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Exam 2: Cost Concepts, Behaviour and Estimation

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Question 1

True/False

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A direct cost is a cost that can be easily traced to the particular cost object under consideration.

A) True
B) False

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Question 2

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The cost of goods manufactured is included in the cost of goods available for sale in a manufacturing company

A) True
B) False

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Question 3

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In April direct labour was 70% percent of conversion cost. If the manufacturing overhead cost for the month was £42,000 and the direct materials cost was £28,000, the direct labour cost was

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 100 units his total cost would be:

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 for the inspector are:

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 the raw materials used in production during the year (in thousands of pounds) was:

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 for visits by staff are:

Differential costs do not include fixed costs.

All of the following costs would be found in a company's accounting records except:

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 sunk cost to 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. In making his decision, Noel would consider the differential cost to 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 1,000 units his total cost would be:

Variable costs are costs that vary, in total, in direct proportion to changes in the volume or level of activity

The following costs were incurred in June: Conversion costs during the month totaled: $\begin{array}{lrr} \text { Direct materials. } &£ 37,000\\ \text { Direct labour. } &£ 28,000\\ \text { Manufacturing overhead. } &£ 38,000\\ \text { Selling expenses. } &£ 12,000\\ \text { Administrative expenses. } & £ 20,000\\\end{array}$

Direct materials cost is a: I. Period Cost or II. Product Cost

All of the following can be differential costs except

Gabriel Inc. is a merchandising company. Last month the company's merchandise purchases totaled £70,000. The company's beginning merchandise inventory was £15,000 and its ending merchandise inventory was £22,000. What was the company's cost of goods sold for the month

Define the following Direct cost, indirect cost, variable cost, fixed cost,

At a sales volume of 40,000 units, Lonnie Company's total fixed costs are £40,000 and total variable costs are £60,000. The relevant range is 30,000 to 50,000 units. -If Lonnie were to sell 50,000 units, the total expected cost per unit would be:

Which of the following costs would be included both as part of prime cost and as part of conversion cost