Question 1

Certified Management Accountants (CMA) must complete a specified number of continuing professional education credits each reporting period. Which of the four standards of ethical conduct issued by the Institute of Management Accountants likely motivated this requirement?
A) Confidentiality
B) Competence
C) Integrity
D) Objectivity

Accepted Answer

The standard of ethical conduct that likely motivated the requirement for CMAs to complete continuing professional education credits is competence. This standard requires management accountants to maintain and improve their knowledge and skills in order to provide competent professional services. Continuing education helps ensure that CMAs stay up-to-date on the latest developments in their field and can maintain their competence.

Question 2

Randall Company manufactures chocolate bars. The following were among Randall's manufacturing costs during the current year: $\begin{array}{llr}
  \text { Wages}\
\
  \text { Machine operators } &\$300,000\
 \text { Selling and administrative personnel } &\$75,000\
 \text { Materials used } &\\
 \text {  Lubricant for oiling machiner} &\$25,000\
 \text { Cocoa, sugar, and other raw materials } &\$225,000\
 \text {Packacinc materials  } &\$190,000\
\end{array}$
 Randall's direct labor costs amounted to:
A) $400,000.
B) $300,000.
C) $175,000.
D) $375,000.

Accepted Answer

Direct labor costs are the wages paid to machine operators, which is $300,000.

Question 3

The benefits of a just-in-time system would include all of the following except:
A) increased warehousing costs.
B) reduced inventory holding costs.
C) improved customer satisfaction.
D) reduced warehousing costs.

Accepted Answer

A just-in-time system is designed to reduce inventory holding costs by only ordering and receiving materials as they are needed in the production process. This reduces the need for large warehouses to store excess inventory. Therefore, the benefits of a just-in-time system include reduced inventory holding costs, improved customer satisfaction due to faster production and delivery times, and reduced warehousing costs since less storage space is needed. However, it does not increase warehousing costs.

Question 4

Randall Company manufactures chocolate bars. The following were among Randall's manufacturing costs during the current year: $\begin{array}{llr}
  \text { Wages}\
\
  \text { Machine operators } &\$340,000\
 \text { Selling and administrative personnel } &\$79,000\
 \text { Materials used } &\\
 \text {  Lubricant for oiling machiner} &\$29,000\
 \text { Cocoa, sugar, and other raw materials } &\$290,000\
 \text {Packacinc materials  } &\$230,000\
\end{array}$
 Randall's direct labor costs amounted to:
A) $183,000
B) $444,000
C) $523,000
D) $340,000

Accepted Answer

Direct labor costs refer to wages paid to employees who are directly involved in the production process. In this case, the machine operators' wages of $340,000 are considered direct labor costs.

Question 5

Ting Company started the accounting period with the following beginning balances:Raw Materials Inventory, $21,000; Work in Process Inventory, $45,000; and Finished Goods Inventory, $10,000. During the accounting period, the company purchased $30,000 of raw materials and ended the period with $8,000 in raw material inventory. Direct labor costs for the period were $60,000 and $63,000 of manufacturing overhead costs was allocated to work in process. Ending work in process was $41,000 and ending finished goods was $17,500. Goods were sold during the period for $162,500. The amount of cost of goods manufactured (i.e., amount transferred from work in process to finished goods) would be:
A) $117,500.
B) $170,000.
C) $221,000.
D) $166,000.

Accepted Answer

The answer of Ting Company started the accounting period with...

Question 6

The Juarez Corporation incurred the following transactions during its first year of operations. (Assume all transactions involve cash).Acquired $1,000 of capital from the owners.Purchased $400 of direct raw materials.Used $300 of these direct raw materials in the production process.Paid production workers $400 cash.Paid $200 for manufacturing overhead.Started and completed 200 units of inventory.Sold 50 units at a price of $6 each.Paid $40 for selling and administrative expenses.The amount of cost of goods manufactured would be:
A) $1,000.
B) $900.
C) $800.
D) $600.

Accepted Answer

The formula for calculating the cost of goods manufactured is:
Direct Materials + Direct Labor + Manufacturing Overhead = Total Manufacturing Cost

In this case, the direct materials used in production were $300 (given in the transactions). The direct labor was $400 (given in the transactions). The manufacturing overhead was $200 (given in the transactions). Therefore, the total manufacturing cost was $900.

Question 7

Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?
A) Credibility
B) Confidentiality
C) Integrity
D) Independence

Accepted Answer

The four Standards of Ethical Conduct for Management Accountants are Credibility, Confidentiality, Integrity, and Objectivity, not Independence.

Question 8

Warren Company applies overhead based on direct labor cost. Warren Company estimated that it would incur $180,000 in manufacturing overhead costs and $120,000 of direct labor costs during the current year. Actual manufacturing overhead cost totaled $150,000 and actual direct labor costs totaled $110,000 during the current year. If total manufacturing costs were $320,000, what amount of direct materials was used during the year?
A) $60,000
B) $30,000
C) $45,000
D) None of these.

Accepted Answer

Total manufacturing costs = Direct materials used + Direct labor + Actual manufacturing overhead costs
Direct materials used = Total manufacturing costs - (Direct labor + Actual manufacturing overhead costs)
Direct materials used = $320,000 - ($110,000 + $150,000)= $60,000

Question 9

Cost of goods sold is equal to the cost of goods:
A) manufactured minus ending finished goods.
B) available for sale minus beginning finished goods.
C) available for sale minus ending finished goods.
D) manufactured minus beginning finished goods.

Accepted Answer

Cost of goods sold (COGS) represents the cost of the products sold during a period. It is calculated by subtracting the ending inventory (i.e. finished goods not sold) from the cost of goods available for sale during the period. Therefore, the correct formula for COGS is: COGS = Beginning Inventory + Purchases - Ending Inventory. Since the question is asking about the cost of goods, choice A and D are incorrect as they mention finished goods but fail to include beginning inventory. Choice B is incorrect as it subtracts beginning finished goods instead of ending finished goods. Choice C, available for sale minus ending finished goods, is the correct formula for COGS.

Question 10

As a Certified Management Accountant, Grace is bound by the standards of ethical conduct issued by the Institute of Management Accountants. If she accepts an expensive gift from a vendor trying to win a contract with her firm, which of the following standards will she violate?
A) Integrity
B) Confidentiality
C) Competence
D) Objectivity

Accepted Answer

The answer of As a Certified Management Accountant, Grace is...

Question 11

Which of the following statements regarding the schedule of cost of goods manufactured and sold is correct?
A) The schedule is an internal document, which is not presented with the company's financial statements.
B) The schedule of cost of goods manufactured and sold shows the amount of cash paid for raw materials.
C) The schedule of cost of goods manufactured and sold reports the amount of direct raw materials used during the period.
D) The schedule is an internal document, which is not presented with the company's financial statements, and, in addition, the schedule of cost of goods manufactured and sold reports the amount of direct raw materials used during the period.

Accepted Answer

The schedule of cost of goods manufactured and sold is indeed an internal document not typically included with external financial statements, and it reports the amount of direct raw materials used during the period, among other costs.

Question 12

Tucker Company's work in process account decreased by $1,000, while its Finished Goods Inventory account increased by $500. Assuming total manufacturing costs were $5,000, what was the company's cost of goods sold amount?
A) $3,500
B) $4,500
C) $4,000
D) $5,500

Accepted Answer

If the inventory balances increased,the ending balances are more than the beginning balances and vice versa.
Cost of goods manufactured = Beginning work in process + Total manufacturing costs- Ending work in process
Cost of goods manufactured = Beginning work in process + $5,000 - (Ending work in process - $1,000)
Cost of goods manufactured = $5,000 + $1,000 = $6,000
Cost of goods sold = Beginning finished goods + Cost of goods manufactured - Ending finished goods
Cost of goods sold = Beginning finished goods + $6,000 - (Beginning finished goods + $500)
Cost of goods sold = $6,000 - $500 = $5,500

Question 13

As a Certified Management Accountant, Derek is bound by the standards of ethical conduct issued by the Institute of Management Accountants. According to the standards, Derek has a responsibility to:
A) inform subordinates that they should protect confidential information.
B) ensure that financial accounting records are maintained as per the governing guidelines.
C) monitor the activities of subordinates to assure that confidentiality is maintained.
D) inform subordinates that they should protect confidential information and monitor the activities of subordinates to assure that confidentiality is maintained.

Accepted Answer

According to the standards of ethical conduct issued by the Institute of Management Accountants, Derek has a responsibility to inform subordinates that they should protect confidential information and monitor their activities to assure that confidentiality is maintained. Additionally, he has a responsibility to ensure that financial accounting records are maintained as per the governing guidelines. Therefore, option D is the most appropriate choice as it includes all the responsibilities that Derek has to fulfill as a Certified Management Accountant.

Question 14

Newton Corporation entered into the following transactions during its first year of operations. (Assume all transactions involve cash.) Acquired $2,000 of capital from the owners.Purchased $600 of direct raw materials.Used $400 of these direct raw materials in the production process.Paid production workers $800 cash.Paid $400 for manufacturing overhead.Started and completed 200 units of inventory.Sold 50 units at a price of $12 each.Paid $80 for selling and administrative expenses.The amount of net income for the year was:
A) $100.
B) $75.
C) $50.
D) $120.

Accepted Answer

Net income is calculated as Revenue - Expenses. Revenue from selling 50 units at $12 each is $600. Total expenses include the cost of direct materials used ($400), production workers ($800), manufacturing overhead ($400), and selling and administrative expenses ($80), totaling $1680. However, only the cost of goods sold (COGS) and selling and administrative expenses should be subtracted from revenue to calculate net income. COGS for the 50 units sold is a portion of the total production costs. Total production costs are the sum of direct materials used ($400), production workers ($800), and manufacturing overhead ($400), which equals $1600. Since 200 units were produced and only 50 were sold, the COGS is 1/4 of $1600, which is $400. Adding the selling and administrative expenses ($80) gives total expenses of $480. Subtracting this from the revenue ($600) gives a net income of $120.

Question 15

Which of the following correctly computes cost of goods manufactured?
A) Beginning work in process + Direct materials used + Direct labor + Overhead − Ending work in process
B) Beginning work in process + Cost of goods sold − Ending finished goods
C) Beginning work in process + Direct materials used + Direct labor + Overhead
D) None of these.

Accepted Answer

The correct formula for computing the cost of goods manufactured is: Beginning work in process + Direct materials used + Direct labor + Overhead − Ending work in process. This formula accounts for all costs involved in production and adjusts for unfinished products at the start and end of the period.

Question 16

As a Certified Management Accountant, Suzanne is bound by the standards of ethical conduct issued by the Institute of Management Accountants. During the course of business, Suzanne learned that her company has decided to discontinue a major product line. If she mentions this fact to her brother, who is a stockbroker, Suzanne could be in violation of the:
A) competence standard.
B) confidentiality standard.
C) integrity standard.
D) objectivity standard.

Accepted Answer

According to the standards of ethical conduct for management accountants, confidentiality is a key aspect of ethical behavior. Suzanne has information about the company's decision to discontinue a major product line, which is confidential information that should not be disclosed to anyone outside the organization without proper authorization. If Suzanne discloses such information to her brother, who is a stockbroker, she could be in violation of the confidentiality standard.

Question 17

Ringgold Company had beginning finished goods of $36,000. During the period, the company produced goods that cost $150,000. If the ending balance in the Finished Goods Inventory account was $24,000, the amount of cost of goods sold was:
A) $162,000.
B) $150,000.
C) $138,000.
D) none of these.

Accepted Answer

Cost of goods sold = Beginning finished goods + Cost of goods manufactured - Ending finished goods
Cost of goods sold = $36,000 + $150,000 - $24,000 = $162,000

Question 18

Travis Company had no beginning work in process or finished goods. Its total manufacturing costs for the year were $427,000. If cost of goods manufactured was $332,000 and cost of goods sold was $250,000, the amount of ending work in process would have been:
A) $82,000.
B) $105,000.
C) $95,000.
D) $127,000.

Accepted Answer

The answer of Travis Company had no beginning work in...

Question 19

Tisdale Company started the year with the following beginning account balances: Raw Materials Inventory, $42,000; Work in Process Inventory, $90,000; and Finished Goods Inventory, $20,000. During the year, the company purchased $60,000 of raw materials and ended the year with $16,000 of raw materials. Direct labor costs for the year were $120,000 and a total of $36,000 of manufacturing overhead costs were incurred. Ending work in process was $82,000 and ending finished goods was $35,000. Goods were sold to customers during the year for $360,000. How much gross margin would be reported for the year?
A) $110,000
B) $145,000
C) $125,000
D) $171,000

Accepted Answer

To calculate the gross margin, we first need to determine the cost of goods sold (COGS). COGS is calculated as follows:1. Beginning Raw Materials + Purchases - Ending Raw Materials = Raw Materials Used   $42,000 + $60,000 - $16,000 = $86,0002. Raw Materials Used + Direct Labor + Manufacturing Overhead = Total Manufacturing Costs   $86,000 + $120,000 + $36,000 = $242,0003. Total Manufacturing Costs + Beginning Work in Process - Ending Work in Process = Cost of Goods Manufactured   $242,000 + $90,000 - $82,000 = $250,0004. Cost of Goods Manufactured + Beginning Finished Goods - Ending Finished Goods = Cost of Goods Sold   $250,000 + $20,000 - $35,000 = $235,000Finally, Gross Margin = Sales - COGS$360,000 - $235,000 = $125,000

Question 20

A systematic problem-solving philosophy that encourages front line workers to achieve zero defects is known as:
A) just-in-time (JIT).
B) total quality management (TQM).
C) activity based management (ABM).
D) None of these

Accepted Answer

The philosophy of achieving zero defects through a systematic problem-solving approach is one of the core principles of Total Quality Management (TQM). A key aspect of TQM is empowering front-line workers to take responsibility for identifying and resolving quality issues, which is achieved through structured problem-solving methodologies such as the Plan-Do-Check-Act (PDCA) cycle. Just-in-Time (JIT) and Activity-Based Management (ABM) are other management approaches that are not specifically focused on achieving zero defects.

Quiz 10: An Introduction to Management Accounting

Certified Management Accountants (CMA) must complete a specified number of continuing professional education credits each reporting period. Which of the four standards of ethical conduct issued by the Institute of Management Accountants likely motivated this requirement?

The benefits of a just-in-time system would include all of the following except:

Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?

Cost of goods sold is equal to the cost of goods:

As a Certified Management Accountant, Grace is bound by the standards of ethical conduct issued by the Institute of Management Accountants. If she accepts an expensive gift from a vendor trying to win a contract with her firm, which of the following standards will she violate?

Which of the following statements regarding the schedule of cost of goods manufactured and sold is correct?

Tucker Company's work in process account decreased by $1,000, while its Finished Goods Inventory account increased by $500. Assuming total manufacturing costs were $5,000, what was the company's cost of goods sold amount?

As a Certified Management Accountant, Derek is bound by the standards of ethical conduct issued by the Institute of Management Accountants. According to the standards, Derek has a responsibility to:

Which of the following correctly computes cost of goods manufactured?

Ringgold Company had beginning finished goods of $36,000. During the period, the company produced goods that cost $150,000. If the ending balance in the Finished Goods Inventory account was $24,000, the amount of cost of goods sold was:

Travis Company had no beginning work in process or finished goods. Its total manufacturing costs for the year were $427,000. If cost of goods manufactured was $332,000 and cost of goods sold was $250,000, the amount of ending work in process would have been:

A systematic problem-solving philosophy that encourages front line workers to achieve zero defects is known as: