Deck 2: Building Blocks of Managerial Accounting

Question 1

1-15 Which of the following types of company is the fastest growing in the United States?

A)Service
B)Merchandising
C)Manufacturing
D)None of the above

Answer 1

A

Question 2

1-8 H & R Block,an income tax preparation service,is what type of company?

A)Manufacturer
B)Service company
C)Retailer
D)Wholesaler

Answer 2

B

Question 3

1-14 How would Honda classify its partially completed vehicles?

A)Finished goods
B)Raw materials
C)Supplies
D)Work in process

Answer 3

D

Question 4

1-11 What type of company resells products it previously purchased ready-made from suppliers?

A)Merchandiser
B)Retailer
C)Wholesaler
D)All of the above

Question 5

1-19 Intel Corporation makes computer chips.Intel Corporation would be classified as a:

A)manufacturing company.
B)merchandising company.
C)service company.
D)simple company.

Question 6

1-12 Before these materials are used to manufacture its cars,Honda classifies steel,glass,and plastic as:

A)finished goods inventory.
B)raw materials inventory.
C)work in process inventory.
D)merchandise inventory.

Question 7

1-17 A lawn mowing business would be classified as a:

A)manufacturing company.
B)merchandising company.
C)service company.
D)simple company.

Question 8

1-1 Retailers sell their products to other wholesalers.

Question 9

1-5 Which of the following are merchandising companies?

A)Manufacturers
B)Retailers
C)Wholesalers
D)Both Retailers and Wholesalers

Question 10

1-18 A law firm would be classified as a:

A)manufacturing company.
B)merchandising company.
C)service company.
D)simple company.

Question 11

1-10 Which type of company typically produces its own inventory?

A)Manufacturer
B)Service company
C)Retailer
D)Wholesaler

Question 12

1-3 All companies have the same types of inventories.

Question 13

1-9 Among other things,General Mills makes breakfast cereal.Which type of company is General Mills?

A)Manufacturer
B)Service company
C)Retailer
D)Wholesaler

Question 14

1-7 The balance sheet of a service company has:

A)little or no inventory.
B)raw materials inventory.
C)three categories of inventory.
D)two categories of inventory.

Question 15

1-16 Which of the following is characteristic of a service company?

A)Service companies generally have no tangible products to sell.
B)Service companies have a single category of inventory.
C)Service companies make a product.
D)Service companies transform raw materials into finished goods.

Question 16

1-13 Wal-Mart classifies its clothing held for sale as:

A)finished goods inventory.
B)raw materials inventory.
C)work in process inventory.
D)merchandise inventory.

Question 17

1-2 Merchandising companies include both wholesalers and retailers.

Question 18

1-20 ____________ has/have three types of inventory.

A)A service company
B)A merchandising company
C)A manufacturing company
D)All of these companies

Question 19

1-4 Merchandising and manufacturing companies have finished goods inventory.

Question 20

1-6 Raw materials,work in process and finished goods are the three types of inventory held by which of the following types of companies?

A)Manufacturers
B)Retailers
C)Wholesalers
D)Service companies

Question 21

2-5 Receipt of materials is part of the firm's value chain.

Question 22

1-30 Describe a company that has some elements of all three types of companies.It is part service company,part manufacturer,and part merchandiser.

Question 23

2-9 Which of the following would NOT be a cost object?

A)Built-to-order web sales
B)Costs in the legal department
C)Sales of a particular model in the southeast
D)All of these could serve as cost objects

Question 24

1-25 Which of the following costs could be found in work in process inventory for an ice cream manufacturer?

A)Utilities for administrative offices
B)Assembly worker wages
C)Depreciation on sales office
D)Customer order forms

Question 25

1-23 Which type(s)of companies prepare income statements and balance sheets?

A)Service company
B)Merchandising company
C)Manufacturing company
D)All types of companies

Question 26

2-1 All of the components of manufacturing-from research and development through customer service after the sale-are part of a firm's value chain.

Question 27

2-7 Which of the following is NOT part of a company's value chain?

A)Design
B)Distribution
C)Marketing
D)Administration

Question 28

1-26 Enter the letter of the type of company on the line in front of each statement.Letters may be used more than once or not at all.

A)Service company
B)Merchandising company
C)Manufacturing company
____ Generally has no inventory
____ Has three types of inventory
____ Inventory consists of freight-in and the cost of the product
____ Has the highest percentage of labor costs
____ Wal-Mart is this type of company

Question 29

1-29 Explain the difference between raw materials inventory,work in process inventory,and finished goods inventory.

Question 30

1-28 Describe service,merchandising,and manufacturing companies.

Question 31

2-3 The value chain helps companies control costs of products only.

Question 32

On the line in front of each statement,enter the letter corresponding to the term that best fits that statement.You may use a letter more than once and some letters may not be used at all.
$$\begin{array} { | l | l | l | l | } \hline \text { A. } & \text { Materials inventory } & \text { E. } & \text { Work in process inventary } \\\hline \text { B. } & \text { Service companies } & \text { F. } & \text { Manufacturing companies } \\\hline \text { C. } & \text { Merchandise inventory } & \text { G. } & \text { Merchandising companies } \\\hline \text { D. } & \text { Finished egods inventory } & & \\\hline\end{array}$$ ____ Typically have a single category of inventory
____ Resell products they previously purchased ready-made from suppliers
____ Do not have inventory for resale
____ Produce its own inventory
____ Transform raw materials into new finished products
____ Ready to sell inventory of manufacturers
____ Partially completed items of manufacturers

Question 33

2-6 A company's distribution system is an important part of the value chain.

Question 34

1-24 Which of the following items would NOT be found in raw materials inventory for a furniture manufacturer?

A)Wood
B)Fabric
C)Assembly worker wages
D)Steel framing

Question 35

2-2 The activities in the value chain must take place in a specific order.

Question 36

1-22 Which type of company has the highest percentage of labor costs?

A)Service company
B)Merchandising company
C)Manufacturing company
D)All companies have a high percentage of labor costs

Question 37

1-31 Why do service firms not have inventory costs pertaining to items to be sold? What type of costs do they have?

Question 38

1-21 In ___________,inventory consists of freight-in and the cost of the product which is to be resold.

A)a service company
B)a merchandising company
C)a manufacturing company
D)all of these companies

Question 39

2-4 Research and development is needed to improve products and to design new products.

Question 40

2-8 All of the following activities are included in the value chain EXCEPT for:

A)customer service.
B)design.
C)production.
D)reporting.

Question 41

2-16 Advertising expenses would be considered which part of the value chain?

A)Customer service
B)Marketing
C)Production
D)Research and development

Question 42

2-14 Depreciation on a factory would be classified as which part of the value chain?

A)Design
B)Distribution
C)Production
D)Research and development

Question 43

Farm Fresh Dairy provided the following expense information for May: $$\begin{array} { | l | r | } \hline \text { Assembly-line warkers' wages } & \$ 72,000 \\\hline \text { Caps for milk bottles } & 2,000 \\\hline \text { Reconfigurig the assembly line } & 155,000 \\\hline \text { Custamer support hotline } & 8,000 \\\hline \text { Delivery expenses } & 17,000 \\\hline \text { Depreciation an factory equipment } & 81,000 \\\hline \text { Plastic milk bottles } & 52,000 \\\hline \text { Salaries of salespegple } & 63,000 \\\hline \text { Salaries of research scientists } & 84,000 \\\hline \text { Custamer toll-free order line } & 4,000 \\\hline\end{array}$$

-What is the total cost for the design category of the value chain?

A)$227,000
B)$218,000
C)$155,000
D)$311,000

Question 44

2-18 A company decision as to where to locate a new store would be considered:

A)customer service.
B)marketing.
C)production.
D)research and development.

Question 45

Sunnybrook Orange Groves processes a variety of fresh juices.The company has the following expenses for July: $$\begin{array} { | l | c | } \hline \text { Depreciation expense an bottling machines } & \$ 63,000 \\\hline \text { Glass juice bottles } & \$ 54,000 \\\hline \text { Comrissions for salespeople } & \$ 27,000 \\\hline \text { Salaries of mutrition researchers } & \$ 89,000 \\\hline \text { Costs of maintaining website used for custamer orders } & \$ 4,000 \\\hline \text { Wages of factory workers } & \$ 75,000 \\\hline \text { Freshess seals/caps for juice battles } & \$ 3,000 \\\hline \text { Reconfiguring the factory layout } & \$ 102,000 \\\hline \text { Custamer help line } & \$ 2,000 \\\hline \text { Costs of refrigerated trucks used to deliver juice } & \$ 17,000 \\\hline\end{array}$$

- What is the total cost for the marketing category of the value chain?

A)$177,000
B)$129,000
C)$27,000
D)$266,000

Question 46

Sunnybrook Orange Groves processes a variety of fresh juices.The company has the following expenses for July: $$\begin{array} { | l | c | } \hline \text { Depreciation expense an bottling machines } & \$ 63,000 \\\hline \text { Glass juice bottles } & \$ 54,000 \\\hline \text { Comrissions for salespeople } & \$ 27,000 \\\hline \text { Salaries of mutrition researchers } & \$ 89,000 \\\hline \text { Costs of maintaining website used for custamer orders } & \$ 4,000 \\\hline \text { Wages of factory workers } & \$ 75,000 \\\hline \text { Freshess seals/caps for juice battles } & \$ 3,000 \\\hline \text { Reconfiguring the factory layout } & \$ 102,000 \\\hline \text { Custamer help line } & \$ 2,000 \\\hline \text { Costs of refrigerated trucks used to deliver juice } & \$ 17,000 \\\hline\end{array}$$

-What is the total cost for the research and development category of the value chain?

A)$92,000
B)$57,000
C)$89,000
D)$191,000

Question 47

Farm Fresh Dairy provided the following expense information for May: $$\begin{array} { | l | r | } \hline \text { Assembly-line warkers' wages } & \$ 72,000 \\\hline \text { Caps for milk bottles } & 2,000 \\\hline \text { Reconfigurig the assembly line } & 155,000 \\\hline \text { Custamer support hotline } & 8,000 \\\hline \text { Delivery expenses } & 17,000 \\\hline \text { Depreciation an factory equipment } & 81,000 \\\hline \text { Plastic milk bottles } & 52,000 \\\hline \text { Salaries of salespegple } & 63,000 \\\hline \text { Salaries of research scientists } & 84,000 \\\hline \text { Custamer toll-free order line } & 4,000 \\\hline\end{array}$$

-What is the total cost for the production category of the value chain?

A)$538,000
B)$52,000
C)$207,000
D)$374,000

Question 48

Farm Fresh Dairy provided the following expense information for May: $$\begin{array} { | l | r | } \hline \text { Assembly-line warkers' wages } & \$ 72,000 \\\hline \text { Caps for milk bottles } & 2,000 \\\hline \text { Reconfigurig the assembly line } & 155,000 \\\hline \text { Custamer support hotline } & 8,000 \\\hline \text { Delivery expenses } & 17,000 \\\hline \text { Depreciation an factory equipment } & 81,000 \\\hline \text { Plastic milk bottles } & 52,000 \\\hline \text { Salaries of salespegple } & 63,000 \\\hline \text { Salaries of research scientists } & 84,000 \\\hline \text { Custamer toll-free order line } & 4,000 \\\hline\end{array}$$

- What is the total cost for the marketing category of the value chain?

A)$227,000
B)$218,000
C)$67,000
D)$311,000

Question 49

Farm Fresh Dairy provided the following expense information for May: $$\begin{array} { | l | r | } \hline \text { Assembly-line warkers' wages } & \$ 72,000 \\\hline \text { Caps for milk bottles } & 2,000 \\\hline \text { Reconfigurig the assembly line } & 155,000 \\\hline \text { Custamer support hotline } & 8,000 \\\hline \text { Delivery expenses } & 17,000 \\\hline \text { Depreciation an factory equipment } & 81,000 \\\hline \text { Plastic milk bottles } & 52,000 \\\hline \text { Salaries of salespegple } & 63,000 \\\hline \text { Salaries of research scientists } & 84,000 \\\hline \text { Custamer toll-free order line } & 4,000 \\\hline\end{array}$$

-What is the total cost for the distribution category of the value chain?

A)$19,000
B)$17,000
C)$176,000
D)$244,000

Question 50

Sunnybrook Orange Groves processes a variety of fresh juices.The company has the following expenses for July: $$\begin{array} { | l | c | } \hline \text { Depreciation expense an bottling machines } & \$ 63,000 \\\hline \text { Glass juice bottles } & \$ 54,000 \\\hline \text { Comrissions for salespeople } & \$ 27,000 \\\hline \text { Salaries of mutrition researchers } & \$ 89,000 \\\hline \text { Costs of maintaining website used for custamer orders } & \$ 4,000 \\\hline \text { Wages of factory workers } & \$ 75,000 \\\hline \text { Freshess seals/caps for juice battles } & \$ 3,000 \\\hline \text { Reconfiguring the factory layout } & \$ 102,000 \\\hline \text { Custamer help line } & \$ 2,000 \\\hline \text { Costs of refrigerated trucks used to deliver juice } & \$ 17,000 \\\hline\end{array}$$

- What is the total cost for the distribution category of the value chain?

A)$ 20,000
B)$123,000
C)$ 21,000
D)$194,000

Question 51

Farm Fresh Dairy provided the following expense information for May: $$\begin{array} { | l | r | } \hline \text { Assembly-line warkers' wages } & \$ 72,000 \\\hline \text { Caps for milk bottles } & 2,000 \\\hline \text { Reconfigurig the assembly line } & 155,000 \\\hline \text { Custamer support hotline } & 8,000 \\\hline \text { Delivery expenses } & 17,000 \\\hline \text { Depreciation an factory equipment } & 81,000 \\\hline \text { Plastic milk bottles } & 52,000 \\\hline \text { Salaries of salespegple } & 63,000 \\\hline \text { Salaries of research scientists } & 84,000 \\\hline \text { Custamer toll-free order line } & 4,000 \\\hline\end{array}$$

-What is the total cost for the customer service category of the value chain?

A)$80,000
B)$ 8,000
C)$71,000
D)$12,000

Question 52

2-11 Collectively,all costs such as design,customer service,etc.are part of:

A)downstream activities.
B)fixed costs.
C)manufacturing costs.
D)the value chain.

Question 53

2-12 The promotion of products and services is known as:

A)customer service.
B)design.
C)distribution.
D)marketing.

Question 54

2-10 The value chain is used by:

A)only manufacturing and merchandising businesses.
B)only service and manufacturing businesses.
C)only service and merchandising businesses.
D)service,manufacturing and merchandising businesses.

Question 55

Sunnybrook Orange Groves processes a variety of fresh juices.The company has the following expenses for July: $$\begin{array} { | l | c | } \hline \text { Depreciation expense an bottling machines } & \$ 63,000 \\\hline \text { Glass juice bottles } & \$ 54,000 \\\hline \text { Comrissions for salespeople } & \$ 27,000 \\\hline \text { Salaries of mutrition researchers } & \$ 89,000 \\\hline \text { Costs of maintaining website used for custamer orders } & \$ 4,000 \\\hline \text { Wages of factory workers } & \$ 75,000 \\\hline \text { Freshess seals/caps for juice battles } & \$ 3,000 \\\hline \text { Reconfiguring the factory layout } & \$ 102,000 \\\hline \text { Custamer help line } & \$ 2,000 \\\hline \text { Costs of refrigerated trucks used to deliver juice } & \$ 17,000 \\\hline\end{array}$$

-What is the total cost for the design category of the value chain?

A)$177,000
B)$129,000
C)$102,000
D)$266,000

Question 56

2-13 Which cost does NOT relate to part of the value chain for a toy company?

A)Administrative costs
B)Cost of advertising the new products
C)Cost of shipping to retailers
D)Salaries of game designers

Question 57

Sunnybrook Orange Groves processes a variety of fresh juices.The company has the following expenses for July: $$\begin{array} { | l | c | } \hline \text { Depreciation expense an bottling machines } & \$ 63,000 \\\hline \text { Glass juice bottles } & \$ 54,000 \\\hline \text { Comrissions for salespeople } & \$ 27,000 \\\hline \text { Salaries of mutrition researchers } & \$ 89,000 \\\hline \text { Costs of maintaining website used for custamer orders } & \$ 4,000 \\\hline \text { Wages of factory workers } & \$ 75,000 \\\hline \text { Freshess seals/caps for juice battles } & \$ 3,000 \\\hline \text { Reconfiguring the factory layout } & \$ 102,000 \\\hline \text { Custamer help line } & \$ 2,000 \\\hline \text { Costs of refrigerated trucks used to deliver juice } & \$ 17,000 \\\hline\end{array}$$

-What is the total cost for the production category of the value chain?

A)$436,000
B)$ 54,000
C)$195,000
D)$293,000

Question 58

2-15 A technical support hotline for customers would be considered which part of the value chain?

A)Customer service
B)Design
C)Distribution
D)Marketing

Question 59

Farm Fresh Dairy provided the following expense information for May: $$\begin{array} { | l | r | } \hline \text { Assembly-line warkers' wages } & \$ 72,000 \\\hline \text { Caps for milk bottles } & 2,000 \\\hline \text { Reconfigurig the assembly line } & 155,000 \\\hline \text { Custamer support hotline } & 8,000 \\\hline \text { Delivery expenses } & 17,000 \\\hline \text { Depreciation an factory equipment } & 81,000 \\\hline \text { Plastic milk bottles } & 52,000 \\\hline \text { Salaries of salespegple } & 63,000 \\\hline \text { Salaries of research scientists } & 84,000 \\\hline \text { Custamer toll-free order line } & 4,000 \\\hline\end{array}$$ What is the total cost of research and development?

A)$ 84,000
B)$ 86,000
C)$ 54,000
D)$239,000

Question 60

2-17 The costs associated with reengineering machinery and its location within the factory to increase efficiency would be considered which part of the value chain?

A)Customer service
B)Marketing
C)Design
D)Research and development

Question 61

Place the letter for the appropriate value chain activity on the line in front of each item.Letters may be used more than once or not at all.Assume a manufacturer.
$$\begin{array} { | l | l | l | l | } \hline \text { A. } & \text { Research and development } & \text { D. } & \text { Marketing } \\\hline \text { B. } & \text { Desipn } & \text { E. } & \text { Distribution } \\\hline \text { C. } & \text { Praduction ar purchases } & \text { F. } & \text { Customer service } \\\hline\end{array}$$ ____ Depreciation expense on equipment in factory
____ Delivery expense
____ Toll free line for customer orders
____ Customer support hot line
____ Assembly line workers' wages

Question 62

3-1 If a company wants to determine a product's cost,they must assign only direct costs.

Question 63

2-31 Delivery expenses are charged to which of the following areas?

A)Customer service
B)Distribution
C)Production or purchases
D)Marketing

Question 64

2-35 Name and briefly describe the activities that make up the value chain.

Question 65

3-2 Costs can be either direct or indirect,depending upon the cost object.

Question 66

3-11 Conversion costs consist of:

A)direct labor and manufacturing overhead.
B)direct materials and direct labor.
C)direct materials and manufacturing overhead.
D)direct materials,direct labor and manufacturing overhead.

Question 67

3-4 Indirect costs cannot be traced to the cost objects,so they are allocated.

Question 68

Sunnybrook Orange Groves processes a variety of fresh juices.The company has the following expenses for July: $\begin{array}{|l|l|}\hline \text { Wages of factory workers } & \$ 75,000 \\\hline \text { Freshness seals/caps for juice bottles } & \$ 3,000 \\\hline \text { Reconfiguring the factory layout } & \$ 102,000 \\\hline \text { Customer help line } & \$ 2,000 \\\hline \text { Costs of refrigerated trucks used to deliver juice } & \$ 17,000 \\\hline \text { Depreciation expense on bottling machines } & \$ 63,000 \\\hline \text { Glass juice bottles } & \$ 54,000 \\\hline \text { Commissions for salespeople } & \$ 27,000 \\\hline \text { Salaries of nutrition researchers } & \$ 89,000 \\\hline \text { Costs of maintaining website used for customer orders } & \$ 4,000 \\\hline\end{array}$
What is the total cost for the customer service category of the value chain?

A)$77,000
B)$29,000
C)$ 2,000
D)$ 6,000

Question 69

3-8 When determining the cost of a manufactured product,the cost of lighting the factory would be classified as:

A)a direct cost.
B)an indirect cost.
C)a period cost.
D)none of the above.

Question 70

3-5 Indirect costs incurred in manufacturing autos include all of the following EXCEPT:

A)cost of the engines.
B)machinery depreciation in the factory.
C)plant utilities.
D)plant supervisor salary.

Question 71

3-9 All of the following would be considered a direct material for a mattress EXCEPT:

A)fabric.
B)glue.
C)lumber.
D)steel.

Question 72

3-10 Prime costs consist of:

A)direct labor and manufacturing overhead.
B)direct materials and direct labor.
C)direct materials and manufacturing overhead.
D)direct materials,direct labor and manufacturing overhead.

Question 73

2-32 A product support hot line would be considered:

A)customer service.
B)distribution.
C)production or purchases.
D)marketing.

Question 74

3-3 Indirect costs can be traced to specific units.

Question 75

3-6 When determining the cost of a manufactured product,a factory janitor's wages would be classified as:

A)a direct cost.
B)an indirect cost.
C)a period cost.
D)none of the above.

Question 76

3-7 When determining the cost of a manufactured product,a salesperson's salary would be classified as:

A)a direct cost.
B)an indirect cost.
C)a period cost.
D)none of the above.

Question 77

3-14 In a manufacturing plant,which is an example of indirect labor?

A)Chief operating officer
B)Machine operators
C)Plant managers
D)Salesmen

Question 78

3-13 Which statement describes direct materials in a manufacturing setting?

A)Direct materials are used to determine total inventoriable product costs.
B)Direct materials are used to determine total manufacturing overhead.
C)Direct materials cannot be separately and conveniently traced.
D)Direct materials do not become part of the finished product.

Question 79

Place the value chain elements in the correct order by numbering them from 1 to 6.
___ Design
___ Customer Service
___ Marketing
___ Research and Development
___ Distribution
___ Production or Purchases

Question 80

3-12 Which of the following is an example of direct labor?

A)Salary of a production manager
B)Salary of the vice-president of operations
C)Wages of assembly line personnel
D)Wages of factory security