Accounting Chapter 14

A manufacturer may report three inventories on its balance sheet: (1) raw materials, (2) work in process, and (3) finished goods. Indicate in what sequence these inventories generally appear on a balance sheet.

3,2,1

for the year, Redder Company has cost of goods manu-factured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods sold is:

550,000 (200,000 + 600,000 - 250,000)

Examples of manufacturing overhead costs:

Utilities for manufacturing equipment, depreciation on manufacturing building/machinery, salary of supervisor, insurance on machinery, property taxes, factory repairs, indirect labor

Which of the following is not a service company?

Walmart

Which of the following would you find on the income statement of a manufacturing company, but not on the income statement of a merchandising company?

cost of goods manufactured

Which of the following will not likely be a line item in the income statement of a service company?

cost of goods sold

Which of the following costs would a computer manufacturer include in manufacturing overhead?

depreciation on testing equipment

period costs=

expenses (advertising, rent, etc), non manufacturing costs, administrative costs

Manufacturers compute cost of goods sold by adding the beginning finished goods inventory to the cost of goods purchased and subtracting the ending finished goods inventory.

false; cost of goods manufactured

managerial accounting

places emphasis on special-purpose information; detailed; for internal users

The management of an organization performs several broad functions. They are:

planning, directing, and controlling

direct materials are a

product cost (not manufacturing or period cost)

A cost of goods manufactured schedule shows beginning and ending inventories for:

raw materials and work in process only

A cost of goods manufactured schedule shows beginning and ending inventories for

raw materials and work in progress

Which of the following is not an element of manufacturing overhead?

sales manager salary (period cost not product cost)

The formula to determine the cost of goods manufactured is:

Beginning work in process inventory + Total manufacturing costs − Ending work in process inventory

Activity-based costing attempts to

allocate manufacturing overhead in a more meaningful fashion

total manufacturing costs=

the sum of direct materials costs, direct labor costs, and manufacturing overhead

Managerial accounting applies to service, merchandising, and manufacturing companies and to all forms of business organizations

true

The costs assigned to beginning work in process inventory are based on product or service costs incurred in the prior period T/F

true

Examples of direct labor costs:

wages of workers

What is the best way to differentiate service companies from manufacturing companies?

Determine how quickly the product is used

Which is not an element of manufacturing overhead?

Sales manager's salary

indirect labor is a _____ cost

product

The controlling process involves

keeping the company on track

Which one of the following is a trend in managerial accounting?

large machines replaced with smaller ones

Planning requires that companies

look ahead and establish objectives

Using just-in-time inventory methods allow many companies to

lower inventory levels/costs

Barry's BarBQue incurred the following costs: $1,400 for ribs, 45 hours of labor to cook the ribs at $10 per hour, $50 for seasoning and sauce, $300 for signs to advertise the ribs, $150 to clean the grill after cooking the ribs, and $100 of administrative costs. How much are total product costs?

$1,400 + (45 hrs × $10) + $50 + $150 = $2,050

Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful fashion?

Activity-based costing

After passage of the Sarbanes-Oxley Act of 2002:

CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results

Which one of the following is true concerning manufacturing and merchandising companies' inventories on the balance sheet?

Finished goods inventory is to a manufacturer what merchandise inventory is to a merchandiser

Manufacturing companies use cost of goods _________ and merchandising companies use cost of goods _____________

manufactured; purchased

Which of the following costs are classified as a period cost?

Wages paid to a cost accounting department supervisor.

Cost of goods available for sale is a step in the calculation of cost of goods sold of:

a merchandising company and a manufacturing company

The value chain refers to

all activities associated with providing a product or service

Product costs=

manufacturing overhead, direct labor, direct materials

The beginning balances for the raw materials inventory and work in process inventory accounts are closed to what account?

manufacturing summary

The principal difference between a merchandising and a manufacturing income statement is the

cost of goods sold section

the smallest component of total manufacturing cost is:

direct labor

Examples of direct material costs:

engine, windshield, raw material, upholstery/wood in manufacturing furniture

Examples of recent trends in the economic environment of U.S. businesses are:

increasing deregulation, increasing global competition, and a shift toward providing services rather than goods

managerial accounting does not involve

independent audits