AC212 Test 1

Lands End, Sears, and LL Bean are examples of

merchandising companies

Most for-profit organizations can be described as being in one (or more) of three categories:

merchandising companies, service companies, and manufacturing companies

Directing

overseeing day to day operations

When management compares a number of different alternatives, this falls under the _________ category

planning

Honda motors converts ______ into finished products

raw materials

in the flow of costs, which of the following comes first?

raw materials inventory

treasurer

reports directly to the CFO. Responsible for raising capital by issuing stocks and bonds, and for investing the company's excess cash

controller

reports to CFO. The head accountant, responsible for financial, tax, and managerial accounting functions

chief operating officer

responsible for the company's operations, such as research and development, production, and distribution

_______ typically do not have an inventory account

service companies

Planning

setting goals and objectives

the average product cost decreases as production volume increases because the company is ______ over 5 million units. The company will be operating _____ efficiently, so the average cost of making each unit decreases

spreading its fixed costs more

how do total variable costs behave?

they decrease as production decreases

product cost per unit formula

total product costs/current years produced units

monthly profit formula

total revenues-total costs

Total variable costs ______ as production volume ______.

total variable costs increase as production volume increases.

Manufactoring companies

use labor, plant, and equipment to covert raw materials into new finished products -3 inventory accounts.

_______ buy products in bulk from producers, marks them up and resell to retailers

wholesalers

A merchandiser's purchases are equivalent to a manufactorers ___________

Cost of goods manufactured

Prime costs vs. Conversion costs

Prime costs refer to the combination of direct material costs. Conversion costs refer to the combination of direct labor and manufacturing overhead. Prime costs=direct materials+direct labor Conversion costs=manufacturing overhead+direct labor

What is overhead?

Utilities Depreciation Rent Production Manager's Salary Security Janitorial Staff Insurance

________ is composed of goods partially through the manufacturing process (not yet finished).

Work in process inventory

All of the following are period costs except a. direct labor expenses b. research and development c, distribution expenses d. marketing expenses

a.

Direct Labor

the cost of compensating employees who physically convert raw materials into the company's products. At a car company, the labor includes wages and benefits of machine operators and technicians who assemble the parts.

if manufacturing overhead has been undercoated during the period, then which of the following is true?

the jobs produced during the period have been undercoated

Total product costs formula

total fixed costs + total variable costs=total product costs

current fixed cost per unit formula

total fixed costs/current years produced units

forecasted fix cost per unit formula

total fixed costs/next years forecasted units

Job cost record

Once the necessary raw materials have arrived, and production is ready, the job will be started A job cost record will be used to accumulate all of the direct materials and direct labor used on the job, as well as the manufacturing overhead allocated to the job Each job will have its own job cost record Notice that the job cost record keeps track of the three manufacturing costs associated with each job: Direct Materials, Direct Labor, and Manufacturing Overhead

The focus of management accounting is on a. external reporting b. auditing c. tax preparation d. internal reporting

d. internal reporting

Service companies

in business to sell intangible services, such as health care, insurance, banking, and consulting, rather than tangible products. -NO inventory - All costs are period costs (no product costs), no COGS

Manufactoring overhead (MOH)

inlcludes all manufactoring costs other than direct materials and direct labor. Includes all indirect manufacturing costs

_______ for a company such as Staples includes all of the costs necessary to purchase products and get them onto the store shelves

inventory (merchandise)

which product costing system would be better for customer order products?

job costing system

Merchandising companies

like Walmart and JCPenny resell tangible products they buy from suppliers. -one inventory account

which of the following types of companies has raw materials, work in process, and finished goods inventory

manufactorers

_______ report three types of inventory on the balance sheet

manufactoring companies

Inventoriable products

-Only the costs incurred during production (manufacturer) or purchase (if merchandiser) -Inventoriable product costs are treated as an asset (inventory) until the product is sold -When the product is sold, these costs are removed from inventory and expensed as cost of goods sold (These costs are capitalized and included as inventory until final products are sold. When products are sold, these costs are reported on the income statement as Cost of Goods Sold)

3 Major themes of managerial accounting

1) information and incentives 2) behavioral issues 3) costs and benefits

Direct cost

A direct cost can be traced to a cost object -Direct Materials -Direct Labor - touch labor, the cost of employees who are directly involved with the manufacturing process -Precise Allocation

indirect cost

An indirect cost has to be assigned or allocated to a cost object (overhead is a common example), less precise allocation

Cost object

Anything for which managers want a separate measurement of cost Individual units Different Models Alternative Marketing Strategies Geographic segments of a business Departments "Green" initiatives

The board of directors hires the ___

CEO

Which of the following positions typically manages the daily operations of a company? a. the stockholders b. the controller c. the board of directors d. The CEO

D. The CEO

EZ Rider motorcycles is considering whether to expand into Germany. If gas prices increase, the company expects more interest in fuel-efficient transportation such as motorcycles. As a result, the company is considering setting up a motorcycle assembly plant. EZ Rider motorcycles estimates it will cost $850,000 to convert an existing building to motorcycle production. Workers will need training, at a total cost of $65,000. The additional cost to organize the business and to establish relationships is estimated to be $150,000. The CEO believes the company can earn sales profits from this expansion of $1,624,000. Use the cost-benefit analysis to determine whether they should expand to Germany

Expected Benefits Expected profits from expansion sales $1,624,000 Expected Costs Conversion of building to manufacturing plant 850,000 Workforce training 65,000 Organizing business and establishing relationships 150000 Total expected costs (1065000) Net expected benefits $559,000

Product costs and period costs receive similar treatment when presented in the financial statements True or false

False

The CFO is the person responsible for the day to day operations of the company. True or False

False

The total cost of a cost object can only include the direct costs that are directly traced to that cost object

False

Variable costs per unit decrease as production volume increases True or False

False

What do indirect manufacturing costs include?

Indirect materials- materials not easily traced to individual units, janitorial supplies,oil, and lubricants for the machine or any physical components of the finished products that are very inexpensive. Indirect Labor-salaries, wages, and benefits of the plan forklift operators, plant security officers, plant janitors, and plant supervisors. Other indirect Costs- plant-related costs as insurance and depreciation on the plant and plant equipment, plant property taxed, plant repairs and maintenance, and plant utilities

What is the name of the professional association for managerial accountants?

Institute of management accountants

Marginal Cost

Is the cost of making one more unit Because total fixed costs will not change, the marginal cost is the same as the variable cost

Process costing

Is the cost of making one more unit Because total fixed costs will not change, the marginal cost is the same as the variable cost

Financial vs. Managerial accounting -primary users -primary accounting product

Managerial accounting is internal users such as managers. Financial accounting is external users, such as creditors, stockholders, and government regulators. The primary accounting product in managerial is any internal accounting report deemed worthwhile by management. In Financial it is Financial statements.

Fixed or viable cost a. shipping costs for amazon.com b. cost of fuel used for a national trucking company c. sales commissions for a car dealership d. cost of fabric used at a clothing manufacturer e. monthly office lease costs for a CPA firm f. cost of fruit sold at a grocery store g. cost of coffee used for a starbucks store h. monthly rent for a nail salon i. depreciation of exercise equipment at the ymca j. hourly wages paid to sales clerks at best buy k. property taxes for a restaurant l. monthly insurance costs for the home office of a company m. monthly flower costs for a florist n. monthly depreciation of equipment for a customer service office o. monthly cost of french fried at a mcdonald's restaurant

a. V b. V c. V d. V e. F f. V g. V h. F i. F j. V k. F l. F m. V n. F o. V

The cost of lighting the factory would be classified as _____ when determining the cost of a manufactured product

an indirect cost

The _____ is made up of members of the board of directors

audit committee

______ gathers, summarizes, and reports on the financial impact of changes to business operations. a. controlling b. managerial accounting c. planning d. directing

b. managerial accounting

Which of the following persons or groups would be least likely to receive detailed managerial accounting reports? a. sales territory managers b. CEO c. current shareholders d. plant managers

c. current shareholders

the _____ is responsible for general financial accounting, managerial accounting, and tax reporting

controller

when a manager compares actual performance to the budget, this falls under the ________ category

controlling

Direct Materials

convert raw materials into finished products. Direct materials are the primary raw materials that become a physical part of the finished product. Ex- A car's direct materials would be steel, tires, engines, upholstery, carpet, dashboard instruments, etc.

before operating income can be determined for a manufacturer, which of the following is calculated?

cost of goods manufactured cost of goods available for sale cost of goods sold

which of the following is not an example of an indirect cost incurred in manufacturing automobiles?

cost of the automobile engines

for toyota, which is a direct cost with respect to the prius?

cost of vehicle engine

Direct cost vs. indirect cost

direct costs are traced back to a cost object, while indirect costs are allocated

Overseeing day to day operations falls under the ______category.

directing

Manufacturers follow four steps to implement a manufacturing allocation system. What is the first step?

estimate total manufacturing overhead costs for the coming year.

Controlling

evaluating results of operation

Period cost

everything that is not a product cost (operating expenses). They are immediately reported on the income statement - Include selling and marketing costs (including shipping expenses incurred to ship final products to customers) -Include all administrative expenses like the salaries of the office staff (accountants, marketing team, CEO).

companies want to run at full capacity to better utilize the resources they spend on ____ costs. The more units they produce, the lower the _______ cost per unit

fixed average fixed

forecasted average product cost per unit formula

forecasted total product cost/next years forecasted units

forecasted total product costs formula

forecasted total variable costs+total fixed costs

Total estimated manufacturing overhead costs = $1,000,000 Cost allocation base is direct labor hours (DLH) Total estimated direct labor hours for the year = 62,500 DLHs Job #603 used 500 DLHs

$1,000,000 estimated overhead costs 62,500 direct labor hours =$16 per direct labor hours

Relevant vs. Irrelevant costs

Relevant costs include differential costs (costs that are different between two alternatives) and controllable costs. Irrelevant costs include uncontrollable costs, sunk costs, and costs that are the same across two alternatives

How do total fixed costs behave

They will remain the same throughout production levels within the relevant range.

Indirect manufacturing costs should be included in manufacturing overhead True or false

True

Management accountants spend more time planning, analyzing, and interpreting accounting data and less time recording routine accounting transactions than they have in the past. True or False

True

The IMA is the professional for managerial accountants True or False

True

The marginal cost is the most of making one more unit of a product. True or False

True

Job costing

Unique, custom products or small batches Total costs are accumulated by job Examples Hospitals Custom home builders Advertising agencies Jewelry Different jobs can vary considerably in direct materials, direct labor, and MOH, so we must accumulate costs separately for each individual job

Fixed costs vs. Variable costs

Variable costs are constant per unit, but changes in total as product levels change. Fixed costs are constant in total across all activity within the relevant range.

Which of the following is being fulfilled when management compares the budget to the actual results? a. controlling b. planning c. directing d. adjusting

a. controlling

Classify each of the following as either fixed or variable. In some cases, your answer may depend on specific circumstances. a. water and sewer bill b. cell phone bill c. health club dues d. bus fare e. apartment rental f. internet cable service g. cost of groceries

a. variable, assuming no flat monthly hookup fee b. fixed or variable depending on the plan c. fixed d. variable, unless unlimited monthly passes are available e. fixed f. fixed g. variable

Direct or indirect cost? a. managers of juniors department b. cost of juniors clothing c. cost of radio advertising for the store d. cost of bags used to purchase at the main registers for the store e. junior department sales clerk f. electricity for the building g. depreciation of the building h. cost of hangers used to display the clothing in the store i. the Medina Kohl's store manager's salary j. juniors clothing buyers salaries( these buyers buy for all the juniors departments of kohl stores) k. cost of costume jewelry on the mannequins in the juniors department l. cost of the security staff at the medina store

a.direct. b. direct c. indirect d. indirect e. direct f. indirect g. indirect h. indirect i. indirect j. indirect k. direct l. indirect

A _____ is a document which is prepared by manufactoring personnel to request materials for the production process.

materials requisition

An insurance company, a health care provider, and a bank are all examples of

service companies