Chapter 18: Managerial Accounting

Cupcake Company: Both Prime and Conversion Costs

Baker's wages

Cupcake Company: Prime Costs

Cupcake mix, Frosting

Cupcake Company: Conversion Costs

Factory rent, Depreciation expense-factory, Sprinkles for decoration (indirect material)

T/F: A report analyzing how many products need to be sold to cover operating costs is not typically a managerial accounting report.

False

T/F: Period costs are operating costs that are expensed in the period in which the goods are sold.

False

T/F: Prime costs consist of direct materials, indirect materials, and direct labor.

False

T/F: The payment of dividends is an example of a cost.

False

Cupcake Company: Neither Prime nor Conversion Cost

Salesperson Commissions, Depreciation expense-office

A company sells goods for $150,000 that costs $54,000 to manufacture. Which of the following statements is true?

The company will decrease finished goods by $54,000.

Materials must have which two qualities in order to be classified as direct materials?

They must be an integral part of the finished product and a significant portion of the total product cost.

T/F: A report analyzing the dollar savings of purchasing new equipment to speed up the production process is a managerial accounting report.

True

T/F: A staff department has no direct authority over a line department.

True

T/F: Conversion cost is the combination of direct labor cost and factory overhead cost.

True

T/F: Depreciation on factory plant and equipment is an example of factory overhead cost.

True

T/F: The controller's staff consists of management accountants responsible for systems and procedures, general accounting, budgets, taxes, and cost accounting.

True

T/F: The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead cost.

True

T/F: The cost of wages paid to employees directly involved in converting materials to finished product is classified as direct labor cost.

True

Cost of goods manufactured is equal to

total manufacturing costs plus beginning work in process inventory less ending work in process inventory.

Compute conversion costs given the following data: direct materials, $347,500; direct labor, $196,300; factory overhead, $187,900; and selling expenses, $45,290.

$384,200

$45,000 is cost of materials used, $48,000 for direct labor costs, $39,000 for factory overhead, $18,000 is WIP beg, & $28,000 is WIP end. What is cost of goods manufactured?

$122,000

The cost of goods is $233,000. Finished goods on Jan 1 was $31,600 & $24,200 on Dec 31. Cost of goods manufactured during the period was

$225,600

Jan 1, WIP inventory was $30,000. During the year, $68,000 for direct materials, $66,000 for direct labor, $90,000 for factory overhead, $230,000 for cost of goods manufactured. What is WIP inventory on Dec 31?

$24,000

A company manufactured 50,000 units of a product at a cost of $450,000. It sold 45,000 units at $15 each. The gross profit is

$270,000

In most business organizations, the chief management accountant is called the

controller.

Managers must continually choose among alternative actions

decision making

Which of the following is part of factory overhead cost?

depreciation of factory equipment and machines

Which of the following costs are conversion costs?

direct labor cost and factory overhead cost

Rent expense on a factory building is

factory overhead.

All of the following could be considered a direct material except

glue (include steel, fabric, lumber)

Used by managers for continuous improvement

improving

Factory overhead includes

indirect labor and indirect materials

What is the primary criterion for the preparation of managerial accounting reports?

manager needs