’s costs for the month of August were as follows: direct materials, 4) $27,000; direct labour, $34,000; sales salaries, $14,000; indirect labour, $10,000;
indirect materials, $15,000; general corporate administrative cost, $12,000; taxes on manufacturing facility, $2,000; and rent on factory, $17,000. The beginning work in

process inventory was $16,000 and the ending work in process inventory was $9,000. What was the cost of goods manufactured for the month?

A) $138,000.

Answer: B Explanation: A)

B) C) D)

B) $112,000.

C) $105,000.

D) $132,000.

5) Micro Computer Company has set up a toll-free telephone line for customer inquiries 5) regarding computer hardware produced by the company. The cost of this toll-free line
would be classified as which of the following?

A) Manufacturing overhead.

C) Product cost.

Answer: B Explanation: A)

B) C) D)

B) Period cost. D) Direct labour.

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Reference: 02-11
Frosting Corp. has provided the following relating to the most recent month (August 31, 2016) of operations, for their main product, cupcakes

Baker’s salaries
Finished goods inventory, beginning Finished goods inventory, ending General & administrative expenses Indirect materials
Production Supervisor, Salary Purchases of raw materials
Raw materials inventory, ending Raw materials inventory, beginning Rent on production factory
Rent, retail store
Sales
Utilities on production factory Utilities, retail store
Wages, retail staff
WIP inventory, beginning
WIP inventory, ending

20,000 18,000 20,000 20,000 17,500 21,000 28,000 19,000 18,000 19,000 18,000

243,000 17,500 17,000 20,000 19,500 21,500

6) What was the cost of goods sold for the period?

6)

A) $120,000

Answer: B Explanation: A)

B) C) D)

B) $118,000

C) $123,000

D) $121,000

7) For a manufacturing company, which of the following is an example of a period rather 7) than a product cost?

A) Wages of machine operators.

C) Wages of salespersons.

Answer: C Explanation: A)

B) C) D)

B) Insurance on factory equipment.
D) Depreciation of factory equipment.

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8) Which of the following would NOT be treated as a product cost for external financial 8) reporting purposes?

A) Salaries of factory workers.

C) Depreciation on a factory building.

Answer: B Explanation: A)

B) C) D)

B) Advertising expenses.
D) Indirect labour in the factory.

Reference: 02-10
Charlie’s Chocolate Factory manufactures chocolate bars and ships them directly to wholesalers and retailers across the country. The company has two product lines: milk chocolate bars and chocolate covered almonds. Classify the following company’s expenses if the cost object is a single product line (either milk chocolate bars or chocolate covered almonds).

9) Salaries for milk chocolate bars production line workers 9)

A) Indirect product cost.

C) Direct period cost.

Answer: B Explanation: A)

B) C) D)

B) Direct product cost. D) Indirect period cost.

10) Conversion cost consists of which of the following? 10) A) Direct materials and direct labour costs.

B) Direct labour cost.
C) Direct labour and manufacturing overhead costs. D) Manufacturing overhead cost.

Answer: C Explanation: A)

B) C) D)