ACCT 302: Accounting For Manufacturing Company Inventory! Trivia Quiz

The explanation for the given answer is that work-in-process inventory refers to goods that are in the process of being manufactured or worked on but have not yet been completed. These goods are still undergoing various stages of production and have not reached the final finished goods stage. Therefore, the statement that work-in-process inventory is goods partially worked on but not yet completed is true.

Insurance companies provide services or intangible products to their customers. This is true because insurance is a service-based industry where companies offer various types of coverage to individuals or businesses in exchange for premium payments. The intangible products refer to the insurance policies that are not physical items but rather contractual agreements that provide financial protection against specific risks. These policies are customized according to the customer's needs and are delivered through services such as policy issuance, claims processing, and customer support.

Merchandising companies are businesses that purchase products from manufacturers or wholesalers and then sell them to customers without making any changes to the products. This means that the products are sold in their original form, without any modifications or alterations. Therefore, the statement "Merchandising companies purchase products and sell them to customers without changing their basic form" is true.

The statement is true because indirect manufacturing costs are indeed referred to as manufacturing overhead costs or factory overhead costs. These costs are not directly associated with the production of a specific product but are necessary for the overall manufacturing process. Examples of indirect manufacturing costs include rent, utilities, depreciation of factory equipment, and indirect labor costs. By using the term "indirect manufacturing costs" interchangeably with "manufacturing overhead costs" or "factory overhead costs," it emphasizes the same concept of costs that are incurred in the manufacturing process but are not directly tied to a specific product.

The statement is true because manufacturing sector firms typically hold three types of inventory. Direct materials inventory refers to the raw materials and components that are used in the production process. Work-in-process inventory includes partially completed products that are still being worked on. Finished goods inventory consists of completed products that are ready to be sold to customers. These three types of inventory are essential for a manufacturing firm to ensure a smooth production process and meet customer demand.

Direct material costs can be traced to the cost object.

Department stores like Target are considered merchandising companies because they primarily sell physical products to consumers. They purchase goods from manufacturers or wholesalers and then sell them to customers at a higher price, making a profit. These companies focus on the buying, displaying, and selling of merchandise, and their main source of revenue comes from the sale of these products. Therefore, the statement "Department stores, such as Target, are examples of a merchandising company" is true.

Direct manufacturing labor refers to the wages and benefits paid to employees who are directly involved in the production process, such as machine operators or assembly line workers. It does not include plant rent or salaries paid to plant supervisors, as these costs are considered indirect manufacturing costs. Therefore, the statement that direct manufacturing labor includes plant rent and salaries paid to plant supervisors is false.

Period costs are not included in the cost of goods sold. Period costs are expenses that are not directly related to the production of goods or services, such as administrative expenses, marketing expenses, and rent. These costs are expensed in the period in which they are incurred and are not included in the calculation of the cost of goods sold, which only includes the direct costs of producing goods. Therefore, the statement "Period costs are included in the cost of goods sold" is false.

The statement that all manufacturing costs are period costs is false. Manufacturing costs can be classified into two categories: product costs and period costs. Product costs include direct materials, direct labor, and manufacturing overhead, and are incurred to produce goods. These costs are capitalized as part of inventory until the goods are sold. On the other hand, period costs are not directly associated with the production process and are expensed in the period they are incurred. Examples of period costs include selling and administrative expenses. Therefore, not all manufacturing costs are period costs.

29,500 × ($85 - ($1,500,000 / $30,000)) = $1,032,500

Direct manufacturing labor costs include the compensation of all manufacturing labor that can be traced to the cost object.

The acquisition costs of direct materials include additional charges such as freight-in charges, sales taxes, and customs duties. These charges are incurred when purchasing direct materials and are considered part of the overall cost of acquiring the materials. Therefore, the statement is true.

Merchandising companies normally hold only one type of inventory: merchandise inventory.

Inventoriable costs are reported as an asset when incurred and expensed on the income statement when the product is sold.

47,000 × ($75 - ($2,000,000 / $50,000)) = $1,645,000