35. During its first year of operations, Beta Company paid $25,000 for direct materials and $18,000 in wages for production workers. Lease payments and utilities on the production facilities amounted to $7,000. General, selling, and administrative expenses were $8,000. The company produced 5,000 units and sold 4,000 units for $15.00 a unit. The average cost to produce one unit is which of the following amounts?
A. $8.00
B. $10.00
C. $9.20
D. $11.50
36. During its first year of operations, Farmer Company paid $30,000 for direct materials and $50,000 in wages for production workers. Lease payments, utility costs, and depreciation on factory equipment totaled $15,000. General, selling, and administrative expenses were $20,000. The average cost to produce one unit was $5.00. How many units were produced during the period?
A. 20,000
B. 19,000
C. 23,000
D. None of these
37. Why do accountants normally calculate cost per unit as an average?
A. Determining the exact cost of a product is virtually impossible.
B. Some manufacturing-related costs cannot be accurately traced to specific units of product.
C. Even when producing multiple units of the same product, normal variations occur in the amount of materials and labor used.
D. All of these are justifications for computing average unit costs.
38. Which of the following costs is not considered to be a product cost?
A. Raw materials costs
B. Depreciation of delivery vehicles
C. Wages paid to production workers
D. Freight paid on a purchase of raw materials
39. Select the incorrect statement regarding costs and expenses.
A. Some costs are initially recorded as expenses while others are initially recorded as assets.
B. Expenses are incurred when assets are used to generate revenue.
C. Manufacturing-related costs are initially recorded as expenses.
D. Non-manufacturing costs should be expensed in the period in which they are incurred.
40. Which of the following costs should be recorded as an expense?
A. Salary expense for administrative employees
B. Depreciation of office equipment
C. Insurance for the factory building
D. Both A and B
41. Which of the following costs should not be recorded as an expense?
A. Office salaries
B. Wages for production workers
C. Product advertising costs
D. Sales commissions
42. Which of the following transactions would cause net income for the period to decrease?
A. Paid $2,500 cash for raw material cost
B. Paid administrative salaries of $5,000
C. Depreciated production equipment for $4,000
D. Purchased $8,000 of merchandise inventory
43. Which of the following statements is true with regard to product costs versus general, selling, and administrative costs?
A. Product costs associated with unsold units appear on the income statement as general expenses.
B. General, selling, and administrative costs appear on the balance sheet.
C. Product costs associated with units sold appear on the income statement as cost of goods sold.
D. None of these is true.
44. Which of the following statements concerning product costs versus general, selling, and administrative costs is true?
A. Product costs incurred during the period will always appear as inventory on the balance sheet.
B. General, selling, and administrative costs are always expensed when cash is paid.
C. Product costs may be divided between the balance sheet and income statement.
D. General, selling, and administrative costs sometimes appear as inventory on the balance sheet.
During its first year of operations, Silver Company paid $7,000 for direct materials and $9,500 for production workers’ wages. Lease payments and utilities on the production facilities amounted to $8,500 while general, selling, and administrative expenses totaled $4,000. The company produced 5,000 units and sold 3,000 units at a price of $7.50 a unit.
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