Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

During its first year of operations,Connor Company paid $50,000 for direct materials and $36,000 in wages for production workers.Lease payments and utilities on the production facilities amounted to $14,000.General,selling,and administrative expenses were $16,000.The company produced 5,000 units and sold 4,000 units for $30.00 a unit.The average cost to produce one unit is which of the following amounts?

Accepted Answer

A)  $20.00 
B)  $16.00 
C)  $18.40 
D)  $25.00

Question 3

Which of the following costs should be recorded as an expense?

Accepted Answer

A)  Administrative employee salaries 
B)  Depreciation of manufacturing equipment 
C)  Insurance for the factory building 
D)  All of these are expenses.

Question 4

Managerial accounting focuses primarily on the performance of the company as a whole.

Accepted Answer

A) True 
 B)False

Question 5

Product costs flow from the balance sheet to the income statement.

Accepted Answer

A) True 
 B)False

Question 6

Discuss the regulation of financial accounting,and compare to the level of regulation of managerial accounting information.

Accepted Answer

The answer of Discuss the regulation of financial accounting,and compare...

Question 7

The Carson Company was started at the beginning of the current year when it acquired $20,000 by issuing common stock to its owners.During the year,the company incurred the following cash costs: $$\begin{array} {| l | r| } 
\hline \text { Direct material costs } & \$ 10,000 \
\hline \text { Direct labor costs } & 8,000 \
\hline \text { Overhead costs } & 4,000 \
\hline \text { Selling and administrative costs } & 2,000\
\hline  
\end{array}$$ The company produced 5,000 units of product and sold 4,500 units.The average selling price was $7.00 per unit.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 financial statements by completing the following schedule. \(\begin{array}{c}
\begin{array}{|l|}
\hline \
\hline \text { Income statement: } \
\hline \text { Revenue } \
\hline \text { Less: Cost of goods sold } \
\hline \text { Gross margin } \
\hline \text { Less: Selling, general, and } \
\text { administrative expenses } \
\hline \text { Net income } \
\hline \text { Balance sheet: } \
\hline \text { Assets } \
\hline \text { Cash } \
\hline \text { Inventory } \
\hline \text { Total assets } \
\hline \text { Equity } \
\hline \text { Common stock } \
\hline \text { Retained earnings } \
\hline \text { Total equity }\
\hline 
\end{array}
\begin{array}{l|}
\hline\text { Scenario 1: With the error }\
\hline\
\hline\
\hline\
\hline\
\hline\
\
\hline\
\hline\
\hline\
\hline\
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline 
\end{array}
\begin{array}{l|}
\hline\text { Scenario 2: Without the error }\
\hline\
\hline\
\hline\
\hline\
\hline\
\
\hline\
\hline\
\hline\
\hline\
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline  
\end{array} 
\end{array}\)

Accepted Answer

The answer of The Carson Company was started at the...

Question 8

As a Certified Management Accountant,Grace is bound by the standards of ethical conduct issued by the Institute of Management Accountants.If she accepts an expensive gift from a vendor trying to win a contract with her firm,which of the following standards will she violate?

Accepted Answer

A)  Integrity 
B)  Confidentiality 
C)  Competence 
D)  Objectivity

Question 9

As a Certified Management Accountant,Suzanne is bound by the standards of ethical conduct issued by the Institute of Management Accountants.During the course of business,Suzanne learned that her company has decided to discontinue a major product line.If she mentions this fact to her brother,who is a stockbroker,Suzanne could be in violation of the:

Accepted Answer

A)  competence standard. 
B)  confidentiality standard. 
C)  integrity standard. 
D)  objectivity standard.

Question 10

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)  Assembly line supervisors need more immediate feedback on performance than do senior executives. 
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 11

Which of the following costs is not considered to be a period cost?

Accepted Answer

A)  Warehousing costs 
B)  Depreciation of delivery vehicles 
C)  Salaries paid to company executives 
D)  Freight paid on a purchase of raw materials

Question 12

The Giga Company produces tablet computers.The following information is provided:  Required:
Classify each of the company's costs as a period cost (general,selling,and administrative cost)or as a direct or indirect product cost.Enter the dollar amount of the cost in the appropriate column.After entering all amounts,calculate the total general,selling,and administrative cost,the total direct product cost,and the total indirect product cost. $$\begin{array} { | l | l | l | l | } 
\hline { \text { Item } } & \text { Period cost } & \text { Direct product cost } & \text { Indirect product cost } \
\hline \text { a) } & & & \
\hline \text { b) } & & & \
\hline \text { c) } & & & \
\hline \text { d) } & & & \
\hline \text { e) } & & & \
\hline \text { f) } & & & \
\hline \text { g) } & & & \
\hline \text { h) } & & & \
\hline \text { i) } & & & \
\hline \text { i) } & & & \
\hline \text { k) } & & & \
\hline \text { l) } & & & \
\hline \text { m) } & & & \
\hline \text { Total } & & & \
\hline
\end{array}$$

Accepted Answer

The answer of The Giga Company produces tablet computers.The following...

Question 13

Assuming that the number of units produced exceeds the number of units sold,misclassifying period costs as product costs will overstate net income relative to what net income would be without this error.

Accepted Answer

A) True 
 B)False

Question 14

Why do accountants normally calculate cost per unit as an average?

Accepted Answer

A)  Determining the exact cost of a product is virtually impossible. 
B)  Some manufacturing-related costs cannot be accurately traced to specific units of product. 
C)  Even when producing multiple units of the same product,normal variations occur in the amount of materials and labor used. 
D)  All of these are justifications for computing average unit costs.

Question 15

Which of the following costs would be classified as a direct cost for a company that produces motorcycles?

Accepted Answer

A)  Rent of manufacturing facility that produces motorcycles 
B)  Seats used in the motorcycles 
C)  Wages of motorcycle assembly workers 
D)  Both seats used in the motorcycles and wages of motorcycle assembly workers are correct.

Question 16

During its first year of operations,a company that incurred $1,000 in production costs reported cost of goods sold of $800 and selling costs of $100.Its ending finished goods inventory was $300.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Which of the following is not a provision of the Sarbanes-Oxley Act of 2002?

Accepted Answer

A)  The chief executive officer and the chief financial officer are jointly responsible for establishment and enforcement of internal controls. 
B)  Companies are required to report on the effectiveness of their internal controls. 
C)  The company's external auditor is charged with the ultimate responsibility for the accuracy of the company's financial statements and accompanying footnotes. 
D)  The company's external auditors are required to attest to the accuracy of the internal controls report.

Question 19

Certified Management Accountants (CMA)must complete a specified number of continuing professional education credits each reporting period.Which of the four standards of ethical conduct issued by the Institute of Management Accountants likely motivated this requirement?

Accepted Answer

A)  Confidentiality 
B)  Competence 
C)  Integrity 
D)  Objectivity

Question 20

During her first year with the company,Ann mistakenly accumulated some of the company's period costs in ending inventory.Which of the following indicates how this error affects the company's financial statements assuming number of units produced exceeded number of units sold during the period?

Accepted Answer

A)  Cash flows from operations are understated. 
B)  Gross margin is unaffected. 
C)  Net income is overstated. 
D)  Inventory is understated.

Exam 1: Management Accounting and Corporate Governance

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

Which of the following costs should be recorded as an expense?

Managerial accounting focuses primarily on the performance of the company as a whole.

Product costs flow from the balance sheet to the income statement.

Discuss the regulation of financial accounting,and compare to the level of regulation of managerial accounting information.

As a Certified Management Accountant,Grace is bound by the standards of ethical conduct issued by the Institute of Management Accountants.If she accepts an expensive gift from a vendor trying to win a contract with her firm,which of the following standards will she violate?

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

Which of the following costs is not considered to be a period cost?

Assuming that the number of units produced exceeds the number of units sold,misclassifying period costs as product costs will overstate net income relative to what net income would be without this error.

Why do accountants normally calculate cost per unit as an average?

Which of the following costs would be classified as a direct cost for a company that produces motorcycles?

During its first year of operations,a company that incurred $1,000 in production costs reported cost of goods sold of $800 and selling costs of $100.Its ending finished goods inventory was $300.

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

Which of the following is not a provision of the Sarbanes-Oxley Act of 2002?

Certified Management Accountants (CMA) must complete a specified number of continuing professional education credits each reporting period.Which of the four standards of ethical conduct issued by the Institute of Management Accountants likely motivated this requirement?

During her first year with the company,Ann mistakenly accumulated some of the company's period costs in ending inventory.Which of the following indicates how this error affects the company's financial statements assuming number of units produced exceeded number of units sold during the period?