Deck 16: Management Accounting

Question 1

Product costs are offset against revenue in the period in which the related products are manufactured,rather than the period in which the products are sold.

Answer 1

False

Question 2

Prime costs include direct materials and direct labor used in the production of goods and services.

Answer 2

True

Question 3

The James Company has incurred the following costs of production:
Direct Materials $350,000;
Direct Labor $475,000;
Manufacturing Overhead $722,000;and
Selling and Administrative Costs $256,000.
The James Company prime costs are $606,000.

Answer 3

False

Question 4

Supervisor salaries,equipment repairs,depreciation of machinery,and indirect materials are all examples of manufacturing overhead.

Question 5

The James Company has incurred the following costs of production:
Direct Materials $350,000;
Direct Labor $475,000;
Manufacturing Overhead $722,000;and
Selling and Administrative Costs $256,000.
The James Company conversion costs are $1,197,000.

Question 6

Management accounting reports may provide sufficient means of monitoring,evaluating and rewarding performance.

Question 7

Manufacturing overhead is a term used to describe all manufacturing costs other than direct materials and direct labor.

Question 8

The three basic types of manufacturing costs are direct materials,direct labor,and manufacturing overhead.

Question 9

Management accounting encompasses the design and use of accounting information systems inside the company to achieve the company's objectives.

Question 10

Period costs are deducted from sales to arrive at gross profit.

Question 11

All three inventory accounts (raw materials,work in process,and finished goods)are considered current assets.

Question 12

Managerial accounting refers to the preparation and use of accounting information designed to meet the needs of decision makers inside and outside the business organization.

Question 13

Depreciation on a manufacturing facility is considered a period cost whereas depreciation on a warehouse used to store finished goods is considered a product cost.

Question 14

Manufacturing overhead is considered an indirect cost,since overhead costs generally cannot be traced conveniently and directly to specific units of product.

Question 15

Product costs become part of inventory and are placed on the balance sheet until the products are sold.

Question 16

Product costs are charged directly to expense accounts.

Question 17

As units are completed,their cost is transferred from the Work in Process Inventory account to the Finished Goods Inventory account.

Question 18

A value chain is a linked set of activities and resources necessary to create and deliver a product or service to a customer.

Question 19

Finished goods is comprised of direct materials purchased,direct labor,and manufacturing overhead.

Question 20

Direct labor and overhead costs that are required to convert raw materials into finished goods are considered to be conversion costs.

Question 21

The principal difference between managerial accounting and financial accounting is that managerial accounting information is:

A)Prepared by managers.
B)Intended primarily for use by decision makers inside the business organization.
C)Prepared in accordance with a set of accounting principles developed by the Institute of Certified Managerial Accountants.
D)Oriented toward measuring solvency rather than profitability.

Question 22

The cost of the employee who installs the leather on the seats of a new automobile would be considered:

A)Manufacturing overhead.
B)Indirect labor.
C)Direct material.
D)Direct labor.

Question 23

Which of the following costs would not be considered part of the manufacturing overhead of a furniture manufacturer?

A)The cost of compliance with federal factory safety regulations
B)Depreciation expense on factory equipment
C)The cost of grease used to lubricate factory equipment
D)The cost of wood used in furniture construction

Question 24

Costs to repair equipment are considered a direct cost.

Question 25

A schedule of the cost of finished goods manufactured summarizes the flow of manufacturing costs into and out of the finished goods inventory account.

Question 26

In comparison with a financial statement prepared in conformity with generally accepted accounting principles,a managerial accounting report is less likely to:

A)Focus upon the entire organization as the accounting entity.
B)Focus upon future accounting periods.
C)Make use of estimated amounts.
D)Be tailored to the specific needs of an individual decision maker.

Question 27

The "cost of finished goods manufactured," which appears on the bottom of the Schedule of Finished Goods Manufactured,flows to the balance sheet and is reported as the ending inventory balance.

Question 28

A debit balance in the Direct Labor account represents a liability for wages payable.

Question 29

The set of linked activities and resources needed to create and deliver a product or service to the customer is referred to as:

A)The budget.
B)The value chain.
C)The operating cycle.
D)The production process.

Question 30

All of the following statements regarding management accounting's role in assigning decision-making authority are true except:

A)Since management accounting information is used for decision-making purposes,historical information is unnecessary.
B)Information from the management accounting system supports decision-making.
C)The syllabus for a college course is a type of report that outlines students' decision-making responsibilities.
D)All members of an organization have some decision-making ability.

Question 31

Which of the following is not a characteristic of managerial accounting?

A)Reports are used primarily by insiders rather than by persons outside of the business entity.
B)Its purpose is to assist managers in planning and controlling business operations.
C)Information must be developed in conformity with generally accepted accounting principles or with income tax regulations.
D)Information may be tailored to assist in specific managerial decisions.

Question 32

Management accounting systems are designed to assist organizations in the performance of all of the following functions except:

A)The assignment of decision-making authority over company assets.
B)Planning and decision-making.
C)Monitoring,evaluating,and rewarding performance.
D)The preparation of income tax returns.

Question 33

The costs of storing and delivering finished goods are allocated to the finished goods account.

Question 34

Which of the following should not be classified as a manufacturing cost?

A)Indirect factory labor costs,such as salaries of plant security guards.
B)Direct materials used in the production process.
C)Utility bills related to factory operations.
D)Commissions paid to salespeople.

Question 35

All of the following are true regarding benchmark studies except:

A)The studies are shared with customers and suppliers.
B)The studies are shared with competitors.
C)The studies are prepared by collecting information from companies in the same industry.
D)The studies show an organization how its costs and processes compare with other companies.

Question 36

Manufacturing costs do not include:

A)Direct labor applicable to production within the period.
B)Selling expenses related to goods manufactured during the period.
C)Direct materials used during the period.
D)Manufacturing overhead charged to work in process during the period.

Question 37

Manufacturing overhead is best described as:

A)All manufacturing costs other than direct materials and direct labor.
B)All period costs associated with manufacturing operations.
C)Indirect materials and indirect labor.
D)All operating expenses other than selling expenses and general and administrative expenses.

Question 38

In comparison with a financial statement prepared in conformity with generally accepted accounting principles,a managerial accounting report is more likely to:

A)Be used by decision makers outside of the business organization.
B)Focus upon the operating results of the most recently completed accounting period.
C)View the entire organization as the reporting entity.
D)Be tailored to the specific needs of an individual decision maker.

Question 39

In an aircraft factory,the inventory of direct materials would not include:

A)Electronic instruments to be installed in aircraft.
B)Completed aircraft,available for sale.
C)Sheet aluminum to be used for the exterior "skin" of the aircraft.
D)Ejection seats to be installed only in military aircraft.

Question 40

When direct materials are applied to the production process,materials inventory is debited and work in process is credited.

Question 41

Costs that are traceable to a particular unit and inventoriable are called:

A)Period costs.
B)Product costs.
C)Overhead costs.
D)Job costs.

Question 42

Goods that are still in the production process would be in which account?

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

Question 43

Which of the following is not a product cost?

A)Property tax on the factory building
B)Advertising
C)Factory workers' salaries
D)Indirect materials used in production

Question 44

The wages paid to employees working directly on a company's products would be shown as a:

A)Credit to Direct Labor.
B)Debit to Direct Labor.
C)Credit to Work in Process.
D)Debit to Manufacturing Overhead.

Question 45

Which of the following is a period cost?

A)Direct materials used
B)Direct labor costs applicable to production
C)Manufacturing overhead
D)Advertising expense

Question 46

When a manufacturing company purchases raw materials or component parts to be used in manufacturing finished goods,these costs are initially debited to:

A)Expense accounts.
B)Raw Materials Inventory.
C)Finished Goods Inventory.
D)Manufacturing Overhead.

Question 47

Which of the following is a period cost?

A)Depreciation on a factory building
B)The cost of direct materials used
C)Depreciation on a sales showroom
D)The cost of disposing of hazardous waste materials from factory operations

Question 48

Determine the amount of manufacturing overhead given the following information:

A)$7,750
B)$10,430
C)$9,750
D)$11,080

Question 49

When goods are completed and transferred from the assembly line:

A)Cost of Goods Sold is debited and Finished Goods Inventory is credited.
B)Work in Process Inventory is debited and Finished Goods Inventory is credited.
C)Finished Goods Inventory is debited and Cost of Goods Sold is credited.
D)Work in Process Inventory is credited and Finished Goods Inventory is debited.

Question 50

Which of the following is not a product cost?

A)Depreciation on a warehouse where raw materials are stored
B)An employee working directly on assembling a car
C)The leather seats of a motorcycle
D)The real estate tax of the showroom

Question 51

The following information is available about the August transactions of the Helpful Tool Company: The product costs to be deducted from revenue in August amount to:

A)$493,000.
B)$737,000.
C)$718,000.
D)$739,000.

Question 52

Until the related goods are sold,product costs are viewed as:

A)Assets.
B)Liabilities.
C)Operating expenses.
D)Manufacturing overhead.

Question 53

Manufacturing companies normally have three types of inventory:

A)Direct materials,direct labor,and manufacturing overhead.
B)Raw materials,work in process,and finished goods.
C)Work in process,finished goods,and returned merchandise.
D)Economy,standard,and deluxe.

Question 54

Which of the following costs would not be considered part of the manufacturing overhead of a chemical plant?

A)The costs of disposing of toxic waste materials
B)Salaries of factory medical personnel
C)Salaries of employees who operate distilling equipment used in the production process
D)The cost of complying with federal safety regulations concerning plant operations

Question 55

Herb Company manufactured more product than it was able to sell during the current year.If the salaries of the sales staff of Herb Company are improperly recorded as a product cost,what will be the likely effect on net income of the period in which the error occurs?

A)Net income will be overstated.
B)Net income will be understated.
C)Net income will be unaffected.
D)Net income will be understated only if inventory levels rise.

Question 56

A product cost is deducted from revenue in the period in which:

A)The related finished goods are sold.
B)The expenditure is made.
C)The production of the product begins.
D)The production process is completed.

Question 57

Which of the following is not a period cost?

A)Depreciation on factory equipment
B)Depreciation on the retail store building
C)Salesperson salaries
D)Office supplies used

Question 58

Direct labor costs in a paint factory would include wages of employees who:

A)Supervise heavy equipment operators.
B)Operate paint-mixing machines.
C)Develop highly secret formulas for new products.
D)Paint the interior of the factory every two years.

Question 59

The cost of the employee who computes total manufacturing costs would be considered:

A)Direct labor.
B)Indirect labor.
C)Manufacturing overhead.
D)Administrative costs.

Question 60

Which of the following is not one of the three types of inventories of a manufacturing company?

A)Raw materials inventory
B)Work in process inventory
C)Product inventory
D)Finished goods inventory

Question 61

When products are completed:

A)Finished Goods Inventory is credited.
B)Work in Process Inventory is credited.
C)Cost of Goods Sold is debited.
D)Work in Process Inventory is debited.

Question 62

[The following information applies to the questions displayed below.]
The following information has been taken from the perpetual inventory system of Elite Mfg.Co.for the month ended August 31:

The cost of finished goods manufactured in August is:

A)$147,000.
B)$92,000.
C)$57,000.
D)Some other amount.

Question 63

The completion of a computer by First Wireless,Inc.would require a debit to which of the following accounts?

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

Question 64

The ending inventory of a merchandising company corresponds most closely to which of the following amounts of a manufacturer?

A)Ending inventory of finished goods
B)Cost of finished goods manufactured
C)Ending inventory of work in process
D)Total manufacturing costs incurred during the period

Question 65

Amounts debited to the Work in Process Inventory account may best be described as:

A)Direct materials purchased,direct labor costs paid,and payments for items classified as manufacturing overhead.
B)The cost of finished goods manufactured during the period.
C)Total manufacturing costs charged to production.
D)The cost of goods sold.

Question 66

[The following information applies to the questions displayed below.]
The following information has been taken from the perpetual inventory system of Elite Mfg.Co.for the month ended August 31:

The total amount of inventory to be included in Elite's August 31st balance sheet amounts to:

A)$135,000.
B)$210,000.
C)$160,000.
D)Some other amount.

Question 67

If the end of the fiscal year is not a payroll date,the Direct Labor account normally has:

A)A debit balance,representing prepaid labor costs.
B)A credit balance,representing accrued wages payable.
C)Either a debit or a credit balance,depending upon whether the end of the fiscal year falls before or after the end of the pay period.
D)A zero balance,because the Direct Labor account is closed along with the other expense accounts.

Question 68

The payment of raw materials previously purchased on account is recorded by an entry debiting:

A)Raw Materials Inventory.
B)Accounts Payable.
C)Work in Process Inventory.
D)Cash.

Question 69

When direct materials are used:

A)Manufacturing Overhead is debited.
B)Raw Materials Inventory is debited.
C)Cost of Goods Sold is debited.
D)Work in Process Inventory is debited.

Question 70

The accountant for Eric's Plumbing Equipment Company recently made a journal entry consisting of a debit to Work in Process and a credit to Raw Materials Inventory.This entry recorded:

A)The use of raw materials in the production process.
B)Payment for raw materials.
C)The return of unused materials to inventory.
D)The receipt of raw materials from the company's supplier.

Question 71

The placing of direct materials into the production process is recorded by an entry debiting:

A)Materials Expense.
B)Raw Materials Inventory.
C)Work in Process Inventory.
D)Finished Goods Inventory.

Question 72

Since manufacturing costs (direct materials,direct labor,and overhead)are incurred in the process of manufacturing units of product,these costs are debited to:

A)The Direct Materials Inventory,Direct Labor,and Manufacturing Overhead accounts.
B)Expense accounts.
C)The Work in Process Inventory account.
D)The Cost of Goods Sold account.

Question 73

When direct labor employees contribute to the production process,the cost of their labor is recorded by debiting:

A)Wages Expense.
B)Direct Labor.
C)Work in Process Inventory.
D)Manufacturing Overhead.

Question 74

Amounts credited to the Work in Process inventory account may best be described as:

A)The cost of finished goods manufactured.
B)Total manufacturing costs charged to production.
C)The cost of goods sold.
D)Direct materials purchased,direct labor costs paid,and payments for items classified as manufacturing overhead.

Question 75

Since manufacturing costs (direct materials,direct labor,and overhead)are incurred in the process of manufacturing units of product,these costs are credited to:

A)The Direct Materials Inventory,Direct Labor,and Manufacturing Overhead accounts respectively.
B)Liability accounts.
C)The Work in Process Inventory account.
D)The Cost of Goods Sold account.

Question 76

The placing of direct materials into the production process is recorded by an entry crediting:

A)Materials Expense.
B)Raw Materials Inventory.
C)Work in Process Inventory.
D)Finished Goods Inventory.

Question 77

[The following information applies to the questions displayed below.]
The following information has been taken from the perpetual inventory system of Elite Mfg.Co.for the month ended August 31:

Total manufacturing costs charged (debited)to Work in Process during August amount to:

A)$60,000.
B)$125,000.
C)$110,000.
D)Some other amount.

Question 78

In the year-end financial statements,the Manufacturing Overhead account should have:

A)A debit balance,representing overhead on hand and available for use.
B)A credit balance,representing accumulated depreciation and amounts owed to suppliers of overhead items.
C)Either a debit or a credit balance,depending upon whether the overhead application rate used throughout the year was higher or lower than 100%.
D)A zero balance,since all overhead costs incurred during the period should have been assigned to the production of the period.

Question 79

The payment of wages to factory employees who work directly on the goods being manufactured is recorded by an entry crediting:

A)Wages Expense.
B)Direct Labor.
C)Work in Process Inventory.
D)Cash.

Question 80

When products held in inventory are sold:

A)Cost of Goods Sold is credited.
B)Work in Process Inventory is credited.
C)Finished Goods Inventory is credited.
D)Finished Goods Inventory is debited.