Team Challenge #1 (Section 9)

The three cost elements ordinarily included in product costs are direct materials, direct labour, and manufacturing overhead.

• True

• False

Direct material cost combined with manufacturing overhead cost is known as conversion cost.

• True

• False

The variable costs per unit are RM6 when a company produces 12,000 units of product. The variable costs per unit will decrease if 14,000 units are produced. 

• True

• False

A 5% sales commission paid to sales personnel can be classified as a fixed product cost in a manufacturing company.

• True

• False

As activity decreases, the total fixed cost decreases.

• True

• False

Which of the following statements is FALSE?

• Period costs affect only the Statement of Profit and Loss.

• Product costs affect both the Statement of Financial Position and the Statement of Profit and Loss.

• Product costs affect only the Statement of Financial Position.

• All is true.

A supplier to your company offers to let you, a management accountant, use the supplier’s condo in Genting for your vacation.  Accepting the supplier’s offer violates the ethical standard of:

• Competence

• Credibility

• Integrity

• Confidentiality

Which of the following is NOT a period cost?

• Depreciation of factory maintenance equipment.

• Salary of a clerk who handles customer billing.

• Insurance on a company showroom where customers can view new products.

• Cost of attending an accounting seminar by the company's accountant.

Product costs that have become expenses can be found in:

• period costs.

• selling expenses.

• cost of goods sold.

• ending inventory cost.

If 5,000 units are produced, product cost per unit equals:

• RM12.35

• RM14.30

• RM36.65

• RM47.51