Test bank chapter 03

 26. If the volume of production is increased over the level planned, the cost per unit would be expected to:

A. Decrease for fixed costs and remain unchanged for variable costs.

B. Remain unchanged for fixed costs and increase for variable costs.

C. Decrease for fixed costs and increase for variable costs.

D. Increase for fixed costs and increase for variable costs.

32. When production levels are expected to decline within a relevant range, what effects would be anticipated with respect to each of the following?

A. Option A

B. Option B

C. Option C

D. Option D

33. Which of the following is normally considered to be a product cost?

A. Insurance on a factory building.

B. Selling expenses.

C. President's salary.

D. Miscellaneous office expense.

34. The Gray Company has a staff of five clerks in its general accounting department. Three clerks who work during the day perform sundry accounting tasks; the two clerks who work in the evening are responsible for (1) collecting the cost data for the various jobs in process, (2) verifying manufacturing material and labor reports, and (3) supplying production reports to the supervisors by the next morning. The salaries of these two clerks who work at night should be classified as:

A. Period costs.

B. Direct costs.

C. Product costs.

D. Indirect costs.

35. A manufacturer of machinery currently produces equipment for a single client. The client supplies all required raw material on a no-cost basis. The manufacturer contracts to complete the desired units from this raw material. The total production costs incurred by the manufacturer are correctly identified as:

A. Prime costs.

B. Conversion costs.

C. Variable production costs.

D. Factory overhead.

36. Certain workers are assigned the task of unpacking production materials received from suppliers. These workers place the material in a storage area pending subsequent use in the production process. The labor cost of such workers is normally classified as:

A. Direct labor.

B. Direct materials.

C. Indirect labor.

D. Indirect materials.

37. Prime cost and conversion cost share what common element of total cost?

A. Direct labor.

B. Direct materials.

C. Variable overhead.

D. Fixed overhead.

Conrad, Inc. recently lost a portion of its records in an office fire. The following information was salvaged from the accounting records.

Direct labor cost incurred during the period amounted to 1.5 times the factory overhead. The CFO of Fisher, Inc. has asked you to recalculate the following accounts and to report to him by the end of the day.

38. What is the amount of direct materials used?

A. $23,500.

B. $28,500.

C. $31,000.

D. $36,000.

39. What is the amount of direct materials purchased?

A. $23,500.

B. $28,500.

C. $31,000.

D. $36,000.

40. What is the amount in the finished goods inventory at the beginning of the year?

A. $10,500.

B. $15,000.

C. $20,000.

D. $25,000.