VSB 3006 Exam 1 Questions & Answers 2024/2025
Product Costs - ANSWERSProduct costs include direct materials, direct labor, and manufacturing overhead.
Product costs are included as part of inventory until the product is sold. Once the product is sold, product costs are expensed on the income ...
Product Costs - ANSWERSProduct costs include direct materials, direct labor, and manufacturing
overhead.
Product costs are included as part of inventory until the product is sold. Once the product is sold,
product costs are expensed on the income statement as cost of goods sold.
Period Costs - ANSWERSPeriod costs (operating expenses) are all the costs that are not product costs.
Period costs are expensed on the income statement in the period in which they are incurred.
Prime Cost - ANSWERSPrime cost = Direct materials + Direct labor
Manufacturing Overhead - ANSWERSMO = Indirect material + Indirect labor + other MOs
What are the inventory accounts on balance sheet for a manufacturing company? - ANSWERSInventory
accounts include raw materials, work in process, and finished goods. Note that direct materials and
direct labor are NOT account names.
Understand the difference between variable costs and fixed costs - ANSWERSVariable cost per unit is a
constant and total variable costs increase in direct proportion to the level of activity.
Total fixed cost is a constant and fixed cost per unit decreases as the level of activity increases.
What is a committed fixed cost? - ANSWERSCommitted fixed costs represent organizational investments
with a multiyear planning horizon that cannot be significantly reduced even for short periods of time
without making fundamental changes. Examples include investments in facilities and equipment, as well
as real estate taxes, insurance expenses, and salaries of top management.
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