BMGT 221 Exam 1 questions n answers
graded A+ updated
Direct costs - correct answer ✔✔Costs that can be easily and conveniently traced to a unit of
product or other cost object.
Ex. direct material, direct labor
Indirect costs - correct answer ✔✔Costs that cannot be easily and conveniently traced to a unit
of product or other cost object.
Ex. manufacturing overhead
Common costs - correct answer ✔✔Indirect costs incurred to support a number of cost objects.
These costs cannot be traced to any individual cost object.
Three basic manufacturing cost categories - correct answer ✔✔Direct materials, direct labor,
manufacturing overhead
Direct materials - correct answer ✔✔Raw materials that become an integral part of the product
and that can be conveniently traced directly to it.
Ex. A radio installed in an automobile
Direct labor - correct answer ✔✔Labor costs that can be easily traced to individual units of
product.
Ex. Wages paid to automobile assembly workers
Manufacturing overhead - correct answer ✔✔All manufacturing costs except direct material
and direct labor. These costs cannot be readily traced to finished products.
,- Includes indirect materials that cannot be easily traced to specific units of product.
- Includes indirect labor costs that cannot be easily traced to specific units of product.
- Only those indirect costs associated with operating the factory are included in manufacturing
overhead.
Examples of manufacturing overhead - correct answer ✔✔- Depreciation of manufacturing
equipment
- Utility costs
- Property taxes
- Insurance premiums incurred to operate a manufacturing facility
Prime cost - correct answer ✔✔Direct material + Direct labor
Conversion cost - correct answer ✔✔Direct labor + Manufacturing overhead
Nonmanufacturing costs - correct answer ✔✔Not assigned to individual jobs, rather they are
expensed in the period incurred; selling costs and administrative costs.
Examples:
1. Salary expense of employees who work in marketing, selling, or administrative capacity.
2. Advertising expenses
Selling costs - correct answer ✔✔Costs necessary to secure the order and deliver the product.
Selling costs can be either direct or indirect costs.
Administrative costs - correct answer ✔✔All executive, organizational, and clerical costs.
Administrative costs can be either direct or indirect costs.
, Product costs - correct answer ✔✔All the costs that are involved in acquiring or making a
product.
Product costs "attach" to a unit of product as it is purchased or manufactured and they stay
attached to each unit of product as long as it remains in inventory awaiting sale.
Manufacturing product costs - correct answer ✔✔- Raw materials
- Work in process
- Finished goods
Raw materials - correct answer ✔✔Any materials that go into the final product
Work in process - correct answer ✔✔Units of product that are only partially complete and will
require further work before they are ready for sale to the customer
Finished goods - correct answer ✔✔Completed units of product that have not yet been sold to
customers
Transfer of product costs - correct answer ✔✔- When direct materials are used in production,
their costs are transferred from Raw Materials to Work in Process.
- Direct labor and manufacturing overhead costs are added to Work in Process to convert direct
materials into finished goods.
- Once units of product are completed, their costs are transferred from Work in Process to
Finished Goods.
- When a manufacturer sells its finished goods to customers, the costs are transferred from
Finished Goods to Cost of Goods Sold.
Cost classifications for preparing financial statements
(product cost vs. period cost) - correct answer ✔✔Product cost
graded A+ updated
Direct costs - correct answer ✔✔Costs that can be easily and conveniently traced to a unit of
product or other cost object.
Ex. direct material, direct labor
Indirect costs - correct answer ✔✔Costs that cannot be easily and conveniently traced to a unit
of product or other cost object.
Ex. manufacturing overhead
Common costs - correct answer ✔✔Indirect costs incurred to support a number of cost objects.
These costs cannot be traced to any individual cost object.
Three basic manufacturing cost categories - correct answer ✔✔Direct materials, direct labor,
manufacturing overhead
Direct materials - correct answer ✔✔Raw materials that become an integral part of the product
and that can be conveniently traced directly to it.
Ex. A radio installed in an automobile
Direct labor - correct answer ✔✔Labor costs that can be easily traced to individual units of
product.
Ex. Wages paid to automobile assembly workers
Manufacturing overhead - correct answer ✔✔All manufacturing costs except direct material
and direct labor. These costs cannot be readily traced to finished products.
,- Includes indirect materials that cannot be easily traced to specific units of product.
- Includes indirect labor costs that cannot be easily traced to specific units of product.
- Only those indirect costs associated with operating the factory are included in manufacturing
overhead.
Examples of manufacturing overhead - correct answer ✔✔- Depreciation of manufacturing
equipment
- Utility costs
- Property taxes
- Insurance premiums incurred to operate a manufacturing facility
Prime cost - correct answer ✔✔Direct material + Direct labor
Conversion cost - correct answer ✔✔Direct labor + Manufacturing overhead
Nonmanufacturing costs - correct answer ✔✔Not assigned to individual jobs, rather they are
expensed in the period incurred; selling costs and administrative costs.
Examples:
1. Salary expense of employees who work in marketing, selling, or administrative capacity.
2. Advertising expenses
Selling costs - correct answer ✔✔Costs necessary to secure the order and deliver the product.
Selling costs can be either direct or indirect costs.
Administrative costs - correct answer ✔✔All executive, organizational, and clerical costs.
Administrative costs can be either direct or indirect costs.
, Product costs - correct answer ✔✔All the costs that are involved in acquiring or making a
product.
Product costs "attach" to a unit of product as it is purchased or manufactured and they stay
attached to each unit of product as long as it remains in inventory awaiting sale.
Manufacturing product costs - correct answer ✔✔- Raw materials
- Work in process
- Finished goods
Raw materials - correct answer ✔✔Any materials that go into the final product
Work in process - correct answer ✔✔Units of product that are only partially complete and will
require further work before they are ready for sale to the customer
Finished goods - correct answer ✔✔Completed units of product that have not yet been sold to
customers
Transfer of product costs - correct answer ✔✔- When direct materials are used in production,
their costs are transferred from Raw Materials to Work in Process.
- Direct labor and manufacturing overhead costs are added to Work in Process to convert direct
materials into finished goods.
- Once units of product are completed, their costs are transferred from Work in Process to
Finished Goods.
- When a manufacturer sells its finished goods to customers, the costs are transferred from
Finished Goods to Cost of Goods Sold.
Cost classifications for preparing financial statements
(product cost vs. period cost) - correct answer ✔✔Product cost
