Week 2: Introduction to Managerial Accounting and Cost Concepts

The following information relates to the manufacturing operations of the JNR Company for the year: Raw materials inventory (Beginning)$ 49,000 Raw materials inventory (Ending) $ 52,000 Finished goods (Beggining)60,000 Finished goods (Ending) 52,000 The raw materials used in manufacturing during the year totaled $110,000. Raw materials purchased during the year amount to: a. $113,000 b. $107,000 c. $118,000 d. $99,000

a. $113,000

Which of the following items appears only in a manufacturing company's financial statements and not in a merchandising company's financial statement? a.Cost of goods manufactured b.Gross profit c.Inventory d.Cost of goods sold

a. Cost of goods manufactured

The law that specifically prohibits payments to foreign officials in order to attain business is knowns as ________. a.FCPA b.IFRS c.AICPA d.SOX

a. FCPA

Which of the following is not true regarding continuous improvement? a.It can be applied only to improve processes and products but not services and practices. b.It applies to both service and manufacturing companies. c.It is used to reduce performance costs. d.It rejects the idea of "good enough."

a. It can be applied only to improve processes and products but not services an practices.

The controller of a corporation: a.reports to the CFO and is in charge of the accounting side of the business b.reports to the board of directors c.reports to the CFO and is in charge of the finance side of the business d.reports to the CEO and implements all cash policies

a. reports to the CFO and is in charge of the accounting side of the business

Which of the following is the primary source of revenue for a manufacturing business? a.the production of products from raw materials b.both the provision of services and the sale of finished goods c.the purchase and resale of finished products d.the provision of intangible goods and services

a. the production of products from raw materials

What year was the Sarbanes-Oxley Act enacted? a.1992 b.2002 c.1997 d.2007

b. 2002

The three major costs of manufacturing a product are: a.Product costs, period costs, and factory overhead. b.Direct materials, direct labor, and factory overhead. c.Marketing, selling, and administrative costs. d.Indirect labor, indirect materials, and factory overhead.

b. Direct materials, direct labor, and factory overhead.

Which of the following statements is incorrect? a.The practice of management accounting is fairly flexible. b.Reports produced using management accounting must follow GAAP. c.The information gathered from management accounting is not required by law. d.Management accounting focuses mainly on the internal user.

b. Reports produced using management accounting must follow GAAP.

What is the law that protects investors from fraudulent financial accounting activity? a.CPAS b.SOX c.SACS d.FASB

b. SOX

The salary paid to the president of a company would be classified on the income statement as a(n): a.Indirect labor cost. b.Selling, general & administrative expenses (SG&A). c.Direct labor cost. d.Material cost.

b. Selling, general & administrative expenses (SG&A).

Which of the following is a primary aspect of the evaluating function within an organization? a.reviewing only the quantitative or financial results of the company b.comparing actual results against expected results for products, departments, divisions, or the company as a whole c.putting controls in place for the upcoming year d.setting goals

b. comparing actual results agasint expected results of products, departments, divisions, or the company as a whole

Conversion costs include all of the following except: a.depreciation on factory equipment b.direct materials purchased c.wages of production workers d.factory utilities

b. direct materials purchased

External users of accounting information would include ________. a.supervisors b.investors c.employees d.managers

b. investors

Total costs for ABC Distributing are $250,000 when the activity level is 10,000 units. If variable costs are $5 per unit, what are their fixed costs? a.Their fixed costs cannot be determined from the information presented. b.$240,000 c.$200,000 d.$260,000

c. $200,000

A partial listing of costs incurred during March at Febbo Corporation appears below: Factory supplies $ 9,000 Administrative wages and salaries $ 85,000 Direct materials $ 126,000 Sales staff salaries $ 30,000 Factory depreciation $ 33,000 Corporate headquarters building rent $ 43,000 Indirect labor $ 26,000 Marketing $ 65,000 Direct labor $ 99,000 The total of the period costs listed above for March is: a. $293,000 b. $291,000 c. $223,000 d. $148,000

c. $223,000

A company's prime costs total $4,599,000 and its conversion costs total $5,610,000. If direct materials costs are $2,121,000 and direct labor costs are $2,478,000, calculate the overhead costs: a.$3,489,000 b.$1,011,000 c.$3,132,000 d.$2,121,000

c. $3,132,000

Which of the following statements is true regarding average fixed costs? a.Average fixed costs per unit cannot be determined. b.Average fixed costs per unit remain fixed regardless of level of activity. c.Average fixed costs per unit fall as the level of activity rises. d.Average fixed costs per unit rise as the level of activity rises.

c. Average fixed costs per unit fall as the level of activity rises.

Which of the following represents the components of the income statement for a service business? a.Service Revenue - Cost of Goods Purchased = gross profit b.Sales Revenue - Cost of Goods Sold = gross profit c.Service Revenue - Operating Expenses = operating income d.Sales Revenue - Cost of Goods Manufactured = gross profit

c. Service Revenue - Operating Expenses = operating income

Use the cost information below for Ruiz Incorporated to determine the total manufacturing costs incurred during the year: Work in Process, beginning ........... $ 54,000 Work in Process, ending ................ 39,000 Raw Materials Inventory, beginning ..... 94,000 Raw Materials Inventory, ending .......... 25,000 Direct materials used ............. $ 14,500 Total factory overhead ........................ 7,500 Direct labor used .................... 28,500 a. $15,000 b. $104,500 c. $97,000 d. $50,500

d. $50,500

What is the amount of Cost of Goods Manufactured? Direct materials ................... $179,300 Direct labor ............................... 200,000 Overhead .................................. 324,700 Beginning Work In Process Inventory ............. 58,500 Ending Work In Process Inventory .................. 23,500 a. $539,000 b. $82,000 c. $282,000 d. $739,000

d. 739,000

Which of the following is correct about a merchandiser's inventory? a.A merchandiser has three inventories: Raw Materials Inventory, Work In Process Inventory and Finished Goods Inventory. b.A merchandiser does not have any inventory. c.A merchandiser only has one inventory: Finished Goods Inventory. d.A merchandiser only has one inventory: Merchandise Inventory.

d. A merchandiser on has one inventory: Merchandise Inventory

Costs incurred from converting raw materials to finished goods are known as: a.Material costs b.Direct material costs c.Prime costs d.Conversion costs

d. Conversion Costs

Which of the following is false regarding strategic planning? a.Strategic objectives will be diverse and vary from company to company. b.It should include both short-term and long-term goals. c.It will span many years. d.It is the sole responsibility of supervisors.

d. It is the sole responsibility of supervisors.

Which of the following represents the components of the income statement for a manufacturing business? a.Service Revenue - Operating Expenses = gross profit b.Sales Revenue - Cost of Goods Manufactured = gross profit c.Service Revenue - Cost of Goods Manufactured = gross profit d.Sales Revenue - Cost of Goods Sold = gross profit

d. Sales Revenue - Cost of goods sold = gross profit

Which of the following is not an objective used in the balanced scorecard approach? a.Financial b.Customer c.Learning and growth d.Vendor

d. Vendor

A company's attempts to utilize sustainable business practices with regard to its employees, the environment, and society are known as ________. a.a balanced scorecard b.total quality management c.value chain d.corporate social responsibility

d. corporate social responsibility

A scatter graph is used to test the assumption that the relationship between cost and activity level is ________. a.curvilinear b.cyclical c.unpredictable d.linear

d. linear

Which of the following is the primary source of revenue for a service business? a.the sale of raw materials to manufacturing firms b.the purchase and resale of finished products c.the production of products from raw materials d.providing intangible goods and services

d. providing intangible goods and services

Which of the following is not considered a product cost? a.direct labor b.indirect materials c.direct materials d.selling expense

d. selling expense

Management accountants help the management of an organization in their planning function through ________. a.monitoring anti-theft systems b.evaluating costs c.analyzing profits d.strategic planning

d. strategic planning

For product costs associated with a product to be reported on the income statement: a.The product must be transferred to Finished Goods Inventory. b.The product may be in any of the manufacturer's inventory accounts. c.The payment of the product must be received. d.The product must be sold.

d. the product must be sold.

In the cost equation Y = a + bx, Y represents which of the following? a.variable costs b.fixed costs c.units of production d.total costs

d. total costs

Which of the following items does not represent a difference between financial and managerial accounting? a.Flexibility of reporting b.Timeliness of information c.Users of the information d.Focus of the information e.Inclusion of monetary information

e. inclusion of monetary information

Which of the following represents the components of the income statement for a merchandising business? a.Sales Revenue - Cost of Goods Sold = gross profit b.Service Revenue - Cost of Goods Purchased = gross profit c.Sales Revenue - Cost of Goods Manufactured = gross profit d.Service Revenue - Operating Expenses = gross profit

a. Sales Revenue - Cost of Goods Sold = gross profit

Internal users of accounting information would not include ________. a.creditors b.officers c.employees d.managers

a. creditors

During the control function, the measurements taken of the performance must be accurate enough to see ________. a.deviations and variances b.only positive results c.only the negative results d.the primary focus

a. deviations and variances

Management accounting: a.emphasizes special-purpose information b.is controlled by GAAP c.is limited to strictly cost figures d.relates to the company as a whole

a. emphasizes special-purpose information

The high-low method and least-squares regression are used by managers to ________. a.estimate costs b.minimize corporate tax liability c.maximize output d.decide whether to make or buy a component part

a. estimate costs

The Certified Management Accountant (CMA) certification: a.includes a two-part exam, education requirements, and a work experience requirement b.is offered to managers who take special courses in accounting c.requires an associate's degree and four years of work experience d.signifies someone specializing in tax accounting

a. includes a two-part exam, education requirements, and a work experience requirement

A process that is often linked to Six Sigma and is designed toward continuous improvement by eliminating waste is ________. a.kaizen b.kamikaze c.total quality management d.value chain

a. kaizen

Variable costs are expenses that ________. a.remain constant on a per-unit basis but change in total based on activity level b.remain constant in total regardless of activity level within a relevant range c.remain constant on a per-unit basis and remain constant in total regardless of activity level d.decrease on a per-unit basis as activity level increases

a. remain constant on a per-unit basis but change in total based on activity level

A manufacturing company has a beginning finished goods inventory of $15,000, raw material purchases of $18,400, cost of goods manufactured of $33,300, and an ending finished goods inventory of $18,200. The cost of goods sold for this company is: a.$28,400 b.$30,100 c.$48,300 d.$21,600

b. $30,100

A company manufactures motorcycles. Compute the total amount of direct materials costs from the following costs. Cost item a. Tires, $11,000 b. Motorcycle seats, $18,000 c. Handlebars, $5,000 d. Factory accounting, $10,000 e. Factory equipment depreciation, $5,000 f. Assembly worker wages, $15,000 g. Factory rent, $60,000 h. Assembly worker benefits, $5,000 i. Bike frames, $14,000 a. $108,000 b. $48,000 c. $63,000 d. $68,000

b. 48,000

Fixed costs are expenses that ________. a.remain constant on a per-unit basis b.remain constant in total regardless of activity level within a relevant range c.the total will vary in response to changes in activity level d.increase on a per-unit basis as activity increases

b. remain constant in total regardless of activity level within a relevant range

A Report that lists the types and amounts of costs incurred in manufacturing is a: a.Schedule of cost of goods sold b.Schedule of cost of goods manufactured c.Manufacturer income statement d.Manufacturer balance sheet

b. schedule of cost of goods manufactured

Which of the following is the primary source of revenue for a merchandising business? a.the production of products from raw materials b.the purchase and resale of finished products c.the sale of raw materials to manufacturing firms d.the provision of intangible goods and services

b. the purchase and resale of finished products

When a representative of an organization gives money to another business official in order to gain favor and/or manipulate a business decision, this is known as ________. a.whistleblowing b.buyer debits c.bribery d.face value

c. bribery

Which of the following would not be classified as manufacturing overhead? a.indirect labor b.property taxes on factory c.direct labor d.indirect materials

c. direct labor

Which of the following are prime costs? a.indirect materials, indirect labor, and direct labor b.direct labor, indirect materials, and indirect labor c.direct labor and direct materials d.direct labor and indirect labor

c. direct labor and direct materials

An inventory system that organizations use to increase efficiency and decrease waste is ________. a.Lean Six Sigma b.total quality management c.just-in-time manufacturing d.corporate social responsibility

c. just-in-time manufacturing

The managers of an organization are responsible for performing several broad functions. They are ________. a.planning, evaluating, and manufacturing b.directing, controlling, and evaluating c.planning, controlling, and evaluating d.planning, controlling, and selling

c. planning, controlling, and evaluating

Managerial accounting produces information: a.that follows the rules of GAAP b.to meet the needs of investors c.that is often focused on the future d.to meet the needs of external users

c. that is often focused on the future

Which of the following methods of cost estimation relies on only two data points? a.least-squares regression b.account analysis c.the high-low method d.SWOT analysis.

c. the high-low method