CPA Business Environment and Concepts (BEC) : Direct Costs, Indirect Costs, & Manufacturing Overhead
Study concepts, example questions & explanations for CPA Business Environment and Concepts (BEC)
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Example Questions
Example Question #1 : Direct Costs, Indirect Costs, & Manufacturing Overhead
Which of the following best describes direct labor?
Both a product cost and a prime cost
A prime cost
Both a period cost and a prime cost
A product cost
Both a product cost and a prime cost
Direct labor is a prime cost, a conversion costs, and a product cost.
Example Question #1 : Operations Management: Performance Management
If a product required a great deal of electricity to produce, and crude oil prices increased, which of the following costs most likely increased?
Direct materials
Conversion costs
Prime costs
Direct labor
Conversion costs
Conversion costs include both direct labor and overhead. Increases in crude oil prices are likely to impact the costs of generating electricity which is significant in manufacturing costs.
Example Question #2 : Operations Management: Performance Management
Which of the following costs includes all the product costs?
Manufacturing overhead and conversion costs
Direct labor and prime costs
Direct material and conversion costs
Direct labor and conversion costs
Direct material and conversion costs
Product costs consist of direct materials, direct labor, and factory overhead. Materials and labor together are prime costs, while labor and overhead are conversion costs. Direct materials and conversion costs together are product costs.
Example Question #117 : Cpa Business Environment And Concepts (Bec)
Which of the following is assigned to goods that were either purchased or manufactured for resale?
Opportunity cost
Relevant cost
Period cost
Product cost
Product cost
Product cost is assigned to goods that were either purchased or manufactured for resale.
Example Question #118 : Cpa Business Environment And Concepts (Bec)
Conversion costs do not include:
Direct labor
Indirect labor
Direct materials
Indirect materials
Direct materials
Conversion costs consist of direct labor and overhead. Thus, conversion costs include all product costs except direct materials.
Example Question #119 : Cpa Business Environment And Concepts (Bec)
Of the following, which would be not included as period expenses?
G&A expenses
Abnormal spoilage
Sales and marketing expenses
Normal spoilage
Normal spoilage
Normal spoilage is an inventory cost rather than a period cost.
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