cost accounting test bank chapter 2

12) Each of the following items pertains to one of these companies: Bedell Electronics (a manufacturing company), Gregory Food Retailers (a merchandising company), and Larson Real Estate (a service sector company). Classify each item as either inventoriable (I) costs or period (P) costs. inventoriable (I) costs or period (P) costs a. Salary of Bedell Electronics president b. Depreciation on Bedell Electronics assembly equipment c. Salaries of Bedell's assembly line workers d. Purchase of frozen food for sale to customers by Gregory Food Retailers e. Salaries of frozen food personnel at Gregory Food Retailing f. Depreciation on freezers at Gregory Food Retailing g. Salary of a receptionist at Larson Real Estate h. Depreciation on a computer at Larson Real Estate i. Salary of a real estate agent at Larson Real Estate Answer: inventoriable (I) costs or period (P) costs a. Salary of Bedell Electronics president P b. Depreciation on Bedell Electronics assembly I equipment c. Salaries of Bedell's assembly line workers I d. Purchase of frozen food for sale to customers by I Gregory Food Retailers e. Salaries of frozen food personnel at Gregory Food I Retailing f. Depreciation on freezers at Gregory Food Retailing P g. Salary of a receptionist at Larson Real Estate P h. Depreciation on a computer at Larson Real Estate P i. Salary of a real estate agent at Larson Real Estate P Diff: 3 Objective: 6

AACSB: Analytical thinking

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13) For last year, Wampum Enterprises reported revenues of $420,000, cost of goods sold of $108,000, cost of goods manufactured of $101,000, and total operating costs of $70,000. Operating income for that year was ________. A) $319,000 B) $312,000 C) $249,000 D) $242,000 Answer: D

Explanation: D) $420,000 - $108,000 - $70,000 = $242,000

Diff: 2

Objective: 6

AACSB: Application of knowledge

14) Prime costs include ________.

A) direct materials and direct manufacturing labor costs

B) direct manufacturing labor and manufacturing overhead costs C) direct materials and manufacturing overhead costs D) only direct materials Answer: A

Diff: 1

Objective: 6

AACSB: Analytical thinking

15) Leslie Manufacturing reported the following: Revenue $450,000 Beginning inventory of direct materials, January 1, 2015 20,000 Purchases of direct materials 156,000 Ending inventory of direct materials, December 31, 2015 18,000 Direct manufacturing labor 21,000 Indirect manufacturing costs 42,000 Beginning inventory of finished goods, January 1, 2015 40,000 Cost of goods manufactured 114,000 Ending inventory of finished goods, December 31, 2015 45,000 Operating costs 150,000 What is Leslie's operating income? A) $186,000 B) $128,000 C) $177,000 D) $191,000 Answer: D

Explanation: D) $450,000 ? ($40,000 + $114,000 ? $45,000) ? $150,000 = $191,000

Diff: 3

Objective: 6

AACSB: Application of knowledge

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