Accounting Chapter 10-An Introduction to Management Accounting

If a company incurs $2,000 in manufacturing costs to produce 1,000 units, what is the average cost per unit?

$2

If a company incurs $4,000 in manufacturing costs to produce 200 units, what is the average cost per unit?

$20. ($4,000 / 200 units = $20)

Match the type of accounting to the reporting frequency 1. Managerial Accounting 2. Financial Accounting

1. Continuous reporting 2. Delayed with emphasis on annual reports

1. Managerial Accounting 2. Financial Accounting

1. Insiders, including executives, managers, and operators 2. Outsiders, including investors, creditors, government agencies, analysts and reporters

Match the type of information with the user group that is most likely to use the information 1. Economic and financial data 2. Primarily financial data and some economic and nonfinancial data 3. Financial and nonfinancial data 4. Primarily nonfinancial data and some financial data

1. Investors and creditors 2. Senior executives 3. Middle managers 4. Operating employees

How do materials, labor, and overhead costs flow through the financial statements?

Added to the inventory account when incurred and expensed on the income statement when the inventory is sold

Paying salaries and administrative costs with cash effects which of the following financial statements?

Cash Flow Statement, Income Statement, Total assets on the balance sheet, Total stockholders' equity on the balance sheet

Which of the following are NOT inventory accounts held by most of the manufacturing companies?

Completed goods, Cost of goods sold

Recognizing depreciation expense on selling and administrative assets results in which of the following?

Decreases net income, Decreases total assets, Decreases stockholders' equity, The transaction does not affect investing cash flow, The transaction does not affect liabilities

What is the reporting frequency of financial accounting information?

Delayed with emphasis on annual reports

Labor that can be easily and conveniently traced to products is called

Direct labor

Raw materials that can be easily and conveniently traced to products are called?

Direct raw materials

What type of information is used in managerial accounting?

Economic and physical data, as well as financial data

What are the characteristics of managerial accounting information?

Estimates that promote relevance and enable timeliness

The primary organization responsible for creating financial reporting rules is the

FASB

What are the characteristics of financial accounting information?

Factual information that is characterized by objectivity, reliability, consistency, and accuracy

External users (outsiders) rely on which of the following types of information?

Financial data, Economic data

Pronouncements and practices on how to report financial accounting information are known as

GAAP

The pronouncements and practices that guide accountants as to how to report financial information are referred to as

GAAP

At what level is information aggregated in financial accounting?

Global on the company as a whole

Selling inventory for cash affects which of the following financial statements?

Income statement, Inventory reported on the balance sheet, Total stockholders' equity on the balance sheet, Cash flow statement

Selling inventory for cash results in which of the following?

Increases stockholders' equity, Increases net income, The transaction does not affect liabilities, Increases operating cash flow, Increases total assets

Recognizing depreciation on manufacturing assets affects which of the following financial statements?

Inventory reported on the balance sheet

Which of the following is used to reduce inventory holding costs?

Just in time inventory

Which of the following are included in the cost of manufacturing a product?

Materials, labor and overhead

What should be included in the raw materials inventory?

Metals, lumber

What should NOT be included in finished goods inventory?

Metals, lumber, partially completed products

Internal users (insiders) primarily rely on which of the following types of information?

Nonfinancial data, Financial data

How is financial accounting regulated?

Regulated by SEC, FASB, and other determiners of GAAP

The organization responsible for regulating financial reporting is the

SEC

Which organization is responsible for enforcing financial reporting rules?

SEC

Paying production workers with cash affects which of the following?

The cash and inventory balances on the balance sheet.

Paying production workers with cash results in which of the following?

The transaction does not affect net income, Increases inventory, The transaction does not affect stockholders' equity, Decreases cash, The transaction does not affect total assets, The transaction does not affect total liabilities

Purchasing materials with cash has the following affect on which financial statements?

The transaction does not affect stockholders' equity, Decreases cash, Increases inventory, The transaction does not affect liabilities, The transaction does not affect total assets, The transaction does not affect investing cash flow, The transaction does not affect net income

When a company pays cash for manufacturing costs such as labor, material, or overhead, how does recording that cost affect total assets?

The transaction does not affect the total assets

Recognizing depreciation expense on selling and administrative assets affects which of the following financial statements?

Total assets on the balance sheet, Total stockholders' equity on the balance sheet, Income statement

Paying salaries and administrative costs with cash affects which of the following financial statements?

Total stockholders' equity on the balance sheet, Income statement, Cash flow statement, Total assets on the balance sheet

Production workers' salaries are not expensed because the cash paid to the workers is used to produce inventory.

True

Raw materials are used to make products

True

Selling and administrative costs are reported as an expense on the income statement in the period in which they are incurred.

True. These cost are not considered part of inventory and are, therefore, expensed immediately.

What are the three categories of inventory for a manufacturing company?

Work in process, Finished goods, Raw materials

Cost of goods manufactured is the cost of

all products that were completed during the period

Cost of goods sold is the cost of

all products that were sold during the period

The practice of identifying the best practices used by competitors is

benchmarking

The process of allocating manufacturing overhead to products is called

cost allocation

The cost of all products sold to customers during the accounting period is called

cost of goods sold

Manufacturing product costs include:

direct labor, indirect materials, depreciation on manufacturing facilities, factory utilities, indirect labor, direct materials

The cost of holding inventory is called inventory

holding costs

Costs that cannot be traced to a product or service in a cost-effective manner are called

indirect costs

The value-added principle states that

managers should engage in activities that add value in excess of the cost of the activity

Indirect costs incurred to make a product, including indirect labor, indirect materials, factory utilities, rent on manufacturing facilities, and depreciation on manufacturing facilities are called

manufacturing overhead

The cost of an alternative that must be foregone in order to pursue a certain action is a(n) _______________ cost.

opportunity

The cost of an alternative that must be foregone in order to pursue a certain action is a(n)

opportunity cost

Resources other than materials and labor that are used in manufacturing a product are called

overhead

Total manufacturing costs include:

overhead during the period, raw materials used during the period, labor used during the period

What should be included in the work process inventory?

partially completed products

Managerial accounting focuses on the

past, present and future

Due to their recognition pattern, nonproduct expenses that are expensed in the accounting period in which they are incurred are called __________ costs.

period

Manufacturing product costs do not include:

period costs, selling and administering costs

Inventory that includes lumber, metals, paints, and chemicals that will be used to make the company's products is called

raw materials inventory

Paying salaries and administrative costs with cash results in which of the following?

the transaction does not affect liabilities, decreases total assets, decreases stockholders' equity, decreases net income, decreases cash

Inventory that includes partially completed products is called

work in process inventory