Chapter 2 : Manufacturing Cost Concept and Components

When classified according to traceability to cost objective, the cost of raw materials is considered a:

• Discretionary cost

• Direct cost

• Product cost

• Committed cost

Variable costs are costs that change regularly while fixed costs remain the same all the time.

• True

• False

Depreciation on office furniture is considered to be a -

• Administrative costs

• Selling and distribution costs

• Overhead costs

• Negative asset

Factory insurance is considered to be a -

• Overhead costs

• Prime costs

• Administrative costs

• Operating income

Prime costs are made up of -

• Raw materials costs + direct labour costs

• Direct labour costs + Indirect labour costs

• Factory overheads + administrative costs

• Selling and distribution costs + administrative costs

The formula for calculating cost of goods sold is -

• Finished goods at beginning of the year + cost of finished goods produced - finished goods at end of the year

• Total manufacturing costs + work-in-progress at beginning of the year - work-in-progress at end of the year

• Finished goods at beginning of the year + cost of sales - finished goods at end of the year

• Finished goods at beginning of the year - cost of finished goods produced - finished goods at end of the year

cost of goods sold is equal to cost of finished goods produced when -

• There is a zero balance for work-in-progress at the beginning and the end of the year.

• There is a zero balance for finished goods stock at the beginning and the end of the year.

• There is a zero balance for raw materials stock at the beginning and the end of the year.

• At all times.

Which cost is also known as inventoriable cost?

• Product cost

• Period cost

• Manufacturing cost

• Non-manufacturing cost

It is possible for both fixed cost and variable cost to be combined in only one cost.

• True

• False

Fixed costs -

• Increase in total with an increase in production

• Decrease per unit with an increase in production

• Increase per unit with an increase in production

• Decrease in total with a decrease in production