Exam 2: An Introduction to Cost Terms and Purposes

Swansea Manufacturing currently produces 3,000 tires per month. The following per unit data for 3,000 tires apply for sales to regular customers: The plant has capacity for 5,000 tires and is considering expanding production to 4,000 tires. What is the total cost of producing 4,000 tires?

A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of a direct cost for the golf equipment line is ________.

The broader the cost object definition (i.e., plant versus product), the more confident the manager will be about the accuracy of the direct cost amounts.

Whippany manufacturing wants to estimate costs for each product they produce at its Troy plant. The Troy plant produces three products at this plant, and runs two flexible assembly lines. Each assembly line can produce all three products. Required: a.Classify each of the following costs as either direct or indirect for each product. b.Classify each of the following costs as either fixed or variable with respect to the number of units produced of each product.

All Rite Manufacturing reported the following: What is All Rite's gross margin (or gross profit)?

A unit cost is computed by dividing total cost by the number of units.

For external reporting purposes, indirect manufacturing costs must be allocated to individual units.

Improvements in information-gathering technologies are making it possible to trace more costs as direct.

Direct materials inventory costs would normally include ________.

Cost allocation is ________.

In the cost classification system used by manufacturing firms, assembly workers' wages would be included in ________.

A company is considering buying a product at $15 per unit, the in-house manufacturing of the same product is $17. The fixed cost per unit is $3 is included in the $17 in-house product manufacturing cost. What should the company do in this scenario?

Conversion costs include ________.

If each motorcycle requires a belt that costs $20 and 2,000 motorcycles are produced for the month, the total cost for belts is ________.

Universal Works Inc., reports the following information for September sales: Promotional expenses for September were $1,000. Required: If sales double in October, what is the impact on the variable costs?

Budgeted costs are ________.

Since budgeting is a financial function and mostly an analytical and quantitative exercise, it generally has no impact on human behavior, motivation and decision making.

Operating income is sales revenue minus operating expenses.

Which of the following statements is true?

Cost of goods sold for a manufacturer is calculated as follows: beginning finished goods + cost of goods manufacturered - ending finished goods.