Chapter 2 - Chapter 2 1 All costs incurred in a...

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Unformatted text preview: Chapter 2 1. All costs incurred in a merchandising firm are considered to be period costs. Ans: False Difficulty: Easy 2. In a manufacturing firm, amortization is always considered a product cost for external financial reporting purposes. Ans: False Difficulty: Medium 3. In external financial reports, factory utilities costs may be included in an asset account on the balance sheet at the end of the period. Ans: True Difficulty: Medium 4. Advertising costs are considered product costs for external financial reports since they are incurred in order to promote specific products. Ans: False Difficulty: Medium 5. Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead. Ans: True Difficulty: Easy 6. Manufacturing overhead combined with direct materials is known as conversion cost. Ans: False Difficulty: Easy 7. If the ending inventory of finished goods is understated, net income will be overstated. Ans: False Difficulty: Medium 8. In a manufacturing company, goods available for sale equals the sum of the cost of goods manufactured and the beginning finished goods inventory. Ans: True Difficulty: Medium 9. Variable costs are costs whose per unit costs vary as the activity level rises and falls. Ans: False Difficulty: Easy 10. On a per unit basis, a fixed cost varies inversely with the level of activity. Ans: True Difficulty: Easy 11. The following would typically be considered indirect costs of manufacturing a particular Boeing 747 to be delivered to Singapore Airlines: electricity to run production equipment, the factory manager's salary, and the cost of the General Electric jet engines installed on the aircraft. Ans: False Difficulty: Easy Page 1 12. The following costs should be considered direct costs of providing delivery room services to a particular mother and her baby: the costs of drugs administered in the operating room, the attending physician's fees, and a portion of the liability insurance carried by the hospital to cover the delivery room. Ans: False Difficulty: Hard 13. The following costs should be considered by a law firm to be indirect costs of defending a particular client in court: rent on the law firm's offices, the law firm's receptionist's wages, the costs of heating the law firm's offices, and the amortization on the personal computer in the office of the attorney who has been assigned the client. Ans: True Difficulty: Hard 14. A cost that differs from one month to another is known as a differential cost. Ans: False Difficulty: Easy 15. Some companies classify labour fringe benefits for direct labour workers as part of the direct labour cost and some classify these costs as manufacturing overhead....
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This note was uploaded on 10/19/2010 for the course ACCOUNTING 341 taught by Professor Ken during the Spring '10 term at University of Guelph - Humber.

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Chapter 2 - Chapter 2 1 All costs incurred in a...

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