Question 1

Which of the following best describes a merchandising company?

Accepted Answer

A company that resells tangible products bought from manufacturers and suppliers.

Question 2

Which of the following is NOT an element of the value chain?

Accepted Answer

Depreciation

Question 3

A cost that can be traced directly and specifically to a cost object is known as:

Accepted Answer

Direct cost

Question 4

Which of the following is a period cost for a manufacturing company?

Accepted Answer

Advertising expense

Question 5

Which formula correctly calculates the total cost for a company producing multiple units?

Accepted Answer

$$Total\ cost = Total\ fixed\ cost + (Variable\ cost\ per\ unit 	imes Number\ of\ units)$$

Question 6

A company has fixed costs of $$20,000,000 and variable costs of 5$$,000 per unit. If it produces 12,000 units, what is the total cost?

Accepted Answer

$$80,000,000$$

Question 7

Which of the following costs would be considered manufacturing overhead?

Accepted Answer

Glue for picture frames (not cost-effective to trace to individual frames)

Question 8

Which of the following statements about relevant and irrelevant costs is TRUE?

Accepted Answer

Sunk costs are always irrelevant for decision making.

Question 9

A company’s average cost per unit will:

Accepted Answer

Decrease as more units are produced, assuming fixed costs do not change.

Question 10

Which of the following is an example of a controllable cost?

Accepted Answer

Manager’s salary for the current year

Question 11

Which of the following best describes the flow of costs in a manufacturing company?

Accepted Answer

Raw materials inventory → Work in process inventory → Finished goods inventory → Cost of goods sold

Question 12

Which of the following is the correct formula for calculating average cost per unit?

Accepted Answer

$$Average\ cost = Total\ cost \div Number\ of\ units$$

Question 13

A company’s cost of goods sold for a merchandising company is calculated as:

Accepted Answer

$$Beginning\ inventory + Purchases - Ending\ inventory$$

Question 14

Which of the following is a prime cost in a manufacturing company?

Accepted Answer

Direct materials + Direct labor

Question 15

If a company’s total cost is $70,000,000 for 10,000 units, what is the average cost per unit?

Accepted Answer

$$7,000$$

Question 16

Which of the following is an example of a variable cost?

Accepted Answer

Direct materials used in production

Question 17

Which of the following is a product cost for a manufacturing company?

Accepted Answer

Direct labor

Question 18

Which of the following best describes the marginal cost?

Accepted Answer

The cost of producing one more unit

Question 19

Which of the following is an example of a sunk cost?

Accepted Answer

The original purchase price of equipment that is now fully depreciated

Building Blocks of Managerial Accounting: Structured Study Notes

Study Guide - Practice Questions