True/False Indicate whether the statement is true or false balance sheet shows c

Question

True/False Indicate whether the statement is true or false balance sheet shows cash, $75,000, marketable securities, $115,000; receivables, $150,000 and $222,500 of inventories. Current liabilities are $225,000. The current ratio is 2.5 to I. 2. The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead cost Conversion costs are the combination of direct labor, direct material and factory overhead costs. The statement of cost of goods manufactured is an extension of the income statement for a manufacturing 4. company 5. Goods that are partway through the manufacturing process, but not yet complete, are referred to as materials inventory The current year's advertising costs are normally considered period costs. the balance sheet as inventory 6. act costs are incurred in the manufacturing process, they are accounted for as assets and reported on he primary uses of a cost of production report is to assist management in controlling production costs a process costing system, a separate work in process inventory account is maintained for each customer's 8. One of t 9. In job. 10. Once equivalent units are calculated for materials, this number will also be used for direct labor and factory 11. Direct materials cost that varies with the number of units produced are an example of a fixed cost of overhead production 12. Direct materials and direct labor costs are examples of variable costs of production. 13. Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is an example of a fixed 14. The contribution margin ratio is the same as the profit-volume ratio 15, Variable costs as a percentage of sales are equal to 100% minus the contribution margin ratio. cost

Explanation / Answer

1 A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000 and $222,500 of inventories. Current liabilities are $225,000. The current ratio is 2.5 to 1. (75000+115000+150000+222500)/225000 = 2.5 TRUE 2 The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead cost. DM+DL+OH = Mfg Cost TRUE 3 Conversion costs are the combination of direct labor, direct material and factory overhead costs. DL+FOH = Conversion cost FALSE 4 The statement of cost of goods manufactured is an extension of the income statement for a manufacturing company. Statement of cost of goods manufactured is prepared as an extension for mfg co. TRUE 5 Goods that are partway through the manufacturing process, but not yet complete, are referred to as materials inventory. Called WIP FALSE 6 The current year’s advertising costs are normally considered period costs. Its periodic cost and expensed in that period TRUE 7 As product costs are incurred in the manufacturing process, they are accounted for as assets and reported on the balance sheet as inventory. Product cost is WIP inventory if in process otherwise finished goods inventory. TRUE 8 One of the primary uses of a cost of production report is to assist management in controlling production costs. Cost of production report is used as controlling measure by management. TRUE 9 In a process costing system, a separate work in process inventory account is maintained for each customer's job. separate account is maintained in job order system FALSE 10 Once equivalent units are calculated for materials, this number will also be used for direct labor and factory overhead. Separate calculation is done for labor and overhead. FALSE 11 Direct materials cost that varies with the number of units produced are an example of a fixed cost of production. Its variable cost FALSE 12 Direct materials and direct labor costs arc examples of variable costs of production. DM and DL cost is variable cost TRUE 13 Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is an example of a fixed cost. Semi-Variable cost FALSE 14 The contribution margin ratio is the same as the profit-volume ratio. TRUE 15 Variable costs as a percentage of sales are equal to 100% minus the contribution margin ratio. TRUE

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