An Introduction to Managerial Accounting and Cost Concepts

True/False

1. Manufacturing overhead is an indirect cost with respect to units of product.

Level: Medium LO: 1 Ans: T

2. Depreciation on office equipment would not be included in the cost of goods manufactured.
Level: Easy LO: 2,4 Ans: T

3. Rent on a factory building used in the production process would be classified as a period cost and as a
fixed cost.
Level: Medium LO: 2,5 Ans: F

4. Period costs are found only in manufacturing companies, not in merchandising companies.
Level: Medium LO: 2 Ans: F

5. Depreciation on equipment a company uses in its selling and administrative activities would be
classified as a product cost.
Level: Medium LO: 2 Ans: F

6. If the finished goods inventory increases between the beginning and the end of a period, then the cost
of goods manufactured is smaller than the cost of goods sold.
Level: Hard LO: 3,4 Ans: F

7. The cost of goods manufactured is calculated by adding the amount of work in process at the end of the
year to the cost of raw materials used, direct labor worked, and manufacturing overhead incurred for the
year and then subtracting work in process at the beginning of the year.
Level: Medium LO: 4 Ans: F