Managerial Accounting Exam Review - Chapter 1,2,3,4

Lucky Cow Dairy provided with the following expense information for May: Assembly - line workers' wages - $72,000 Caps for milk bottles - $3,000 Reconfiguring the assembly line - $125,000 Customer support hotline - $10,000 Delivery expenses - $20,000 Depreciation on factory equipment - $75,000 Plastic milk bottles - $52,000 Salaries of salespeople - $63,000 Salaries of research scientists - $70,000 Customer toll - free order line - $6,000 What is the total cost for the production category of the value chain?

$72,000 + $3,000 + $75,000 + $52,000 = $202,000

Of the following skills, which are needed by today's management accountants?

1. Knowledge of both financial and managerial accounting. 2. Oral and written communication skills 3. Knowledge of how a business functions

Which of the following are part of manufacturing overhead?

1. Other indirect manufacturing costs, such as plant utilities 2. indirect labor, such as forklift operators' wages 3. Indirect materials, such as machine lubricants

What is activity based costing?

A system that focuses on activities as the fundamental cost object and uses the cost for these activities to compile indirect costs of goods and services.

Ethical Standards are critical for management accountants. Which one best relates to Integrity?

Abstain from engaging in or supporting any activity that might discredit the profession.

Which of the following is not an activity in the value chain?

Administration

The value chain describes the costs associated with making a product. What box(es) are expensed immediately when incurred on the income statement as operating expensesSGA ("period costs")?

All of them, expect production or purchases.

For service firms, how are indirect period costs allocated?

Allocated to each job based on the indirect cost allocated rate.

Due to many organizations reporting fraudulent financial statements, companies on certain stock exchanges are required to form an audit committee. An audit committee is/does all of the following except:

Are employees of the company

Which of the following documents specifies the materials needed to produce a job?

Bill of materials

Which of the following are merchandising companies?

Both retailers and wholesalers.

What is an example of a prevention cost?

Buying higher grade materials to avoid production problems.

Ethical Standards are critical for management accountants. Which one best relates to credibility?

Communicate information fairly and objectively

Managers responsibilities in an organization include decision making and continuous feedback. Of the three direct responsibilities of a manager, which one covered comparing the actual results to the budget the manager is responsible for?

Controlling

When managers evaluate the company's performance to the plan, they are performing the ______ role of management.

Controlling

Assuming the amount of manufacturing overallocation or under allocation is not material, which account is adjusted at the end of the period?

Cost of Goods Sold

Which of the following is a calculated amount, rather than a general ledger account?

Cost of goods manufactured.

Financial accounting develops reports for external parties such as ______ and ______.

Creditors & Shareholders

In the future, after graduation, you will end up working with various individuals across the organization, not just employees in your own department. What term is best associated with this?

Cross-functional teams

Which of the following are an activity in the value chain?

Customer Service, Design, Marketing.

Which box on the value chain captures the cost of recalls on the products?

Customer Service.

Costs of Goods Sold of a manufacturing represents the costs related to building a product that are expensed when it is sold. To determine Costs of Goods Sold, three formula were used representing the three different categories of inventory. Which schedule is based on raw materials inventory?

Direct Materials Used.

When allocating manufacturing overhead using a predetermined manufacturing overhead rate, only ______ can be used as a basis for allocation.

Direct labor hours, machine hours, direct labor costs.

Us companies must follow GAAP or IFRS in their _____________ systems.

Financial Accounting

____________ statements of public companies are audited annually by CPA's

Financial Accounting

______________ provides information on a company's past performance to external parties.

Financial Accounting

Which of the following professional standards requires management accountants to mitigate conflicts of interest

Integrity

Which of the following is false?

Job cost information is not useful for assessing profitability of different products.

What form is used to accumulate the all costs associated with making the product?

Job cost record

__________ systems are not restricted by GAAP or IFRS but are chosen by comparing the costs versus the benefits of the system

Managerial Accounting

_____________ systems report on various segments or business units of the company.

Managerial Accounting

_______ are decision makers inside a company

Managers

This course is dealing with managerial accounting versus financial accounting. One of the biggest differences between the two it.

Managers and other internal organization users will receive various reports to help them achieve their goals and objectives, whereas financial accounting deals with a set of financial statements that are provides to external users.

This course is dealing with managerial accounting versus financial accounting. One of the biggest differences between the two is.

Managers and other internal organizations users will receive various reports to help them achieve their goals and objectives, where as financial accounting deals with a set of financial statements that are provides to external users.

Which of the following types of companies would carry raw materials, work in process, and finished goods inventory?

Manufacturing

When building a product, costs related to it are either direct or indirect. What category is the plant manager of the factory where the product is produced?

Manufacturing overhead

American Eagle Outfitters classifies the denim jeans on the shelves at its retail locations as

Merchandise inventory

Which of the following types of companies will always have the Cost of Goods Sold account on their income statements?

Merchandising and manufacturing companies.

Ethical Standards are critical for management accountants. Which of the following relates to Competence?

Perform professional duties in accordance with laws, regulations and technical standards.

Which of the following is not part of manufacturing overhead?

Period costs, such as depreciation on office computers.

Choosing goals and the means to achieve them is the ________ function of management.

Planning.

What are some of the costs of quality categories?

Prevention costs, appraisal costs, External failure costs.

Activity Based Management (ABM) refers to using activity-based cost information to make decisions that increase profits while satisfying customers' needs. ABM will help companies with?

Pricing and product mix decisions, Identify costs that may need to be cut, Planning and control (creating costs of activity budget goals and comparing them to actual results).

There are four cost hierarchies when implementing activity based costing. Which level else with a patent on a product?

Product.

What is an example of an internal failure cost?

Production loss caused by downtime.

Lean operations means?

Pull system; the customer drives the production of the product.

Lean operations means?

Reduced set up times.

Which of the following requires the company's CEO and CFO to assume responsibility for the company's financial statements and disclosures?

Sarbanes-Oxley Act of 2002 (SOX)

There are three different types of companies in Chapter. Which one has no inventory?

Service

What is the difference between a service firm and a manufacturer?

Service firms allocate indirect period costs and a manufacturer allocates manufacturing overhead. A service firms largest cost of a job is labor where as a typical manufacturer direct labor is not the largest component but only part of the total cost of a job. The cost of a job for a service firm consists of direct labor and indirect costs of a job for a manufacturer consists of direct materials, direct labor and manufacturing overhead.

Chapter 3 discusses job costing. Process costing was briefly discussed. Which company listed below would most likely use process costing?

Soda pop manufacturer

Why do companies refine its cost allocation systems and switch from a plant wide overhead rate to either departmental overhead rates or to the use of Activity Based Costing?

To prevent cost distortion, To prevent mismatching of resources, To get a clearer picture of the true cost of making a product.

Which of the following is not one of the costs of quality categories

Transportation costs

Which of the following corprate positions is responsible for raising capital and investing funds

Treasurer

A cost-plus price is determined by adding a markup to the cost.

True

ABM refers to using activity-based cost information to make decisions

True

Direct costing focuses on only the direct costs found on the job cost record.

True

ERP systems integrate information from all company functions into a centralized data warehouse.

True

Globalization has increased the necessity for more detailed and accurate cost information.

True

Lean operations is a philosophy and business strategy of operating without waste

True

Non-manufacturing costs can be assigned to jobs only for internal decision making, never for external financial reporting.

True

Which of the following is an example of direct labor?

Wages of a machine operator.

Which of the following is an example of overhead expense in a factory?

Wages of factory maintenance personnel.

Utilizing Activity Based Costing requires a cost benefit test. Which situation below would a company consider using Activity Based Costing?

When it has many different products that use different types and amounts of resources (indirect costs).

Overallocated/overcosted overhead occurs when

allocated all year long is greater than the actual manufacturing overhead at year end.

Manufacturing overhead is over allocated if the amount

allocated during the period is greater than the actual incurred.

Under-allocated/undercosted overhead occurs when

allocated overhead all year long is less than the actual manufacturing overhead at year end.

Cost distortion is more likely to occur when

departments incur different types of overhead and the products or job use the departments to a different extent

Managerial accounting differs from financial accounting in that managerial accounting

emphasizes data relevance over data objectivity.

When allocating MANUFACTURING OVERHEAD to a job...

it should be allocated based on the predetermined manufacturing overhead rate when the job is being completed.

The predetermined indirect cost allocation rate is computed as

total estimated indirect cost / total estimated amount of the allocation base.