Answer :
Which of the following costs would normally be considered a variable cost?
A variable cost changes in proportion to the level of production output of goods or services. Let's look at the options:
A. Direct materials cost - These are costs for raw materials that vary with the level of production.
B. Direct labor cost - These are wages for workers directly involved in production, which can also vary based on the number of goods produced.
C. Electricity to operate factory equipment - Electricity costs can change depending on how much the factory equipment is being used.
D. All of the above - Since all three costs can vary with production levels, they are all considered variable costs.
Answer: D. All of the above
The account maintained by a manufacturing business for inventory of goods in the process of manufacture is:
A manufacturing business tracks goods that are still being produced in a specific account:
A. Finished goods - These are completed products ready for sale, not in process.
B. Materials - Refers to raw materials not yet used in production.
C. Work in process - This refers to goods that are in the stages of being manufactured but are not yet completed.
Answer: C. Work in process
For a manufacturing business, finished goods inventory includes:
Finished goods inventory consists of products ready for sale to customers, which should include all costs associated with manufacturing:
A. Direct materials costs - Raw materials that are part of the finished product.
B. Direct labor costs - The labor costs for workers who have directly assembled the product.
C. Factory overhead costs - Indirect costs related to production, like utilities and maintenance.
Answer: D. All of the above
An example of a factory overhead cost is:
Factory overhead costs are indirect production costs that cannot be traced directly to specific units of product:
A. Wages of factory assembly-line workers - This is not overhead; it's direct labor.
B. Salaries for factory plant supervisors - These are considered indirect costs, hence factory overhead.
C. Bearings for electric motors being manufactured - This is a direct materials cost.
Answer: B. Salaries for factory plant supervisors
For which of the following would the job order cost system be appropriate?
A job order cost system is used in situations where products are customized or produced in small batches:
A. Antique furniture repair shop - Each piece of furniture is unique and requires specific job cost tracking.
B. Rubber manufacturer - Typically uses a process cost system for mass production.
C. Coal manufacturer - Generally uses process costing for continuous production.
Answer: A. Antique furniture repair shop
If the factory overhead account has a credit balance, factory overhead is said to be:
When the overhead applied to jobs exceeds the actual overhead costs:
A. Under applied - This would mean the opposite, where overhead applied is less than actual costs.
B. Over applied - Means more overhead has been applied than actually incurred.
C. Under absorbed - Similar to under applied, not applicable.
D. Over absorbed - Means more overhead costs have been absorbed by products than incurred.
Answer: E. B & D
