Management vs. Cost Accounting

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Questions and Answers

Which of the following best describes direct materials in the manufacturing process?

Materials that have no influence on the cost of sales.

Materials that can be used in any part of the production process.

Materials that are an integral part of a finished product and can be traced directly to it. (correct)

Materials that are consumed in the production process but not part of the finished product.

What is a major factor in determining the cost of sales in manufacturing?

Marketing and distribution expenses after manufacturing.

Direct materials used in producing the finished product. (correct)

Utility expenses incurred during manufacturing.

Labor costs associated with workforce management.

Which of the following is NOT considered a direct material?

Leather used in Nike shoes.

Fabric used in Nike shoes.

Threads used in Nike shoes.

Salaries of production supervisors. (correct)

In the context of Jollibee's Chicken Joy, which ingredient is classified as a direct material?

Chicken Signup and view all the answers

Why are direct materials significant in product costing?

They involve resources directly linked to the product and its manufacture. Signup and view all the answers

Which of the following best exemplifies a direct material in manufacturing?

Rubber used in tires. Signup and view all the answers

Which ingredient is a major direct material in the preparation of Jollibee's Chicken Joy?

Flour for chicken coating. Signup and view all the answers

What role do direct materials play in manufacturing?

Serve as the components that make up the finished product. Signup and view all the answers

What is the total amount of operating expenses for James Coffee in September 2024?

PHP 120,290 Signup and view all the answers

Which of the following is NOT listed as an operating expense for James Coffee?

Inventory costs Signup and view all the answers

How much is the total operating income before taxes for James Coffee?

PHP 379,710 Signup and view all the answers

What is the percentage tax for MSMEs whose annual gross sales do not exceed PHP 3 million?

3% Signup and view all the answers

Which expense item represents costs incurred for professional services for James Coffee?

Professional fees Signup and view all the answers

What is the total cost for wages for the three staff at James Coffee?

PHP 43,290 Signup and view all the answers

What is a key benefit of supplier diversification?

It prevents price increases due to lack of competition. Signup and view all the answers

Which of these costs is included in the operating expenses of James Coffee?

Rent Signup and view all the answers

Which cost management practice focuses on environmentally friendly methods?

Implementing energy-saving programs. Signup and view all the answers

How much is allocated to marketing and advertising costs for James Coffee?

PHP 15,000 Signup and view all the answers

What may be a consequence of too much cost reduction?

Compromise in product and service quality. Signup and view all the answers

What is a valid reason for increasing selling prices?

To counteract inflation movements. Signup and view all the answers

Which packaging approach is recommended to reduce costs?

Opting for biodegradable or reusable packaging. Signup and view all the answers

What does factory overhead include?

General costs associated with the production process. Signup and view all the answers

Which of the following is NOT considered part of factory overhead?

Direct labor costs for assembling products. Signup and view all the answers

Why are factory overhead costs necessary?

They are required for the operation of the production facility. Signup and view all the answers

Which of the following is an example of factory overhead in a food establishment?

Utility bills for the kitchen. Signup and view all the answers

What is a key characteristic of factory overhead expenses?

They do not directly contribute to the creation of a finished product. Signup and view all the answers

Which of the following examples does NOT belong to factory overhead?

Administrative salaries of office workers. Signup and view all the answers

What must be considered when calculating gross profit?

Total revenues minus all costs associated with producing goods. Signup and view all the answers

Which aspect of factory overhead can lead to inaccurate product pricing?

Ignoring indirect manufacturing costs. Signup and view all the answers

What is the corporate tax rate effective until June 30, 2023, under the CREATE Act?

1% Signup and view all the answers

Which businesses must register for Value Added Tax (VAT)?

Businesses with gross annual sales exceeding PHP 3 million Signup and view all the answers

How is net income calculated?

Total revenue minus all costs and expenses Signup and view all the answers

What was the operating income for James Coffee in September 2024?

PHP 379,710 Signup and view all the answers

What is the VAT rate on the sale of goods, services, and imports?

12% Signup and view all the answers

What is one method suggested for cost management practices?

Expense tracking and analysis Signup and view all the answers

What was the total amount of tax calculated for James Coffee's September 2024 operations?

PHP 45,000 Signup and view all the answers

What is the result when a business's net income is negative?

The business had a loss Signup and view all the answers

Study Notes

Management Accounting vs. Cost Accounting

Management accounting focuses on internal users, such as managers and business owners.
Cost accounting is a specific aspect of management accounting, focusing on the collection and analysis of cost data.

What Are Direct Costs?

Direct costs are essential components directly traceable to a finished product.
Examples include raw materials, labor directly involved in production, and manufacturing supplies.

Direct Materials

Direct materials are the raw components that are physically incorporated into a finished product.
These materials directly impact the cost of goods sold in manufacturing.

Factory Overhead

Factory overhead encompasses general production costs not directly traceable to specific products.
Examples include rent for factory space, utilities for manufacturing facilities, and wages for factory supervisors.

Gross Profit Computation

Gross profit is calculated by subtracting the cost of goods sold from sales revenue.
Operating expenses are then deducted from gross profit to determine operating income (earnings before taxes).

Operating Expenses Examples

Rent or lease payments for office space
Salaries and wages for administrative staff, including benefits
Utilities for office or non-manufacturing facilities
Marketing and advertising costs
Office supplies
Legal, consultation, and professional fees

Operating Income

Operating income represents the profit a business generates from its core operations after paying for direct and indirect costs.

Taxes for Micro, Small, and Medium Enterprises (MSMEs)

Percentage tax applies to businesses with annual gross sales not exceeding PHP 3 million.
The percentage tax rate is 3% on gross sales or receipts.
Businesses exceeding PHP 3 million in annual gross sales must register for value-added tax (VAT).
The VAT rate is 12% on sales of goods, services, and imports.

Net Income

Net income is what remains after deducting all expenses, including taxes, from sales revenue.
If net income is positive, the business made a profit.
If net income is negative, the business incurred a loss.

Cost Management Practices

Expense Tracking and Analysis: Continuous monitoring of manufacturing costs and operating expenses is paramount.
Automation: Implementing technology and automation tools can reduce manual labor costs and improve efficiency.
Supplier Negotiation: Seeking better terms with suppliers, such as discounts, can reduce a company's expenses.
Supplier Diversification: Utilizing multiple suppliers helps ensure competitive pricing and reduces the risk of dependence on a single source.
Sustainability Practices: Adopting environmentally friendly practices can reduce long-term costs.
Minimizing Packaging Costs: Evaluating and minimizing packaging requirements while prioritizing product quality can lead to cost savings.

Final Reminders

Increasing selling prices can deter customers and may not be a viable strategy for all businesses.
Excessive cost reduction can compromise product and service quality and negatively impact employee and supplier relationships.

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Description

This quiz explores the differences between management accounting and cost accounting. It covers topics such as direct costs, direct materials, factory overhead, and gross profit computation. Perfect for students looking to understand these essential accounting concepts.