Question 1

Select the incorrect statement regarding the relationship between type of user and type of information.

Accepted Answer

A)  Middle managers need more nonfinancial, or operational data than do senior executives. 
B)  Lower level employees use nonfinancial information such as work schedules, store hours, and customer service policies. 
C)  Senior executives need less aggregated information than do lower-level managers. 
D)  Senior executives use general economic information as well as financial information.

Question 2

An ongoing process through which employees strive to eliminate waste, reduce response time, minimize defects, and simplify the design and delivery of products and services to customers is known as benchmarking.

Accepted Answer

A) True 
 B)False

Question 3

Randall Company manufactures chocolate bars. The following were among Randall's manufacturing costs during the current year: $\begin{array}{llr}
  \text { Wages}\
\
  \text { Machine operators } &\$300,000\
 \text { Selling and administrative personnel } &\$75,000\
 \text { Materials used } &\\
 \text {  Lubricant for oiling machiner} &\$25,000\
 \text { Cocoa, sugar, and other raw materials } &\$225,000\
 \text {Packacinc materials  } &\$190,000\
\end{array}$
 Randall's direct labor costs amounted to:

Accepted Answer

A)  $400,000. 
B)  $300,000. 
C)  $175,000. 
D)  $375,000.

Question 4

A systematic problem-solving philosophy that encourages front line workers to achieve zero defects is known as:

Accepted Answer

A)  just-in-time (JIT). 
B)  total quality management (TQM). 
C)  activity based management (ABM). 
D)  None of these

Question 5

The objective of a just-in-time inventory system is to totally eliminate all inventories.

Accepted Answer

A) True 
 B)False

Question 6

Ting Company started the accounting period with the following beginning balances:Raw Materials Inventory, $21,000; Work in Process Inventory, $45,000; and Finished Goods Inventory, $10,000. During the accounting period, the company purchased $30,000 of raw materials and ended the period with $8,000 in raw material inventory. Direct labor costs for the period were $60,000 and $63,000 of manufacturing overhead costs was allocated to work in process. Ending work in process was $41,000 and ending finished goods was $17,500. Goods were sold during the period for $162,500. The amount of cost of goods manufactured (i.e., amount transferred from work in process to finished goods) would be:

Accepted Answer

A)  $117,500. 
B)  $170,000. 
C)  $221,000. 
D)  $166,000.

Question 7

Managerial accounting is designed to satisfy needs of external users including creditors, investors, and governmental agencies.

Accepted Answer

A) True 
 B)False

Question 8

The following information relates to the operations of Cruz Manufacturing during the current year: $\begin{array}{llr}
  \text { Raw materials used } &\$10,000\
 \text { Direct labor wages } &30,000\
 \text { Sales salaries and commissions } &25,000\
 \text { Depreciation on production equipment } &2,000\
 \text { Rent on manufacturing facilities } &15,000\
 \text {Packaging and shipping supplies  } &3,000\
 \text { Sales revenue } &95,000\
 \text {Units produced and sold  } &10,000\
 \text { Selling price per unit } &\$10.00\
\end{array}$
 Based on this information, what is the company's cost of goods sold? (Do not round intermediate calculations.)

Accepted Answer

A)  $43,000 
B)  $85,000 
C)  $57,000 
D)  $60,000

Question 9

Which of the following types of labor costs will never flow through the inventory account?

Accepted Answer

A)  Plant supervision 
B)  Sales commissions 
C)  Material handling 
D)  Assembly labor

Question 10

Select the incorrect statement regarding upstream and downstream costs.

Accepted Answer

A)  Companies normally incur significant downstream costs. 
B)  To be profitable, companies must recover the total cost of developing, producing, and delivering products. 
C)  Pricing decisions must consider both upstream and downstream costs in addition to manufacturing costs. 
D)  Upstream and downstream costs are reported as product costs on the income statement.

Question 11

Select the incorrect statement regarding costs and expenses.

Accepted Answer

A)  Some costs are initially recorded as expenses while others are initially recorded as assets. 
B)  Expenses are incurred when assets are used to generate revenue. 
C)  Manufacturing-related costs are initially recorded as expenses. 
D)  Non-manufacturing costs should be expensed in the period in which they are incurred.

Question 12

Product costs include materials, labor, and selling and administrative costs.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements regarding the schedule of cost of goods manufactured and sold is correct?

Accepted Answer

A)  The schedule is an internal document, which is not presented with the company's financial statements. 
B)  The schedule of cost of goods manufactured and sold shows the amount of cash paid for raw materials. 
C)  The schedule of cost of goods manufactured and sold reports the amount of direct raw materials used during the period. 
D)  The schedule is an internal document, which is not presented with the company's financial statements, and, in addition, the schedule of cost of goods manufactured and sold reports the amount of direct raw materials used during the period.

Question 14

What costs are treated as product costs for a manufacturing company?

Accepted Answer

The answer of What costs are treated as product costs...

Question 15

What is the effect on the balance sheet of making cash sales of inventory to customers for profit?

Accepted Answer

A)  Assets and stockholders' equity increase. 
B)  Assets and stockholders' equity decrease. 
C)  Assets decrease and stockholders' equity increases. 
D)  Assets increase and stockholders' equity decreases.

Question 16

Describe the schedule of cost of goods manufactured and sold. What information does it include, and how is it used?

Accepted Answer

The answer of Describe the schedule of cost of goods...

Question 17

Kirsten believes her company's overhead costs are driven (affected) by the number of direct labor hours because the production process is very labor intensive. During the period, the company produced 5,000 units of Product A requiring a total of 1,600 labor hours and 2,500 units of Product B requiring a total of 400 labor hours. What allocation rate should be used if the company incurs overhead costs of $20,000?

Accepted Answer

A)  $10 per labor hour 
B)  $2.67 per unit 
C)  $12.50 per labor hour for Product A and $50 per labor hour for Product B 
D)  None of these

Question 18

Cash paid to production workers should be recorded as Wages Expense in the income statement for the period incurred.

Accepted Answer

A) True 
 B)False

Question 19

Costs associated with holding inventory include hidden costs, such as low employee motivation.

Accepted Answer

A) True 
 B)False

Question 20

A potential negative effect of using a just-in-time inventory system is the immediate impact of labor strikes on the transportation system such as railroad.

Accepted Answer

A) True 
 B)False

Exam 10: An Introduction to Management Accounting

Select the incorrect statement regarding the relationship between type of user and type of information.

An ongoing process through which employees strive to eliminate waste, reduce response time, minimize defects, and simplify the design and delivery of products and services to customers is known as benchmarking.

A systematic problem-solving philosophy that encourages front line workers to achieve zero defects is known as:

The objective of a just-in-time inventory system is to totally eliminate all inventories.

Managerial accounting is designed to satisfy needs of external users including creditors, investors, and governmental agencies.

Which of the following types of labor costs will never flow through the inventory account?

Select the incorrect statement regarding upstream and downstream costs.

Select the incorrect statement regarding costs and expenses.

Product costs include materials, labor, and selling and administrative costs.

Which of the following statements regarding the schedule of cost of goods manufactured and sold is correct?

What costs are treated as product costs for a manufacturing company?

What is the effect on the balance sheet of making cash sales of inventory to customers for profit?

Describe the schedule of cost of goods manufactured and sold. What information does it include, and how is it used?

Cash paid to production workers should be recorded as Wages Expense in the income statement for the period incurred.

Costs associated with holding inventory include hidden costs, such as low employee motivation.

A potential negative effect of using a just-in-time inventory system is the immediate impact of labor strikes on the transportation system such as railroad.