Managerial Accounting Chapter 1: Assignment Instructions: Right T if the statement is true and F if false opposite the corresponding statement

t number.

JACF

1. Reports prepared in financial accounting are general-purpose reports, whereas reports prepared in managerial accounting are usually special-purpose reports. 2. Managerial accounting information generally pertains to an entity as a whole and is highly aggregated. 3. Managerial accounting applies to all forms of business organizations. 4. Determining the unit cost of manufacturing a product is an output of financial accounting. 5. Managerial accounting internal reports are prepared more frequently than are classified financial statements. 6. The management function of organizing and directing is mainly concerned with setting goals and objectives for the entity. 7. The Sarbanes-Oxley Act replaces generally accepted accounting principles in a manufacturing company. 8. Controlling is the process of determining whether planned goals are being met. 9. Decision-making is an integral part of the planning, directing, and controlling functions. 10. Both direct labor cost and indirect labor cost are product costs. 11. Manufacturing costs that cannot be classified as direct materials or direct labor are classified as manufacturing overhead. 12. Raw materials are equal to direct materials minus indirect materials. 13. Raw materials that can be conveniently and directly associated with a finished product are called materials overhead. 14. The total cost of a finished product does not generally contain equal amounts of materials, labor, and overhead costs. 15. Direct materials costs and indirect materials costs are manufacturing overhead. 16. Period costs include selling and administrative expenses. 17. Indirect materials and indirect labor are both inventoriable costs. 18. Direct materials and direct labor are the only product costs. 19. Total period costs are deducted from total cost of work in process to calculate cost of goods manufactured. 20. Period costs are not inventoriable costs. 21. Ending finished goods inventory appears on both the balance sheet and the income statement of a manufacturing company. 22. The beginning work in process inventory appears on both the balance sheet and the cost of goods manufactured schedule of a manufacturing company. 23. In calculating gross profit for a manufacturing company, the cost of goods manufactured is deducted from net sales. 24. Finished goods inventory does not appear on a cost of goods manufactured schedule. 25. If the ending work in process inventory is greater than the beginning work in process inventory, then the cost of goods manufactured will be less than total manufacturing costs for the period. 26. Finished goods inventory for a manufacturing company is equivalent to merchandise inventory for a merchandising company. 27. Raw materials inventory is not an asset until it is used to make a product. 28. Raw materials inventory shows the cost of completed goods available for sale to customers. 29. The supply chain is all the activities associated with providing a product or service. 30. Many companies have significantly lowered inventory levels and costs using just-in-time inventory methods. 31. The theory of constraints is used to measure performance. 32. The focus of a TQM system is to reduce defects in finished products. 33. The balanced scorecard approach attempts to maintain as little inventory on hand as possible. 34. In preparing closing entries for a manufacturing company, all revenue and expense account balances are closed to a Manufacturing Summary account. 35. To balance the Cost of Goods Manufactured columns of a worksheet for a manufacturing company, an entry must be made in the income statement debit column. 36. Managerial accounting is primarily concerned with managers and external users. Page 1 of 17

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Planning involves coordinating the diverse activities and human resources of a company to produce a smooth running operation. When the physical association of raw materials with the finished product is too small to trace in terms of cost, they are usually classified as indirect materials. Product costs are also called inventoriable costs. Direct materials become a cost of the finished goods manufactured when they are acquired, not when they are used. The sum of the direct materials costs, direct labor costs, and beginning work in process is the total manufacturing costs for the year. In a manufacturing company balance sheet, manufacturing inventories are reported in the current assets section in the order of their expected use in production.

MULTIPLE CHOICE QUESTIONS

43. Managerial accounting applies to each of the following types of businesses except a. service firms. b. merchandising firms. c. manufacturing firms. d. Managerial accounting applies to all types of firms. Managerial accounting information is generally prepared for a. stockholders. b. creditors. c. managers. d. regulatory agencies. Managerial accounting information a. pertains to the entity as a whole and is highly aggregated. b. pertains to subunits of the entity and may be very detailed. c. is prepared only once a year. d. is constrained by the requirements of generally accepted accounting principles. The major reporting standard for presenting managerial accounting information is a. relevance. b. generally accepted accounting principles. c. the cost principle. d. the current tax law. Managerial accounting is also called a. management accounting. b. controlling. c. analytical accounting. d. inside reporting. Which of the following is not an internal user? a. Creditor b. Department manager c. Controller d. Treasurer Managerial accounting does not encompass a. calculating product cost. b. calculating earnings per share. c. determining cost behavior. d. profit planning. Managerial accounting is applicable to Page 2 of 17

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service entities. manufacturing entities. not-for-profit entities. all of these.

Management accountants would not a. assist in budget planning. b. prepare reports primarily for external users. c. determine cost behavior. d. be concerned with the impact of cost and volume on profits. Internal reports must be communicated a. daily. b. monthly. c. annually. d. as needed. Financial statements for external users can be described as a. user-specific. b. general-purpose. c. special-purpose. d. managerial reports. Managerial accounting reports can be described as a. general-purpose. b. macro-reports. c. special-purpose. d. classified financial statements. The reporting standard for external financial reports is a. industry-specific. b. company-specific. c. generally accepted accounting principles. d. department-specific.

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Which of the following statements about internal reports is not true? a. The content of internal reports may extend beyond the double-entry accounting system. b. Internal reports may show all amounts at market values. c. Internal reports may discuss prospective events. d. Most internal reports are summarized rather than detailed. In an analogous sense, external user is to internal user as generally accepted accounting principles are to a. timely. b. special-purpose. c. relevance to decision. d. SEC. Internal reports are generally a. aggregated. b. detailed. c. regulated. d. unreliable. A distinguishing feature of managerial accounting is a. external users. b. general-purpose reports. c. very detailed reports. d. quarterly and annual reports. What activities and responsibilities are not associated with management's functions? a. Planning b. Accountability c. Controlling d. Directing Planning is a function that involves a. hiring the right people for a particular job. b. coordinating the accounting information system. c. setting goals and objectives for an entity. d. analyzing financial statements. The managerial function of controlling a. is performed only by the controller of a company. b. is only applicable when the company sustains a loss. c. is concerned mainly with operating a manufacturing segment. d. includes performance evaluation by management. Which of the following is not a management function? a. Constraining b. Planning c. Controlling d. Directing A manager that is establishing objectives is performing which management function? a. Controlling b. Directing c. Planning d. Constraining The management function that requires managers to look ahead and establish objectives is a. controlling. b. directing. c. planning. Page 4 of 17

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d. constraining. 66. In determining whether planned goals are being met, a manager is performing the function of a. planning. b. follow-up. c. directing. d. controlling. Which of the following is not a separate management function? a. Planning b. Directing c. Decision-making d. Controlling Directing includes a. providing a framework for management to have criteria to terminate employees when needed. b. running a department under quality control standards universally accepted. c. coordinating a company's diverse activities and human resources to produce a smooth-running operation. d. developing a complex performance ranking system to give certain high performers good raises. Both direct materials and indirect materials are a. raw materials. b. manufacturing overhead. c. merchandise inventory. d. sold directly to customers by a manufacturing company. The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is a. manufacturing overhead. b. indirect materials. c. indirect labor. d. direct labor. Which one of the following would not be classified as manufacturing overhead? a. Indirect labor b. Direct materials c. Insurance on factory building d. Indirect materials Manufacturing costs include a. direct materials and direct labor only. b. direct materials and manufacturing overhead only. c. direct labor and manufacturing overhead only. d. direct materials, direct labor, and manufacturing overhead. Which one of the following is not a direct material? a. A tire used for a lawn mower b. Plastic used in the covered case for a home PC c. Steel used in the manufacturing of steel-radial tires d. Lubricant for a ball-bearing joint for a large crane Which one of the following is not a cost element in manufacturing a product? a. Manufacturing overhead b. Direct materials c. Office salaries d. Direct labor

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A manufacturing process requires small amounts of glue. The glue used in the production process is classified as a(n) a. period cost. b. indirect material. c. direct material. d. miscellaneous expense. The wages of a timekeeper in the factory would be classified as a. a period cost. b. direct labor. c. indirect labor. d. compliance costs. Which one of the following is not considered as material costs? a. Partially completed motor engines for a motorcycle plant b. Bolts used in manufacturing the compressor of an engine c. Rivets for the wings of a new commercial jet aircraft d. Lumber used to build tables Which of the following is not a manufacturing cost category? a. Cost of goods sold b. Direct materials c. Direct labor d. Manufacturing overhead As current technology changes manufacturing processes, it is likely that direct a. labor will increase. b. labor will decrease. c. materials will increase. d. materials will decrease. For the work of factory employees to be considered as direct labor, the work must be conveniently and a. materially associated with raw materials conversion. b. periodically associated with raw materials conversion. c. physically associated with raw materials conversion. d. promptly associated with raw materials conversion. Which of the following is not classified as direct labor? a. Bottlers of beer in a brewery b. Copy machine operators at a copy shop c. Wages of supervisors d. Bakers in a bakery Cotter pins and lubricants used irregularly in a production process are classified as a. miscellaneous expense. b. direct materials. c. indirect materials. d. nonmaterial materials. Which of the following is not another name for the term manufacturing overhead? a. Factory overhead b. Pervasive costs c. Burden d. Indirect manufacturing costs Because of automation, which component of product cost is declining? a. Direct labor b. Direct materials Page 6 of 17

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c. Manufacturing overhead d. Advertising 85. The product cost that is most difficult to associate with a product is a. direct materials. b. direct labor. c. manufacturing overhead. d. advertising. Manufacturing costs that cannot be classified as either direct materials or direct labor are known as a. period costs. b. nonmanufacturing costs. c. selling and administrative expenses. d. manufacturing overhead. Which one of the following is an example of a period cost? a. A change in benefits for the union workers who work in the New York plant of a Fortune 1000 manufacturer b. Workers' compensation insurance on factory workers' wages allocated to the factory c. A box cost associated with computers d. A manager's salary for work that is done in the corporate head office Which one of the following costs would not be inventoriable? a. Period costs b. Factory insurance costs c. Indirect materials d. Indirect labor costs Direct materials and direct labor of a company total $6,000,000. If manufacturing overhead is $3,000,000, what is direct labor cost? a. $3,000,000 b. $6,000,000 c. $0 d. Cannot be determined from the information provided Which of the following are period costs? a. Raw materials b. Direct materials and direct labor c. Direct labor and manufacturing overhead d. Selling expenses Sales commissions are classified as a. overhead costs b. period costs. c. product costs. d. indirect labor. Product costs consist of a. direct materials and direct labor only. b. direct materials, direct labor, and manufacturing overhead. c. selling and administrative expenses. d. period costs. Which one of the following represents a period cost? a. The VP of Sales' salary and benefits b. Overhead allocated to the manufacturing operations c. Labor costs associated with quality control d. Fringe benefits associated with factory workers Page 7 of 17

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Product costs are also called a. direct costs. b. overhead costs. c. inventoriable costs. d. capitalizable costs. For inventoriable costs to become expenses under the matching principle, a. the product must be finished and in stock. b. the product must be expensed based on its percentage-of-completion. c. the product to which they attach must be sold. d. all accounts payable must be settled. As inventoriable costs expire, they become a. selling expenses. b. gross profit. c. cost of goods sold. d. sales revenue. A manufacturing company calculates cost of goods sold as follows: a. Beginning FG inventory + cost of goods purchased ending FG inventory. b. Ending FG inventory cost of goods manufactured + beginning FG inventory. c. Beginning FG inventory cost of goods manufactured ending FG inventory. d. Beginning FG inventory + cost of goods manufactured ending FG inventory. A manufacturing company reports cost of goods manufactured as a(n) a. current asset on the balance sheet. b. administrative expense on the income statement. c. component in the calculation of cost of goods sold on the income statement. d. component of the raw materials inventory on the balance sheet. The subtotal, "Cost of goods manufactured" appears on a. a merchandising company's income statement. b. a manufacturing company's income statement. c. both a manufacturing and a merchandising company's income statement. d. neither a merchandising nor a manufacturing company's income statement. Cost of goods manufactured in a manufacturing company is analogous to a. Ending inventory in a merchandising company. b. Beginning inventory in a merchandising company. c. Cost of goods available for sale in a merchandising company. d. Cost of goods purchased in a merchandising company. Cost of goods sold a. only appears on merchandising companies' income statements. b. only appears on manufacturing companies' income statements. c. appears on both manufacturing and merchandising companies' income statements. d. is calculated exactly the same for merchandising and manufacturing companies. Hollern Combines, Inc. has $10,000 of ending finished goods inventory as of December 31, 2008. If beginning finished goods inventory was $5,000 and cost of goods sold was $20,000, how much would Hollern report for cost of goods manufactured? a. $22,500 b. $5,000 c. $25,000 d. $15,000 Cost of goods manufactured is calculated as follows: Page 8 of 17

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a. b. c. d. 104.

Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP. Direct materials used + direct labor + manufacturing overhead beginning WIP + ending WIP. Beginning WIP + direct materials used + direct labor + manufacturing overhead ending WIP. Direct materials used + direct labor + manufacturing overhead ending WIP beginning WIP.

If the amount of "Cost of goods manufactured" during a period exceeds the amount of "Total manufacturing costs" for the period, then a. ending work in process inventory is greater than or equal to the amount of the beginning work in process inventory. b. ending work in process is greater than the amount of the beginning work in process inventory. c. ending work in process is equal to the cost of goods manufactured. d. ending work in process is less than the amount of the beginning work in process inventory. On the costs of goods manufactured schedule, depreciation on factory equipment a. is not listed because it is included with Depreciation Expense on the income statement. b. appears in the manufacturing overhead section. c. is not listed because it is not a product cost. d. is not an inventoriable cost. On the costs of goods manufactured schedule, the item raw materials inventory (ending) appears as a(n) a. addition to raw materials purchases. b. addition to raw materials available for use. c. subtraction from raw materials available for use. d. subtraction from raw materials purchases.

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Use the following information for questions 107109. Carly Manufacturing Company's accounting records reflect the following inventories: Dec. 31, 2008 Dec. 31, 2007 Raw materials inventory $310,000 $260,000 Work in process inventory 300,000 160,000 Finished goods inventory 190,000 150,000 During 2008, $500,000 of raw materials were purchased, direct labor costs amounted to $600,000, and manufacturing overhead incurred was $480,000. 107. The total raw materials available for use during 2008 for Carly Manufacturing Company is a. $810,000. b. $260,000. c. $450,000. d. $760,000. Carly Manufacturing Company's total manufacturing costs incurred in 2008 amounted to a. $1,530,000. b. $1,490,000. c. $1,390,000. d. $1,580,000. If Carly Manufacturing Company's cost of goods manufactured for 2008 amounted to $1,390,000, its cost of goods sold for the year is a. $1,500,000. b. $1,250,000. c. $1,350,000. d. $1,430,000. What is work in process inventory generally described as? a. Costs applicable to units that have been started in production but are only partially completed b. Costs associated with the end stage of manufacturing that are almost always complete and ready for customers c. Costs strictly associated with direct labor Page 9 of 17

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d. Beginning stage production costs associated with labor costs dealing with bringing in raw materials from the shipping docks 111. Utley Manufacturing Company reported the following year-end information: beginning work in process inventory, $180,000; cost of goods manufactured, $516,000; beginning finished goods inventory, $252,000; ending work in process inventory, $220,000; and ending finished goods inventory, $264,000. Utley Manufacturing Company's cost of goods sold for the year is a. $504,000. b. $528,000. c. $476,000. d. $252,000. Neeley Manufacturing Company reported the following year-end information: Beginning work in process inventory $1,080,000 Beginning raw materials inventory 300,000 Ending work in process inventory 900,000 Ending raw materials inventory 480,000 Raw materials purchased 960,000 Direct labor 900,000 Manufacturing overhead 600,000 Neeley Manufacturing Company's cost of goods manufactured for the year is a. $2,280,000. b. $2,460,000. c. $2,100,000. d. $2,640,000. Use the following information for questions 113115. Hopkins Manufacturing Inc.'s accounting records reflect the following inventories: Dec. 31, 2007 Dec. 31, 2008 Raw materials inventory $ 80,000 $ 64,000 Work in process inventory 104,000 116,000 Finished goods inventory 100,000 92,000 During 2008, Hopkins purchased $760,000 of raw materials, incurred direct labor costs of $100,000, and incurred manufacturing overhead totaling $128,000. 113. How much is raw materials transferred to production during 2008 for Hopkins Manu-facturing? a. $992,000 b. $776,000 c. $760,000 d. $744,000 How much is total manufacturing costs incurred during 2008 for Hopkins? a. $992,000 b. $1,004,000 c. $988,000 d. $1,000,000 Assume Hopkins Manufacturings cost of goods manufactured for 2008 amounted to $960,000. How much would it report as cost of goods sold for the year? a. $968,000 b. $1,000,000 c. $1,060,000 d. $952,000 McNally Manufacturing Company reported the following year-end information: Page 10 of 17

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Beginning work in process inventory $ 46,000 Beginning raw materials inventory 24,000 Ending work in process inventory 50,000 Ending raw materials inventory 20,000 Raw materials purchased 680,000 Direct labor 240,000 Manufacturing overhead 100,000 How much is McNally Manufacturings cost of goods manufactured for the year? a. $684,000 b. $1,024,000 c. $1,020,000 d. $1,028,000 Use the following information for questions 117118. Modine Manufacturing Inc.'s accounting records reflect the following inventories: Dec. 31, 2007 Dec. 31, 2008 Raw materials inventory $120,000 $ 96,000 Work in process inventory 156,000 174,000 Finished goods inventory 150,000 138,000 During 2008, Modine purchased $1,140,000 of raw materials, incurred direct labor costs of $150,000, and incurred manufacturing overhead totaling $192,000. 117. How much is total manufacturing costs incurred during 2008 for Modine? a. $1,488,000 b. $1,506,000 c. $1,482,000 d. $1,500,000 How much would Modine Manufacturing report as cost of goods manufactured for 2008? a. $1,464,000 b. $1,524,000 c. $1,518,000 d. $1,488,000 Sauder Manufacturing Company reported the following year-end information: Beginning work in process inventory $ 35,000 Beginning raw materials inventory 18,000 Ending work in process inventory 38,000 Ending raw materials inventory 15,000 Raw materials purchased 510,000 Direct labor 180,000 Manufacturing overhead 75,000 How much is Sauder Manufacturings total cost of work in process for the year? a. $513,000 b. $768,000 c. $765,000 d. $803,000 Hardigan Manufacturing Company reported the following year-end information: beginning work in process inventory, $80,000; cost of goods manufactured, $980,000; beginning finished goods inventory, $50,000; ending work in process inventory, $70,000; and ending finished goods inventory, $40,000. How much is Hardigans cost of goods sold for the year? a. $980,000 Page 11 of 17

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b. $990,000 c. $970,000 d. $1,000,000 Use the following information for questions 121124. Raw materials inventory, January 1 Raw materials inventory, December 31 Work in process, January 1 Work in process, December 31 Finished goods, January 1 Finished goods, December 31 Raw materials purchases Direct labor Factory utilities Indirect labor Factory depreciation Selling and administrative expenses 121. Direct materials used is a. $1,060,000. b. $1,020,000. c. $1,000,000. d. $980,000. Assume your answer to question 121 above is $1,000,000. Total manufacturing costs equal a. $2,060,000. b. $2,054,000. c. $1,860,000. d. $2,480,000. Assume your answer to question 122 above is $2,000,000. Cost of goods manufactured equals a. $1,992,000. b. $1,994,000. c. $2,006,000. d. $2,008,000. Assume your answer to question 123 above is $2,040,000. The cost of goods sold is a. $2,046,000. b. $2,008,000. c. $2,032,000. d. $2,048,000.

20,000 40,000 18,000 12,000 40,000 32,000 1,000,000 460,000 150,000 50,000 400,000 420,000

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Use the following information for questions 125128: Raw materials inventory, January 1 Raw materials inventory, December 31 Work in process, January 1 Work in process, December 31 Finished goods, January 1 Finished goods, December 31 Raw materials purchases Direct labor Factory utilities Indirect labor Factory depreciation Selling and administrative expenses

30,000 60,000 27,000 18,000 60,000 48,000 1,500,000 690,000 225,000 75,000 600,000 630,000 Page 12 of 17

125.

Direct materials used is a. $1,590,000. b. $1,530,000. c. $1,500,000. d. $1,470,000. Assume your answer to question 125 above is $1,500,000. Total manufacturing costs equal a. $3,090,000. b. $3,081,000. c. $2,790,000. d. $3,720,000.

126.

127. Assume your answer to question 126 above is $3,000,000. Cost of goods manufactured equals a. $2,988,000. b. $2,991,000. c. $3,009,000. d. $3,012,000. 128. Assume your answer to question 127 above is $3,060,000. The cost of goods sold is a. $3,069,000. b. $3,012,000. c. $3,048,000. d. $3,072,000. Samson Company reported total manufacturing costs of $130,000, manufacturing overhead totaling $26,000, and direct materials totaling $32,000. How much is direct labor cost? a. Cannot be determined from the information provided. b. $188,000 c. $58,000 d. $72,000 Given the following data for Mehring Company, manufactured: Direct materials used $180,000 Direct labor 75,000 Manufacturing overhead 225,000 Operating expenses 263,000 (A) (B) a. $465,000 $495,000 b. $480,000 $465,000 c. $480,000 $495,000 d. $495,000 $510,000 compute (A) total manufacturing costs and (B) costs of goods Beginning work in process Ending work in process Beginning finished goods Ending finished goods $30,000 15,000 38,000 23,000

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Penner Company reported total manufacturing costs of $195,000, manufacturing overhead totaling $39,000, and direct materials totaling $48,000. How much is direct labor cost? a. Cannot be determined from the information provided. b. $282,000 c. $87,000 d. $108,000 Given the following data for Glennon Company, manufactured: Direct materials used $240,000 Direct labor 100,000 Manufacturing overhead 300,000 Operating expenses 350,000 compute (A) total manufacturing costs and (B) costs of goods Beginning work in process Ending work in process Beginning finished goods Ending finished goods $40,000 20,000 50,000 30,000 Page 13 of 17

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a. b. c. d. 133.

(A) $620,000 $640,000 $640,000 $660,000

(B) $660,000 $620,000 $660,000 $680,000

Which one of the following does not appear on the balance sheet of a manufacturing company? a. Finished goods inventory b. Work in process inventory c. Cost of goods manufactured d. Raw materials inventory The equivalent of finished goods inventory for a merchandising firm is referred to as a. purchases. b. cost of goods purchased. c. merchandise inventory. d. raw materials inventory. What term describes all activities associated with providing a product or service? a. The manufacturing chain b. The product chain c. The supply chain d. The value chain How have many companies significantly lowered inventory levels and costs? a. They use activity-based costing. b. They utilize an enterprise resource planning system. c. They have a just-in-time method. d. They focus on a total quality management system. Which one of the following managerial accounting approaches attempts to allocate manu-facturing overhead in a more meaningful fashion? a. Theory of constraints b. Just-in-time inventory c. Activity-based costing d. Total-quality management What is one primary benefit of an enterprise resource planning (ERP) system? a. It reduces inventory levels. b. It permits companies to be more streamlined in production. c. It replaces research and development in a company. d. It requires an increased emphasis on product quality. What is balanced in the balanced scorecard approach? a. The number of products produced b. The emphasis on financial and non-financial performance measurements c. The amount of costs allocated to products d. The number of defects found on each product For what purpose is the theory of constraints used? a. To reduce product defects b. To balance performance measurement c. To identify and manage constraints that bottle-neck operations d. To reduce inventory levels Which one of the following characteristics would likely be associated with a just-in-time inventory method? a. Ending inventory of work in process that would allow several production runs Page 14 of 17

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b. A backlog of inventory orders not yet shipped c. Minimal finished goods inventory on hand d. An understanding with customers that they may come to the showroom and select from inventory on hand 142. Which one of the following is a cost that would not likely be associated with computer-integrated manufacturing? a. Manufacturing overhead associated with allocation of equipment depreciation b. Direct labor costs of a welder on the production floor c. Manufacturing overhead associated with allocation of the plant lease to the latest production run d. Direct materials cost with several fuse plates for a new automobile Which one of the following is an activity not associated with TQM? a. Tightening the bolts on a chassis so that the frame will not drop out b. Redesigning the gas tank after fuel efficiency standards are not being met c. Verifying the 10 check points associated with producing the highest quality loaf of bread d. Ensuring that the mattress just manufactured meets the standard of comfort of a random factory line worker What is ERPs primary benefit? a. It can eliminate stand alone systems that do not share information easily for manage-ments use. b. It allows management to rely on the simplest way to utilize information systems in a manufacturing environment. c. It permits line workers to perform accounting and marketing tasks. d. It calculates year end bonuses to a precision not available in traditional information systems management. Some companies implement systems to reduce defects in finished products with the goal of achieving zero defects. What are these systems called? a. Activity-based costing systems b. Enterprise resource planning systems c. Value chain systems d. Total quality management systems Many companies now manufacture products that are untouched by human hands. What do they use to achieve this? a. Activity-based costing b. Computer-integrated manufacturing c. Enterprise resource planning systems d. Total quality management systems When a company prepares a worksheet for a manufacturing company, to which column is the Indirect Labor account extended? a. To the adjustment columns b. To the income statement columns c. To the cost of goods manufactured columns d. To the balance sheet columns When a worksheet is prepared for a manufacturing company, an offsetting entry must be made to balance the cost of goods manufactured columns. Where does the offsetting entry appear? a. In the balance sheet debit column b. In the income statement debit column c. In the balance sheet credit column d. In the income statement credit column Which one of the following accounts would not appear in the cost of goods manufactured columns of a worksheet? a. Ending Work in Process Inventory b. Ending Finished Goods Inventory c. Raw Materials Inventory Page 15 of 17

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When making closing entries for a manufacturing company, to which account do all accounts that appear on the cost of goods manufactured schedule get closed? a. Income Summary b. Materials, Labor, and Overhead c. Manufacturing Summary d. Finished Goods Inventory Financial and managerial accounting are similar in that both a. have the same primary users. b. produce general-purpose reports. c. have reports that are prepared quarterly and annually. d. deal with the economic events of an enterprise. The function that pertains to keeping the activities of the enterprise on track is a. planning. b. directing. c. controlling. d. accounting. Property taxes on a manufacturing plant are an element of a Product Cost Period Cost a. Yes No b. Yes Yes c. No Yes d. No No For a manufacturing company, which of the following is an example of a period cost rather than a product cost? a. Depreciation on factory equipment b. Wages of salespersons c. Wages of machine operators d. Insurance on factory equipment For a manufacturing firm, cost of goods available for sale is computed by adding the beginning finished goods inventory to a. cost of goods purchased. b. cost of goods manufactured. c. net purchases. d. total manufacturing costs. If the cost of goods manufactured is less than the cost of goods sold, which of the following is correct? a. Finished Goods Inventory has increased. b. Work in Process Inventory has increased. c. Finished Goods Inventory has decreased. d. Work in Process Inventory has decreased. The principal difference between a merchandising and a manufacturing income statement is the a. cost of goods sold section. b. extraordinary item section. c. operating expense section. d. revenue section. If the total manufacturing costs are greater than the cost of goods manufactured, which of the following is correct? a. Work in Process Inventory has increased. b. Finished Goods Inventory has increased. Page 16 of 17

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c. Work in Process Inventory has decreased. d. Finished Goods Inventory has decreased. 159. The sum of the direct materials costs, direct labor costs, and manufacturing overhead incurred is the a. cost of goods manufactured. b. total manufacturing overhead. c. total manufacturing costs. d. total cost of work in process. The inventory accounts that show the cost of completed goods on hand and the costs applicable to production that is only partially completed are, respectively a. Work in Process Inventory and Raw Materials Inventory. b. Finished Goods Inventory and Raw Materials Inventory. c. Finished Goods Inventory and Work in Process Inventory. d. Raw Materials Inventory and Work in Process Inventory.

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