Question 1

Costs that are not classified as product costs are normally expensed in the period incurred.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following items would be reported directly on the income statement as a period cost?

Accepted Answer

A)  Selling and administrative salaries 
B)  Cost of lubricant for oiling machinery 
C)  Wages paid to machine operators 
D)  All of these

Question 3

Period costs are initially recorded in asset accounts and are later expensed in the period when the related units are sold.

Accepted Answer

A) True 
 B)False

Question 4

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 5

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

Accepted Answer

A)  Insurance on factory building 
B)  Sales commissions 
C)  Product shipping costs 
D)  Product advertising

Question 6

Unlike manufacturers,service companies do not have an inventory of products.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?

Accepted Answer

A)  Credibility 
B)  Confidentiality 
C)  Integrity 
D)  Independence

Question 8

Which of the following is a product cost for a construction company?

Accepted Answer

A)  Cost of transporting raw materials to the job site 
B)  Wages paid to the company's payroll clerk 
C)  Rent of the company's main office 
D)  All of these.

Question 9

Is depreciation on manufacturing equipment expensed in the period incurred? Explain why or why not.

Accepted Answer

The answer of Is depreciation on manufacturing equipment expensed in...

Question 10

According to the Sarbanes-Oxley Act,a company's audit committee is responsible for its system of internal controls.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a reason management might be tempted to classify costs as product costs rather than expensing them during periods in which production exceeds sales?

Accepted Answer

A)  The company's bank may be more likely to extend financing to the firm. 
B)  Income taxes will be lower. 
C)  Net income will be higher. 
D)  Management bonuses may be higher.

Question 12

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:
 $$\begin{array} { l r } 
\text { Direct material costs } & \$ 80,000 \
\text { Direct labor costs } & 100,000 \
\text { Overhead costs } & 40,000 \
\text { Selling and adrninistrative costs } & 60,000
\end{array}$$ The company produced 10,000 units of product and sold 8,000 units.The average selling price was $34.00 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:

Accepted Answer

The answer of The Jacobson Manufacturing Company was started at...

Question 13

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:
 $\begin{array}{lr}
\text { Direct material costs } & \$ 10,000 \
\text { Direct labor costs } & 8,000 \
\text { Overhead costs } & 4,000 \
\text { Selling and administrative costs } & 2,000
\end{array}$ 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.

Accepted Answer

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

Question 14

Which of the following statements is true with regard to product costs versus general,selling,and administrative costs?

Accepted Answer

A)  Product costs associated with unsold units appear on the income statement as general expenses. 
B)  General, selling, and administrative costs appear on the balance sheet. 
C)  Product costs associated with units sold appear on the income statement as cost of goods sold. 
D)  None of these are true.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

During its first year of operations,Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wages.Lease payments and utilities on the production facilities amounted to $17,000 while general,selling,and administrative expenses totaled $8,000.The company produced 5,000 units and sold 3,000 units at a price of $15.00 a unit. What is the amount of finished goods inventory on the balance sheet at year-end?

Accepted Answer

A)  $10,000 
B)  $20,000 
C)  $4,000 
D)  $15,000

Question 17

Choose the answer that is not a distinguishing characteristic of financial accounting information.

Accepted Answer

A)  It is global information that reflects the performance of the whole company. 
B)  It is focused primarily on the future. 
C)  It is more concerned with financial data than physical or economic data. 
D)  It is more highly regulated than managerial accounting information.

Question 18

The following information relates to the operations of Cruz Manufacturing during the current year: $\begin{array}{lrr}
  \text { Raw materials used } &\$20,000\
 \text { Direct labor wages } &60,000\
 \text {Sales salaries and commissions  } &50,000\
 \text {  Depreciation on production equipment} &4,000\
 \text { Rent on manufacturing facilities } &30,000\
 \text {Packaging and shipping supplies  } &6,000\
 \text {  Sales revenue} &190,000\
 \text {  Units produced and sold} &10,000\
 \text { Selling price per unit } &\$20.00\
\end{array}$
 Based on this information,what is the company's cost of goods sold?

Accepted Answer

A)  $86,000 
B)  $120,000 
C)  $114,000 
D)  $170,000

Question 19

Match between columns
                        Premises:  Costs that are incurred after the manufacturing process is complete
 The identification of the best practices used by world-class competitors
 The linked sequence of activities that create value for the customer
 Costs that cannot be easily traced to specific products
 All costs related to obtaining or manufacturing a product intended for sale to customers
 Work that contributes to a product’s ability to satisfy customer needs
 The process of dividing a total cost into parts and assigning the parts to relevant cost objects
 The field of accounting that is designed to meet the information needs of external users
 General, selling, and administrative costs that are expensed in the period in which the economic sacrifice is made
 Costs that can easily and conveniently be traced to products

Accepted Answer

The Answer of Benchmarking and Cost allocation and Direct costs is...

Question 20

Steuben Company produces dog houses.During the current year,Steuben Company incurred the following costs: $\begin{array}{lrr}
  \text {  Rent on manufacturing facility} &\$250,000\
 \text { Office manager's salary } &150,000\
 \text { Wages of factory machine operator's } &110,000\
 \text {Depreciation on manufacturing equipment  } &50,000\
 \text {  Insurance and taxes on selling and administrative offices} &30,000\
 \text {Direct materials purchased and used  } &170,000\
\end{array}$

Wages paid to factory machine operators in producing the dog houses should be categorized as:

Accepted Answer

A)  a product cost and recorded in the inventory account 
B)  a period cost and recorded on the income statement 
C)  a product cost and recorded on the income statement 
D)  a period cost and recorded in the inventory account

Exam 1: Management Accounting and Corporate Governance

Costs that are not classified as product costs are normally expensed in the period incurred.

Which of the following items would be reported directly on the income statement as a period cost?

Period costs are initially recorded in asset accounts and are later expensed in the period when the related units are sold.

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

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

Unlike manufacturers,service companies do not have an inventory of products.

Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?

Which of the following is a product cost for a construction company?

Is depreciation on manufacturing equipment expensed in the period incurred? Explain why or why not.

According to the Sarbanes-Oxley Act,a company's audit committee is responsible for its system of internal controls.

Which of the following is not a reason management might be tempted to classify costs as product costs rather than expensing them during periods in which production exceeds sales?

Which of the following statements is true with regard to product costs versus general,selling,and administrative costs?

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

Choose the answer that is not a distinguishing characteristic of financial accounting information.

Select the term from the list provided that best matches each of the following descriptions.