Chapter 16

A company had a Finished Goods inventory balance of $200,000 at the beginning of the year. Its cost of goods manufactures for entire year was $500,000 and its Cost of Goods Sold balance for the year was $600,000. Based on this information, the company's FInished Goods inventory balance reported in the balance sheet at the end of the year was _____

$100,000 ( 200 + 500 - 6000)

A companys work in process inventory had a balance of 10,000 at the beginning of the year and 15,000 at the end of the year. During the year, it used 50,000 of direct materials, and it incurred direct labor and manufacturing overhead costs of 100,000 and 120,000 respect. Based on this information, the companys cost of finished goods manufactures was ____

265,000 (10 + 50 + 100 + 120 - 15)

A manufacutring produced 4,000 golf carts in December. To do so, it incurred manufacturing costs of 2,500 per unit. Of these units, 3,000 were sold in December, and the remaining 1,000 were sold in January of the following year. What amount associated with December's manufacturing costs of these carts should be included in the company's income statment for the period ending December 31?

7.5 million (3,000 units sold x $2,500 per unit)

Benchmark Study:

A study designed to show an organization how its costs and processes compare to others in the industry

to record the purcahse of indirect materials, the manufacturing overhead account is debited and the account credited would most likely be which of the following?

Accounts Payable

In addition to evaluating managerial performance, a management accounting system must also be designed to:

Assigne decision-making authority and support decision-making processes

As dierct labor employee salaries and wages are recorded each period,

Cash is credited and the direct labor account is debited

Costs in the work in progress inventory account flow directly into the ___ ___ inventory account.

Finished Goods

direct labor:

Payroll costs for employees who work directly on the products being manufactured , either by hand or wth machines

Which of the following is/are considered a product cost?

The depreciation of manufacturing machinery and the depreciation of a raw materials warehouse

t/f: managers at all levels of an organization have some degree of decision-making control over assets.

True

what are a company's product related inventory accounts?

Work in processes inventory, finished goods inventory and materials inventory

manufacturing overhead

a catchall category including all manufacutring costs other than the cost of direct materials used and direct labor.

direct manufactuing cost

a manufacturing cost that can be traced conviently and directly into the quantitty of finished goods manufactured. Examples include direct materials and direct labor.

indirect manufacutring cost:

a manufacturing cost that cannot be conviently traced to the specific products being manufactured. examples include property taces, depreciation on machinery, and other types of manufacutring overhead.

schedule of the cost of finished goods manufactured

a schedule summarizing the flow of manufacutring costs into and out of the work in process inventory accont. intended to assit managers in evaluating manufacturing costs

Information about how a particular company compares to other companies in the same industry is often obtained through:

benchmark studies

Management accounting information is:

composed of many types of custom-designed reports to meet the specific of management and provided primarily to managers for planning, evaluating and rewarding performace

Financial accounting information is:

composed primarily of general purpose financial statements and related disclosures, influenced heavily by generally accepted accounting principles, provided primarily to investors, creditors, and other external parties

management accounting systems must be designed to:

copmare actual outcomes to budgetary projections, evaluate and reward management performance and make budgetary projections of future performace

Which of the accounts are included among those used by copmanies to track the flow of manufacturing costs?

cost of goods sold, manufacturing overhead, materials inventory, direct labor

period costs

costs that are changed to expense accounts in the period that the costs are incurred. includes all items classified as expense.

Examples of actual manufacturing overhead costs debited to the manufacturing overhead account include the:

deprecitation of manufactruing equpiemnt and the purchase of indirect materials

costs that can be easily traced to units of production are referred to as ____ manufacturing costs.

direct

Which of the following manufacturing costs is/are considered both a prime cost and a conversion cost?

direct labor

what are added to the beginning work in process inventory to determine the total manufacturing costs reported in a schedule of the cost of finished goods manufactured?

direct labor cost, direct materials used and manufactruing overhead.

work in progress inventory

goods at any stage of the manufacutring process short of completing. As these units are completed, they become finished goods.

Management accountanats use unit cost information to:

make pricing decision, evaluate operating efficiency and prepare operating budgets

The focus of this chapter was primarily upon ___ acounting systems, as opposed to financial accounting systems

management

Inventory costs of a manufacturing company are composed of the company's _____ costs

manufacturing

Direct materials

materials and component parts that become an integral part of manufactured goods and can be traced directly to the finished products

As direct materials are placed into production

materials inventory is credited and work in process inventory is debited

From what accounts will there be an increase to work in process inventory flow?

materials inventory, direct labor and manufacutring overhead.

indirect material

materials used in the manufacutring process that cannot be traced convienently to specific units of production. examples include lubricating oil, maintenance spuulies, and glue. indirect materials are accounted for as part of manufacturing overhead.

indirect labor

payroll costs relating to facotry employees who do ont work directly on the goods being manufactured. examples are: wages of security guards and maintenance personnell. Indirect labor costs are classified as manufactruing overhead.

the assets over which individual managers have decision-making authority

produce returns that are used to evaluate the performance of those managers and produce returns that belong to the corporation

The depreciation of a raw materials warehouse is a :

product cost, conversion cost and a manufacturing cost

The depreciation of a raw materials warehouse is a:

product cost, manufacturing cost, conversion cost

Which of the following terms is synonymous with manufacturing costs?

product costs

Finished accountants use unit cost information to:

record the transfer of completed goods from work in process inventory to finished goods inventory and record the transfer of items from finished goods inventory to cost of goods sold

finished goods inventory

the completed units that have emerged from the manufacturing process and are on hand available for sale

materials inventory

the cost of direct materials on hand and available for use in the manufacturing process

manufacturing costs

the cost of manufacutring the goods that will be sold to customers. the basic types of manufacutring costs are direct materials, direct labor and manufacturing overhead.

product costs

the costs of purhcasing or manufacutring inventory. until the related goods are sold, these product costs represent an asset -inventory. Once the goods are sold, these costs are deducted from revenue as the costs of goods sold.

management accounting

the design and use of accounting information systems inside the firm to achieve the firm's objectives.

conversion costs

the direct labor and overhead costs required to convert raw materials into finished goods

prime costs

the direct materials and direct labor consumer in the production of goods and services

value chain

the linked set of activities and resources necessary to create and deliver a product or service to customers

A manufacturing company uses a perpetual inventory system. As materials are acquired by the company, which of the following occurs?

the materials inventory account is debited

As various manufacturing overhead items are consumer for use in produciton, what occurs?

the work in process inventory account is debited and the manufacturing overhead account is credited

t/f: unit cost information is important to both financial and managerial accountants

true

A ____ ____ is a set of activities and resources required to create and deliver goods and services to customers.

value chain

As manufacturing overhead costs such as indirect labor costs or factory utilities are incurred, which of the following occurs?

various accounts are credited, such as ACcounts payable, cash or accumulated depreciation and the manufacturing overhead account is debited

A credit balance in the direct labor account at then end of a period is reported in the balance sheet as:

wages payable

What of inventories has value based upon an assignment of costs as opposed to its actual purchase price?

work in process inventory and finished goods inventory