1.

The sum of all costs that composed manufacturing costs

PART I. True or False (Shade A for True, B for False)

1. The sum of all costs that composed manufacturing costs

except direct materials is called manufacturing

overhead.

2. Conversion cost is the sum of direct labor and

manufacturing overhead.

3. Prime cost is the sum of direct labor and manufacturing

overhead.

4. Thread used in the production of bed sheet set, an

indirect material, is classified as manufacturing

overhead.

5. All costs in a manufacturing company are product costs.

6. The cost of goods sold of a manufacturing company

equals beginning finished goods inventory + cost of

goods manufactured - ending finished goods inventory.

7. A variable cost is constant if expressed on a per unit

basis but the total dollar amount changes as the

number of units’ increases or decreases.

8. As activity increases within the relevant range, fixed

costs remain constant on a per unit basis.

9. All of the following are examples of opportunity costs:

salary given up to start a business; rental income given

up when you live in a house you own; interest income

that could be earned on money spent for a car.

10. The amount that was paid by a company for a building

to house its operations is an example of a sunk cost.

11. The flow of costs through the manufacturing accounts is

essentially the same in both process costing and job-

order costing.

12. Companies that use a process-cost accounting system

would establish a separate Work-in-Process Inventory

account for each manufacturing department.

13. ABC Inc. overstated the percentage of work completed

with respect to conversion cost on the ending work-in-

process inventory. This overstatement caused

conversion-cost equivalent units to be overstated.

14. Equivalent-unit calculations are necessary to allocate

manufacturing costs between units sold and ending

work in process.

15. Equivalent units are computed to assign costs to

partially completed units.