BUAD 2050: Chapter 1

a company incurs $2,000 in manufacturing costs to produce 1,000 units, what is the average cost per unit?

$2

Franklin Manufacturing Company began operations on January 1. During the year, it started and completed 1,800 units of product. The financial statements are prepared in accordance with GAAP. The company incurred the following costs: Raw materials purchased and used—$3,220. Wages of production workers—$3,490. Salaries of administrative and sales personnel—$1,905. Depreciation on manufacturing equipment—$5,170. Depreciation on administrative equipment—$1,755. Franklin sold 1,030 units of product. Required Determine the total product cost for the year. Determine the total cost of the ending inventory. (Do not round intermediate calculations.) Determine the total of cost of goods sold.

-Total Product Cost: $11,880 -Total Cost of Ending Inventory: $5,082 -Total Cost of Goods Sold: $6,798

Materials, labor, and overhead costs are

-added to the inventory account -reported as an expense on the income statement in the period in which the inventory is sold

Which of the following are considered inventory holding costs?

-cost of theft/damage -cost of obsolescence -cost of supervising inventory -warehouse space cost -cost of financing inventory

Bilberry company purchased materials with cash. This transaction

-decreases cash of Bilberry Company -increases inventory of Bilberry Company -does not affect stockholders' equity of Bilberry Company -does not affect net income of Bilberry Company -does not affect total assets of Bilberry Company -does not affect liabilities of Bilberry Company

Which of the following would not be included in manufacturing overhead?

-direct labor -selling and administrative costs -direct materials -depreciation of selling and administrative buildings

Selling inventory for cash results in which of the following? Assume the inventory is sold for more that it cost to produce.

-increase stockholders' equity -increase net income -increase total assets -the transaction does not affect liabilities

Which of the following are expected of IMA members?

-integrity -confidentiality -competence -credibility -resolution of ethical conflict

recognizing depreciation on manufacturing assets results in which of the following? assume the company has not sold the inventory yet.

-no effect on net income -no effect on total assets -increases inventory -decreases the book value of manufacturing equipment

Identify the costs that are included in manufacturing a product.

-overhead -labor -materials

identify the three elements of the fraud triangle.

-rationalization -opportunity -pressure

Which of the following are not considered inventory holding costs?

-research and development cost -product manufacturing cost

recognizing depreciation on selling and administrative expenses result is which of the following

-the transaction does not affect liabilities -decreases net income -decreases stockholders' equity -decreases total assets

paying administrative salaries with cash affects which of the following income statements?

-total assets on the balance sheet -income statement -total stockholders' equity on the balance sheet

Which of the following does GAAP not allow companies to include in inventory?

-upstream costs -downstream costs

what costs should management consider when pricing a product?

-upstream costs -downstream costs -product manufacturing costs

A) Wages of production workers B) Advertising costs C) Promotion costs D) Production Supplies E) Depreciation on administrative building F) Depreciation on manufacturing equipment G) Research and development costs H) Cost to set up manufacturing equipment I) Utilities used in manufacturing facility J) Cars for sales staff K) Real estate tax levied on a factory L) General office supplies M) Raw materials used in the manufacturing process N) Cost to rent office equipment

A) Product Cost/Asset B) SG&A Cost/Expense C) SG&A Cost/Expense D) Product Cost/Asset E) SG&A Cost/Expense F) Product Cost/Asset G) SG&A Cost/Expense H) Product Cost/Asset I) Product Cost/Asset J) SG&A Cost/Asset K) Product Cost/Asset L) SG&A Cost/Asset M) Product Cost/Asset N) SG&A Cost/Expense

Driscoll Industries recognized the annual cost of depreciation on its December 31, 2018, financial statements. Using the following horizontal financial statements model, indicate how this event affected the company's GAAP-based financial statements under the following two assumptions: (1) the depreciation was on office furniture and (2) the depreciation was on manufacturing equipment. Indicate whether the event increases (I), decreases (D), or has no effect (NA) on each element of the financial statements. Show accumulated depreciation as a decrease in the book value of the appropriate asset account.

Event 1) NA/NA/NA/D/NA/D/NA/I/D Event 2) NA/I/D/NA/NA/NA/NA/NA/NA

The SEC has delegated much of its authority to develop accounting rules to the _______.

FASB

The pronouncements and practices that guide accountants as how to report financial information are referred to as _______.

GAAP

which cost does GAAP allow to be recorded as inventory?

Midstream

Which organization is responsible for financial reporting?

SEC

TRUE/FALSE: Corporate governance is a set of relationships between the board of directors, management, shareholders, auditors, and other stakeholders that determine how a company is operated.

True

TRUE/FALSE: Raw materials are used to make products.

True

which type of accounting reports information continuously throughout the year?

managerial

The value-added principle states that

managers should engage in activities that add value in excess of the cost

Which type of company makes and sells goods to customers

manufacturing

indirect costs incurred to make a product including direct labor, indirect materials, factory utilities, rent on manufacturing facilities, and depreciation on manufacturing facilities are called.

manufacturing overheado

just in time inventory

minimizes inventory holding costs by making products for immediate customer consumption

The lack of controls to protect a business's assets provides the _______to commit fraud.

opportunity

Resources other than material and labor that are used in manufacturing a product are called manufacturing _______.

overhead

Costs that are expensed as soon as they are incurred are called _______ costs.

period

personal vices such as drug addiction, gambling, or promiscuity can put you in a situation where there is _______ to commit fraud.

pressure

"The company can afford it. Look at what it is paying the officers." This is an example of which of the components of the fraud triangle

rationalization

materials used to make products are called _______ materials.

raw

How is financial accounting regulated?

regulated by SEC, FASB, and other determiners of GAAP

An accounting firm is an example of which type of company?

service

paying production workers with cash affects which of the following?

the cash and inventory balances on the balance sheet -decreases cash -increases inventory -the transaction does not affect stockholders' equity -the transaction does not affect net income -the transaction does not affect total assets -the transaction does not affect liabilities

Costs incurred before the manufacturing process begins are called _______ costs.

upstream

salaries of production workers are not expensed because

it is associated with producing inventory, not earning revenue

Accounting that reports on what is expected to happen in the future is referred to as _______ accounting.

managerial

A) Information is factual and is characterized by objectivity, reliability, consistency, and accuracy. B) Information is reported continuously and has a current or future orientation. C) Information is provided to outsiders, including investors, creditors, government agencies, analysts, and reporters. D) Information is regulated by the SEC, FASB, and other sources of GAAP. E) Information is based on estimates that are bounded by relevance and timeliness. F) Information is historically based and usually reported annually. G) Information is local and pertains to subunits of the organization. H) Information includes economic and nonfinancial data as well as financial data. I) Information is global and pertains to the company as a whole. J) Information is provided to insiders, including executives, managers, and employees.

a. Financial accounting b. Managerial accounting c. Financial accounting d. Financial accounting e. Managerial accounting f. Financial accounting g. Managerial accounting h. Managerial accounting i. Financial accounting j. Managerial accounting

labor costs that can be easily and conveniently traced to products is called _______ labor.

direct

costs incurred after the manufacturing process is complete are called _______ costs.

downstream

The cost of keeping inventory is called inventory _______.

holding cost

costs that cannot be traced to a product or service in a cost-effective manner are called ________ costs.

indirect

Who are the users of managerial accounting information?

internal users