Question

1. Costs that are expensed when incurred are called:
A. product costs.
B. direct costs.
C. inventoriable costs.
D. period costs.
E. indirect costs

2. The accounting records of Manning Company revealed the following costs: direct materials used, $250,000; direct labor, $425,000; manufacturing overhead, $375,000; and selling and administrative expenses, $220,000. Ehrlich’s product costs total:

A. $675,000.
B. $1,050,000.
C. $895,000.
D. $1,270,000.
E. None of the answers is correct

3. How should a company that manufactures automobiles classify its partially completed vehicles?

A. Work in process inventory
B. Raw materials inventory.
C. Finished goods inventory.
D. Cost of goods manufactured.

4. Work-in-process inventory is composed of:
A. direct material and direct labor.
B. direct labor and manufacturing overhead.
C. direct material and manufacturing overhead.
D. direct material, direct labor, and manufacturing overhead.
E. direct material only.

Answer 1

Part 1) OPTION D---- Period costs

Costs that are expensed when incurred are called period costs. FOR eg---- Administrative expenses, sales commission

Part 2)OPTION B----$1050000

Calculation of Product costs

Direct Material	250000
Direct Labor	425000
Manufacturing overhead	375000
Product Costs	$1050000

Part 3) OPTION A ----- work in process inventory

Partially completed vehicles will be classified as work in process inventory. Since partial work needs to be completed yet for becoming finished goods.

Part 4)OPTION D---- Direct material, direct labor and manufacturing overhead.

Work in process inventory comprises of direct material, direct labor and manufacturing overhead.