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Exam 2: Cost Concepts, Behaviour and Estimation

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Question 21

Multiple Choice

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The following data (in thousands of pounds) have been taken from the accounting records of Karmint Corporation for the just completed year: -The cost of goods sold for the year (in thousands of pounds) was

A) £540.
B) £420.
C) £460.
D) £520.

E) A) and B)
F) None of the above

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Question 22

Multiple Choice

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Within the relevant range

A) variable cost per unit decreases as production decreases.
B) fixed cost per unit increases as production decreases.
C) fixed cost per unit decreases as production decreases.
D) variable cost per unit increases as production decreases.

E) A) and D)
F) None of the above

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Question 23

Multiple Choice

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In a manufacturing company, direct labour costs combined with direct materials costs are known as

Data for Morton Co: Prime cost was: $\begin{array}{lrr} \text { Direct materials } &£300,000\\ \text { Direct labour } &400,000\\ \text { Manutacturing overhead: } &\\ \text {variable. } &80,000\\ \text {Fixed } &50,000\\\end{array}$

Noel Stewart bought a machine two years ago for £500. He must now replace the old machine by buying a new model 206 for £700 or a used model 204 for £650. Noel has decided to buy model 204. Noel Stewart has estimated that the total fixed costs for his department are £10,000. He also estimated that his variable cost per unit is £10. Noel Stewart bought some materials 2 years ago for £300. These materials have simply been left in stock as they were not needed. A new customer offers to buy a product that uses these materials. The conversion cost is £500 and the customer has offered to pay £650 for the product. Noel decides to accept the order. -If Noel produced only one unit his total cost would be:

Noel Stewart bought a machine two years ago for £500. He must now replace the old machine by buying a new model 206 for £700 or a used model 204 for £650. Noel has decided to buy model 204. Noel Stewart has estimated that the total fixed costs for his department are £10,000. He also estimated that his variable cost per unit is £10. Noel Stewart bought some materials 2 years ago for £300. These materials have simply been left in stock as they were not needed. A new customer offers to buy a product that uses these materials. The conversion cost is £500 and the customer has offered to pay £650 for the product. Noel decides to accept the order. -If Noel produced only one unit his fixed cost per unit would be:

In general only the differences between alternatives are relevant to decisions

During April, the cost of goods manufactured was £74,000. The beginning finished goods inventory was £17,000 and the ending finished goods inventory was £14,000. What was the cost of goods sold for the month

The following data (in thousands of pounds) have been taken from the accounting records of Karmint Corporation for the just completed year: -The cost of goods manufactured (finished) for the year (in thousands of pounds) was:

Wages paid to the factory supply shop foreman are considered an example of: I. Direct Labour or II. Period Cost

A department accepts a new order from a customer. It has already incurred £100 for design costs. It has also incurred costs of £200 for visits by sales staff. If the order is accepted a quality inspector will be transferred from another department. The inspector earns £20,000 per year. If the order is accepted there will be additional training costs of £700. -In this decision the differential costs total:

Noel Stewart bought a machine two years ago for £500. He must now replace the old machine by buying a new model 206 for £700 or a used model 204 for £650. Noel has decided to buy model 204. Noel Stewart has estimated that the total fixed costs for his department are £10,000. He also estimated that his variable cost per unit is £10. Noel Stewart bought some materials 2 years ago for £300. These materials have simply been left in stock as they were not needed. A new customer offers to buy a product that uses these materials. The conversion cost is £500 and the customer has offered to pay £650 for the product. Noel decides to accept the order. - In this decision the company is better off by:

Last month a manufacturing company had the following operating results: What was the cost of goods manufactured for the month? $\begin{array}{lrr} \text { Beginning finished goods inventory} &£ 84,000 \\ \text { Ending finished goods inventory} &£ 71,000\\ \text { Sales } &£ 505,000\\ \text {Gross margin } &£ 63,000\\\end{array}$

The potential benefit that is given up when one alternative is selected over another is called a sunk cost

The variable portion of the cost of electricity for a manufacturing plant is a: I. Conversion Cost or II. Period Cost

Noel Stewart bought a machine two years ago for £500. He must now replace the old machine by buying a new model 206 for £700 or a used model 204 for £650. Noel has decided to buy model 204. Noel Stewart has estimated that the total fixed costs for his department are £10,000. He also estimated that his variable cost per unit is £10. Noel Stewart bought some materials 2 years ago for £300. These materials have simply been left in stock as they were not needed. A new customer offers to buy a product that uses these materials. The conversion cost is £500 and the customer has offered to pay £650 for the product. Noel decides to accept the order. - In this decision, Noel would consider the relevant material cost to be:

Depreciation on manufacturing equipment is a period cost

A sunk cost is

The following costs were incurred in April: Conversion costs during the month totalled: $\begin{array}{lrr} \text { Direct materials. } &£ 18,000\\ \text { Direct labour. } &£ 21,000\\ \text { Manufacturing overhead. } &£ 33,000\\ \text { Selling expenses. } &£ 14,000\\ \text { Administrative expenses. } & £ 19,000\\\end{array}$

Which of the following would most likely be included as part of manufacturing overhead in the production of a wooden table