I: Multiple choice (3 points each, 34 questions, total 102 points). For each of
ID: 2596472 • Letter: I
Question
I: Multiple choice (3 points each, 34 questions, total 102 points). For each of the following questions, circle the letter of the best answer. 1. Which of the following statements concerning manufacturing costs is incorreet? Depreciation on manufacturing equipment is a period cost. a. b. Direct labor costs are recorded initially in an inventory account. The cost of direct materials can be readily traced to products. c. d. All salaries incurred by the sales department are expensed as incurred. 2. The following costs are included in a recent summary of data for a company: advertising expense $85,000; depreciation expense factory building $133,000; direct labor $250,000; direct material used $300,000; factory utilities $105,000; and sales salaries expense $150,000. Determine the dollar amount of manufacturing overhead costs. a. $550,000 b. $488,000 c. $238,000 d. $235,000 3. Period costs for a manufacturing company would flow directly to: a. The current balance sheet. b. Factory overhead c. The current income statement. d. Inventory until the goods are sold. When the level of activity increases within the relevant range, how does each of the following change? 4. Average cost per unit Total variable cost Fixed cost per unit A) B) C) D) Increases Decreases Decreases Increases No change No change Increases Increases Decreases Decreases a. A c. C d. DExplanation / Answer
Solution-1: Depreciation on manufacturing equipment is allocated on the manufactured products and is expensed off when the manufactured products are sold. Therefore, Depreciation on manufacturing equipments is a product cost and not a period cost. Hence, option (a) is correct and option (b), (c) and (d) are not correct.
Solution-2: Manufacturing overhead costs = Depreciation on factory building + factory utilities
or, Manufacturing overhead costs = $133,000 + $105,000
or, Manufacturing overhead costs = $238,000
Hence, option (c) is correct and option (a), (b) and (d) are not correct.