BUS100 (Managerial Accounting Basics)

*Study Week 1 Checkpoint*

Financial Accounting

Produces financial statements for parties outside the company.

Managerial Accounting

Primarily used within the company for internal decision-making.

Product Differentiation

Companies differentiate the products from another company to stand out.

Price-Based Competition

Companies sell products for a lower price.

Direct Materials

Raw materials that are directly used in the production of a product.

Direct Labor

Includes the labor cost for all the employees working directly on the product to convert the raw materials into a finished product.

Manufacturing Overhead

All other factory expenses not classified as direct materials or direct labor.

Total Cost of Inventory

Raw Materials (direct) + Direct Labor + Manufacturing

Inventoriable Expenses

Factory expenses that are included in the cost of inventory.

Non-Inventoriable Costs

Expenses not related to factory operations, expensed in the period incurred.

Period Costs

Costs that are expensed in the period they are incurred and not included in inventory.

Fixed Costs

stay the same in total regardless of the volume produced.

Variable Costs

move exactly with the level of production

Simple Income Statement

Revenue - Expenses = Net Income or (loss)

Multi-Step Income Statement

Sales - Costs of Goods Sold = Gross Profit - Operating Expenses = Net Income or (loss)

Contribution Margin Income Statement

Sales - Variable costs = Contribution Margin - Fixed Costs = Net Income or (loss)

Total Product Cost

Direct materials + Direct Labor + Overhead

Which of the following statements is true? 

1. Managerial accounting for companies in the US is governed by GAAP.

2. Managerial accounting statements are prepared to go to parties outside the company.

3. Managerial accounting is more future oriented than financial accounting. 

4. The results of both managerial and financial accounting 

are reported only in currency.

Managerial accounting is more future oriented than financial accounting.

On what date would a door handle for a freezer be expensed by a manufacturing company?

1. When door handle is paid for by the company

2. When the freezer is sold by the company

3. When payment is received for the sale of the freezer

4. When the door handle is attached to the freezer in the production assembly line

When the freezer is sold by the company

Which of the following is true of a manufacturing company?

1. Period costs are expensed as cost of goods sold when the inventory is sold.

2. The salary of the factory foreman is a period cost.

3. Selling expenses are considered a product cost of the company.

4. Period costs are expensed as they are incurred.

Period costs are expensed as they are incurred

The salary of the factory supervisor is classified as? 

1. A non-product cost

2. An administrative expense 

3. An inventoriable cost

4. A process cost

An inventoriable cost

 Which of the following is true?

1. Total fixed costs vary exactly as the level of production varies.

2. Variable costs are fixed per unit.

3. The contribution margin per unit varies as the number of units varies.

4. Fixed costs are fixed per unit.

Variable costs are fixed per unit.

Which of the following is true? 

1. Changing the sales price per unit has no impact on the contribution margin percentage of total sales.

2. An increase in the total number of units sold increases the contribution margin percentage.

3. Fixed cost per unit decreases as the total sales increase.

4. Variable cost per unit varies as the total sales vary.

Fixed cost per unit decreases as the total sales increase.

Which of the following is true of the contribution margin income statement?

1. The percentage of fixed costs to total sales remains constant.

2. The total amount of variable costs remains constant.

3. The breakeven point is the level of sales at which total sales equals variable costs plus fixed costs.

4. Total fixed costs will always equal the contribution margin.

The breakeven point is the level of sales at which total sales equals variable costs plus fixed costs.