11.During its first year of operations, Connor Company paid $50,000 for direct materials and $36,000 in wages for production workers. Lease payments and utilities on the production facilities amounted to $14,000. General, selling, and administrative expenses were $16,000. The company produced 5,000 units and sold 4,000 units for $30.00 a unit. The average cost to produce one unit is which of the following amounts?
A. $20.00
B. $16.00
C. $18.40
D. $25.00
12.During its first year of operations, Forrest Company paid $30,000 for direct materials and $50,000 in wages for production workers. Lease payments, utility costs, and depreciation on factory equipment totaled $15,000. General, selling, and administrative expenses were $20,000. The average cost to produce one unit was $2.50. How many units were produced during the period?
A. 40,000
B. 46,000
C. 38,000
D. None of these.
13.Why do accountants normally calculate cost per unit as an average?
A. Determining the exact cost of a product is virtually impossible.
B. Some manufacturing-related costs cannot be accurately traced to specific units of product.
C. Even when producing multiple units of the same product, normal variations occur in the amount of materials and labor used.
D. All of these are justifications for computing average unit costs.
14.Which of the following costs is
not
considered to be a period cost?
A. Warehousing costs
B. Depreciation of delivery vehicles
C. Salaries paid to company executives
D. Freight paid on a purchase of raw materials
15.Select the
incorrect
statement regarding costs and expenses.
A. Some costs are initially recorded as expenses while others are initially recorded as assets.
B. Expenses are incurred when assets are used to generate revenue.
C. Manufacturing-related costs are initially recorded as expenses.
D. Non-manufacturing costs should be expensed in the period in which they are incurred.
16.Which of the following costs should be recorded as an expense?
A. Administrative employee salaries
B. Depreciation of manufacturing equipment
C. Insurance for the factory building
D. All of these are expenses.
17.Which of the following costs should
not
be recorded as an expense?
A. Insurance on factory building
B. Sales commissions
C. Product shipping costs
D. Product advertising
18.Which of the following transactions would cause net income for the period to decrease?
A. Paid $2,500 cash for raw material cost
B. Purchased $8,000 of merchandise inventory
C. Recorded $5,000 of depreciation on production equipment
D. Paid $2,000 for production supplies
19.Which of the following statements is true with regard to product costs versus general, selling, and administrative costs?
A. Product costs associated with unsold units appear on the income statement as general expenses.
B. General, selling, and administrative costs appear on the balance sheet.
C. Product costs associated with units sold appear on the income statement as cost of goods sold.
D. None of these is true.
20.Which of the following statements concerning product costs versus general, selling, and administrative costs is
false?
A. Product costs incurred during the period will initially appear as inventory on the balance sheet.
B. General, selling, and administrative costs are always expensed when paid.
C. Product costs may be divided between the balance sheet and income statement.
D. General, selling, and administrative costs never appear as inventory on the balance sheet.