2-1. The cost of lubricants used to grease a machine used in the production process of a manufacturing company is an example of a

	a. prime cost.
	b. direct material cost.
	c. an indirect material cost.
	d. period cost.

2-2. The cost of direct materials is

	a. fixed per unit but variable in total.
	b. variable per unit (due to quantity discounts offered by vendors) and in total.
	c. variable per unit but fixed in total.
	d. fixed per unit and in total.

2-3. The amount paid by a manufacturing company for a factory building is considered

	a. a sunk cost.
	b. an opportunity cost.
	c. a period cost.
	d. an incremental cost.

2-4. The nursing station on the fourth floor of General Hospital is responsible for the care of patients who have undergone orthopedic surgery. The costs of drugs administered by the nursing station to patients would be classified as

	a. direct costs.
	b. indirect costs.
	c. overhead costs.
	d. period costs.

2-5. The controller of ABC Manufacturing would consider the cost of salaries paid to personnel in his/her department to be

	a. direct and controllable.
	b. direct but not controllable.
	c. indirect and controllable.
	d. indirect and not controllable.

2-6. Fixed costs expressed on a per unit basis

	a. will react directly with changes in activity.
	b. will react inversely with changes in activity.
	c. are not affected by activity.
	d. should be ignored in making decisions since they cannot change.

2-7. Product costs appear on the balance sheet

	a. only if goods are partially completed at the end of the period.
	b. only if goods are unsold at the end of a period.
	c. only if goods are partially completed, are unsold at the end of a period, or both.
	d. only in merchandising firms.

2-8. Straight-line amortization on a computer used in the marketing department of a manufacturing firm would be classified as

	a. a product cost that is fixed in terms of cost behaviour.
	b. a period cost that is fixed in terms of cost behaviour.
	c. an asset representing funds accumulated to replace the computer when it is retired.
	d. a liability representing the probably future outlay of funds to replace the computer when it is retired.

2-9. Which of the following classifications is correct? Prime Cost/ Conversion Cost

	a. Direct labour and materials /Direct labour and material and manufacturing overhead
	b. Direct labour and direct materials /Direct labour and manufacturing overhead
	c. Direct materials/ Direct labour
	d. Raw materials/ Work in process

2-10. The following information is taken from the records of Dana Manufacturing for the year ending December 31, 2000: Direct materials, $5,000; Manufacturing overhead, $6,000; Total manufacturing costs, $17,000; Beginning work in process inventory, $1,000; Cost of goods manufactured, $15,000. What are the correct amounts for direct labour and ending work in process inventory? Direct Labour / Ending Work in Process

	a. $12,000 / $2,000
	b. $11,000 / $2,000
	c. $ 6,000 / $1,000
	d. $ 6,000 / $3,000

2-11. Questions 11 and 12 refer to the following:
The manufacturing operations of Barton, Inc. had the following inventory balances for the month of March, 2000:

Inventories	3/1/00	3/31/00
Raw Materials	10,000	12,000
Work in process	6,000	7,000
Finished goods	30,000	22,000

If Barton purchased $18,000 of raw materials during March, the cost of raw materials used in production would be:

	a. $16,000
	b. $20,000
	c. $41,000
	d. $19,000

2-12. If Barton transferred $38,000 of completed goods from work in process to finished goods during March, what was the amount of the cost of goods sold?

	a. $38,000
	b. $43,000
	c. $30,000
	d. $46,000

2-13. The schedule of cost of goods manufactured of Cartoon Company shows the following balances for the year ended December 31, 2000: Raw materials used in production, $900,000; Direct labour, 560,000; Total overhead costs, 750,000; Ending work in process inventory, 460,000; Cost of goods manufactured, 2,250,000. The beginning work in process inventory was:

	a. $500,000
	b. $420,000
	c. $1,250,000
	d. $40,000

2-14. The following information is taken from the records of Datum Company for the year ended May 31, 2000: Direct materials, $ 8,000; Direct labour, $3,000; Manufacturing overhead, $11,000; Ending work in process inventory, $5,000; Cost of goods manufactured, $19,000. The amount of beginning work in process inventory is:

	a. $0
	b. $2,000
	c. $3,000
	d. $8,000

2-15. The following information appears on the income statement of Teddy, Inc. for the year ended June 30, 2000: Beginning finished goods inventory, $150,475; Ending finished goods inventory, $145,750; Sales, $400,000; Gross margin, $120,000. The cost of goods manufactured for the year was:

	a. $115,275
	b. $284,725
	c. $275,275
	d. $124,725

2-16. The following information is taken from the balance sheet of El Felix Manufacturing at September 30, 2000: Total assets, $900,000; Cash, $20,000; Accounts receivable, $105,000; Finished goods inventory, $180,000; Work in process inventory, $65,000; Prepaid expenses, $15,000; Total long-term assets, $500,000. The raw materials inventory at September 30, 2000 was:

	a. $30,000
	b. $130,000
	c. $15,000
	d. $115,000

2-17. A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $3,000 and is paid at the beginning of the first year. Three-fourths of the premium applies to factory operations and one-fourth applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage? Product / Period

	a. $3,000/ $ 0
	b. $2,250 / $750
	c. $1,500 / $500
	d. $750 / $250

2-18. Warren Company's direct labour cost is 30% of its conversion cost. If the manufacturing overhead cost for the last period was $49,000 and the direct materials cost was $20,000, the direct labour cost was:

	a. $ 6,000
	b. $14,700
	c. $21,000
	d. $34,000

2-19. Questions 19 and 20 refer to the following: At a sales volume of 30,000 units, Judi, Inc.'s total fixed costs are $30,000 and total variable costs are $45,000. The relevant range for this product is 20,000 to 40,000 units. If Judi were to sell 32,000 units, the total expected cost would be:

	a. $75,000
	b. $78,000
	c. $80,000
	d. $77,000

2-20. If Judi were to sell 40,000 units, the total expected cost per unit (rounded to the nearest cent) would be:

	a. $2.50
	b. $2.25
	c. $2.13
	d. $1.88