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
