Chapter 10 - Management Accounting
42 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary characteristic of overhead costs?

  • They are direct costs associated with production.
  • They are only related to selling and administrative functions.
  • They cannot be traced to products in a cost-effective manner. (correct)
  • They can be easily traced to specific products.

Which of the following is considered a component of manufacturing overhead?

  • Rent of manufacturing facilities. (correct)
  • Salaries of employees working in the accounting department.
  • Commissions paid to sales staff.
  • Direct materials used in the product.

What process is used to assign indirect costs to products?

  • Cost allocation (correct)
  • Cost segregation
  • Cost absorption
  • Cost tracing

Which of the following is NOT classified as a period cost?

<p>Indirect labor used to manufacture inventory. (D)</p> Signup and view all the answers

Which of the following costs would be classified as indirect materials?

<p>Light bulbs consumed in the factory. (C)</p> Signup and view all the answers

When is the expense for the tables recognized?

<p>When the tables are sold (C)</p> Signup and view all the answers

How much does it cost to build each table?

<p>$250 (C)</p> Signup and view all the answers

What type of costs remain in an inventory account until the related revenue is earned?

<p>Manufacturing costs (C)</p> Signup and view all the answers

Which costs are classified as direct raw materials costs?

<p>Materials that can be traced easily and conveniently to products (B)</p> Signup and view all the answers

How are production wages treated in accounting?

<p>Added to inventory and included in cost of goods sold (D)</p> Signup and view all the answers

Where does the depreciation cost for manufacturing equipment go?

<p>Split between income statement and balance sheet (C)</p> Signup and view all the answers

Which costs are typically expensed in the period they are incurred?

<p>Selling and administrative costs (B)</p> Signup and view all the answers

What happens to material costs at the time goods are sold?

<p>They are transferred to the Cost of Goods Sold account (D)</p> Signup and view all the answers

What are direct materials in product costing?

<p>Materials whose cost can be easily traced to specific products (C)</p> Signup and view all the answers

Which of the following statements is true about direct labor?

<p>It is labor that can be easily traced to specific products (C)</p> Signup and view all the answers

What type of costs are considered indirect costs?

<p>Costs related to utility expenses for manufacturing facilities (B)</p> Signup and view all the answers

How are managerial accounting reports typically delivered?

<p>On a continuous basis, as needed for decision-making (B)</p> Signup and view all the answers

What is a primary use of product costing in manufacturing?

<p>To assist in cost-plus pricing strategies (C)</p> Signup and view all the answers

Which users are considered insiders in the context of reporting?

<p>Managers and executives (A)</p> Signup and view all the answers

Why is product costing essential for controlling business operations?

<p>It helps identify and manage production-related expenses (A)</p> Signup and view all the answers

What type of transaction typically occurs with Tabor Manufacturing Company regarding their expenses?

<p>Recording of zero total expenses (D)</p> Signup and view all the answers

What is one benefit of a just-in-time (JIT) inventory system?

<p>It reduces costs associated with holding inventory. (B)</p> Signup and view all the answers

Which of the following is NOT a hidden cost mentioned?

<p>Increased production volume (A)</p> Signup and view all the answers

Paula Elliott improved her flower sales by reducing which type of activity?

<p>Nonvalue-added activities (D)</p> Signup and view all the answers

What pressure might management accountants face regarding confidential information?

<p>To disclose it without consent (A)</p> Signup and view all the answers

Which action is a potential conflict for management accountants?

<p>Undertaking unqualified duties (C)</p> Signup and view all the answers

What are included in product costs?

<p>Direct materials, direct labor, and manufacturing overhead (A)</p> Signup and view all the answers

Which of the following represents a period cost?

<p>Depreciation on office furniture (D)</p> Signup and view all the answers

Which costs are categorized as manufacturing overhead?

<p>Quality department costs and repair &amp; maintenance salaries (C)</p> Signup and view all the answers

How is finished goods inventory on the balance sheet defined?

<p>Materials, labor, and overhead costs related to unsold products (B)</p> Signup and view all the answers

Which statement correctly describes period costs?

<p>They are deducted immediately as an expense when incurred. (A)</p> Signup and view all the answers

Which of the following is NOT a characteristic of product costs?

<p>They include selling and administrative expenses. (B)</p> Signup and view all the answers

What is the primary difference between service organizations and merchandising companies?

<p>Service organizations provide services to customers, while merchandising companies sell goods. (A)</p> Signup and view all the answers

What happens when a cost is initially classified as a product cost?

<p>Its recognition as an expense is delayed until the product is sold. (C)</p> Signup and view all the answers

What is the primary distinction between manufacturing companies and service companies?

<p>Finished products from service companies are consumed immediately. (D)</p> Signup and view all the answers

Which of the following is NOT one of the three distinct inventory accounts used by manufacturing companies?

<p>Sales Inventory (B)</p> Signup and view all the answers

Which costs are included in the Work in Process Inventory account?

<p>Labor and overhead costs for partially completed products (B)</p> Signup and view all the answers

What does the Finished Goods Inventory include?

<p>Completed products that are ready for sale (B)</p> Signup and view all the answers

Which of the following costs would likely contribute to inventory holding costs?

<p>Warehouse space utilization (C)</p> Signup and view all the answers

Which of the following statements about the Cost of Goods Manufactured is true?

<p>It totals all manufacturing costs near the completion of products. (C)</p> Signup and view all the answers

Which cost category would NOT be typically included in manufacturing costs?

<p>Marketing expenses (B)</p> Signup and view all the answers

What is the primary goal of Just-in-Time inventory management?

<p>To minimize storage costs and waste. (A)</p> Signup and view all the answers

Flashcards

Direct Materials

Raw materials whose quantity in a product is known and easily traceable to the product.

Direct Labor

Labor costs easily traceable to specific products, because involved in 'hands-on' contact with the product.

Manufacturing Overhead

Indirect costs needed for production but hard to trace to specific products.

Product Costing

Determining the cost of a product, used in pricing and controlling business operations.

Signup and view all the flashcards

Cost-Plus Pricing

A common business practice of setting prices by adding a markup to the cost.

Signup and view all the flashcards

Time Horizon

The length of time used to track and report on financial information. Can be long term or short term.

Signup and view all the flashcards

Reporting Frequency

How often financial information is reported.

Signup and view all the flashcards

Users of Financial Reports

Stakeholders who need financial information, including investors, creditors, and government agencies.

Signup and view all the flashcards

Indirect Costs

Costs that cannot be directly traced to a product or service.

Signup and view all the flashcards

Manufacturing Overhead

Indirect costs related to manufacturing.

Signup and view all the flashcards

Cost Allocation

Dividing a total cost into parts and assigning them to specific things/products.

Signup and view all the flashcards

Indirect Materials

Raw materials necessary for production but not easily traced to specific products.

Signup and view all the flashcards

Product vs. Period Costs

Costs categorized as either directly related to making a product (product) or related to running the business (period).

Signup and view all the flashcards

Direct Labor

Labor costs directly traceable to a product, like wages paid to carpenters.

Signup and view all the flashcards

Manufacturing Overhead

Indirect costs in manufacturing, like tools and supplies.

Signup and view all the flashcards

Product Costs

Costs related to producing goods. These are not expensed until the product is sold.

Signup and view all the flashcards

Inventory Account

An account where product costs are recorded until the products are sold.

Signup and view all the flashcards

Cost of Goods Sold

The expense account for the cost of products sold.

Signup and view all the flashcards

Direct Raw Materials

Raw materials that are directly and easily traceable to the product.

Signup and view all the flashcards

Expense Recognition

When expenses are recorded on the income statement.

Signup and view all the flashcards

Cost of Production

Includes materials, labor. and manufacturing overhead to create product.

Signup and view all the flashcards

Service Companies

Companies that provide services rather than products, where the service is consumed immediately.

Signup and view all the flashcards

Merchandising Companies

Companies that buy and resell products they don't make.

Signup and view all the flashcards

Raw Materials Inventory

Inventory of the basic materials used to make products.

Signup and view all the flashcards

Work in Process Inventory

Inventory of partially completed products.

Signup and view all the flashcards

Finished Goods Inventory

Inventory of completed products ready for sale.

Signup and view all the flashcards

Cost of Goods Manufactured

Total cost of producing completed goods during a period.

Signup and view all the flashcards

Cost of Goods Sold

Cost of products sold during a period.

Signup and view all the flashcards

Just-in-Time Inventory

Inventory management system to minimize holding costs by only producing as needed.

Signup and view all the flashcards

Product Costs

Direct materials, direct labor, and manufacturing overhead costs used to produce goods.

Signup and view all the flashcards

Period Costs

Selling and administrative expenses not directly tied to producing products.

Signup and view all the flashcards

Cost of Goods Sold

The direct costs of producing the goods sold during a period.

Signup and view all the flashcards

Finished Goods Inventory

Product costs of goods completely made but not yet sold.

Signup and view all the flashcards

Manufacturing Overhead

Indirect costs of production like repair supplies, quality control, and manufacturing facility upkeep.

Signup and view all the flashcards

Direct Labor

Costs of employees directly involved in making the product.

Signup and view all the flashcards

Service Company

A company that provides services instead of physical goods.

Signup and view all the flashcards

Merchandising Company

A company that sells products manufactured by others.

Signup and view all the flashcards

Just-in-Time (JIT) Inventory

A strategy to minimize inventory costs by receiving materials only when needed for production or customer consumption.

Signup and view all the flashcards

Hidden Costs of Production

Unforeseen costs associated with production, including reduced worker motivation, lower quality work, and increased production time.

Signup and view all the flashcards

IMA Statement of Ethical Professional Practice

Ethical guidelines for management accountants, emphasizing competence, confidentiality, integrity, and credibility.

Signup and view all the flashcards

Potential Conflicts of Interest (Management Accountants)

Situations where management accountants may be pressured to violate ethical principles, including performing untrained work, disclosing confidential info, or issuing misleading reports.

Signup and view all the flashcards

Ethical Conflict Resolution

Process for addressing ethical dilemmas in accounting, leading to a solution that respects professional standards and integrity.

Signup and view all the flashcards

Study Notes

Chapter 10 - Management Accounting

  • Management accounting differs from financial accounting
  • Financial accounting focuses on external users (investors, creditors)
  • Financial accounting provides limited information needed by business managers
  • Managerial accounting focuses on the needs of internal users (executives, managers, employees)
  • Internal users need information to plan, direct, and control business operations
  • External users need general economic information
  • Information for internal users is often more detailed, while information for external users is more aggregated
  • Users of managerial accounting receive timely information for decisions, which is used to make predictions
  • External Users receive information to determine company performance as a whole
  • Internal users require detailed information about specific parts of the company
  • Financial reporting focuses on the past
  • Managerial reporting focuses on the future as well as the now
  • Financial reporting is periodic (standard timeframe), while managerial reporting is continuous
  • Financial reports are often based on historical data that is objective, reliable, consistent, and has historical nature
  • Managerial reports are based more on estimations and less on facts
  • The main purpose for determining product costs in manufacturing companies is for pricing, along with managing business operations
  • Major costs in manufacturing are direct materials, direct labor, and manufacturing overhead; sometimes called the "Big Three"
  • Raw materials are materials used for production, costs are easy to trace
  • Direct labor is the cost of employees directly working on the product
  • Manufacturing overhead costs cannot be traced directly to a specific product (e.g., utilities, depreciation).

Inventory Accounts

  • Raw materials inventory: Includes raw materials (lumber, metals, paints) that will be used to make the company's products
  • Work in process inventory: Includes partially completed products
  • Finished goods inventory: Includes completed products that are ready for sale

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

Introduction to Management Accounting PDF

Description

Explore the key differences between management accounting and financial accounting in this quiz. Understand how internal and external users rely on different types of information for decision-making. This chapter highlights the importance of timely, detailed data for managers versus aggregated reports for external stakeholders.

More Like This

Financial vs. Management Accounting Quiz
10 questions

Financial vs. Management Accounting Quiz

EnthusiasticMercury avatar
EnthusiasticMercury
Financial and Management Accounting Quiz
15 questions

Financial and Management Accounting Quiz

CleanlyForest avatar
CleanlyForest
Management vs Financial Accounting
30 questions

Management vs Financial Accounting

TimeHonoredYtterbium avatar
TimeHonoredYtterbium
Financial vs Management Accounting Overview
44 questions

Financial vs Management Accounting Overview

BestPerformingCornet5988 avatar
BestPerformingCornet5988
Use Quizgecko on...
Browser
Open
Browser
Browser