Exam 10: An Introduction to Management Accounting

Reno Company provided the following information regarding its operations for the month ending September 30, 2013: Administrative costs \ 30,000 Depreciation on factory equipment 12,000 Indirect materials 2,000 Marketing and distribution costs 24,000 Salaries for factory supervisors 20,000 Wages for production workers 26,000 Raw materials used 38,000 Sales revenue 196,000 Selling costs 18,000 Utilities for production facilities 8,000 Number of units produced 20,000 Number of units sold 15,000 Required: 1) Compute the firm's total manufacturing overhead cost. 2) Prepare a schedule of inventory costs that shows total product costs, ending inventory, and cost of goods sold; and 3) Prepare an income statement for the month ending September 30, 2013.

Which of the following costs should not be recorded as an expense?

Average costs are used for internal decision-making, but actual costs are required for calculating cost of goods sold.

Management accountants have a responsibility to demonstrate integrity. What does this ethical standard require of management accountants?

Upstream costs are classified as product costs and downstream costs are classified as period costs for financial reporting purposes.

Under the terms of the Sarbanes-Oxley Act, a company and its external auditor are required to report on the effectiveness of the company's system of internal controls.

The Jacobson Manufacturing Company was started at the beginning of the current year when it acquired $200,000 from its owners. During the year, the company incurred the following costs, all for cash: Direct material costs \ 80,000 Direct labor costs 100,000 Overhead costs 40,000 Selling and administrative costs 60,000 The company produced 10,000 units of product and sold 8,000 units. The average selling price was $34 per unit; all sales were for cash. The accountant who prepared the firm's financial statements misclassified the selling and administrative costs as product costs. Required: Demonstrate the impact of the error on the company's income statement and balance sheet by completing the following schedule: Scenario 1: With the error Soenario 2: Without the error Income statement: Revenue Less: Cost of goods sold Oross margin Less: Selling, general, and administrative expenses Net income Balance sheet: Assets Cash Inventory Total assets Equity Common stock Retsined earnings Total equity

The following information relates to Minimart's 2012 accounting period: Raw materials used \ 17,000 Direct labor wages and salaries 33,000 Sales salaries 25,000 Depreciation on manufacturing equipment 3,000 Rent on manufacturing facilities 4,000 Administrative supplies and utilities 5,000 Sales revenue 105,000 Units of products produced 4,000 Units of products sold 4,000 Based on this information, Minimart's total manufacturing costs for 2012 equal:

What inventory holding costs would be incurred by a business that holds a large amount of inventory?

For a manufacturing company, product costs include all of the following except:

Discuss three practical implications of misclassifying product and/or period costs.

What is the fraud triangle? Which element of the fraud triangle is most closely connected with internal controls?

Complete the following table to compare and contrast financial and managerial accounting. Characteristic Finsecial Accomaning Managerial Acceunting Users Level of aggegation Regulation Characteristics of information Time horizon Reportang frequency

Which of the following is not classified as manufacturing overhead?

For a manufacturing company, both direct labor costs and indirect labor costs are classified as product costs.

Steuben Company produces dog houses. During 2013, Steuben Company incurred the following costs: Rent on manufacturing facility \ 250,000 Office manager's salary 150,000 Wages of factory machine operators 110,000 Depreciation on manufacturing equipment 50,000 Insurance and taxes on selling and administrative offices 30,000 Direct materials purchased and used 170,000 Wages paid to factory machine operators in producing the dog houses should be categorized as:

Management accountants have a responsibility to be objective. What does this ethical standard require of management accountants?

The Szakos Company engaged in the following transactions during 2013: a) Acquired $50,000 of cash by issuing common stock to owners b) Paid $10,000 to acquire manufacturing equipment c) Paid $5,000 cash for materials used in production d) Paid $2,000 for wages of production workers e) Paid $8,000 in general, selling, and administrative costs f) Recognized $1,000 of depreciation on the manufacturing equipment g) Sold inventory for $18,000 cash h) The cost of the inventory sold was $6,500 Required: Show the balance sheet and income statement effects of the transactions by completing the financial statement model provided.

The primary difference between manufacturing companies and service companies is that the products provided by service companies are consumed immediately.

If product costs are misclassified as selling costs, the cost per unit will be understated.