ACCT 505 Practice Midterm Questions and Answers

ACCT 505 Practice Midterm Page 1 1. Indirect labor is a part of a prime cost. b conversion cost. - c period cost. d nonmanufacturing cost. Answer: B Explanation: Conversion costs are all m anufacturing costs other than direct materials cost. 2. Prime cost and conversion cost share what common element of total cost? A Direct materials B Direct labor -- C Variable overhead D Variable overhead Answer: B Explanation: Prime costs and conversion costs have direct labor cost as an overlapping item. Formula Prime costs = direct materials cost + direct labor cost Conversion costs = direct labor cost + manufacturing overheads 3. On the Schedule of Cost of Goods Manufactured, the final Cost of Goods Manufactured figure represents A the amount of cost charged to Work in Process during the period. B the amount of cost transferred from Finished Goods to Cost of Goods Sold during the period. C the amount of cost placed into production during the period. D the amount of cost of goods completed during the current year whether they were started before or during the current year. Answer: D Explanation: It includes the cost of goods completed during current period irrespective of when they were started. 4. Which of the following would most likely be included as part of manufacturing overhead in the production of a wooden table? A The amount paid to the individual who stains the table B The commission paid to the salesperson who sold the table C The cost of the glue used in the table --- D The cost of the wood used in the table Answer: C Explanation: Manufacturing overhead includes such things as indirect labor, indirect materials (such as manufacturing supplies)