Accounting 102- Final

True or False

Management accounting is the process of identifying, measuring, accumulating, analyzing, preparing, and communicating financial information used by management.

True

True or False

Financial Accounting information is used to plan, evaluate and control within the organization and to ensure appropriate use and accountability for its resources

False

financial- internal/external

managerial- internal

True or False

Rules applicable to accounting information created and prepared for management use are the same as those for information reported to the general public.

False

True or False

Most management decisions are based on analyses using expected future dollars

True

True or False

The management process and management accounting are identical.

False

True or False

An advantage of value chain analysis is that it allows a company to focus on what a company does best.

True

Core competency

True or False

Performance measure are limited to financial data.

False

True or False

When unable to resolve an ethical conflict, the accountant should consider consulting with an attorney as to the legal obligations and rights concerning the ethical conflict.

True

True or False

If a management accountant gives information about a future merger of his or her company to a relative, the accountant has acted unethically.

True

insider trading info

True or False

Management accountants who alter reports to meet targeted levels of performance are not acting unethically, because their job is to provide information that will aid in communicating the goals of the business.

False

Management accounting

A. deals primarily with people and organizations outside the business entity

B. requires only periodic reporting on a regular basis

C. uses any type of useful measurement unit, including physical as well as monetary measures

D. deals only with the double-entry recording system

C

Which of the following is a characteristic of management accounting?

A. it must follow generally accepted accounting principles

B. it is used primarily by internal users

C. it is concerned primarily with reporting past performance

D. it uses historical costs as the sole measurement unit

B

In comparing management accounting with financial accounting, which of the following statements is true?

A. both use historical costs as their primary unit of measurement

B. both depend on the double-entry system of accounting

C. both require adherence to GAAP

D. financial accounting reports are more objective, whereas management accounting reports are more subjective

D

Which of the following is NOT part of the "perform" stage in the management process?

A. matching human resources to the task to be performed

B. hiring and training personnel

C. identifying operating activities that minimize waste

D. controlling operations

D

Analysis of non-financial data is important to the management accountant because

A. financial data are usually irrelevant

B. non-financial data lend themselves more to computer analysis than do financial data

C. managers make many decisions base solely on non-financial data

D. non-financial data are easier to work with than financial data

C

Short Answer

Identify and Explain the important questions a manager must address before preparing a managerial report.

who- target audience

what- what's the style-orally/written

when- must be timely

why- what is the purpose

Product cost

direct materials, direct labor, overhead

Fixed Cost

constant

Variable cost

change in direct proportion to output

Direct cost

can be traced

indirect cost

can't be traced

Period cost

GAS

True/False

Product costs for manufacturing company consists of direct materials, direct labor, and overhead

True

Period cost and product cost are synonymous terms

False

For a manufactured product, all costs incurred to get the product ready for sale are included in the inventory value of the product

True

Period costs are not considered when costing products for inventory

True

The two primary types of cost behavior are fixed and variable

True

Direct materials are the only materials in a product

False

wages of machine operators and other workers involved in actually shaping the product are classified as direct labor costs

True

(direct materials + direct labor + Overhead)/ Total Number of Units Produced= Product Unit Cost

True

At the end of an accounting period, the balance in the Finished Goods Inventory account is made up of the costs of products completed but not sold as of that date

True

Under activity-based costing (ABC), a product's unit cost may include assigned overhead from several cost pools

True

Which of the following is not included in the purchase cost of merchandise inventory?

A. purchase discounts

B. overhead costs

C. freight-in costs

D. purchase returns and allowances

B

An example of a period cost is

A. advertising costs

B. indirect materials

C. product design costs

D. direct materials

A

Which of the following is a typical example of a variable cost?

A. sales commissions

B. rent

C. depreciation

D. salaries

A

Materials and supplies that cannot be traced conveniently to specific products are called

A. indirect materials

B. raw materials

C. minor materials

D. direct materials

A

When a company calculates its product unit cost using estimated costs, it is using which cost of measurement method?

A. standard costing

B. actual costing

C. full costing

D. normal costing

A

indicated whether the cost should be classified as direct materials, direct labor, or overhead

maintenance on factory building

OH

indicated whether the cost should be classified as direct materials, direct labor, or overhead

cream

DM

indicated whether the cost should be classified as direct materials, direct labor, or overhead

mixing department wages

DL

indicated whether the cost should be classified as direct materials, direct labor, or overhead

Vanilla

DM

indicated whether the cost should be classified as direct materials, direct labor, or overhead

Factory supervisor's salary

OH

indicated whether the cost should be classified as direct materials, direct labor, or overhead

machine oil for mixing machines

OH

indicated whether the cost should be classified as direct materials, direct labor, or overhead

sugar

DM

indicated whether the cost should be classified as direct materials, direct labor, or overhead

machine operator wages

DL

indicated whether the cost should be classified as direct materials, direct labor, or overhead

factory maintenance labor

OH

indicated whether the cost should be classified as direct materials, direct labor, or overhead

depreciation on factory equipment

OH

True/False

In a process costing system, each product is assigned the same amount of costs

True

True/False

companies that produce custom-made products usually use a process costing system

False

no they'd use job order

True/False

the typical product costing system in a factory incorporates parts of both job order costing and process costing to create a hybrid system

True

True/False

in a job order costing system, when the goods are sold, Cost of Goods Sold account is increased, and the Finished Goods Inventory account is decreased for the selling price

False

Selling cost not price

True/False

A zero balance in Finished Goods Inventory at the start of the period means all previously completed products have been shipped

True

True/False

In a job order costing system when are issued from inventory to production, the Overhead account is increased

True

True/False

in a job order costing system, indirect labor costs are transferred to the Overhead account by increasing the Factory payroll account and decreasing the Overhead account

False

it's the opposite

True/False

in a job order costing system, indirect labor costs incurred are charged to the Work in Process Inventory account

False

Overhead

True/False

to prepare financial statements at the end of the accounting period, the actual overhead cost for the period and the estimated overhead that was applied during the period must be reconciled in both job order and process costing system.

True

True/False

if applied overhead exceeds actual overhead, cost of goods sold must be reduced by the amount of the overcharge in a job order costing system

True

Job order costing and process costing are systems of

A. inventory costing

B. cost flow assumptions

C. product costing

D, product pricing

C

Product costs appear on the income statement in the form of

A. cost of goods sold

B. materials inventory

C. sales commissions

D. none of these

A

mat. inventory- on the balance sheet

sales com- on the income statement but as a period cost

A company should use process costing rather than job order costing if

A. production is only partially completed during the accounting period

B. the produce is produced in batches only as orders are received

C. the product is composed of mass-produced homogeneous units

D. the product goes through several stages of production

C

Which of the following characteristics applies to process costing, but does not apply to job order costing?

A. the need for averaging

B. the use of equivalent units

C. separate, identifiable jobs

D. the use of predetermined overhead rates

B

The basic document for keeping track of costs in a job order costing system is a

A. job order cost card

B. labor time card

C. process cost report

D. materials requisition form

A

True/False

cost behavior is defined as the manner in which costs respond to changes in volume or activity

True

True/False

Total variable and fixed costs will be the same regardless of how many units are produced

False

True/False

Fixed costs remain constant

True

True/False

normal capacity is the average annual level of operating capacity needed to meet expected sales demand, adjusted for seasonal changes and industry and economic cycles

True

True/False

Regression analysis can be performed using one or more activities to predict costs

True

True/False

cost-volume-profit analysis assumes a constant sales mix

True

True/False

the contribution margin equals total fixed costs at the breakeven point

True

True/False

if revenue was $120,000,000, variable costs were $90,000,000, and fixed costs were $15,000,000, then the contribution margin ratio was 25%

True

120

(90)=

30/120=

1/4=.25

True/False

if targeted sale are 12,000 units, the sales price/unit is $70, fixed costs are $130,000, and variable costs are $40/unit, the planned profit must be $230,000

True

70-40=30

12000= (130000+230000)/30

True/False

For profit planning purposes, the following equation is used: Target Sales Units= (FC+P) divided by CM per Unit.

True

Which of the following statements most accurately explains the behavior of costs?

A. there is no norm; rather costs can be fixed, variable, or a combination of both

B. the majority of costs are variable per unit of production

C. the majority of costs are fixed per unit of production

D. Costs can be fixed or variable. but usually not a combination of both

A

An insurance company pays its employees a commission of 6% on each sale. What is the proper classification of the cost of sales commissions?

A. constant cost

B. variable cost

C. mixed cost

D. fixed cost

B

Suppose a company rents a building for $250,000/year for the purpose of manufacturing between 80,000 and 140,000 units (relevant range of activity). the rental cost per unit of production will ______ as production levels increase.

A. behave in a nonlinear fashion

B. increase

C. decrease

D. remain fixed

C

$250,000- Fixed cost

Fixed costs don't increase with volume of production

When fixed costs are $18,000 and the contribution margin per unit is $4, the breakeven point is

A. 4500 units

B. 2230 units

C. $22300

D. $72000

A

18000/4=4500

If the contribution margin on a new product line is $15, fixed costs are $165000, and the total market for the product is 22000 units, then breakeven analysis would recommend that the company

A. abandon the new product line

B. decrease the sales of the price per unit

C. increase fixed costs (such as advertising) to lower the breakeven units

D. adopt the new product line

D

FC/CM=165000/15=11000

Identify the following as fixed cost, variable cost, or mixed cost:

Direct materials

V

Identify the following as fixed cost, variable cost, or mixed cost:

electricity

M

Identify the following as fixed cost, variable cost, or mixed cost:

factory building rent

F

Identify the following as fixed cost, variable cost, or mixed cost:

advertising expense

F

Identify the following as fixed cost, variable cost, or mixed cost:

shipping expense

M

Identify the following as fixed cost, variable cost, or mixed cost:

insurance on the factory building

F

Identify the following as fixed cost, variable cost, or mixed cost:

cost of goods sold

V

Identify the following as fixed cost, variable cost, or mixed cost:

direct labor

V

True/False

Budgeting is the process of identifying, gathering, summarizing, and communicating financial and non-financial information about an organization's future activities

True

True/False

A budget can contain non-financial information

True

True/False

Participative budgeting involved only personnel at top levels of the organization

False

all levels

True/False

The short-term plan or budget involves every part of the enterprise and is much more detailed than the long-term plan

False

True/False

Projected financial statements are the final product of the budgeting process

True

True/False

operating budgets are plans used in daily operations

True

True/False

the direct materials purchases budget reflect both the quantity and the cost of direct materials purchases

True

True/False

the direct labor budget is needed to prepare the production budget

False

Sales Budget

True/False

the overhead budget must be separate into variable and fixed cost segments

False

not required

True/False

a company seeks to have as much cash as possible on hand. Cash budgeting helps to accomplish this.

False

Budgets

A. should contain both revenues and expenses

B. contain as much information as possible

C. are presented in dollars only; nondollar data should be excluded

D. are synonymous with managing an organization

D

Which type of budgeting utilizes employees at all levels of the company?

A. group budgeting

B. selective budgeting

C. target budgeting

D. participative budgeting

D

A master budget is a compilation of forecasts for the coming year or operating cycle made by various departments or functions within an organization. What is the most basic forecast made in a master budget?

A. sales forecast

B. production forecast

C. labor forecast

D. materials forecast

A

The first budget to be prepared when making a master budget is the

A. sales budget

B. production budget

C. cash budget

D. direct labor budget

A

Which of the following would most likely be considered a short-term goal?

A. modernization and expansion of the plant

B. a product line change

C. a unit sales forecast

D. a marketing plan to gain a higher percentage of control of the market in five years

C