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    Section (6) 2

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    wessam.ibrahim

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    Section (6) 2

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    wessam.ibrahim
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    Section (6) 2

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    wessam.ibrahim

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    You are on page 1of 5

    An Introduction to Cost Terms and Purposes

    Answer the following questions using the information below:


    The following information pertains to Alleigh's Mannequins:
    Manufacturing costs $1,500,000
    Units manufactured 30,000
    Units sold 29,500 units sold for $85 per unit
    Beginning inventory 0 units

    1) What is the amount of gross margin?


    A) $1,475,000
    B) $1,500,000
    C) $2,507,500
    D) $1,032,500
    Answer: D
    Explanation: D) 29,500 × ($85 - ($1,500,000 / $30,000)) = $1,032,500

    2) The income statement of a manufacturing firm reports:


    A) period costs only
    B) inventoriable costs only
    C) both period and inventoriable costs
    D) period and inventoriable costs but at different times; the reporting varies
    Answer: C

    3) The cost of inventory reported on the balance sheet may include all of the following EXCEPT:
    A) customer-service costs
    B) wages of the plant supervisor
    C) depreciation of the factory equipment
    D) the cost of parts used in the manufacturing process
    Answer: A

    4) The balance sheet of a service-sector companies would show ________.


    A) work-in-process inventory, and finished goods inventory accounts
    B) direct materials inventory, work-in-process inventory, and finished goods inventory accounts
    C) only finished goods inventory
    D) no inventory accounts

    Answer: D
    5) Which of the following formulas determine cost of goods sold in a manufacturing entity?
    A) Beginning work-in-process inventory + Cost of goods manufactured - Ending work-in-process
    inventory = Cost of goods sold
    B) Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process
    inventory = Cost of goods sold
    C) Cost of goods manufactured - Beginning finished goods inventory - Ending finished goods
    inventory = Cost of goods sold
    D) Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods
    inventory = Cost of goods sold
    Answer: D

    6) Which of the following is an inventoriable cost?


    A) customer service costs
    B) marketing costs
    C) manufacturing overhead cost
    D) distribution costs
    Answer: C

    7) What was Lewisburn's cost of goods sold?


    A) $103,000
    B) $152,000
    C) $268,000
    D) $317,000
    Answer: A
    Explanation: A) $35,000 + $104,000 - $36,000 = $103,000
    8) What was Lewisburn's gross margin (or gross profit)?
    A) $103,000
    B) $152,000
    C) $268,000
    D) $317,000
    Answer: D
    Explanation: D) $420,000 - ($35,000 + $104,000 - $36,000) = $317,000

    9) What was Lewisburn's operating income?


    A) $76,000
    B) $128,000
    C) $177,000
    D) $280,000
    Answer: C
    Explanation: C) $420,000 - ($35,000 + $104,000 - $36,000) - $140,000 = $177,000

    10) How much of the above would be considered period costs for Lewisburn Manufacturing?
    A) $104,000
    B) $140,000
    C) $246,000
    D) $390,000
    Answer: B

    11) Depreciation can be classified as either an inventoriable cost or a period cost, depending on
    what is being depreciated.
    A) True
    B) False
    Answer: A

    12) Overtime premium is normally considered as a component of direct labor.

    A) True
    B) False
    Answer: B
    Answer the following questions using the information below for Pert Products:

    Beginning finished goods, 1/1/2023 $ 90,000

    Ending finished goods, 12/31/2023 77,000

    Cost of goods sold 270,000

    Sales revenue 500,000

    Operating expenses 155,000

    13) What is cost of goods manufactured (COGM)for 2023?

    A) $257,000
    B) $283,000
    C) $230,000
    D) $355,000
    Answer: A

    Explanation: A) COGS + Ending FG - Beginning FG

    14) what is gross margin for 2023?

    A) $230,000
    B) $257,000
    C) $283,000
    D) $355,000
    Answer: A

    Explanation: C) Sales Revenue – COGS

    15) what is operating income for 2023?


    A) $62,000
    B) $75,000
    C) $112,000
    D) $230,000

    Answer: B

    Explanation: B) Sales Rev - COGS- Operating Expenses


    Hammer Inc., had the following activities during 2012:

    Required:

    a. What is the cost of direct materials used during 2012?

    b. What is cost of goods manufactured for 2012?

    c. What is cost of goods sold for 2012?

    Answer:

    a. $20,000 + $61,600 - $10,400 = $71,200

    b. $71,200 + $16,000 + $12,000 + $800 - $4,000 = $96,000

    c. $96,000 + $24,000 - $16,000 = $104,000

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