Question 1

Describe the flow of product costs for a manufacturer.

Accepted Answer

The flow of product costs for a manufacturer begins with the purchase of raw materials. The manufacturer then uses direct labor and manufacturing overhead to convert these materials into Work-in-Process Inventory. When the manufacturing process is complete, the costs are transferred to Finished Goods Inventory. The cost of the finished goods that the manufacturer sells becomes its Cost of Goods Sold on the income statement.

Question 2

Most companies structure their organizations along departments or divisions.

Accepted Answer

A) True 
 B)False  True

Question 3

Define indirect labor and give two examples of indirect labor for a manufacturing company.

Accepted Answer

Indirect labor are labor costs for activities that support the production process but either cannot be conveniently traced directly to specific finished products or are not large enough to justify tracing to the specific products. Examples include production supervisor's salary and wages of factory janitors and factory maintenance employees.

Question 4

Rossi, Inc. sells plasticware. The following information summarizes Rossi's operating activities for the year:
 $$\begin{array} { |l | r | } 
\hline \text { Utilities Expense } & \$ 65,000 \
\hline \text { Rent Expense } & 10,000 \
\hline \text { Sales Commissions Expense } & 32,500 \
\hline \text { Purchases of Merchandise } & 260,000 \
\hline \text { Merchandise Inventory on January 1 } & 65,000 \
\hline \text { Merchandise Inventory on December 31 } & 97,500 \
\hline \text { Sales Revenue } & 650,000 \
\hline
\end{array}$$ Prepare an income statement for Rossi, Inc., a merchandiser, for the year ended December 31 using the format below. Include a proper heading.
 $$\begin{array} { | l | l | l | } 
\hline \text { Sales Revenue } & \quad \quad \quad& \quad \quad \quad \quad \
\hline \text { Cost of Goods Sold: } & & \
\hline \text { Beginning Inventory } & & \
\hline \text { Purchases } & & \
\hline \text { Cost of Goods Available for Sale } & & \
\hline \text { Ending Inventory } & & \
\hline \text { Cost of Goods Sold } & & \
\hline \text { Gross Profit } & & \
\hline \text { Selling Expenses: } & & \
\hline \text { Sales Commissions Expense } & & \
\hline \text { Administrative Expenses: } & & \
\hline \text { Rent Expense } & & \
\hline \text { Utilities Expense } & & \
\hline \text { Total Operating Expenses } & & \
\hline \text { Operating Income } & & \
\hline
\end{array}$$

Accepted Answer

The answer of Rossi, Inc. sells plasticware. The following information...

Question 5

Match each term with its correct definition.
-The role managers play when they evaluate why results were different from expectations.

Accepted Answer

A) Controlling 
B) Managerial accounting 
C) Organizational chart 
D) Planning 
E) Line position
F)Financial accounting
G)Directing 
A) Controlling 
B) Managerial accounting 
C) Organizational chart 
D) Planning 
E) Line position
F)Financial accounting
G)Directing

Question 6

In a manufacturing company, advertising and marketing costs are examples of period costs.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following formulas represent cost of goods sold for a merchandising business?

Accepted Answer

A)  Beginning Merchandise Inventory - Ending Merchandise Inventory = Cost of Goods Sold 
B)  Purchases and Freight In + Ending Merchandise Inventory = Cost of Goods Sold 
C)  Ending Merchandise Inventory + Purchases and Freight In - Beginning Merchandise Inventory = Cost of Goods Sold 
D)  Beginning Merchandise Inventory + Purchases and Freight In - Ending Merchandise Inventory = Cost of Goods Sold 
A)  Beginning Merchandise Inventory - Ending Merchandise Inventory = Cost of Goods Sold 
B)  Purchases and Freight In + Ending Merchandise Inventory = Cost of Goods Sold 
C)  Ending Merchandise Inventory + Purchases and Freight In - Beginning Merchandise Inventory = Cost of Goods Sold 
D)  Beginning Merchandise Inventory + Purchases and Freight In - Ending Merchandise Inventory = Cost of Goods Sold

Question 8

The balance sheet of a ________ company will include Work-in-Process Inventory as a line item.

Accepted Answer

A)  manufacturing 
B)  merchandising 
C)  service 
D)  trading 
A)  manufacturing 
B)  merchandising 
C)  service 
D)  trading

Question 9

Which of the following is true of product costs?

Accepted Answer

A)  They are expensed in the period they are paid. 
B)  For external reporting, GAAP requires that they be expensed before the products are sold. 
C)  They are first recorded in an inventory account. 
D)  For merchandising companies, product costs do not include freight costs. 
A)  They are expensed in the period they are paid. 
B)  For external reporting, GAAP requires that they be expensed before the products are sold. 
C)  They are first recorded in an inventory account. 
D)  For merchandising companies, product costs do not include freight costs.

Question 10

Onyx Corporation has provided the following information about its operating activities for the year:
 $$\begin{array} { | l | r | } 
\hline \text { Merchandise Inventory, January 1 } & \$ 150,000 \
\hline \text { Merchandise Inventory, December 31 } & 75,000 \
\hline \text { Purchases } & 854,000 \
\hline \text { Selling and Administrative Expenses } & 65,000 \
\hline \text { Sales Revenue } & 1,000,000 \
\hline
\end{array}$$ Required: Prepare Onyx's income statement for the year ended December 31, including the heading. Use the format provided below:
 $$\begin{array} { | l | l | l | } 
\hline \text { Sales Revenue } &\quad\quad\quad   &\quad \quad \quad  \
\hline \text { Cost of Goods Sold } & & \
\hline \text { Beginning Inventory } & & \
\hline \text { Cost of Goods Available for Sale } & & \
\hline \text { Ending Inventory } & & \
\hline \text { Cost of Goods Sold } & & \
\hline \text { Gross Profit } & & \
\hline \text { Selling and Administrative Expenses } & & \
\hline \text { Operating Income } & & \
\hline
\end{array}$$

Accepted Answer

None

Question 11

The cost of goods sold is added to net sales revenue to determine gross profit.

Accepted Answer

A) True 
 B)False

Question 12

A company that uses labor, equipment, supplies, and facilities to convert raw materials into finished products is a ________.

Accepted Answer

A)  merchandising company 
B)  manufacturing company 
C)  service company 
D)  trading company 
A)  merchandising company 
B)  manufacturing company 
C)  service company 
D)  trading company

Question 13

Value added activities which begin in research and development through product design and production are called ________.

Accepted Answer

A)  downstream activities 
B)  design activities 
C)  upstream activities 
D)  sustainability activities 
A)  downstream activities 
B)  design activities 
C)  upstream activities 
D)  sustainability activities

Question 14

Goods that have been started in the manufacturing process but are not yet complete are included in the ________.

Accepted Answer

A)  Finished Goods Inventory account 
B)  Work-in-Process Inventory account 
C)  Raw Materials Inventory account 
D)  Cost of Goods Sold account 
A)  Finished Goods Inventory account 
B)  Work-in-Process Inventory account 
C)  Raw Materials Inventory account 
D)  Cost of Goods Sold account

Question 15

Identify each cost as a period cost or a product cost.
-Depreciation on the office equipment

Accepted Answer

A) Period cost 
B) Product cost 
A) Period cost 
B) Product cost

Question 16

In a manufacturing company, wages and benefits of assembly line workers are period costs.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following functions might be classified as a staff position as opposed to a line position?

Accepted Answer

A)  Division Manager 
B)  Production Manager 
C)  Sales Manager 
D)  Payroll Processing Manager 
A)  Division Manager 
B)  Production Manager 
C)  Sales Manager 
D)  Payroll Processing Manager

Question 18

Match each term with its correct definition.
-The role managers play when they are motivating employees

Accepted Answer

A) Controlling 
B) Managerial accounting 
C) Organizational chart 
D) Planning 
E) Line position
F)Financial accounting
G)Directing 
A) Controlling 
B) Managerial accounting 
C) Organizational chart 
D) Planning 
E) Line position
F)Financial accounting
G)Directing

Question 19

Which of the following statements is true of managerial accounting?

Accepted Answer

A)  The external stakeholders of a company are the primary users of managerial accounting. 
B)  Managerial accounting information is used to help managers plan, direct and control their operations. 
C)  An external audit by an independent CPA is required for managerial accounting information. 
D)  Managerial accounting information must comply with Generally Accepted Accounting Principles. 
A)  The external stakeholders of a company are the primary users of managerial accounting. 
B)  Managerial accounting information is used to help managers plan, direct and control their operations. 
C)  An external audit by an independent CPA is required for managerial accounting information. 
D)  Managerial accounting information must comply with Generally Accepted Accounting Principles.

Question 20

Quinton Corporation provided the following information for the year: $$\begin{array} { | l | r | } 
\hline \text { Beginning Balance - Work-in-Process Inventory } & \$ 27,000 \
\hline \text { Ending Balance - Work-in-Process Inventory } & 57,000 \
\hline \text { Beginning Balance - Direct Materials } & 87,000 \
\hline \text { Ending Balance - Direct Materials } & 61,000 \
\hline \text { Purchases - Direct Materials } & 358,000 \
\hline \text { Direct Labor } & 469,000 \
\hline \text { Indirect Labor } & 21,000 \
\hline \text { Depreciation on Factory Plant and Equipment } & 22,000 \
\hline \text { Plant Utilities and Insurance } & 271,000 \
\hline
\end{array}$$ What was the total manufacturing costs incurred during the year?

Accepted Answer

A)  $698,000 
B)  $314,000 
C)  $853,000 
D)  $1,167,000 
A)  $698,000 
B)  $314,000 
C)  $853,000 
D)  $1,167,000

Exam 16: Introduction to Managerial Accounting

Describe the flow of product costs for a manufacturer.

Most companies structure their organizations along departments or divisions.

Define indirect labor and give two examples of indirect labor for a manufacturing company.

Match each term with its correct definition. -The role managers play when they evaluate why results were different from expectations.

In a manufacturing company, advertising and marketing costs are examples of period costs.

Which of the following formulas represent cost of goods sold for a merchandising business?

The balance sheet of a ________ company will include Work-in-Process Inventory as a line item.

Which of the following is true of product costs?

The cost of goods sold is added to net sales revenue to determine gross profit.

A company that uses labor, equipment, supplies, and facilities to convert raw materials into finished products is a ________.

Value added activities which begin in research and development through product design and production are called ________.

Goods that have been started in the manufacturing process but are not yet complete are included in the ________.

Identify each cost as a period cost or a product cost. -Depreciation on the office equipment

In a manufacturing company, wages and benefits of assembly line workers are period costs.

Which of the following functions might be classified as a staff position as opposed to a line position?

Match each term with its correct definition. -The role managers play when they are motivating employees

Which of the following statements is true of managerial accounting?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based Just-In-Time

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

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