CH.14 PRACTICE

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

A; A cost of goods manufactured schedule shows beginning and ending inventories for raw materials and work in process only.

Which of the following is not an element of manufacturing overhead? A. Sales manager's salary. B. Factory manager's salary. C. Factory repairman's wages. D. Product inspector's salary.

A; The sales manager's salary is not directly or indirectly associated with the manufacture of the finished product.

A method of allocating overhead based on each product's use of activities in making the product.

Activity- based costing

After passage of the Sarbanes-Oxley Act:

B; CEOs and CFOs must certify that financial statements provide a fair presentation of the company's operating results.

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; Managerial accounting emphasizes special-purpose information.

A performance-measurement approach that uses both financial and non financial measures, tied to company objectives, to evaluate a company's operations in an integrated fashion.

Balanced scorecard

The calculation to determine the cost of goods manufactured is:

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

Which of the following costs are classified as a period cost? A. Wages paid to a factory custodian. B. Wages paid to a production department supervisor. C. Wages paid to the CEO. D. Wages paid to an assembly worker.

C; Wages paid to the CEO would be included in administrative expenses and classified as a period cost.

How do you compute cost of goods manufactured and prepare financial statements for a manufacturer?

Companies add the cost of the beginning work in process to the total manufacturing costs for the current year to arrive at the total cost of work in process for the year. They then subtract the ending work in process from the total cost of work in process to arrive at the cost of goods manufactured. The difference between a merchandising and a manufacturing balance sheet is in the current assets section. The current assets section of a manufacturing company's balance sheet presents three inventory accounts: finished goods inventory, work in process inventory, and raw materials inventory. The difference between a merchandising and a manufacturing income statement is in the cost of goods sold section. A manufacturing cost of goods sold section shows beginning and ending finished goods inventories and the cost of goods manufactured.

A company's efforts to employ sustainable business practices with regard to its employees, society, and the environment.

Corporate social responsibility

For the year, Redder 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:

Cost of goods sold is computed as Beginning finished goods inventory ($200,000) + Cost of goods manufactured ($600,000) − Ending finished goods inventory ($250,000), or $200,000 + $600,000 − $250,000 = $550,000

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

D; Activity-based costing

Which of the following costs would a computer manufacturer include in manufacturing overhead? A. The cost of the disk drives. B. The wages earned by computer assemblers. C. The cost of the memory chips. D. Depreciation on testing equipment.

D; Depreciation on testing equipment would be included in manufacturing overhead because it is indirectly associated with the finished product.

Direct materials are a: product cost, manufacturing overhead cost or period cost

Direct materials are a product cost only

TRUE/ FALSE Managerial accountants have a single role within an organization: collecting and reporting costs to management.

False. Managerial accountants do determine product costs, but they are also responsible for evaluating how well the company employs its resources. As a result, when the company makes critical strategic decisions, managerial accountants serve as team members alongside personnel from production, marketing, and engineering.

TRUE/ FALSE Managerial accounting reports must now comply with generally accepted accounting principles (GAAP).

False. Managerial accounting reports are for internal use and thus do not have to comply with GAAP.

TRUE/ FALSE Managers' activities and responsibilities can be classified into three broad functions: cost accounting, budgeting, and internal control.

False. Managers' activities are classified into three broad functions: planning, directing, and controlling. Planning requires managers to look ahead to establish objectives. Directing involves coordinating a company's diverse activities and human resources to produce a smooth-running operation. Controlling keeps the company's activities on track.

Inventory system in which goods are manufactured or purchased just as they are needed for use or sale.

Just- in- time inventory (JIT)

What are some trends in managerial accounting?

Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as an emphasis on ethical behavior. Improved practices include a focus on managing the value chain through techniques such as just-in-time inventory, total quality management, activity-based costing, and theory of constraints. The balanced scorecard is now used by many companies in order to attain a more comprehensive view of the company's operations, and companies are now evaluating their performance with regard to their corporate social responsibility. Finally, data analytics and data visualizations are important tools that help businesses identify problems and opportunities, and then make informed decisions.

What are the classes of manufacturing costs and the differences between product and period costs?

Manufacturing costs are typically classified as either (1) direct materials, (2) direct labor, or (3) manufacturing overhead. Raw materials that can be physically and directly associated with the finished product during the manufacturing process are called direct materials. The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is considered direct labor. Manufacturing overhead consists of costs that are indirectly associated with the manufacture of the finished product. Manufacturing costs are typically incurred at the manufacturing facility. Product costs are costs that are a necessary and integral part of producing the finished product (manufacturing costs). Product costs are also called inventoriable costs. These costs do not become expenses until the company sells the finished goods inventory. Period costs are costs that are identified with a specific time period rather than with a salable product. These costs relate to nonmanufacturing costs and therefore are not inventoriable costs. They are expensed as incurred.

A code of ethical standards developed by the Institute of Management Accountants.

Statement of Ethical Professional Practice

TRUE/ FALSE Financial accounting reports are general-purpose and intended for external users.

TRUE

TRUE/ FALSE Managerial accounting reports are special-purpose and issued as frequently as needed.

TRUE

What are the features of managerial accounting and the functions of management?

The primary users of managerial accounting reports, issued as frequently as needed, are internal users, who are officers, department heads, managers, and supervisors in the company. The purpose of these reports is to provide special-purpose information for a particular user for a specific decision. The content of managerial accounting reports pertains to subunits of the business. It may be very detailed, and may extend beyond the accrual accounting system. The reporting standard is relevance to the decision being made. No independent audits are required in managerial accounting. The functions of management are planning, directing, and controlling. Planning requires management to look ahead and to establish objectives. Directing involves coordinating the diverse activities and human resources of a company to produce a smooth-running operation. Controlling is the process of keeping the activities on track.

Systems implemented to reduce defects in finished products with the goal of achieving zero defects.

Total quality management

All activities associated with providing a product or performing a service.

Value Chain

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

planning, directing, and controlling.

Indirect labor is a:

product cost because it is part of the effort required to produce a product.