Chap002

Cost Management: Strategies for Business Decisions

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Unformatted text preview: Chapter 02 - Product Costing Systems: Concepts and Design Issues Chapter 02 Product Costing Systems: Concepts and Design Issues True / False Questions 1. Product costs are costs assigned to goods that were either purchased or manufactured for resale. TRUE Difficulty: Easy Learning Objective: 1 2. Product costs become expenses in the period they are purchased. FALSE Difficulty: Easy Learning Objective: 1 3. The product cost of merchandise inventory acquired by a retailer consists of the purchase cost of the inventory plus any shipping charges. TRUE Difficulty: Easy Learning Objective: 1 4. Inventoriable cost is another term for product costs. TRUE Difficulty: Easy Learning Objective: 1 2-1 Chapter 02 - Product Costing Systems: Concepts and Design Issues 5. Period costs are recognized as expenses by retailers, but are included in inventory by manufacturers. FALSE Difficulty: Easy Learning Objective: 1 6. The difference between sales revenue and cost of goods sold is called contribution margin. FALSE Difficulty: Medium Learning Objective: 2 7. The basic formula used to compute cost of goods sold is beginning inventory plus purchases plus ending inventory. FALSE Difficulty: Medium Learning Objective: 2 8. Marketing costs are considered period costs for retailers and product costs for manufacturers. FALSE Difficulty: Medium Learning Objective: 2 9. Cost of goods sold does not include the costs of selling merchandise. TRUE Difficulty: Medium Learning Objective: 2 2-2 Chapter 02 - Product Costing Systems: Concepts and Design Issues 10. Theoretically, the cost of employer paid health insurance premiums for direct labor personnel should be considered a manufacturing overhead cost. FALSE AACSB: Reflective Thinking AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 3 11. Factory heating and air conditioning should be considered a product cost in a manufacturing operation. TRUE AACSB: Reflective Thinking AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 3 12. Depreciation of office equipment is a manufacturing overhead cost at Dell Computer, a large manufacturer of personal computers. FALSE AACSB: Reflective Thinking AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 3 13. Maintenance workers in the factory are considered a direct labor cost at Hewlett-Packard, a leading manufacturer of computers and computer equipment. FALSE AACSB: Reflective Thinking AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 3 2-3 Chapter 02 - Product Costing Systems: Concepts and Design Issues 14. Lubricants used for production machinery should be considered a direct material cost at General Motors Corporation. FALSE AACSB: Reflective Thinking AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 3 15. Before materials enter the production process, they are called raw materials....
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Chap002 - Chapter 02 - Product Costing Systems: Concepts...

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