Temple University

Acct 2102

Ch 3

1)Classify each of the following as a product cost or a period cost:

• • depreciation for production equipment –
  • depreciation for the office building –
  • sales office rent –
  • factory rent –
  • advertising –
  • cost of materials and components used in production –
  • production supervisor’s salary –
  • sales commissions –
  • marketing manager’s salary –
  • cost of merchandise for Amazon –
  • assembly workers’ wages –

2. Maintenance on factory equipment is a(n):

1. Period cost.
2. Overhead cost.
3. Administrative cost.
4. Product cost.

5. Both B and D are correct.

3. Which of the following statements relating to product and period costs is correct?

1. All fixed costs are period costs.
2. All variable costs are product costs.
3. Product costs are matched to sales revenue (i.e., they are expensed only when the product was sold) whereas period costs are expensed when incurred.
4. Product costs are matched to GAAP whereas period costs are matched to overhead.

4. A GAAP income statement combines which of the following costs?

1. Fixed costs with variable costs.
2. Controllable costs with non-controllable costs
3. Product costs and period costs.
4. A and B only.
5. A, B, and C.

5. A 7-11 store recorded the following data for the month of October: Cost of beginning inventory                               $46,000

Cost of ending inventory                      $36,000

Cost of goods sold                                   $120,000 The purchases of new merchandise in October total:

a.    $110,000

b.   $130,000

c.     $200,000

d. $46,000

6. Gate Grocery’s most popular candy bars cost $0.50 each and sells for $0.75. Management purchased 3,000 candy bars in February. It began February with 200 bars and had 150 remaining at the end of February. How much is cost of goods sold for February?

a.    $1,475

b. $2,287.50

c.     $3,050

d.   $1,525

7. Classify each of the following items as direct materials, direct labor, manufacturing overhead, or SG&A costs for General Motors:
   • factory rent –
   • sales office rent –
   • electric bill for the factory –
   • assembly workers’ wages –
   • phone bill for the sales office –
   • cost of engines –
   • cost of glue used in production (less than $5 per vehicle) –
   • sales manager’s salary –
   • production supervisor’s salary –
   • advertising –
   • production support staff salaries –
   • maintenance costs for the assembly line –
   • cost of steel used to make car bodies (more than $1,000 per vehicle) –
   • cost of drill bits for power tools used on the assembly line –

8. Which of the following would most likely not be included in manufacturing overhead in a car assembly plant?

1. Glass used to make windshields.
2. Salary paid to manufacturing plant custodians.
3. Manufacturing plant utility expenses.
4. Real estate taxes on the manufacturing plant

9. The Merchant Tire Company provided the following information for the month of February: Cost of goods manufactured                                                   $147,000

Beginning finished goods inventory         $23,000 Cost of goods sold                                                                                $129,000

The company’s balance in their finished goods inventory account at the end of February is:

A. $23,000

B. $18,000

C. $5,000

D. $41,000

10. The Harvey Company has provided the following information about its only product when they sold 10,000 units (all items are per unit).

For every additional unit sold above 10,000, the company’s profit will increase by:

1. $4.50 per unit
2. $9.00 per unit
3. $7.00 per unit
4. $11.50 per unit

11. Beginning inventory of direct materials is $1,000, purchases of direct materials are $5,000, and ending inventory of direct materials is $1,500. Direct labor costs are $3,000 and