ACCT 302: Cost Accounting! Trivia Questions

1. Inventoriable costs are assigned to inventories under GAAP.

True

False

Inventoriable costs refer to the direct costs incurred in the production of goods or services that can be easily traced to the inventory. These costs include the cost of raw materials, direct labor, and direct overhead. Under GAAP (Generally Accepted Accounting Principles), these costs are assigned to inventories to accurately reflect the cost of goods held for sale. Therefore, the statement that inventoriable costs are assigned to inventories under GAAP is true.

Explanation

Inventoriable costs refer to the direct costs incurred in the production of goods or services that can be easily traced to the inventory. These costs include the cost of raw materials, direct labor, and direct overhead. Under GAAP (Generally Accepted Accounting Principles), these costs are assigned to inventories to accurately reflect the cost of goods held for sale. Therefore, the statement that inventoriable costs are assigned to inventories under GAAP is true.

2. Rework labor time is considered an overhead cost and not a direct labor cost.

True

False

Rework labor time is considered an overhead cost because it involves additional time and resources that are not directly related to the production of a product or service. It is an indirect cost that is incurred due to errors or defects in the initial production process. This cost includes the time spent on identifying and fixing the issues, as well as any additional materials or resources required. Therefore, it is not considered a direct labor cost, which refers to the wages or salaries paid to employees directly involved in the production process.

Explanation

Rework labor time is considered an overhead cost because it involves additional time and resources that are not directly related to the production of a product or service. It is an indirect cost that is incurred due to errors or defects in the initial production process. This cost includes the time spent on identifying and fixing the issues, as well as any additional materials or resources required. Therefore, it is not considered a direct labor cost, which refers to the wages or salaries paid to employees directly involved in the production process.

3. For external reporting purposes, indirect manufacturing costs must be allocated to individual units.

True

False

Indirect manufacturing costs, such as factory utilities and maintenance, are not directly traceable to individual units of production. However, for external reporting purposes, these costs need to be allocated to individual units to accurately reflect the total cost of production. This allocation is typically done using a predetermined overhead rate based on a cost driver, such as direct labor hours or machine hours. Therefore, the statement "For external reporting purposes, indirect manufacturing costs must be allocated to individual units" is true.

Explanation

Indirect manufacturing costs, such as factory utilities and maintenance, are not directly traceable to individual units of production. However, for external reporting purposes, these costs need to be allocated to individual units to accurately reflect the total cost of production. This allocation is typically done using a predetermined overhead rate based on a cost driver, such as direct labor hours or machine hours. Therefore, the statement "For external reporting purposes, indirect manufacturing costs must be allocated to individual units" is true.

4. If a worker is paid for 40 hours but is idle for 5 of those 40 hours, the 5 hours of idle time would be considered a component of direct labor.

True

False

Idle time is normally considered a component of indirect labor since it is usually not associated with a particular job.

Explanation

Idle time is normally considered a component of indirect labor since it is usually not associated with a particular job.

5. Idle time wages consist of the wages paid to all workers (for both direct labor and indirect labor) in excess of their straight-time wage rates.

True

False

Idle time wages do not consist of the wages paid to all workers in excess of their straight-time wage rates. Idle time wages refer to the wages paid to workers when they are not engaged in productive work due to reasons such as machine breakdowns, power outages, or lack of materials. These wages are typically paid at a reduced rate or may not be paid at all. Therefore, the statement is false.

Explanation

Idle time wages do not consist of the wages paid to all workers in excess of their straight-time wage rates. Idle time wages refer to the wages paid to workers when they are not engaged in productive work due to reasons such as machine breakdowns, power outages, or lack of materials. These wages are typically paid at a reduced rate or may not be paid at all. Therefore, the statement is false.

6. Overtime premium is normally considered as a component of direct labor.

True

False

Overtime premium is normally considered as part of indirect labor since it is usually not associated with a particular job.

Explanation

Overtime premium is normally considered as part of indirect labor since it is usually not associated with a particular job.

7. Tony worked 48 hours last week for Bread Works Manufacturing. Of the 48 hours 5 hours were considered overtime, and also Tony was idle for 4 of the 48 hours due to an equipment malfunction. Tony makes $50 per hour and is paid $75 an hour (time and a half) for overtime. Tony's total compensation for that week would be , and assuming Bread Works charges overtime premium and idle time to indirect labor, the amount of this compensation credited to indirect labor would be .

$2,950; $325

$2,900; $280

$2,750; $300

$2,500; $350

total compensation (44 × $50) + (5 × $75) = $2,950;
indirect labor (4 × $50) + (5 × $25) = $325

Explanation

total compensation (44 × $50) + (5 × $75) = $2,950;
indirect labor (4 × $50) + (5 × $25) = $325

8. Dave Rigby is paid $30 an hour for straight-time and $40 an hour for overtime. One week he worked 45 hours, which included 5 hours of overtime, and 3 hours of idle time caused by material shortages. What is the direct labor cost incurred to the company?

$1,260

$1,400

$1,310

$1,210

Direct labor (45 - 3 = 42 hours × $30) = $1,260

Explanation

Direct labor (45 - 3 = 42 hours × $30) = $1,260

9. Mario Garcia is paid $20 an hour for straight-time and $30 an hour for overtime. One week she worked 42 hours, which included 2 hours of overtime. What is the overhead incurred to the company?

$60

$10

$30

$20

Overtime premium (2 hrs × $10) = $20

Explanation

Overtime premium (2 hrs × $10) = $20

ACCT 302: Cost Accounting! Trivia Questions

1. Inventoriable costs are assigned to inventories under GAAP.

2.

What first name or nickname would you like us to use?

2. Rework labor time is considered an overhead cost and not a direct labor cost.

3. For external reporting purposes, indirect manufacturing costs must be allocated to individual units.

4. If a worker is paid for 40 hours but is idle for 5 of those 40 hours, the 5 hours of idle time would be considered a component of direct labor.

5. Idle time wages consist of the wages paid to all workers (for both direct labor and indirect labor) in excess of their straight-time wage rates.

6. Overtime premium is normally considered as a component of direct labor.

8. Dave Rigby is paid $30 an hour for straight-time and $40 an hour for overtime. One week he worked 45 hours, which included 5 hours of overtime, and 3 hours of idle time caused by material shortages. What is the direct labor cost incurred to the company?

9. Mario Garcia is paid $20 an hour for straight-time and $30 an hour for overtime. One week she worked 42 hours, which included 2 hours of overtime. What is the overhead incurred to the company?