Accounting Exam Review 2 T/F

The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead cost.

Period costs include direct materials and direct labor.

The cost of materials entering directly into the manufacturing process is classified as factory overhead cost.

Manufacturers use machinery and labor to convert direct materials into finished products.

A cost object indicates how costs are related or identified.

Goods that are part way through the manufacturing process, but not yet complete, are referred to as materials inventory.

If the cost of materials is not a significant portion of the total product cost, the materials may be classified as part of factory overhead cost.

Factory overhead cost is sometimes referred to as factory burden.

Period costs can be found on both the balance sheet and the income statement.

Product costs include direct labor and advertising expense.

Labor costs that are directly traceable to the product are part of factory overhead.

The payment of dividends is an example of a cost.

The costs of materials and labor that do not enter directly into the finished product are classified as factory overhead.

A cost can be a payment of cash for the purpose of generating revenues.

Prime costs consist of factory overhead and direct labor.

Controlling is the process of monitoring operating results and comparing actual results with the expected results.

Direct labor costs are included in the conversion costs of a product.

Conversion costs are the combination of direct labor, direct material, and factory overhead costs.

Indirect costs can be specifically traced to a cost object.

Only the value of the inventory that is sold will appear on the income statement.

On the balance sheet for a manufacturing business, the cost of direct materials, direct labor, and factory overhead are categorized as either materials inventory, work in process inventory, or finished goods inventory.

The statement of cost of goods manufactured is an extension of the income statement for a manufacturing company.

Managers use managerial information to evaluate performance of a company's operation.

A report analyzing how many products need to be sold to cover operating costs is not typically a managerial accounting report.

A report analyzing the dollar savings of purchasing new equipment to speed up the production process is a managerial accounting report.

Managerial information is for external as well as internal stakeholders.