Chapter 15 – Managerial Accounting Review – Flashcards
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Managers' Activities and Responsibilities can be Classified into Three broad Functions:
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1. Planning - requires managers to look ahead and to establish objectives. These objectives are often diverse: maximizing short-term profits and market share, maintaining a commitment to environmental protection, and contributing to social programs 2. Directing - involves coordinating a company's diverse activities and human resources to produce a smooth-running operation. This function relates to implementing planned objectives and providing necessary incentives to motivate employees. 3. Controlling - is the process of keeping the company's activities on track. In controlling operations, managers determine whether planned goals are met. When there are deviations from targeted objectives, managers decide what changes are needed to get back on track.
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The Controller's Responsibilities Include:
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1) Maintaining the accounting records, 2) Ensuring an adequate system of internal control, and 3) Preparing financial statements, tax returns, and internal reports. The treasurer has custody of the corporation's funds and is responsible for maintaining the company's cash position.
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1. (T/F) Managerial accountants have a single role within an organization: collecting and reporting costs to management.
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False. Managerial accountants determine product costs. In addition, managerial accountants are now held responsible for evaluating how well the company employs its resources. As a result, when the company makes critical strategic decisions, managerial accountants serve as team members alongside personnel from production, marketing, and engineering.
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2. (T/F) Financial accounting reports are general-purpose and intended for external users.
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True
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3. (T/F) Managerial accounting reports are special-purpose and issued as frequently as needed.
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True
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4. (T/F) Managers' activities and responsibilities can be classified into three broad functions: cost accounting, budgeting, and internal control.
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False. Managers' activities are classified into three broad functions: planning, directing, and controlling. Planning requires managers to look ahead to establish objectives. Directing involves coordinating a company's diverse activities and human resources to produce a smooth-running operation. Controlling keeps the company's activities on track.
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5. (T/F) Managerial accounting reports must now comply with generally accepted accounting principles (GAAP).
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False. Managerial accounting reports are for internal use and thus do not have to comply with GAAP.
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Indirect materials have one of two characteristics.
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1. They do not physically become part of the finished product (such as polishing compounds used by Current Designs for the finishing touches on kayaks). Or, 2. they are impractical to trace to the finished product because their physical association with the finished product is too small in terms of cost (such as cotter pins and lock washers).
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Companies account for Indirect Materials as part of:
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Manufacturing Overhead
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Manufacturing Overhead
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Overhead costs also include manufacturing costs that cannot be classified as direct materials or direct labor. Manufacturing overhead includes indirect materials, indirect labor, depreciation on factory buildings and machines, and insurance, taxes, and maintenance on factory facilities.
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Cost of Goods Sold Components Formula: Merchandiser
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Cost of Goods Sold = Beginning Inventory + Cost of Goods Purchased - Ending Inventory
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Cost of Goods Sold Components Formula: Manufacturer
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Cost of Goods Sold = Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory
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Total Cost of Work in Process Formula
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Total Cost of Work in Process = Beginning Inventory + Total Manufacturing Costs
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Cost of Goods Manufactured Formula
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Cost of Goods Manufactured = Total Cost of Work in Process - Ending Work in Process Inventory
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Inventory Accounts for a Manufacturer
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Raw Materials Inventory - Shows the cost of Raw Materials on hand Work in Process Inventory - Shows the cost applicable to units that have been started into production but are only partially completed. Finished Goods Inventory - Shows the cost of completed goods on hand.
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Manufacturer's Value Chain
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Research & Development and Product Design -> Acquisition of Raw Materials -> Production -> Sales and Marketing -> Delivery -> Customer Relations and Subsequent Services
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Sarbanes-Oxley Act (SOX)
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CEOs and CFOs are now required to certify that financial statements give a fair presentation of the company's operating results and its financial condition. In addition, top managers must certify that the company maintains an adequate system of internal controls to safeguard the company's assets and ensure accurate financial reports. Another result of SOX is that companies now pay more attention to the composition of the board of directors. In particular, the audit committee of the board of directors must be comprised entirely of independent members (that is, nonemployees) and must contain at least one financial expert. Finally, the law substantially increases the penalties for misconduct.
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Institute of Management Accountants (IMA) has developed a code of ethical standards, entitled
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IMA Statement of Ethical Professional Practice.
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1. (TERM) All activities associated with providing a product or performing a service
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Value chain
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2. (TERM) A method of allocating overhead based on each product's use of activities in making the product.
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Activity-Based Costing (ABC)
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3. (TERM) Systems implemented to reduce defects in finished products with the goal of achieving zero defects
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Total Quality Management
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4.(TERM) A performance-measurement approach that uses both financial and nonfinancial measures, tied to company objectives, to evaluate a company's operations in an integrated fashion.
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Balanced Scorecard
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5.(TERM) Inventory system in which goods are manufactured or purchased just as they are needed for use.
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Just-In-Time (JIT) Inventory
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6.(TERM) A company's efforts to employ sustainable business practices with regards to its employees, society, and the environment.
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Corporate Social Responsibility
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7.(TERM) A code of ethical standards developed by the Institute of Management Accountants.
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Statement of Ethical Professional Practice
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1.Managerial accounting: A. Is governed by generally accepted accounting principles. B. Places emphasis on special-purpose information. C. Pertains to the entity as a whole and is highly aggregated. D. Is limited to cost data.
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B
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2. The management of an organization performs several broad functions. They are A. planning, directing, and selling. B. planning, directing, and controlling. C. planning, manufacturing, and controlling. D. directing, manufacturing, and controlling.
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B
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3. Direct materials are a: 1)Product Cost 2) Manufacturing Overhead Cost 3) Period Cost A. Yes, Yes, No B. Yes, No, No C. Yes, Yes, Yes D. No, No, No
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B
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4. Which of the following costs would a computer manufacturer include in manufacturing overhead? A. The cost of the disk drives. B. The wages earned by computer assemblers. C. The cost of the memory chips. D. Depreciation on testing equipment.
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D
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5. Which of the following is not an element of manufacturing overhead? A. Sales Manager's Salary. B. Plant Manager's Salary. C. Factory Repairman's Wages. D. Product Inspector's Salary.
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A
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6. Indirect Labor is a: A. Nonmanufacturing Cost. B. Raw material Cost. C. Product Cost. D. Period Cost.
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C
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7. Which of the following costs are classified as a period cost? A. Wages paid to a factory custodian. B. Wages paid to a production department supervisor. C. Wages paid to a cost accounting department supervisor. D. Wages paid to an assembly worker.
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C
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8. 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: A. $450,000. B. $500,000. C. $550,000. D. $600,000.
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C
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9. Cost of goods available for sale is a step in the calculation of cost of goods sold of: A. a merchandising company but not a manufacturing company. B. a manufacturing company but not a merchandising company. C. a merchandising company and a manufacturing company. D. neither a manufacturing company nor a merchandising company.
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C
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10. A cost of goods manufactured schedule shows beginning and ending inventories for: A. raw materials and work in process only. B. work in process only. C. raw materials only. D. raw materials, work in process, and finished goods.
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A
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11. The formula to determine the cost of goods manufactured is: A. Beginning raw materials inventory + Total manufacturing costs ? Ending work in process inventory. B. Beginning work in process inventory + Total manufacturing costs ? Ending finished goods inventory. C. Beginning finished good inventory + Total manufacturing costs ? Ending finished goods inventory. D. Beginning work in process inventory + Total manufacturing costs ? Ending work in process inventory.
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D
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12. After passage of the Sarbanes-Oxley Act: A. reports prepared by managerial accountants must by audited by CPAs. B. CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results. C. the audit committee, rather than top management, is responsible for the company's financial statements. D. reports prepared by managerial accountants must comply with generally accepted accounting principles (GAAP).
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B
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13. Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful fashion? A. Just-in-time inventory. B. Total quality management. C. Balanced scorecard. D. Activity-based costing.
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D
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14. Corporate social responsibility refers to: A. The practice by management of reviewing all business processes in an effort to increase productivity and eliminate waste. B. An approach used to allocate overhead based on each product's use of activities. C. The attempt by management to identify and eliminate constraints within the value chain. D. Efforts by companies to employ sustainable business practices with regard to employees and the environment.
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D
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Financial Accounting Features: 1.Primary Users of Reports: 2. Types and Frequency of Reports: 3. Purpose of Reports: 4. Content of Reports: 5. Verification Process:
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1. External users: stockholders,creditors, and regulators 2. Financial Statements:-Quarterly and annually. 3. General-purpose 4. Pertains to business as a whole. Highly aggregated (condensed). Limited to Double-Entry- Accounting and Cost Data Generally accepted- Accounting Principles 5. Audited by CPA.
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Managerial Accounting Features: 1.Primary Users of Reports: 2. Types and Frequency of Reports: 3. Purpose of Reports: 4. Content of Reports: 5. Verification Process:
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1. Internal users: officers and managers 2. Internal reports: - As frequently as needed. 3. Special-purpose for specific decisions . 4. Pertains to subunits of the business. Very detailed Extends beyond double-entry --accounting to any relevant data Standard is relevance to decisions 5. No independent Audits
