Deck 15: Introduction to Management Accounting

Question 1

Internal users of management information include:

A) creditors.
B) bank lenders.
C) competitors.
D) department heads.

Answer 1

department heads.

Question 2

Which of the following is not a manufacturing cost category?

A) Cost of sales.
B) Direct materials.
C) Direct labour.
D) Manufacturing overhead.

Answer 2

Cost of sales.

Question 3

For the work of factory employees to be considered as direct labour, the work must be conveniently and:

A) materially associated with raw material conversion.
B) periodically associated with raw material conversion.
C) physically associated with raw material conversion.
D) promptly associated with raw material conversion.

Answer 3

physically associated with raw material conversion.

Question 4

Which one of the following costs would not be included in inventory?

A) Period costs.
B) Prime costs.
C) Conversion costs.
D) Indirect labour costs.

Question 5

Prime costs of a company are $3,000,000, manufacturing overhead is $1,500,000 and direct labour is $750,000. What is the amount of direct materials?

A) $1,500,000.
B) $750,000.
C) $2,250,000.
D) Cannot be determined from the information provided.

Question 6

Prime costs of a company are $6,000,000. If manufacturing overhead is $3,000,000, what is direct labour cost?

A) $3,000,000.
B) $6,000,000.
C) $0.
D) Cannot be determined from the information provided.

Question 7

Which of the following are period costs?

A) Raw materials.
B) Prime costs.
C) Conversion costs.
D) Selling expenses.

Question 8

Product costs consist of:

A) conversion costs and unexpired expenses.
B) prime costs and manufacturing overhead.
C) selling and administrative expenses.
D) period costs.

Question 9

Manufacturing inventories are generally listed on the statement of financial position in:

A) alphabetical order.
B) order of their liquidity.
C) order from largest to smallest.
D) any order the company desires.

Question 10

Craft Manufacturing Company's accounting records reflect the following inventories:
During 2019, $500,000 of raw materials were purchased, direct labour costs amounted to $600,000, and manufacturing overhead incurred was $480,000.

-The total raw materials available for use during 2019 for Craft Manufacturing Company is:

A) $810,000.
B) $260,000.
C) $450,000.
D) $760,000.

Question 11

Craft Manufacturing Company's accounting records reflect the following inventories:
During 2019, $500,000 of raw materials were purchased, direct labour costs amounted to $600,000, and manufacturing overhead incurred was $480,000.

-Craft Manufacturing Company's total manufacturing costs incurred in 2019 amounted to:

A) $1,530,000.
B) $1,490,000.
C) $1,390,000.
D) $1,580,000.

Question 12

Craft Manufacturing Company's accounting records reflect the following inventories:
During 2019, $500,000 of raw materials were purchased, direct labour costs amounted to $600,000, and manufacturing overhead incurred was $480,000.

-If Craft Manufacturing Company's cost of goods manufactured for 2019 amounted to $1,390,000, its cost of sales for the year is:

A) $1,500,000.
B) $1,250,000.
C) $1,350,000.
D) $1,430,000.

Question 13

Stevens Manufacturing Company reported the following year-end information: beginning work in process inventory $180,000; cost of goods manufactured $516,000; beginning finished goods inventory $252,000; ending work in process inventory $220,000; and ending finished goods inventory $264,000. Stevens Manufacturing Company's cost of sales for the year is:

A) $504,000.
B) $528,000.
C) $476,000.
D) $252,000.

Question 14

Nolte Manufacturing Company reported the following year-end information:
Nolte Manufacturing Company's cost of goods manufactured for the year is:

A) $760,000
B) $820,000
C) $700,000
D) $880,000

Question 15

In order to obtain more accurate product costs, many companies now allocate overhead using:

A) activity-based costing.
B) values-based management.
C) balanced scorecards.
D) total quality management systems.

Question 16

The number of additional columns needed on a financial statement worksheet so that it can be used to also prepare the cost of goods manufactured schedule is:

A) three.
B) four.
C) six.
D) two.

Question 17

A manufacturing summary account is used to close all accounts that appear in a(n):

A) cost of goods sold schedule.
B) cost of raw materials schedule.
C) cost of goods manufactured schedule.
D) inventory schedule.

Question 18

Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by choosing the letter F and indicate those characteristics which are more closely associated with managerial accounting by choosing the letter M :

-General-purpose reports

A) F
B) M

Question 19

Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by choosing the letter F and indicate those characteristics which are more closely associated with managerial accounting by choosing the letter M :

-Reports are used internally

A) F
B) M

Question 20

Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by choosing the letter F and indicate those characteristics which are more closely associated with managerial accounting by choosing the letter M :

-Prepared in accordance with generally accepted accounting principles

A) F
B) M

Question 21

Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by choosing the letter F and indicate those characteristics which are more closely associated with managerial accounting by choosing the letter M :

-Special purpose reports

A) F
B) M

Question 22

Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by choosing the letter F and indicate those characteristics which are more closely associated with managerial accounting by choosing the letter M :

-Limited to historical cost data

A) F
B) M

Question 23

Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by choosing the letter F and indicate those characteristics which are more closely associated with managerial accounting by choosing the letter M :

-Reporting standard is relevant to the decision to be made

A) F
B) M

Question 24

Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by choosing the letter F and indicate those characteristics which are more closely associated with managerial accounting by choosing the letter M :

-Classified financial statements

A) F
B) M

Question 25

Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by choosing the letter F and indicate those characteristics which are more closely associated with managerial accounting by choosing the letter M :

-Reports generally relate to the company as a whole

A) F
B) M

Question 26

Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by choosing the letter F and indicate those characteristics which are more closely associated with managerial accounting by choosing the letter M :

-Reports generally relate to sub-units

A) F
B) M

Question 27

Financial accounting information and managerial accounting information have a number of distinguishing characteristics. For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by choosing the letter F and indicate those characteristics which are more closely associated with managerial accounting by choosing the letter M :

-Reports issued quarterly or annually

A) F
B) M

Question 28

Match the list of costs and expenses incurred in the factory by Eco Systems Ltd, a manufacturer of eco-friendly, hybrid vehicles with the following categories:

-Property rates on the factory land

A) Direct materials(DM)
B) Direct labour(DL)
C) Manufacturing overhead (MO)

Question 29

Match the list of costs and expenses incurred in the factory by Eco Systems Ltd, a manufacturer of eco-friendly, hybrid vehicles with the following categories:

-Metal used in manufacturing

A) Direct materials(DM)
B) Direct labour(DL)
C) Manufacturing overhead (MO)

Question 30

Match the list of costs and expenses incurred in the factory by Eco Systems Ltd, a manufacturer of eco-friendly, hybrid vehicles with the following categories:

-Cabinet maker's wages

A) Direct materials(DM)
B) Direct labour(DL)
C) Manufacturing overhead (MO)

Question 31

Match the list of costs and expenses incurred in the factory by Eco Systems Ltd, a manufacturer of eco-friendly, hybrid vehicles with the following categories:

-Nails and glue used in production

A) Direct materials(DM)
B) Direct labour(DL)
C) Manufacturing overhead (MO)

Question 32

Match the list of costs and expenses incurred in the factory by Eco Systems Ltd, a manufacturer of eco-friendly, hybrid vehicles with the following categories:

-Factory supervisors' salaries

A) Direct materials(DM)
B) Direct labour(DL)
C) Manufacturing overhead (MO)

Question 33

Match the list of costs and expenses incurred in the factory by Eco Systems Ltd, a manufacturer of eco-friendly, hybrid vehicles with the following categories:

-Depreciation on factory machines

A) Direct materials(DM)
B) Direct labour(DL)
C) Manufacturing overhead (MO)

Question 34

Match the list of costs and expenses incurred in the factory by Eco Systems Ltd, a manufacturer of eco-friendly, hybrid vehicles with the following categories:

-Factory electricity and power

A) Direct materials(DM)
B) Direct labour(DL)
C) Manufacturing overhead (MO)

Question 35

Match the list of costs and expenses incurred in the factory by Eco Systems Ltd, a manufacturer of eco-friendly, hybrid vehicles with the following categories:

-Carpeting for the vehicles

A) Direct materials(DM)
B) Direct labour(DL)
C) Manufacturing overhead (MO)

Question 36

Match the list of costs and expenses incurred in the factory by Eco Systems Ltd, a manufacturer of eco-friendly, hybrid vehicles with the following categories:

-Property maintenance on the factory building

A) Direct materials(DM)
B) Direct labour(DL)
C) Manufacturing overhead (MO)

Question 37

Match the list of costs and expenses incurred in the factory by Eco Systems Ltd, a manufacturer of eco-friendly, hybrid vehicles with the following categories:

-Insurance on factory equipment

A) Direct materials(DM)
B) Direct labour(DL)
C) Manufacturing overhead (MO)

Question 38

For each item, choose all applicable cost labels. Use the codes below in your answer. More than one code may be applicable.

-Advertising

A) Prime Cost
B) Conversion Cost
C) Product Cost
D) Period Cost

Question 39

For each item, choose all applicable cost labels. Use the codes below in your answer. More than one code may be applicable.

-Direct materials used

A) Prime Cost
B) Conversion Cost
C) Product Cost
D) Period Cost

Question 40

For each item, choose all applicable cost labels. Use the codes below in your answer. More than one code may be applicable.

-Sales salaries

A) Prime Cost
B) Conversion Cost
C) Product Cost
D) Period Cost

Question 41

For each item, choose all applicable cost labels. Use the codes below in your answer. More than one code may be applicable.

-Indirect factory labour

A) Prime Cost
B) Conversion Cost
C) Product Cost
D) Period Cost

Question 42

For each item, choose all applicable cost labels. Use the codes below in your answer. More than one code may be applicable.

-Repairs to office equipment

A) Prime Cost
B) Conversion Cost
C) Product Cost
D) Period Cost

Question 43

For each item, choose all applicable cost labels. Use the codes below in your answer. More than one code may be applicable.

-Factory manager's salary

A) Prime Cost
B) Conversion Cost
C) Product Cost
D) Period Cost

Question 44

For each item, choose all applicable cost labels. Use the codes below in your answer. More than one code may be applicable.

-Direct labour used

A) Prime Cost
B) Conversion Cost
C) Product Cost
D) Period Cost

Question 45

For each item, choose all applicable cost labels. Use the codes below in your answer. More than one code may be applicable.

-Indirect materials

A) Prime Cost
B) Conversion Cost
C) Product Cost
D) Period Cost

Question 46

Assume you have just taken a position as a financial officer for a new company that manufactures and sells wooden chairs. Although the founder of the company, who is the CEO, is a great artisan, she has very limited knowledge of accounting. To help your new boss better understand accounting for a manufacturing organisation, write a memo to her in which you: (1) identify, (2) describe and (3) provide examples of the three manufacturing costs and the three inventory accounts used in accounting for a manufacturing company.

Question 47

For each item listed below, choose whether the item would be considered an inventoriable cost or a period cost for a manufacturing company. Use the following code:

-Factory supervisory salaries

A) Inventoriable cost (I)
B) Period cost (P)

Question 48

For each item listed below, choose whether the item would be considered an inventoriable cost or a period cost for a manufacturing company. Use the following code:

-Sales commissions

A) Inventoriable cost (I)
B) Period cost (P)

Question 49

For each item listed below, choose whether the item would be considered an inventoriable cost or a period cost for a manufacturing company. Use the following code:

-Income tax expense

A) Inventoriable cost (I)
B) Period cost (P)

Question 50

For each item listed below, choose whether the item would be considered an inventoriable cost or a period cost for a manufacturing company. Use the following code:

-Indirect materials used

A) Inventoriable cost (I)
B) Period cost (P)

Question 51

For each item listed below, choose whether the item would be considered an inventoriable cost or a period cost for a manufacturing company. Use the following code:

-Indirect labour

A) Inventoriable cost (I)
B) Period cost (P)

Question 52

For each item listed below, choose whether the item would be considered an inventoriable cost or a period cost for a manufacturing company. Use the following code:

-Office salaries expense

A) Inventoriable cost (I)
B) Period cost (P)

Question 53

For each item listed below, choose whether the item would be considered an inventoriable cost or a period cost for a manufacturing company. Use the following code:

-Property rates on factory building

A) Inventoriable cost (I)
B) Period cost (P)

Question 54

For each item listed below, choose whether the item would be considered an inventoriable cost or a period cost for a manufacturing company. Use the following code:

-Sales manager's salary

A) Inventoriable cost (I)
B) Period cost (P)

Question 55

For each item listed below, choose whether the item would be considered an inventoriable cost or a period cost for a manufacturing company. Use the following code:

-Factory wages expense

A) Inventoriable cost (I)
B) Period cost (P)

Question 56

For each item listed below, choose whether the item would be considered an inventoriable cost or a period cost for a manufacturing company. Use the following code:

-Direct materials used

A) Inventoriable cost (I)
B) Period cost (P)

Question 57

Yates Ltd incurs the following manufacturing costs and expenses during the month of May:
1.Assembly line wages
2.Raw materials used directly in product
3.Depreciation on office equipment
4.Property rates on factory building
5.Rent on factory building
6.Sales commissions
7.Depreciation on factory equipment
8.Factory electricity and power
9.Wages for factory maintenance workers
10.Advertising
11.Indirect materials used in production
12.Factory manager's salary
Instructions : Complete the following matrix by placing an X mark under the appropriate headings.

Question 58

Among the items that Patrick's Print Shop accounts for are the following:
Lane prepares the following schedule and financial statements on a yearly basis:
(a) cost of goods manufactured schedule
(b) income statement
(c) statement of financial position.
Instructions: For each item, indicate by using the appropriate letter(s) the schedule and/or financial statements in which the item will appear.

Question 59

Aquasure manufactures boats. During September 2019, the company purchased 100 cellular phones at a cost of $150 each. Aquasure withdrew 70 phones from the warehouse during the month. Twenty of these phones were installed in salesmen's cars and the remaining 50 phones were put in boats manufactured during the month.
Of the boats put into production during September 2019, 80% were completed and transferred to the company's storage lot. 50% of the boats completed during the month were sold by 30 September.
Instructions: Determine the cost of cellular phones that would appear in each of the following accounts at 30 September 2019:
Raw materials inventory
Work in process inventory
Finished goods inventory
Cost of sales
Selling expenses

Question 60

Eucalyptus Ltd has the following data at 30 June 2019:
Instructions:
(a) Prepare an income statement for the month of June.
(b) Indicate the statement of financial position presentation of 30 June inventories.

Question 61

From the account balances listed below, prepare a schedule of cost of goods manufactured for Seamless Manufacturing Ltd for the month ended 31 December 2019.

Question 62

Jenny's Jewellery Ltd has developed the following information for the year ended 31 December 2019:
The Work in process inventory on 1 January 2019 was 80% of the work in process inventory on 31 December 2019.
Instructions: Prepare a cost of goods manufactured schedule for Jenny's Jewellery Ltd for the year ended 31 December 2019.

Question 63

Fill in the missing information on the cost of goods manufactured schedule of Perth Ltd:

Question 64

Data for the cost of direct materials for the month ended 31 March 2019, are as follows:
During March, the company purchased $200,000 of raw materials on account from Alice Ltd and $72,000 of raw materials for cash from Darwin Ltd. In addition, $50,000 was paid on the Alice account balance.
Instructions: Compute the cost of direct materials used during March.

Question 65

Stylus Ltd, the manufacturer of printers, was incorporated in September. Stylus purchases the toner cartridges used in the printers from a local distributor. Early in September, Stylus bought 50,000 cartridges at a cost of $20 each. During September, 40,000 cartridges were transferred from Raw Materials Inventory. Of the 40,000 cartridges withdrawn from Raw Materials Inventory, 8,000 were given to sales personnel to be given to customers as an incentive to buy a large quantity of printers. Another 2,000 cartridges were transferred to the corporate office to be used by members of the clerical staff. The remaining 30,000 cartridges were transferred to Work in Process Inventory. Of the units started into production during September, 90 percent of them were completed. Seventy % of the units completed during September were sold and shipped to customers.
Instructions: Determine the cost of cartridges to be found in each of the following accounts:
a. Raw Materials Inventory
b. Work in Process Inventory
c. Finished Goods Inventory
d. Cost of Sales
e. Selling Expenses
f. Administrative Expenses

Question 66

The following costs and inventory data were taken from the accounts of Cairns Ltd as of 31 December 2019:
Instructions:
a. Prepare a schedule showing the amount of direct materials used in production during the year.
b. Compute the amount of manufacturing overhead incurred during the year.
c. Prepare a schedule of cost of goods manufactured for Cairns Ltd for the year ended 31 December 2019 in good form.
d. Prepare the cost of sales section of the income statement for Cairns Ltd for the year ended 31 December 2019 in good form.

Question 67

Listed below are current asset items for Adelaide Ltd at 31 December 2019. Prepare the current assets section of the statement of financial position. (Include a complete heading.)

Question 68

Match the descriptions with their terms:

-The cost of products which are partially complete.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 69

Match the descriptions with their terms:

-The function of keeping activities in accordance with plans.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 70

Match the descriptions with their terms:

-Primarily concerned with internal users and reports relate to sub-units of the entity.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 71

Match the descriptions with their terms:

-Materials which can be physically and directly associated with manufacturing a product.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 72

Match the descriptions with their terms:

-The function of setting goals and objectives.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 73

Match the descriptions with their terms:

-Indirect costs of manufacturing a product.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 74

Match the descriptions with their terms:

-Primarily concerned with external users and reports pertain to the entity as a whole.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 75

Match the descriptions with their terms:

-Costs which are non-inventoriable.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 76

Match the descriptions with their terms:

-Direct materials and direct labour.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 77

Match the descriptions with their terms:

-The function of coordinating diverse activities and human resources of a company.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 78

Match the descriptions with their terms:

-Direct labour and manufacturing overhead costs incurred in converting raw materials into finished goods.

A) Managerial accounting
B) Financial accounting
C) Planning
D) Directing and motivating
E) Controlling
F) Work in process inventory
G) Direct materials
H) Manufacturing overhead
I) Period costs
J) Prime costs
K) Conversion costs

Question 79

Ethics: Merino Mills is a textile manufacturing firm located in one state. The company carefully prepares all financial statements in accordance with GAAP, and gives a copy of all financial statements to each department. In addition, the company keeps records on quality control, safety and environmental pollution by the company. It then prepares 'scorecards' for each department indicating their performance. Recently, the financial impact of the second set of information was added, and the information has been used in the evaluation of employees for merit pay and promotions.
At the most recent employee meeting, Tyler Hanes, marketing manager, expressed his discomfort with the system. He said that there was no guarantee that the second set of information was fair, since there were no generally accepted principles for this kind of information. He also said that it was kind of like keeping two sets of books - one following all legal requirements, and the other one actually used by the company.
Required:
1. Is it ethical to evaluate managers in the way described? Explain briefly.
2. Name at least two safeguards the company could build into its system to ensure the ethical treatment of employees

Question 80

Communication: Quality Acoustics Ltd, a producer of audio equipment for large computer systems, is reviewing its policies as part of a biannual self-examination of the company. As part of this process, all managers have been asked to carefully examine costs and determine as closely as possible which costs are direct and which are indirect.
Mary Peters and Sam Wilson, managers of different manufacturing departments in the same building, have been working together. They found the following four costs that could be economically traced to the products, but have historically been a part of overhead:
• Cost of setting up the machinery for a different production run.
• Cost of minor assembly components such as knobs and switches.
• Cost of packaging, which is quite different for each model.
• Cost of inspecting and testing each model.
None of the costs is significant by itself, but together these four costs make up between 10 and 15 % of the total cost of the product. Mary favours 'leaving well enough alone', as she puts it, and leaving these costs in overhead. She is afraid that her volunteering to trace these costs will result in her having to trace many more costs in the future. Sam, on the other hand, prefers to have the product cost as accurate as possible. He points out that these costs are already known, and the process would require little extra work.
Required: You have been called on in your function as accounting manager to resolve the dispute. Write a memo to Mary and Sam, supporting one or the other position. Be sure to adequately defend your position, but be brief.