Question 1

The sequence of activities through which an organization provides products to its customers is called a supply chain.

Accepted Answer

The answer of The sequence of activities through which an...

Question 2

For a manufacturing company, product costs include all of the following except:
A) indirect material costs.
B) warehousing costs of finished goods.
C) direct labor costs.
D) All of these are product costs.

Accepted Answer

Warehousing costs are considered a period cost, not a product cost. Product costs are costs directly associated with the production of a product while period costs are not directly tied to the production process.

Question 3

Which of the following costs should be recorded as an expense in the period incurred?
A) Salary of administrative employee
B) Depreciation of manufacturing equipment
C) Insurance for the factory building
D) All of these are expenses.

Accepted Answer

Only option A, salary of administrative employee, should be recorded as an expense in the period incurred. Depreciation and insurance are both examples of costs that are allocated over multiple periods through the use of accounting methods such as depreciation expense and prepaid insurance.

Question 4

Select the correct statement regarding managerial and financial accounting.
A) Users of managerial accounting information desire greater aggregation than do users of financial accounting information.
B) Both managerial and financial accounting use economic and physical data in addition to financial data.
C) Financial accounting is more highly regulated than managerial accounting.
D) Timeliness is more important in financial accounting than in managerial accounting.

Accepted Answer

Financial accounting is highly regulated by bodies such as the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB), while managerial accounting is not subject to the same level of regulation. Therefore, choice C is correct. A is incorrect because users of financial accounting information generally desire more aggregation. B is incorrect because managerial accounting primarily uses financial data, while also incorporating non-financial data to a lesser extent. D is incorrect because timeliness is equally important in both managerial and financial accounting, although the frequency and level of detail may differ.

Question 5

During its first year of operations, Connor Company paid $49,990 for direct materials and $19,700 in wages for production workers. Lease payments and utilities on the production facilities amounted to $8,700. General, selling, and administrative expenses were $9,700. The company produced 6,700 units and sold 5,700 units for $16.70 a unit. The average cost to produce one unit is which of the following amounts?
A) $10.30
B) $13.75
C) $13.15
D) $11.70

Accepted Answer

The answer of During its first year of operations, Connor...

Question 6

During its first year of operations, Connor Company paid $50,000 for direct materials and $36,000 in wages for production workers. Lease payments and utilities on the production facilities amounted to $14,000. General, selling, and administrative expenses were $16,000. The company produced 5,000 units and sold 4,000 units for $30.00 a unit. The average cost to produce one unit is which of the following amounts?
A) $20.00
B) $16.00
C) $18.40
D) $25.00

Accepted Answer

The answer of During its first year of operations, Connor...

Question 7

Select the incorrect statement regarding costs and expenses.
A) Some costs are initially recorded as expenses while others are initially recorded as assets.
B) Expenses are incurred when assets are used to generate revenue.
C) Manufacturing-related costs are initially recorded as expenses.
D) Non-manufacturing costs should be expensed in the period in which they are incurred.

Accepted Answer

Manufacturing-related costs are not initially recorded as expenses; they are initially recorded as assets (inventory) and then expensed as cost of goods sold when the product is sold.

Question 8

Which of the following costs should not be recorded as an expense in the period incurred?
A) Insurance on factory building
B) Sales commissions
C) Product shipping costs
D) Product advertising

Accepted Answer

Insurance on factory building should be recorded as a prepaid expense and amortized over the period it covers.

Question 9

Which of the following costs is not considered a period cost?
A) Warehousing costs
B) Depreciation of delivery vehicles
C) Salaries paid to company executives
D) Freight paid on a purchase of raw materials

Accepted Answer

Freight paid on a purchase of raw materials is considered a product cost, not a period cost, because it is directly associated with the acquisition of goods that will be sold. Period costs are expenses that are not directly tied to the production process and are expensed in the period in which they occur, such as administrative expenses and sales commissions.

Question 10

Why do accountants normally calculate cost per unit as an average?
A) Determining the exact cost of a product is virtually impossible.
B) Minute details such as a second of labor time cannot be effectively measured.
C) Even when producing multiple units of the same product, normal variations occur in the amount of materials and labor used.
D) All of these are justifications for computing average unit costs.

Accepted Answer

All of these are common reasons why accountants calculate cost per unit as an average. Determining the exact cost of a product is difficult, labor time is complex to measure, and variations in materials and labor can occur even within the same product line. Therefore, taking an average cost per unit provides a reasonable estimate that can help businesses make informed decisions.

Question 11

Which of the following is a product cost for a construction company?
A) Cost of transporting raw materials to the job site
B) Wages paid to the company's payroll clerk
C) Rent of the company's main office
D) All of these.

Accepted Answer

The cost of transporting raw materials to the job site is considered a direct cost that is directly attributable to the product being produced, and therefore a product cost. Wages paid to the payroll clerk and rent of the main office are considered indirect costs or overhead costs, and are not directly attributable to the product being produced.

Question 12

All of the following are features of managerial accounting except:
A) information is provided primarily to insiders such as managers.
B) information includes economic and non-financial data as well as financial data.
C) information is characterized by objectivity, reliability, consistency, and accuracy.
D) information is reported continuously with a present or future orientation.

Accepted Answer

While objectivity, reliability, consistency, and accuracy are certainly desirable qualities of managerial accounting information, they are not necessarily inherent features. Managerial accounting information can be subjective, imprecise, or based on estimates, particularly when dealing with non-financial data. Therefore, choice C is incorrect. The other three choices are all features of managerial accounting.

Question 13

Managerial accounting information is limited or restricted by which of the following authorities or principles?
A) Securities and Exchange Commission
B) Generally Accepted Accounting Principles
C) Managerial Accounting Standards Board
D) Value-Added Principle

Accepted Answer

The answer of Managerial accounting information is limited or restricted...

Question 14

Which of the following costs would be classified as a direct cost for a company that produces motorcycles?
A) Rent of manufacturing facility that produces motorcycles.
B) Seats used in the motorcycles.
C) Wages of motorcycle assembly workers.
D) Both seats used in the motorcycles and wages of motorcycle assembly workers are correct.

Accepted Answer

Direct costs are costs that can be easily traced to a specific product or service. In this case, seats used in the motorcycles and wages of motorcycle assembly workers are both costs that are directly related to the production of motorcycles. Rent of the manufacturing facility is an indirect cost because it cannot be attributed solely to the production of motorcycles but rather shared among all the products produced in the facility.

Question 15

An ongoing process through which employees strive to eliminate waste, reduce response time, minimize defects, and simplify the design and delivery of products and services to customers is known as benchmarking.

Accepted Answer

The description is actually referring to continuous improvement, not benchmarking. Benchmarking is the process of comparing one's business processes and performance metrics to industry bests or best practices from other companies.

Question 16

Which of the following most exemplifies the value-added principle?
A) An ongoing process where continuous improvement is the goal.
B) A competitive management program that emphasizes quality.
C) Information gathering and reporting activities should be restricted to those activities that add value in excess of their cost.
D) Managerial accounting information is measured in economic, physical, and financial terms.

Accepted Answer

The value-added principle emphasizes that activities and processes should only be pursued if the value they add exceeds their cost. This is reflected in choice C, which states that information gathering and reporting activities should be restricted to those activities that add value in excess of their cost. Choices A, B, and D do not specifically address the value-added principle.

Question 17

Select the incorrect statement regarding the relationship between type of user and type of information.
A) Middle managers need more nonfinancial, or operational data than do senior executives.
B) Lower level employees use nonfinancial information such as work schedules, store hours, and customer service policies.
C) Senior executives need less aggregated information than do lower-level managers.
D) Senior executives use general economic information as well as financial information.

Accepted Answer

Senior executives typically need more aggregated information than lower-level managers as they are responsible for making strategic decisions based on overall organizational performance.

Question 18

During its first year of operations, Forrest Company paid $47,290 for direct materials and $50,700 in wages for production workers. Lease payments, utility costs, and depreciation on factory equipment totaled $14,300. General, selling, and administrative expenses were $20,700. The average cost to produce one unit was $5.70. How many units were produced during the period?
A) 20,823
B) 19,700
C) 23,332
D) None of these.

Accepted Answer

To find the number of units produced, we need to use the following formula:
Total cost = (Direct materials + Direct labor + Factory overhead + General and administrative expenses) / Number of units produced
We are given:
Direct materials = $47,290
Direct labor = $50,700
Factory overhead = $14,300
General and administrative expenses = $20,700
Average cost per unit = $5.70
We can plug these values into the formula and solve for the number of units produced:
Total cost = ($47,290 + $50,700 + $14,300 + $20,700) = $133,990
Number of units produced = $133,990 / $5.70 = 23,509.65
Since we cannot produce a fraction of a unit, we round down to the nearest whole number, which gives us:
Number of units produced = 19,700. 
Therefore, the answer is B.

Question 19

Choose the answer that is not a distinguishing characteristic of financial accounting information.
A) It is global information that reflects the performance of the whole company.
B) It is focused primarily on the future.
C) It is more concerned with financial data than physical or economic data.
D) It is more highly regulated than managerial accounting information.

Accepted Answer

Financial accounting information is focused primarily on historical data, not the future. Managerial accounting information, on the other hand, is focused more on the future and assists in making decisions.

Question 20

During its first year of operations, Forrest Company paid $30,000 for direct materials and $50,000 in wages for production workers. Lease payments, utility costs, and depreciation on factory equipment totaled $15,000. General, selling, and administrative expenses were $20,000. The average cost to produce one unit was $2.50. How many units were produced during the period?
A) 40,000
B) 46,000
C) 38,000
D) None of these.

Accepted Answer

The total production cost is the sum of direct materials, wages for production workers, and other production-related expenses (lease payments, utility costs, depreciation on factory equipment), which equals $30,000 + $50,000 + $15,000 = $95,000. Dividing this total production cost by the average cost to produce one unit ($2.50) gives the number of units produced: $95,000 / $2.50 = 38,000 units.

Quiz 10: An Introduction to Management Accounting

The sequence of activities through which an organization provides products to its customers is called a supply chain.

For a manufacturing company, product costs include all of the following except:

Which of the following costs should be recorded as an expense in the period incurred?

Select the correct statement regarding managerial and financial accounting.

Select the incorrect statement regarding costs and expenses.

Which of the following costs should not be recorded as an expense in the period incurred?

Which of the following costs is not considered a period cost?

Why do accountants normally calculate cost per unit as an average?

Which of the following is a product cost for a construction company?

All of the following are features of managerial accounting except:

Managerial accounting information is limited or restricted by which of the following authorities or principles?

Which of the following costs would be classified as a direct cost for a company that produces motorcycles?

An ongoing process through which employees strive to eliminate waste, reduce response time, minimize defects, and simplify the design and delivery of products and services to customers is known as benchmarking.

Which of the following most exemplifies the value-added principle?

Select the incorrect statement regarding the relationship between type of user and type of information.

Choose the answer that is not a distinguishing characteristic of financial accounting information.