Chapter 2 Cost Terms, Concepts, and Classifications Garrison, Managerial Accounting, 12th Edition 15 True/False Questions 1. Manufacturing overhead is an indirect cost with respect to units of product. Answer: True Level: Medium LO: 1 2. Depreciation on office equipment would not be included in the cost of goods manufactured. Answer: True Level: Easy LO: 2,4 3. Rent on a factory building used in the production process would be classified as a period cost and as a fixed cost. Answer:...

Exercise 2-9: Gelinas Computer Co was organized on May1. On that date the company purchased 22,000 USB flash drives to be sold with personal computers, each preloaded with the company’s product information brochures. The front of the USB flash drives displays the company’s name and an attractive logo. Each USB flash drive cost Gelinas $6. During May, 19,500 USB flash drives were drawn from the raw materials inventory account. Of these, 500 were taken by the sales manager to an import...

Week 9: Tutorial problems 11-2, 11-5, 11-23 EXERCISE 11–2 Segmented Income Statement Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement below: Sales $2,000,000 Variable expenses 792,000 Contribution margin 1,208,000 Fixed expenses 1,305,000 Operating loss $ (97,000)    In an effort to isolate the problem, the president has asked for an income statement segme...

Chapter 5 1. When combining activities in an activity-based costing system, activities should be grouped together at the same level. For example, batch-level activities should not be combined with unit-level activities. Ans: True Difficulty: Easy 2. Unit-level activities arise as a result of the total volume of production and are performed each time a unit is produced. Ans: True Difficulty: Easy 3. Unit-level production activities are performed each time a unit is made. Ans: True Diffic...

Chapter 7 1. A shift in the sales mix from products with a low contribution margin ratio toward products with a high contribution margin ratio will lower the break-even point in the company as a whole. Ans: True Difficulty: Medium 2. The break-even point in units can be obtained by dividing total fixed expenses by the contribution margin ratio. Ans: False Difficulty: Medium 3. In two companies making the same product and with the same total sales and total expenses, the contribution mar...

Chapter 3 1. Job-order costing is more likely to be used than process costing in situations where many different products or services are produced each period to customer specifications. Ans: True Difficulty: Easy 2. Job-order costing is used in manufacturing companies and process costing is used in service firms. Ans: False Difficulty: Easy 3. In a job-order costing system, costs are traced to departments and then allocated to units of product using an averaging process. Ans: False Dif...

Chapter 10 1. Standard costs should generally be based on the actual costs of prior periods. Ans: False Difficulty: Easy 2. The standard direct labour rate should NOT include fringe benefits. Ans: False Difficulty: Easy 3. From a standpoint of cost control, the most effective time to recognize material price variances is when the materials are placed into production. Ans: False Difficulty: Medium 4. The material quantity variance is computed based on the quantity of all materials purcha...

Question 1 Sunrise Pools and Spas manufactures fibreglass forms for in-ground pools and swim spas for all-season use. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided the data for their swim spa business in years 1, 2, and 3 shown below. The company’s fixed manufacturing overhead per unit was constant at $4,000 for all three years: Year 1 Year 2 Year 3 In...