ACC Chapter 14 – Flashcards
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All of the following are distinguishing features of managerial accounting except
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independent audits.
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Planning is the process of keeping the company's activities on track.
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False. Look ahead and establish objectives
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Which of the following are considered to be management's three broad functions?
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Planning, directing, and controlling
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Which of the following is considered part of the controlling process?
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Keeping the company's activities on track
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After passage of the Sarbanes-Oxley Act of 2002
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CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results.
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The process of keeping the company's activities on track is
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controlling.
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Indirect material costs are easily traced to products because of their physical association with the finished product.
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False.
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Manufacturing overhead consists of costs that are indirectly associated with the manufacture of the finished product.
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True.
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Which one of the following is not a manufacturing cost?
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Advertising cost
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Which of the following answer choices lists the three manufacturing costs?
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Direct materials, direct labor, and manufacturing overhead
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Which of the following costs would a computer manufacturer include in manufacturing overhead?
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Depreciation on testing equipment.
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Which of the following is not an element of manufacturing overhead?
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Sales manager's salary.
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Manufacturing overhead includes all of the following except
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direct materials.
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On average, studies have shown that the smallest component of total manufacturing cost is
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direct labor.
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Product costs are costs that are a necessary and integral part of producing the finished product.
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True.
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Barry's BarBQue incurred the following costs: $1,400 for ribs, 45 hours of labor to cook the ribs at $10 per hour, $50 for seasoning and sauce, $300 for signs to advertise the ribs, $150 to clean the grill after cooking the ribs, and $100 of administrative costs. How much are total product costs?
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$2,050 $1,400 + (45*$10) + $50 + $150 = $2,050.
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Which group of costs consists of only product costs?
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Direct labor, indirect labor, factory utilities
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Indirect labor is a
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product cost.
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Which of the following costs are classified as a period cost?
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Wages paid to a cost accountant department supervisor.
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Product costs include each of the following except
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selling and administrative expenses.
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Each of the following is a period cost except
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indirect labor.
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Pharmco incurred the following costs while manufacturing its product: Materials used in production, $120,000; factory depreciation, $60,000; property taxes on the administrative offices, $12,000; labor costs of assembly-line workers, $95,000; factory supplies used, $8,000; advertising expense, $13,000; property taxes on the factory, $20,000; delivery expense, $23,000; salaries of the sales staff, $53,000; and sales commissions, $17,000. The total product costs for Pharmco are
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$303,000 120,000 + 95,000 + 8,000 + 60,000 + 20,000= 303,000
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Manufacturers compute cost of goods sold by adding the beginning finished goods inventory to the cost of goods purchased and subtracting the ending finished goods inventory.
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False
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Which of the following would you find on the income statement of a manufacturing company, but not on the income statement of a merchandising company?
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Cost of goods manufactured
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One key difference appears when comparing the income statements of a manufacturing company to a merchandising company. What is that difference?
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Manufacturing companies use cost of goods manufactured and merchandising companies use cost of goods purchased.
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For the year, Redder Company has cost of goods manufactured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods sold is
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$550,000 200,000 + 600,000 - 250,000= 550,000
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Cost of goods available for sale is reported on the income statement of
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a merchandising company and a manufacturing company.
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For a manufacturing firm, cost of goods available for sale is computed by adding the beginning finished goods inventory to
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cost of goods manufactured.
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The principal difference between a merchandising and a manufacturing income statement is the
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cost of goods sold section.
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Manders Corporation has $20,000 of ending finished goods inventory at December 31. If beginning finished goods inventory was $15,000 and cost of goods sold was $40,000, how much would Manders Corporation report as cost of goods manufactured?
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$45,000 40,000 + 15,000 - 20,000= 45,000
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The costs assigned to beginning work in process inventory are based on the manufacturing costs incurred in the prior period.
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True.
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The cost of the beginning work in process plus the total manufacturing costs for the current period is the cost of goods manufactured.
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False.
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A cost of goods manufactured schedule shows beginning and ending inventories for
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raw materials and work in process only.
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The formula to determine the cost of goods manufactured is
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beginning work in process inventory + total manufacturing costs - ending work in process inventory.
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The sum of the direct materials costs, direct labor costs, and manufacturing overhead incurred is the
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total manufacturing costs.
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Companies compute cost of goods manufactured by subtracting ending work in process inventory from
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total cost of work in process.
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Model Magic Manufacturing reported the following year-end balances: Beginning work in process inventory, $35,000; beginning raw materials inventory, $18,000; ending work in process inventory, $38,000; ending raw materials inventory, $15,000; raw materials purchased, $510,000; direct labor, $180,000; and manufacturing overhead, $75,000. What is the amount of total work in process for Model Magic for the current year?
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First, direct materials used = beginning raw materials inventory ($18,000) + raw materials purchased ($510,000) - ending raw materials inventory ($15,000) = $513,000. Then, total cost of work in process = beginning work in process inventory ($35,000) + direct materials used ($513,000) + direct labor ($180,000) + manufacturing overhead ($75,000) = $803,000
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Buxmont Manufacturing reported the following year-end balances: Beginning work in process inventory, $40,000; beginning finished goods inventory, $60,000; ending work in process inventory, $20,000; ending finished goods inventory, $30,000; direct materials used, $240,000; direct labor, $250,000; manufacturing overhead, $150,000; selling expenses, $50,000; and administrative expenses, $350,000. How much would Buxmont Manufacturing report as cost of goods manufactured at year-end?
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Cost of goods manufactured = beginning work in process ($40,000) + total manufacturing costs [direct materials used ($240,000) + direct labor ($250,000) + manufacturing overhead ($150,000)] or $640,000 - ending work in process ($20,000) = $660,000
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Companies generally list manufacturing inventories in the order of completion-raw materials, work in process, and finished goods.
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False.
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Which one of the following is true concerning manufacturing and merchandising companies' inventories?
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Manufacturing companies report inventories in the order of liquidity.
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Which one of the following is true concerning manufacturing and merchandising companies' inventories on the balance sheet?
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Finished goods is to a manufacturer what merchandise inventory is to a merchandiser.
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A manufacturer may report three inventories in its balance sheet: (1) raw materials, (2) work in process, and (3) finished goods. Indicate in what sequence these inventories generally appear on a balance sheet.
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(3), (2), (1)
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The cost applicable to units that have been started into production but not completed is shown as
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work in process inventory.
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Under the just-in-time inventory method, goods are manufactured or purchased just-in-time for use.
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True.
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Which one of the following is a trend in industry?
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The U.S. economy has shifted toward an emphasis on providing services.
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Which one of the following is a trend in managerial accounting?
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Large machines have been replaced with smaller, more flexible ones.
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Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful fashion?
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Activity-based costing.
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Examples of recent trends in the economic environment of U.S. businesses are
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increasing deregulation, increasing global competition, and a shift toward providing services rather than goods.
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Many companies have significantly lowered inventory levels and costs using
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just-in-time inventory methods.
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All activities associated with providing a product or service is referred to as
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the value chain.
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