Who is managerial accounting for?
managers and internal users
Managerial Accounting
A) Is governed by generally accepted accounting principles
B) Places emphasis on special-purpose information
C) Pertains to the entity as a whole and is highly aggregated
D) Is limited to cost data
B) Places emphasis on special-purpose information
Managerial Accounting is a field of accounting that provides economic information for external users. (True/False)
False
The primary users of managerial accounting information are external users who are stockholders, creditors and regulatory agencies. (True/False)
False
The purpose of reports in managerial accounting is to provide special-purpose information for a particular user for a specific decision. (True/False)
True
Which of the following does not apply to the content of managerial reports?
A) Reporting standard is relevant to the decision to be made
B) May extend beyond the double entry accounting system
C) Pertains to subunits of the entity and may be very detailed
D) Pertains to the entity as a whole and is highly aggregated
What are the three management functions?
Planning, Directing and Controlling
According to the Sarbanes Oxley Act of 2002, a chief executive officer or chief financial officer who misrepresents the company's finances may be penalized by being...
A) Fired, but not imprisoned
B) Imprisoned, but not fined
C) Removed from the corporate
D) Fined and imprisoned
Managerial accountants have a single role within an organization, collecting and reporting costs to management. (True/False)
False
Financial accounting reports are general-purpose and intended for external users. (True/False)
True
Managerial accounting reports are special-purpose and issued as frequently as needed. (True/False)
True
Managers' activities and responsibilities can be classified into three broad functions: cost accounting, budgeting, and internal control. (True/False)
False
As a result of the Sarbanes-Oxley Act, managerial accounting reports must now comply with generally accepted accounting principles (GAAP) (True/False)
False
Top managers must certify that a company maintains an adequate system of internal controls. (True/False)
True
Manufacturing Costs vs. Manufacturing Overhead
Costs = Direct Materials and Direct Labor
Overhead = Everything else (indirectly affects costs)
Manufacturing inventory is one of the three inventory accounts a manufacturing company may have. (True/False)
False
The three accounts are:
1) Raw Materials Inventory
2) Work In Progress Inventory
3) Finished Goods Inventory
Which of the following is not an element of manufacturing overhead?
A) Sales manager's salary
B) Plant manager's salary
C) Factory repairman's wages
D) Product inspector's salary
A) Sales manager's salary
Product Costs vs. Period Costs
Product - Direct materials, Direct labor and Manufacturing overhead (integral part of producing the product)
Period - Non-manufacturing costs; selling expenses and administrative costs
Direct materials and direct labor are...
A) Period costs
B) Product costs
C) Overhead costs
D) Indirect costs
B) Product Costs
A bicycle company has these costs: tires, salaries of employees who put tires onthe wheels, factory building depreciation, wheel nuts, spokes, salary of factory manager, handlebars, and salaries of factory maintenance employees. Classify each as direct ma
Direct Materials - Tires, Spokes, Handlebars
Direct Labor - Salaries of employees who put tires on the wheels
Overhead - Factory depreciation, Factory manager salary, Factory maintenance employees salary
Indirect materials, indirect labor, and maintenance on factory facilities are all included in manufacturing overhead. (True/False)
True
For the year, Red Company has cost of goods manufactured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods sold is...
A) $450,000
B) $500,000
C) $550,000
D) $600,000
C) $550,000
Beginning finished goods inventory 200,000
+ COGs Manufactured +600,000
- Ending finished goods inventory -250,000
= Cost of goods sold =550,000
What together ='s Manufacturing Costs
Direct materials + Direct labor + Overhead = Manufacturing Costs
Finished goods inventory plus work in process inventory constitutes cost of goods available for sale. (True/False)
False
The sum of direct materials costs, direct labor costs, and manufacturing overhead incurred is the total manufacturing costs for the current period. (True/False)
True
A cost of goods manufactured schedule shows beginning and ending inventories for:
A) Raw materials and work in process only
B) Work in process only
C) Raw materials only
D) Raw materials, work in process, and finished goods
A) Raw materials and work in process only
Material cost ($30) per board (product/period, Direct materials/direct labor/manufacturing overhead)
Product - direct materials
Labor cost ($40) per board (product/period, Direct materials/direct labor/manufacturing overhead)
Product - direct labor
Depreciation on factory equipment ($25,000 per year) (product/period, Direct materials/direct labor/manufacturing overhead)
Product - manufacturing overhead
Property taxes on factory building ($6,000 per year) (product/period, Direct materials/direct labor/manufacturing overhead)
Product - manufacturing overhead
Advertising costs ($60,000 per year) (product/period, Direct materials/direct labor/manufacturing overhead)
Period
Sales commissions ($20 per board) (product/period, Direct materials/direct labor/manufacturing overhead)
Period
Maintenance salaries (factory facilities) ($45,000 per year) (product/period, Direct materials/direct labor/manufacturing overhead)
Product - manufacturing overhead
Salary of plant manager ($70,000) (product/period, Direct materials/direct labor/manufacturing overhead)
Product - manufacturing overhead
Cost of shipping boards ($8 per board) (product/period, Direct materials/direct labor/manufacturing overhead)
Period
How to find the manufacturing cost from list of items....
Manufacturing cost (price x amount produced)
+Labor cost (price x amount produced)
+Depreciation on factory equipment
+Property taxes on factory building
+Maintenance salaries (factory facilities)
+Salary of plant manager
= Total manufacturing cost
Just-in-Time Inventory methods
inventory system in which goods are manufactured or purchased just in time for sale
Total Quality Management
Reduce defects in finished products, with the goal of zero defects
Activity-based Costing
Allocates overhead based on use of activities
Results in more accurate product costing and scrutiny of all activities in the value chain
Balanced Scorecard
Evaluates operations in an integrated fashion
Uses both financial and non-financial measures
Links performance to overall company objectives
Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful manner?
A) Just-in-time inventory
B) Total-quality management
C) Balanced scorecard
D) Activity-based costing
D) Activity-based costing
Which of the following inventory accounts is not applicable to a manufacturing company?
A) Finished goods inventory
B) Merchandise inventory
C) Raw materials inventory
D) Work in process inventory
B) Merchandise inventory
If direct materials for one unit of product are $9.00, direct labor for one hour is $15.00, manufacturing overhead costs are $5.00 per direct labor hour, and one fourth hour of direct labor is required to produce one unit of product, how much are the labo
A) $5.00
DM = $9.00
DL = $15.00
MOH = $5.00 per DL hour
MOH .25 x 5 = 1.25
DL .25 x 15 = 3.75
= $5.00
If a product required a great deal of electricity to produce, and crude oil prices increased, which of the following costs most likely increased? (AICPA)
A) Direct materials
B) Direct labor
C) Prime costs
D) Conversion costs
A) Direct materials or D) Conversion costs
(depends how you read the question)
extra notes:
prime costs = direct materials + direct labor
conversion costs = direct labor + overhead
Cost accounting involves...
Measuring, Recording, and Reporting product costs
Job Order Cost System
Costs are assigned to each job or batch
Process Cost System
Used when a large volume of similar products are manufactured
Costs are accumulated for a time period
Costs are assigned to departments or processes for a specified period of time
Cost accounting involves the measuring, recording, and reporting of:
A) Product costs
B) Future costs
C) Manufacturing processes
D) Managerial accounting decisions
A) Product costs
Job Order Cost Flow
Work in Process (WIP) -> Finished Goods -> Cost of Goods Sold
Factory Labor Costs
1) Gross earnings of factory workers
2) Employer payroll taxes on these earnings
3) Fringe benefits incurred by the employer
When incurred, factory labor costs are debited to:
A) Work in Process
B) Factory Wages Expense
C) Factory Labor
D) Factory Wages Payable
C) Factory Labor
In the current assets section of the balance sheet, in which order are manufacturing inventories listed?
A) Raw materials, work in process, finished goods
B) Finished goods, work in process, raw materials
C) Work in process, finished goods, raw materials
B) Finished goods, work in process, raw materials
Which one of the following costs is a component of both manufacturing overhead and total manufacturing costs?
A) Direct Labor
B) Direct materials
C) Selling and administrative costs
D) Factory utilities
D) Factory utilities
Manufacturing costs are typically classified as...
A) Product costs or period costs
B) Direct materials or Direct labor
C) Direct materials, Direct labor, or manufacturing overhead
D) Direct materials, direct labor, or selling and administrative
C) Direct materials, Direct labor, or manufacturing overhead
Raw materials inventory, January 1 $12,000
Raw materials inventory, December 31 16,000
Work in process, January 1 5,000
Work in process, December 31 8,000
Finished goods, January 1 17,000
Finished goods, December 31 12,000
Raw materials purchases 118,000
B) $114,000
12,000 + 118,000 - 16,000 = 114,000
Raw materials inventory, January 1 $12,000
Raw materials inventory, December 31 16,000
Work in process, January 1 5,000
Work in process, December 31 8,000
Finished goods, January 1 17,000
Finished goods, December 31 12,000
Raw materials purchases 118,000
A) $389,000
DM + DL + OH (factory utilities, indirect labor, factory depreciation) = total manufacturing costs
Raw materials inventory, January 1 $12,000
Raw materials inventory, December 31 16,000
Work in process, January 1 5,000
Work in process, December 31 8,000
Finished goods, January 1 17,000
Finished goods, December 31 12,000
Raw materials purchases 118,000
C) $397,000
WIP, Jan. 1 + TMC - WIP, Dec. 31 = COGM
Raw materials inventory, January 1 $12,000
Raw materials inventory, December 31 16,000
Work in process, January 1 5,000
Work in process, December 31 8,000
Finished goods, January 1 17,000
Finished goods, December 31 12,000
Raw materials purchases 118,000
D) $425,000
FG, Jan. 1 + COGM - FG, Dec. 31 = COGS
The formula for computing a predetermined overhead rate is...
A) Estimated annual overhead cost / Estimated annual operating activity
B) Estimated annual overhead costs / Actual annual operating activity
C) Actual annual overhead costs / Actual annual ope
A) Estimated annual overhead cost / Estimated annual operating activity
Which one of the following is an example of a period cost...
A) Maintenance on factory machines
B) Wages of factory workers
C) Salesmen's commissions
D) Depreciation on the factory building
C) Salesmen's commissions
What are the functions of management in an organization?
A) Planning, controlling, and decision making
B) Planning, directing, and controlling
C) Directing, controlling, and decision making
D) Directing, planning, and decision making
B) Planning, directing, and controlling
Which one of the following is not one of the major activities of managerial accounting...
A) Providing a basis for controlling costs by comparing actual results with planned objectives
B) Preparing financial statements designed primarily for stockholders
B) Preparing financial statements designed primarily for stockholders and creditors
Which of the following would most likely use a job order cost system?
A) Cement manufacturer
B) Cat food manufacturer
C) Specialty printing company
D) Automobile manufacturer
C) Specialty printing company
Who is managerial accounting for?
managers and internal users
Managerial Accounting
A) Is governed by generally accepted accounting principles
B) Places emphasis on special-purpose information
C) Pertains to the entity as a whole and is highly aggregated
D) Is limited to cost data
B) Places emphasis on special-purpose information
Managerial Accounting is a field of accounting that provides economic information for external users. (True/False)
False
The primary users of managerial accounting information are external users who are stockholders, creditors and regulatory agencies. (True/False)
False
The purpose of reports in managerial accounting is to provide special-purpose information for a particular user for a specific decision. (True/False)
True
Which of the following does not apply to the content of managerial reports?
A) Reporting standard is relevant to the decision to be made
B) May extend beyond the double entry accounting system
C) Pertains to subunits of the entity and may be very detailed
D) Pertains to the entity as a whole and is highly aggregated
What are the three management functions?
Planning, Directing and Controlling
According to the Sarbanes Oxley Act of 2002, a chief executive officer or chief financial officer who misrepresents the company's finances may be penalized by being...
A) Fired, but not imprisoned
B) Imprisoned, but not fined
C) Removed from the corporate
D) Fined and imprisoned
Managerial accountants have a single role within an organization, collecting and reporting costs to management. (True/False)
False
Financial accounting reports are general-purpose and intended for external users. (True/False)
True
Managerial accounting reports are special-purpose and issued as frequently as needed. (True/False)
True
Managers' activities and responsibilities can be classified into three broad functions: cost accounting, budgeting, and internal control. (True/False)
False
As a result of the Sarbanes-Oxley Act, managerial accounting reports must now comply with generally accepted accounting principles (GAAP) (True/False)
False
Top managers must certify that a company maintains an adequate system of internal controls. (True/False)
True
Manufacturing Costs vs. Manufacturing Overhead
Costs = Direct Materials and Direct Labor
Overhead = Everything else (indirectly affects costs)
Manufacturing inventory is one of the three inventory accounts a manufacturing company may have. (True/False)
False
The three accounts are:
1) Raw Materials Inventory
2) Work In Progress Inventory
3) Finished Goods Inventory
Which of the following is not an element of manufacturing overhead?
A) Sales manager's salary
B) Plant manager's salary
C) Factory repairman's wages
D) Product inspector's salary
A) Sales manager's salary
Product Costs vs. Period Costs
Product - Direct materials, Direct labor and Manufacturing overhead (integral part of producing the product)
Period - Non-manufacturing costs; selling expenses and administrative costs
Direct materials and direct labor are...
A) Period costs
B) Product costs
C) Overhead costs
D) Indirect costs
B) Product Costs
A bicycle company has these costs: tires, salaries of employees who put tires onthe wheels, factory building depreciation, wheel nuts, spokes, salary of factory manager, handlebars, and salaries of factory maintenance employees. Classify each as direct ma
Direct Materials - Tires, Spokes, Handlebars
Direct Labor - Salaries of employees who put tires on the wheels
Overhead - Factory depreciation, Factory manager salary, Factory maintenance employees salary
Indirect materials, indirect labor, and maintenance on factory facilities are all included in manufacturing overhead. (True/False)
True
For the year, Red Company has cost of goods manufactured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods sold is...
A) $450,000
B) $500,000
C) $550,000
D) $600,000
C) $550,000
Beginning finished goods inventory 200,000
+ COGs Manufactured +600,000
- Ending finished goods inventory -250,000
= Cost of goods sold =550,000
What together ='s Manufacturing Costs
Direct materials + Direct labor + Overhead = Manufacturing Costs
Finished goods inventory plus work in process inventory constitutes cost of goods available for sale. (True/False)
False
The sum of direct materials costs, direct labor costs, and manufacturing overhead incurred is the total manufacturing costs for the current period. (True/False)
True
A cost of goods manufactured schedule shows beginning and ending inventories for:
A) Raw materials and work in process only
B) Work in process only
C) Raw materials only
D) Raw materials, work in process, and finished goods
A) Raw materials and work in process only
Material cost ($30) per board (product/period, Direct materials/direct labor/manufacturing overhead)
Product - direct materials
Labor cost ($40) per board (product/period, Direct materials/direct labor/manufacturing overhead)
Product - direct labor
Depreciation on factory equipment ($25,000 per year) (product/period, Direct materials/direct labor/manufacturing overhead)
Product - manufacturing overhead
Property taxes on factory building ($6,000 per year) (product/period, Direct materials/direct labor/manufacturing overhead)
Product - manufacturing overhead
Advertising costs ($60,000 per year) (product/period, Direct materials/direct labor/manufacturing overhead)
Period
Sales commissions ($20 per board) (product/period, Direct materials/direct labor/manufacturing overhead)
Period
Maintenance salaries (factory facilities) ($45,000 per year) (product/period, Direct materials/direct labor/manufacturing overhead)
Product - manufacturing overhead
Salary of plant manager ($70,000) (product/period, Direct materials/direct labor/manufacturing overhead)
Product - manufacturing overhead
Cost of shipping boards ($8 per board) (product/period, Direct materials/direct labor/manufacturing overhead)
Period
How to find the manufacturing cost from list of items....
Manufacturing cost (price x amount produced)
+Labor cost (price x amount produced)
+Depreciation on factory equipment
+Property taxes on factory building
+Maintenance salaries (factory facilities)
+Salary of plant manager
= Total manufacturing cost
Just-in-Time Inventory methods
inventory system in which goods are manufactured or purchased just in time for sale
Total Quality Management
Reduce defects in finished products, with the goal of zero defects
Activity-based Costing
Allocates overhead based on use of activities
Results in more accurate product costing and scrutiny of all activities in the value chain
Balanced Scorecard
Evaluates operations in an integrated fashion
Uses both financial and non-financial measures
Links performance to overall company objectives
Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful manner?
A) Just-in-time inventory
B) Total-quality management
C) Balanced scorecard
D) Activity-based costing
D) Activity-based costing
Which of the following inventory accounts is not applicable to a manufacturing company?
A) Finished goods inventory
B) Merchandise inventory
C) Raw materials inventory
D) Work in process inventory
B) Merchandise inventory
If direct materials for one unit of product are $9.00, direct labor for one hour is $15.00, manufacturing overhead costs are $5.00 per direct labor hour, and one fourth hour of direct labor is required to produce one unit of product, how much are the labo
A) $5.00
DM = $9.00
DL = $15.00
MOH = $5.00 per DL hour
MOH .25 x 5 = 1.25
DL .25 x 15 = 3.75
= $5.00
If a product required a great deal of electricity to produce, and crude oil prices increased, which of the following costs most likely increased? (AICPA)
A) Direct materials
B) Direct labor
C) Prime costs
D) Conversion costs
A) Direct materials or D) Conversion costs
(depends how you read the question)
extra notes:
prime costs = direct materials + direct labor
conversion costs = direct labor + overhead
Cost accounting involves...
Measuring, Recording, and Reporting product costs
Job Order Cost System
Costs are assigned to each job or batch
Process Cost System
Used when a large volume of similar products are manufactured
Costs are accumulated for a time period
Costs are assigned to departments or processes for a specified period of time
Cost accounting involves the measuring, recording, and reporting of:
A) Product costs
B) Future costs
C) Manufacturing processes
D) Managerial accounting decisions
A) Product costs
Job Order Cost Flow
Work in Process (WIP) -> Finished Goods -> Cost of Goods Sold
Factory Labor Costs
1) Gross earnings of factory workers
2) Employer payroll taxes on these earnings
3) Fringe benefits incurred by the employer
When incurred, factory labor costs are debited to:
A) Work in Process
B) Factory Wages Expense
C) Factory Labor
D) Factory Wages Payable
C) Factory Labor
In the current assets section of the balance sheet, in which order are manufacturing inventories listed?
A) Raw materials, work in process, finished goods
B) Finished goods, work in process, raw materials
C) Work in process, finished goods, raw materials
B) Finished goods, work in process, raw materials
Which one of the following costs is a component of both manufacturing overhead and total manufacturing costs?
A) Direct Labor
B) Direct materials
C) Selling and administrative costs
D) Factory utilities
D) Factory utilities
Manufacturing costs are typically classified as...
A) Product costs or period costs
B) Direct materials or Direct labor
C) Direct materials, Direct labor, or manufacturing overhead
D) Direct materials, direct labor, or selling and administrative
C) Direct materials, Direct labor, or manufacturing overhead
Raw materials inventory, January 1 $12,000
Raw materials inventory, December 31 16,000
Work in process, January 1 5,000
Work in process, December 31 8,000
Finished goods, January 1 17,000
Finished goods, December 31 12,000
Raw materials purchases 118,000
B) $114,000
12,000 + 118,000 - 16,000 = 114,000
Raw materials inventory, January 1 $12,000
Raw materials inventory, December 31 16,000
Work in process, January 1 5,000
Work in process, December 31 8,000
Finished goods, January 1 17,000
Finished goods, December 31 12,000
Raw materials purchases 118,000
A) $389,000
DM + DL + OH (factory utilities, indirect labor, factory depreciation) = total manufacturing costs
Raw materials inventory, January 1 $12,000
Raw materials inventory, December 31 16,000
Work in process, January 1 5,000
Work in process, December 31 8,000
Finished goods, January 1 17,000
Finished goods, December 31 12,000
Raw materials purchases 118,000
C) $397,000
WIP, Jan. 1 + TMC - WIP, Dec. 31 = COGM
Raw materials inventory, January 1 $12,000
Raw materials inventory, December 31 16,000
Work in process, January 1 5,000
Work in process, December 31 8,000
Finished goods, January 1 17,000
Finished goods, December 31 12,000
Raw materials purchases 118,000
D) $425,000
FG, Jan. 1 + COGM - FG, Dec. 31 = COGS
The formula for computing a predetermined overhead rate is...
A) Estimated annual overhead cost / Estimated annual operating activity
B) Estimated annual overhead costs / Actual annual operating activity
C) Actual annual overhead costs / Actual annual ope
A) Estimated annual overhead cost / Estimated annual operating activity
Which one of the following is an example of a period cost...
A) Maintenance on factory machines
B) Wages of factory workers
C) Salesmen's commissions
D) Depreciation on the factory building
C) Salesmen's commissions
What are the functions of management in an organization?
A) Planning, controlling, and decision making
B) Planning, directing, and controlling
C) Directing, controlling, and decision making
D) Directing, planning, and decision making
B) Planning, directing, and controlling
Which one of the following is not one of the major activities of managerial accounting...
A) Providing a basis for controlling costs by comparing actual results with planned objectives
B) Preparing financial statements designed primarily for stockholders
B) Preparing financial statements designed primarily for stockholders and creditors
Which of the following would most likely use a job order cost system?
A) Cement manufacturer
B) Cat food manufacturer
C) Specialty printing company
D) Automobile manufacturer
C) Specialty printing company