Managerial Accounting Chapter 1 Quiz and Flashcards

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Questions and Answers

What is the primary difference between a manufacturer's and a merchandiser's cost of goods sold?

The cost of goods sold for a manufacturer is calculated using the same formula as a merchandiser, but with different account names

The cost of goods sold for a manufacturer is always higher than that of a merchandiser

The cost of goods sold for a manufacturer is not reported on the income statement, whereas a merchandiser is

The cost of goods sold for a manufacturer includes direct labor and overhead costs, whereas a merchandiser does not (correct)

What is the purpose of the merchandise inventory account in a merchandiser's balance sheet?

To track the cost of goods available for sale at the end of the period (correct)

To track the cash spent on purchasing goods during the period

To track the cost of goods sold during the period

To track the cost of goods purchased during the period

What is the classification of 'Work in Process' in a manufacturer's balance sheet?

Non-Current Asset

Equity

Current Liability

Current Asset (correct)

How is the cost of goods sold calculated for a merchandiser?

Beginning merchandise inventory + Purchases - Ending merchandise inventory Signup and view all the answers

What is the purpose of the 'Prepaid Expenses' account in a company's balance sheet?

To track the payments made in advance for goods or services Signup and view all the answers

What is the classification of 'Raw Materials' in a manufacturer's balance sheet?

Current Asset Signup and view all the answers

What is the primary purpose of identifying areas that require additional attention in a company?

To allocate resources efficiently Signup and view all the answers

What is the term for the wages paid to automobile assembly workers?

Direct Labor Signup and view all the answers

What is the primary purpose of managerial accounting?

To assist management in making better decisions related to business performance Signup and view all the answers

What is the key to effective control in managerial accounting?

Gathering feedback Signup and view all the answers

Which of the following is an example of manufacturing overhead?

Lubricants used in the automobile assembly plant Signup and view all the answers

What is the primary difference between direct materials and indirect materials?

Direct materials can be traced to individual units, while indirect materials cannot Signup and view all the answers

Which of the following is a vital function of management accounting?

Decision making Signup and view all the answers

What is the main purpose of a budget in managerial accounting?

To provide a detailed plan for the future Signup and view all the answers

What is the role of decision-making in the management of a company?

To exercise good judgment in planning, directing, and controlling Signup and view all the answers

What type of report compares budgeted to actual results in managerial accounting?

Performance Report Signup and view all the answers

What is the primary purpose of manufacturing cost classification?

To identify areas of inefficiency in production Signup and view all the answers

What are the three vital functions of management accounting?

Planning, controlling, and decision making Signup and view all the answers

Study Notes

Balance Sheet

Current assets include: Cash, Receivables, Prepaid Expenses, and Merchandise Inventory
Merchandise Inventory consists of:
- Raw Materials (materials waiting to be processed)
- Work in Process (partially complete products)
- Finished Goods (completed products awaiting sale)

Income Statement

Cost of goods sold for manufacturers differs slightly from that of merchandisers
Cost of goods sold for merchandising company: Beginning merchandise inventory + Purchases - Ending merchandise inventory

Managerial/Management Accounting

Definition: A method of accounting that creates statements, reports, and documents to help management make better decisions
Primarily used for internal purposes
Three pillars of management accounting:
- Planning: Establishing goals and specifying how to achieve them
- Control: Gathering feedback to ensure plans are properly executed or modified as circumstances change
- Decision making: Selecting a course of action from competing alternatives

Costs Terms, Concepts, and Classifications

Manufacturing costs include:
- Direct Materials: Raw materials that become an integral part of the product and can be conveniently traced directly to it
- Direct Labor: Labor costs that can be easily traced to individual units of product
- Manufacturing Overhead: Manufacturing costs that cannot be traced directly to specific units produced
Examples of Manufacturing Overhead:
- Indirect labor (wages paid to employees not directly involved in production work)
- Indirect materials (materials used to support the production process)

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Description

Test your knowledge on the introductory concepts of Managerial Accounting, including its definition, purpose, and three pillars. This quiz is designed to help you understand the basics of Managerial Accounting and its role in business decision-making.

Managerial Accounting Chapter 1

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