Accounting for Manufacturing Companies
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Questions and Answers

What is the primary difference in balance sheets for manufacturers, merchandisers, and service companies?

  • Types of inventory (correct)
  • Types of liabilities
  • Types of revenue
  • Types of revenue recognition

    • Work in process inventory represents items that have been completed and are ready for sale.

    False

    What term describes the costs associated with converting raw materials into finished products?

    Conversion costs

    Products that are completed and available for sale are known as ______ inventory.

    <p>finished goods</p> Signup and view all the answers

    Match the following terms with their definitions:

    <p>Raw material inventory = Materials that have not yet been used in production Cost of goods sold = Total cost incurred to acquire or produce the products sold Finished goods inventory = Products that are completed and ready for sale Work in process inventory = Products that are being manufactured but are not yet complete</p> Signup and view all the answers

    What type of cost are beverages for passengers on an airline considered?

    <p>Variable cost</p> Signup and view all the answers

    Direct labor costs can be traced directly to the finished goods.

    <p>True</p> Signup and view all the answers

    What is an example of direct materials cost?

    <p>Steel used in the frame of a mountain bike.</p> Signup and view all the answers

    The wages paid to a mountain bike assembly worker are classified as __________ costs.

    <p>direct labor</p> Signup and view all the answers

    Which of the following statements best defines product costs?

    <p>Costs that are assigned to goods that are manufactured.</p> Signup and view all the answers

    Period costs are typically included in the inventory valuation.

    <p>False</p> Signup and view all the answers

    What is the impact of product and period costs on financial statements?

    <p>They affect net income and asset valuation.</p> Signup and view all the answers

    What is the primary purpose of the Schedule of Cost of Goods Manufactured?

    <p>To summarize the types and amounts of costs incurred in the manufacturing process</p> Signup and view all the answers

    Cost of Goods Sold for manufacturers is significantly different from cost of goods sold for merchandisers.

    <p>False</p> Signup and view all the answers

    What is one of the learning objectives related to cost of goods sold?

    <p>Compute cost of goods sold for a manufacturer and for a merchandiser.</p> Signup and view all the answers

    The Schedule of Cost of Goods Manufactured helps link manufacturing costs to __________.

    <p>financial statements</p> Signup and view all the answers

    Which of the following activities is part of the flow of manufacturing activities?

    <p>Production processes</p> Signup and view all the answers

    Understanding the flow of manufacturing costs is irrelevant to financial statements.

    <p>False</p> Signup and view all the answers

    What is the significance of the Schedule of Cost of Goods Manufactured?

    <p>It summarizes manufacturing costs and links them to financial statements.</p> Signup and view all the answers

    What formula is used to calculate raw materials inventory turnover?

    <p>Raw materials used / Average materials inventory</p> Signup and view all the answers

    The average materials inventory is calculated by adding beginning and ending material inventory and then dividing by 2.

    <p>True</p> Signup and view all the answers

    What is the formula for calculating days’ sales in raw materials inventory?

    <p>Ending raw materials inventory X 365 / Raw materials used</p> Signup and view all the answers

    The formula for raw materials inventory turnover is Raw materials used divided by _________.

    <p>Average materials inventory</p> Signup and view all the answers

    What is included in Total Manufacturing Costs?

    <p>Direct materials, direct labor, and factory overhead</p> Signup and view all the answers

    Cost of Goods Manufactured is calculated by adding Beginning Work in Process and Total Manufacturing Costs, then subtracting Ending Work in Process.

    <p>True</p> Signup and view all the answers

    What is the primary purpose of preparing a schedule of cost of goods manufactured?

    <p>To summarize the total cost of producing goods and link it to financial statements.</p> Signup and view all the answers

    Total Manufacturing Costs equal Direct Materials Used plus Direct Labor and __________.

    <p>Factory Overhead</p> Signup and view all the answers

    Match the following elements with their respective definitions:

    <p>Direct Materials Used = Raw materials consumed in production Direct Labor = Wages paid to workers directly involved in manufacturing Factory Overhead = Indirect costs associated with manufacturing Cost of Goods Manufactured = Total cost of goods completed during a period</p> Signup and view all the answers

    Which statement correctly reflects how Ending Work in Process affects Cost of Goods Manufactured?

    <p>It is subtracted from the sum of Total Manufacturing Costs and Beginning Work in Process.</p> Signup and view all the answers

    Direct Labor costs should not be included when calculating Total Manufacturing Costs.

    <p>False</p> Signup and view all the answers

    Explain how Cost of Goods Manufactured links to financial statements.

    <p>It connects to the income statement by indicating the cost of goods sold and impacts net income.</p> Signup and view all the answers

    What is a primary focus of customer orientation in managerial accounting?

    <p>Improving customer satisfaction</p> Signup and view all the answers

    Total Quality Management emphasizes low standards and minimal employee input.

    <p>False</p> Signup and view all the answers

    What does Just-In-Time (JIT) manufacturing aim to minimize?

    <p>Inventory holding costs</p> Signup and view all the answers

    In lean practices, businesses focus on eliminating ______ in their activities.

    <p>waste</p> Signup and view all the answers

    Match the following managerial accounting trends with their descriptions:

    <p>Total Quality Management = Emphasizes improvement in quality through employee involvement Just-In-Time Manufacturing = Focuses on reducing inventory by syncing production with customer demand Lean Practices = Aims to eliminate waste in business processes Customer Orientation = Prioritizes customer needs and satisfaction</p> Signup and view all the answers

    Which of the following is NOT a trend in managerial accounting?

    <p>Cost leadership</p> Signup and view all the answers

    A key aspect of lean practices is to consistently focus on waste in business activities.

    <p>True</p> Signup and view all the answers

    What is the significance of quality awards in Total Quality Management?

    <p>They emphasize the value of quality within the organization.</p> Signup and view all the answers

    Study Notes

    Chapter 14: Planning and Management Control Systems

    • The chapter focuses on managerial accounting concepts and principles.
    • Managerial accounting provides financial and nonfinancial information to managers and other decision-makers within an organization.
    • It helps managers make planning and control decisions.
    • Managerial accounting information is used in various career paths, including marketing, management, entrepreneurship, and non-business roles.
    • Managerial accounting's purpose involves planning, monitoring, and controlling business activities.
    • The purpose is to develop new products, expand markets, and build new facilities.
    • It also involves evaluating performance, finding areas where costs are too high, assessing profitability of services, and evaluating customer satisfaction.
    • Managerial accounting differs from financial accounting.
    • Financial accounting reports are primarily for external users, like investors and creditors, and are structured by GAAP principles.
    • Information in managerial accounting may be generated quickly without extensive auditing.
    • It often focuses on future projections and historical data alongside financial information.
    • Financial data are monetary but some non-monetary data may also be considered.
    • Fraud affects all businesses and can cost significant revenue losses.
    • Internal controls are policies and procedures used to guarantee reliable accounting, protect assets, and support company policies.
    • The Institute of Management Accountants provides an ethical code of conduct for accountants.
    • Learning objectives cover the principles of managerial accounting, cost classifications (fixed vs. variable, direct vs. indirect), and the impact of product and period costs on financial statements.
    • Different balance sheets and income statements are used for manufacturing, merchandising, and service companies, especially concerning inventory.
    • Cost of goods sold calculations differ for merchandising and manufacturing businesses.
    • Manufacturing activities encompass acquiring raw materials, production processes, and sales.
    • A schedule of cost of goods manufactured summarizes costs in a company's manufacturing process, involving direct materials, direct labor, and factory overhead.
    • Raw materials are expenditures directly traced to finished goods.
    • Direct labor involves wages of assembly or production workers.
    • Factory overhead encompasses indirect labor and materials.
    • Prime cost is the sum of direct materials and direct labor, while conversion cost combines direct labor and factory overhead.
    • Nonmanufacturing costs include selling and administrative expenses.
    • Learning objectives also cover analyzing raw materials inventory using turnover and days of sales in raw materials and calculation methods.
    • Trends in managerial accounting include customer orientation, lean practices, global economy, e-commerce, service economy, value chains, total quality management, and corporate social responsibility.

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    Chapter 14 Planning And Management Control Systems PDF

    Description

    This quiz explores key concepts in accounting specifically for manufacturing companies, including differences in balance sheets, inventory classifications, and cost definitions. Test your knowledge on product costs, materials, and cost of goods sold in the manufacturing context.

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