Exam On Accounting: Quiz!

The salary of a corporate office security guard is considered a period cost. Period costs are expenses that are not directly related to the production of goods or services, but are incurred over a specific period of time. These costs are expensed in the period in which they are incurred, rather than being included in the cost of the product. Since the security guard's salary is not directly tied to the production of goods, it is classified as a period cost.

The answer "a measurement of reality" suggests that work-in-process inventory is a tangible representation of the production process. It implies that work-in-process inventory is a quantifiable measure of the actual goods or materials that are in the process of being produced. This explanation implies that work-in-process inventory is a real and tangible component of the production process.

When goods have been completed and are transferred to finished goods, the account that will be debited is Finished Goods Inventory. This is because Finished Goods Inventory represents the cost of goods that have been completed and are ready for sale. By debiting this account, the company recognizes the increase in the value of finished goods in its inventory.

The raw materials transferred to production can be calculated by subtracting the ending raw materials inventory from the beginning raw materials inventory and adding the raw materials purchased. In this case, the calculation would be: $100,000 (beginning raw materials inventory) + $990,000 (raw materials purchased) - $120,000 (ending raw materials inventory) = $970,000. Therefore, the correct answer is $970,000.

Touch labor is a term used interchangeably with direct labor. Direct labor refers to the cost of labor that is directly involved in the production of goods or services. It includes the wages and benefits of employees who are directly working on the production line or directly contributing to the manufacturing process. Touch labor emphasizes the physical aspect of labor, where workers physically touch and handle the materials or products. Therefore, touch labor and direct labor both refer to the same concept of labor costs directly associated with production activities.

Depreciation taken on the desk located in the office of the controller is considered a period cost. Period costs are expenses that are not directly tied to the production of goods or services, but rather are incurred over a specific period of time. In this case, the depreciation on the desk is not directly related to the production process or the creation of inventory, but rather it is an expense incurred over time for the use of the desk in the office. Therefore, it falls under the category of a period cost.

The cost of purchasing the product is included in inventory for any unsold products because it represents the actual cost incurred to acquire the goods. This cost includes the purchase price of the product, any discounts or allowances, and any other costs directly related to acquiring the product, such as transportation or import duties. By including the cost of purchasing the product in inventory, a company can accurately determine the value of its unsold goods and calculate the cost of goods sold when the products are eventually sold.

The cost of delivering an item to a customer is classified as a selling cost because it is directly related to the sales process. This cost includes expenses such as transportation, packaging, and any other costs incurred in getting the product to the customer. Selling costs are considered as part of the overall cost of sales and are essential for businesses to deliver their products to customers efficiently.

The cost of goods manufactured can be calculated by adding the direct materials cost, direct labor cost, and manufacturing overhead cost, and then subtracting the beginning work-in-process inventory and adding the ending work-in-process inventory. In this case, the calculation would be: $100,000 + $120,000 + $270,000 - $30,000 + $36,000 = $484,000. Therefore, the correct answer is $484,000.

When a product is sold, its cost is reflected by increasing the cost of goods sold on the income statement. This is because the cost of goods sold represents the direct costs associated with producing the goods that were sold. By increasing the cost of goods sold, the income statement accurately reflects the expenses incurred in generating the revenue from the sale of the product.

When goods have been sold to customers, the entry to remove the goods from inventory will have a credit to Finished Goods Inventory. This is because Finished Goods Inventory represents the cost of completed goods that are ready for sale. When these goods are sold, they are no longer part of the inventory and their cost needs to be removed from the balance sheet. By crediting Finished Goods Inventory, the account is reduced, reflecting the decrease in the value of the inventory.

The cost of goods sold can be calculated by adding the beginning inventory of finished goods to the cost of goods manufactured, and then subtracting the ending inventory of finished goods. In this case, the beginning finished goods inventory is $56,000, the cost of goods manufactured is $229,000, and the ending finished goods inventory is $48,000. Therefore, the cost of goods sold is $56,000 + $229,000 - $48,000 = $237,000.

A period cost is a cost that is incurred by the firm that is not directly related to the production or purchase of merchandise. It includes expenses such as rent, utilities, salaries, and advertising. These costs are not directly tied to the production process and are instead incurred over a specific period of time, such as a month or a year. Period costs are expensed in the period in which they are incurred rather than being added to the cost of inventory.

Freight-in is considered an example of a product cost because it is directly related to the cost of acquiring or producing a product. Freight-in refers to the transportation costs incurred when bringing raw materials or goods into the company's premises. These costs are necessary for the production process and are directly attributable to the product's cost. Therefore, freight-in is classified as a product cost rather than an operating expense like advertising charges or sales commissions paid.

The cost of factory overhead can be calculated by adding the depreciation on factory ($25,000) and the indirect materials used ($8,000). Therefore, the cost of factory overhead is $25,000 + $8,000 = $33,000. However, none of the given answer choices match this calculation. Therefore, the correct answer cannot be determined based on the given information.

Raw materials become a part of raw materials inventory immediately after they have been purchased. This means that once the materials are acquired, they are recorded and accounted for as part of the inventory. This allows the company to keep track of the quantity and value of the raw materials they have on hand, which is important for production planning and cost management.

Manufacturing overhead refers to any cost associated with the operation of a manufacturing facility that is not directly related to labor or materials. This includes expenses such as rent, utilities, depreciation of equipment, and indirect labor costs. These costs are necessary for the production process but cannot be directly attributed to a specific product. Therefore, they are allocated to the overall manufacturing process and considered as manufacturing overhead.

Product costs for a merchandising firm include all costs directly related to the production and acquisition of merchandise, such as freight-in costs, merchandise packaging, and the cost of the merchandise itself. Advertising expense, on the other hand, is not directly related to the production or acquisition of merchandise, but rather to the promotion and marketing of the products. Therefore, advertising expense is not included in product costs for a merchandising firm.

Raw materials that are used in the production process can be considered either direct or indirect materials. Direct materials are those that are directly involved in the production of a product and can be easily traced to it, such as raw materials used in manufacturing a car. Indirect materials, on the other hand, are not directly involved in the production process but are still necessary for the operation of the business, such as office supplies or maintenance tools. Therefore, raw materials can fall into either category depending on their role in the production process.

The cost of factory overhead can be calculated by adding up the depreciation on factory ($22,000), depreciation on administrative equipment ($9,000), and factory security guard cost ($33,000). Therefore, the cost of factory overhead is $22,000 + $9,000 + $33,000 = $59,000.

The term "manufacturing overhead" refers to indirect costs incurred during the production process, such as rent, utilities, and maintenance. These costs are also referred to as "factory overhead" or "factory burden." Additionally, "overhead" is a general term that encompasses all indirect costs in manufacturing. Therefore, all of the given answers are correct as they are different ways to describe the same concept.

Service firms differ from merchandisers or manufacturers in terms of identifying product costs because service firms do not have inventory. Unlike merchandisers and manufacturers who have physical products to sell, service firms offer intangible services to their customers. Therefore, the concept of inventory, which involves tracking and valuing physical goods, does not apply to service firms. Instead, service firms focus on determining the costs associated with providing their services, such as labor, overhead, and other expenses.

If managers believe that labor cost is insignificant, they may choose to treat it as an indirect labor cost. Indirect labor costs are those that are not directly tied to the production of goods or services, such as administrative or support staff salaries. By treating labor cost as an indirect cost, managers can allocate it to various departments or overhead expenses rather than directly attributing it to the production process. This allows them to focus on other more significant costs and prioritize resources accordingly.

When goods have been completed and are transferred to finished goods, the account that will be credited is the Work-in-Process Inventory. This is because the Work-in-Process Inventory account represents the cost of partially completed goods, and when these goods are completed, their cost is transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account. The Cost of Goods Sold account is used when the goods are sold to customers, not when they are transferred to finished goods. The Cost of Goods Manufactured account represents the total cost of goods produced during a specific period, but it is not directly involved in the transfer of completed goods to finished goods.