Chapter 14
MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES
True/False Questions
1. Managerial accounting is an activity that helps managers determine costs of products and
services, plan future activities, and compare actual to planned results.
2. Control is the process of setting goals and determining ways to achieve them.
3. Managerial accounting provides financial and nonfinancial information to an organization’s
managers and other internal decision makers.
4. One of the usual differences between financial and managerial accounting is the timeliness of
the information reported.
5. Managerial accounting information can be forwarded to the managers of a company quickly
since external auditors do not have to review it, and estimates and projections are acceptable.
6. Managerial accounting reports and information are used by external users and financial
accounting by internal users.
7. Both financial and managerial accounting rely on accepted principles that are enforced
through an extensive set of rules and guidelines.
8. Both financial and managerial accounting report monetary information; managerial accounting
also reports considerable nonmonetary information.
9. Both financial and managerial accounting affect user’s decisions and actions.
10. The focus of managerial accounting information is on the organization as a whole.
11. The concept of total quality management focuses on continuous improvement.
12. Just-in-time manufacturing is a system that acquires inventory and produces product only
when needed for an order.
13. When the attitude of continuous improvement exists throughout an organization, every
manager and employee is challenged to continuously experiment with new and improved
business practices.
14. The main goal of the lean business model is the elimination of waste while satisfying the
customer and providing a positive return to the company.
15. The management concept of customer orientation motivates a company to spend large
amounts on advertising to convince customers to buy the company’s standard products.
16. The management concept of customer orientation encourages a company to set up its
production system to produce large quantities of the same product for all customers.
17. Total quality management and just-in-time manufacturing focus on quality improvement as
well as on time customer deliveries.
18. Under a just-in-time manufacturing system, large quantities of inventory are accumulated
throughout the factory to be certain that components are available each time that they are
needed.
19. The balanced scorecard aids in continuous improvement by augmenting financial measures
with information on the drivers or indicators of future financial performance.
20. Adopting a lean business model should have no effect on cost in a modern manufacturing
environment.
21. The Institute of Management Accountants (IMA) Statement of Ethical Professional Practice
requires that management accountants be competent and act with integrity.
22. An employee overstates his reimbursable expenses in one period in order to receive needed
additional cash. Since he intends to reduce his expenses the next period by the current
overstatement, this act is not considered fraudulent.
23. Direct materials are not usually easily traced to a product.
24. Costs may be classified by many different cost classifications.
25. Straight line depreciation, rent and manager salaries are examples of variable costs.
26. Cost concepts such as variable, fixed, mixed, direct and indirect apply only to manufacturers
and not to service companies.
27. A variable cost changes in proportion to changes in the volume in activity.
28. Direct costs are incurred for the benefit of more than one cost object.
29. Product costs can refer to expenditures necessary to finish products and to the administrative
support during the time period.
30. Product costs are capitalized as inventory on the balance sheet and period costs are expenses
on the income statement.
31. The sales commission incurred based on units of product sold during the month is an
example of a product cost.
32. Period costs are incurred by purchasing merchandise or manufacturing finished goods.
33. Product costs can be classified as one of three types: direct materials, direct labor, or
overhead.
34. Product costs are expenditures necessary and integral to finished products.
35. Selling and administrative expenses are normally period costs.
36. The cost of partially completed products is included in the balance of the Work in Process
Inventory account.
37. Manufacturers usually have three inventories: raw materials, work in process, and finished
goods.
38. The main difference between the cost of goods sold of a manufacturer and a merchandiser is
that the merchandiser includes cost of goods manufactured rather than cost of goods purchased.
39. Raw materials that become part of a product and are identified with specific units or batches
of a product are called direct materials.
40. Raw materials inventory should not include indirect materials.
41. The Work in Process Inventory account is found only in the ledgers of merchandising
companies.
42. Raw materials purchased plus beginning raw materials inventory equals the ending balance
of raw materials inventory.
43. Four factors come together in production activity: beginning work in process inventory, raw
materials, direct labor, and factory overhead.
44. Newly completed units are combined with beginning finished goods inventory to make up
total ending work in process inventory.
45. The series of activities that add value to a company’s products or services is called a value
chain.
46. The raw materials inventory turnover is raw materials purchased divided by the average raw
materials inventory.
47. A manufacturer’s cost of goods manufactured is the sum of direct materials, direct labor, and
factory overhead costs incurred in producing products.
48. Indirect materials are accounted for as factory overhead because they are not clearly
identified with specific product units.
49. Indirect labor refers to the cost of the workers whose efforts are directly related to specific
units of product.
50. Although direct labor and raw materials costs are treated as manufacturing costs and
therefore make up part of the finished goods inventory cost, factory overhead is charged to
expense as it is incurred because it is a period cost.
51. Factory overhead includes selling and administrative expenses because they are indirect costs
of a product.
52. Prime costs consist of direct labor and factory overhead.
53. The schedule of cost of goods manufactured is also known as a manufacturing statement.
54. The schedule of cost of goods manufactured must be prepared monthly as it is a required
general-purpose financial statement.
55. Managerial accounting information:
A. Is used mainly by external users.
B. Involves gathering information about costs for planning and control decisions.
C. Is generally the only accounting information available to managers.
D. Can be used for control purposes but not for planning purposes.
E. Has little to do with controlling costs.
56. Managerial accounting is different from financial accounting in that:
A. Managerial accounting is more focused on the organization as a whole and financial
accounting is more focused on subdivisions of the organization.
B. Managerial accounting never includes nonmonetary information.
C. Managerial accounting includes many projections and estimates whereas financial accounting
has a minimum of predictions.
D. Managerial accounting is used extensively by investors, whereas financial accounting is used
only by creditors.
E. Managerial accounting is mainly used to set stock prices.
57. Flexibility of practice when applied to managerial accounting means that
A. The information must be presented in electronic format so that it is easily changed.
B. Managers must be willing to accept the information as the accountants present it to them,
rather than in the format they ask for.
C. The managerial accountants need to be on call twenty-four hours a day.
D. Managerial accounting system differ across companies depending on the nature of the
business and the arrangement of its internal operations.
E. Managers must be flexible with information provided in varying forms and using inconsistent
measures.
58. Which of the following items does not represent a difference between financial and
managerial accounting?
A. Users of the information.
B. Flexibility of reporting.
C. Timeliness of information.
D. Focus of the information.
E. Managerial accounting does not use the financial information from the financial accounting
system.
59. Which of the following items is not a management concept that was created to improve
companies’ performances?
A. Just-in-time manufacturing.
B. GAAP constraints and guidelines.
C. Total quality management.
D. Continuous improvement.
E. Customer orientation
60. The Malcolm Baldrige National Quality Award that encourages an emphasis on quality was
established by
A. The United Nations.
B. The U.S. Chamber of Commerce.
C. The Malcolm Baldrige Foundation.
D. The U.S. Congress.
E. The SEC.
61. Continuous improvement:
A. Encourages employees to maintain established business practices.
B. Strives to preserve acceptable levels of performance.
C. Rejects the notion of “good enough.”
D. Is not applicable to most businesses.
E. Is possible only in service businesses.
62. An attitude of constantly seeking ways to improve company operations, including customer
service, product quality, product features, the production process, and employee interactions, is
called:
A. Continuous improvement.
B. Customer orientation.
C. Just-in-time.
D. Theory of constraints.
E. Total quality measurement.
63. A management concept based on an understanding of the changing wants and needs of
customers, and which leads to flexible product designs and production processes, is called:
A. Continuous improvement.
B. Customer orientation.
C. Just-in-time.
D. Theory of constraints.
E. Total quality management.
64. An approach to managing inventories and production operations such that units of materials
and products are obtained and provided only as they are needed is called:
A. Continuous improvement.
B. Customer orientation.
C. Just-in-time manufacturing.
D. Theory of constraints.
E. Total quality management.
65. A management concept that seeks to uncover and eliminate waste in all aspects of business
activities is called:
A. Continuous operations.
B. Customer orientation.
C. Just-in-time.
D. Theory of constraints.
E. Total quality management.
66. The model whose goal is to eliminate waste while satisfying the customer and providing a
positive return to the company is:
A. Just in time manufacturing model.
B. Managerial accounting model.
C. Corporate social responsibility model.
D. Continuous improvement model.
E. Lean business model.
67. Jenny, an employee of Toucan Company, used company assets for her own personal gain.
This is an example of
A. embezzlement.
B. fraud.
C. internal control.
D. ethics.
E. employment perks.
68. An employee is dissatisfied with the resolution of an ethical conflict with his supervisor at
his place of employment. According to the Institute of Management Accountants, the employee’s
next step should be to
A. contact the IMA.
B. contact the next level of management who is not involved in the ethical conflict.
C. make the president of the company aware of the ethical conflict.
D. report the incident to the State Board of Accountancy.
E. resign from the company.
69. A direct cost is a cost that is:
A. Identifiable as controllable.
B. Traceable to the company as a whole.
C. Does not change with the volume of activity.
D. Traceable to a single cost object.
E. Traceable to multiple cost objects.
70. Classifying costs by behavior with changes in volume of activity involves:
A. Identifying fixed cost and variable cost.
B. Identifying cost of goods sold and operating costs.
C. Identifying costs as financial or managerial.
D. Identifying costs in a physical manner.
E. Identifying both quantitative and qualitative cost factors.
71. A classification of costs that determines whether a cost is expensed to the income statement
or capitalized to inventory is:
A. Fixed versus variable.
B. Direct versus indirect.
C. Financial versus managerial.
D. Service versus manufacturing.
E. Product versus period.
72. A fixed cost:
A. Requires the future outlay of cash and is relevant for future decision making.
B. Does not change with changes in the volume of activity within the relevant range.
C. Is directly traceable to a cost object.
D. Changes with changes in the volume of activity within the relevant range.
E. Is irrelevant for cost-volume-profit and short-term decision making.
73. Last year, Wesson Company sold 10,000 units of its only product. If sales increase by 12% in
the current year, how will unit variable cost and unit fixed cost be affected?
Unit Variable Cost Unit Fixed Cost
A) Remains constant Remains constant
B) Increases Decreases
C) Decreases Remains constant
D) Remains constant Decreases
E) Remains constant Increases
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
74. Last year, Gordon Company sold 20,000 units of its only product. If sales increase by 20% in
the current year, how will unit variable cost and total fixed cost be affected?
Unit Variable Cost Total Fixed Cost
A) Remains constant Remains constant
B) Increases Decreases
C) Decreases Remains constant
D) Remains constant Decreases
E) Remains constant Increases
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
75. Last year, Flash Company sold 15,000 units of its only product. If sales decreased by 17% in
the current year, how will total variable cost and total fixed cost be affected?
Total Variable Cost Total Fixed Cost
A) Remains constant Remains constant
B) Increases Decreases
C) Decreases Remains constant
D) Remains constant Decreases
E) Remains constant Increases
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
76. Period costs for a manufacturing company would flow directly to:
A. The income statement as an expense.
B. Factory overhead.
C. The balance sheet as inventory.
D. Cost of goods sold on the income statement.
E. The current schedule of cost of goods manufactured.
77. For product costs associated with a particular product to be reported on the income
statement:
A. The product must be transferred to Finished Goods Inventory.
B. The product must still be in Work in Process Inventory.
C. The product must be sold.
D. The product may be in any of the manufacturer’s inventory accounts.
E. The company must expect to sell the product during the next twelve months.
78. Costs that are capitalized as inventory when they are incurred are called:
A. Period costs.
B. Product costs.
C. General costs.
D. Administrative costs.
E. Fixed costs.
79. Costs that flow directly to the income statement as expenses are called:
A. Period costs.
B. Product costs.
C. General costs.
D. Balance sheet costs.
E. Capitalized costs.
80. Marshall Corporation incurred costs for materials and labor needed to manufacture its
products. These costs are an example of:
A. Period costs.
B. Product costs.
C. General costs.
D. Balance sheet costs.
E. Capitalized costs.
81. Product costs:
A. Are expenditures necessary and integral to finished products.
B. Are expenditures identified more with a time period rather than with units of product.
C. Include selling and administrative expenses.
D. Are expensed on the income statement when incurred.
E. Are moved to the income statement for any unsold inventory at the end of the year.
82. Products that have been completed and are ready to be sold by the manufacturer are called:
A. Finished goods inventory.
B. Work in Process inventory.
C. Raw materials inventory.
D. Cost of goods sold.
E. Factory supplies.
83. Goods a company acquires to use in making products are called:
A. Cost of goods sold.
B. Raw materials inventory.
C. Finished goods inventory.
D. Work in Process inventory.
E. Conversion costs.
84. Products that are in the process of being manufactured but are not yet complete are called:
A. Raw materials inventory.
B. Conversion costs.
C. Cost of goods sold.
D. Work in Process inventory.
E. Finished goods inventory.
85. Another title for work in process inventory is:
A. Indirect materials inventory.
B. Goods in process inventory.
C. Conversion costs.
D. Direct materials inventory.
E. Raw materials inventory.
86. Which of the following represents the correct formula for calculating raw materials inventory
turnover for a manufacturer?
A. Raw materials purchased/Average raw materials inventory.
B. Average raw materials inventory/Raw materials used.
C. Raw materials used/Average raw materials inventory.
D. Ending raw materials/Raw materials used * 365.
E. Raw materials used/Beginning raw materials inventory *365.
87. Which of the following statements is correct concerning the Days’ sales in raw materials
inventory?
A. A measure of how long it takes raw materials to be used in production.
B. The ratio is not useful for a manufacturer.
C. Reveals how many times a company turns over its raw materials inventory in a period.
D. Most companies generally prefer a higher number of days’ sales in raw materials inventory.
E. Is calculated by taking the Raw materials used/Average raw materials inventory .
88. The cost of workers who assist in or supervise the manufacturing process, not linked to
specific units of product is called:
A. Unspecified labor.
B. Direct labor.
C. Indirect labor.
D. Basic labor.
E. Joint labor.
89. Factory overhead costs may include all of the following except:
A. Indirect labor costs.
B. Indirect material costs.
C. Selling costs.
D. Assembly supplies.
E. Factory rent.
90. Labor costs that are clearly associated with specific units of product because the labor is
used to convert raw materials into finished products are called:
A. Contracted labor.
B. Direct labor.
C. Indirect labor.
D. Finished labor.
E. All labor.
91. Manufacturing costs other than direct materials and direct labor, and are not readily traceable
to specific units or batches of production are called:
A. Administrative expenses.
B. Nonmanufacturing costs.
C. Prime costs.
D. Factory overhead.
E. Preproduction costs.
92. Materials that are used in manufacturing but are not clearly identified with specific product
units are called:
A. Secondary materials.
B. General materials.
C. Direct materials.
D. Indirect materials.
E. Materials inventory.
93. The salary paid to the assembly line supervisor would normally be classified as:
A. Direct labor.
B. Indirect labor.
C. A period cost.
D. A general cost.
E. An assembly cost.
94. Which of the following items appears only in a manufacturing company’s financial
statements?
A. Cost of goods sold.
B. Cost of goods manufactured.
C. Goods available for sale.
D. Gross profit.
E. Net income.
95. Which of the following costs is not included in factory overhead?
A. Payroll taxes on the wages of factory supervisors.
B. Indirect labor.
C. Depreciation of manufacturing equipment.
D. Manufacturing supplies used.
E. Direct materials.
96. Which of the following should not be included in direct materials costs?
A. Invoice costs of direct materials.
B. Delivery charges on shipments to customers.
C. Materials storage costs.
D. Materials handling costs.
E. Incoming freight charges.
97. Raw materials that are tangible components of the finished product and can be separately and
readily traced through the manufacturing process are called:
A. Raw materials sold.
B. Chargeable materials.
C. Work in process.
D. Indirect materials.
E. Direct materials.
98. The three major cost components of manufacturing a product are:
A. Marketing, selling, and administrative costs.
B. Indirect labor, indirect materials, and fixed expenses.
C. Direct materials, direct labor, and factory overhead.
D. Product costs, period costs, and variable costs.
E. General, selling, and administrative costs.
99. Which of the following costs would not be classified as factory overhead?
A. Property taxes on maintenance machinery.
B. Insurance on factory building.
C. Wages of the factory janitor.
D. Rubber for the soles of shoes produced.
E. Small tools used in production.
100. A manufacturer’s total cost of making and finishing products in the period is called:
A. Ending finished goods inventory.
B. Total manufacturing costs.
C. Ending work in process inventory.
D. Cost of goods manufactured.
E. Cost of goods sold.
101. A manufacturing firm’s cost of goods manufactured is equivalent to a merchandising firm’s:
A. Cost of goods sold.
B. Cost of goods purchased.
C. Cost of goods available.
D. Beginning merchandise inventory.
E. Ending merchandise inventory.
102. Which one of the following items is normally not a manufacturing cost?
A. Direct materials.
B. Factory overhead.
C. General and administrative expenses.
D. Direct labor.
E. Conversion cost.
103. Which of the following is not part of the materials activity in the flow of manufacturing
activities?
A. Beginning raw materials
B. Beginning work in process
C. Raw materials purchases
D. Raw materials available for use
E. Ending raw materials
104. Which of the following is not part of the production activity in the flow of manufacturing
activities?
A. Beginning Work in Process Inventory
B. Cost of goods manufactured
C. Direct labor
D. Factory overhead
E. Total finished goods available for sale
105. Which of the following is not part of the sales activity in the flow of manufacturing
activities?
A. Beginning Finished Goods Inventory
B. Cost of goods manufactured
C. Total Finished Goods available for sale
D. Ending Work in Process Inventory
E. Total finished goods available for sale
106. A manufacturing company has a beginning finished goods inventory of $14,600, raw
material purchases of $18,000, cost of goods manufactured of $32,500, and an ending finished
goods inventory of $17,800. The cost of goods sold for this company is:
A. $21,200.
B. $29,300.
C. $32,500.
D. $47,100.
E. $27,600.
107. A manufacturing company has a beginning finished goods inventory of $28,300, cost of
goods manufactured of $58,500, and an ending finished goods inventory of $27,600. The cost of
goods sold for this company is:
A. $114,400.
B. $57,800.
C. $2,600.
D. $86,100.
E. $59,200.
108. Romeo Corporation has accumulated the following accounting data for the year:
Finished goods inventory, January 1 ………. $3,200
Finished goods inventory, December 31 …… 4,000
Total cost of goods sold ……………………. 14,200
The cost of goods manufactured for the year is:
A. $21,400.
B. $11,000.
C. $15,000.
D. $17,400.
E. $10,200.
109. Mustang Corporation has accumulated the following accounting data for the month of April:
Finished goods inventory, April 1 …. $30,200
Finished goods inventory, April 30 … 24,600
Total cost of goods manufactured……. 114,500
The cost of goods sold for the year is:
A. $169,300.
B. $108,900.
C. $59,700.
D. $120,100.
E. $144,700.
110. A company’s prime costs total $3,000,000 and its conversion costs total $7,000,000. If direct
materials are $1,000,000 and factory overhead is $5,000,000, then direct labor is:
A. $4,000,000.
B. $14,000,000.
C. $2,000,000.
D. $1,000,000.
E. $3,000,000.
113. A schedule of cost of goods manufactured is also known as a:
A. Raw materials processed schedule.
B. Factory supplies used schedule.
C. Manufacturing statement.
D. Total finished goods statement.
E. Cost of goods sold schedule.
114. The following information relates to the manufacturing operations of the JNR Printing
Company for the year:
Beginning Ending
Raw materials inventory……………………… $ 57,000 $60,000
Finished goods………………………………… 68,000 60,000
The raw materials used in manufacturing during the year totaled $118,000. Raw materials
purchased during the year amount to:
A. $107,000.
B. $115,000.
C. $118,000.
D. $121,000
E. $126,000.
115. The following information relates to the manufacturing operations of the Abbra Publishing
Company for the year:
Beginning Ending
Raw materials inventory……………………… $ 547,000 $610,000
The raw materials used in manufacturing during the year totaled $1,018,000. Raw materials
purchased during the year amount to:
A. $955,000.
B. $892,000.
C. $1,565,000.
D. $408,000
E. $1,081,000.
116. Comet Company accumulated the following account information for the year:
Beginning raw materials inventory…….….. $6,000
Indirect materials cost……………..…………… 2,000
Indirect labor cost ……………………………..… 5,000
Maintenance of factory equipment............ 2,800
Direct labor cost……………………..…………… 7,000
Using the above information, total factory overhead costs would be:
A. $ 9,800.
B. $16,800.
C. $15,800.
D. $13,000.
E. $ 7,800.
117. Asteroid Industries accumulated the following cost information for the year:
Direct materials…………………………………… $16,000
Indirect materials……………………………….… 4,000
Indirect labor…………………….………………… 8,500
Factory depreciation……………………….……. 12,800
Direct labor……………………………………….… 37,000
Using the above information, total factory overhead costs would be:
A. $78,300.
B. $25,300.
C. $12,800.
D. $16,800.
E. $53,000.
118. The following information is available for the year ended December 31:
Beginning raw materials inventory…….….. $21,500
Raw materials purchases………………………. 74,000
Ending raw materials inventory…………….. 23,000
Office supplies expense…..…………………… 2,400
The amount of raw materials used in production for the year is:
A. $76,400.
B. $95,500.
C. $72,500.
D. $74,900.
E. $70,100.
119. The following information is available for the year ended December 31:
Beginning raw materials inventory…….….. $11,000
Raw materials purchases………………………. 86,000
Ending raw materials inventory…………….. 10,400
Manufacturing supplies expense…............ 900
The amount of raw materials used in production for the year is:
A. $87,500.
B. $85,700.
C. $86,900.
D. $85,400.
E. $86,600.
120. A financial report that summarizes the amounts and types of costs that were incurred in the
manufacturing process during the period is a:
A. Materials statement.
B. Managerial statement.
C. Schedule of cost of goods manufactured.
D. Merchandise schedule.
E. General-purpose statement.
121. If beginning and ending work in process inventories are $5,000 and $15,000, respectively,
and cost of goods manufactured is $170,000, what is the total manufacturing cost for the period?
A. $180,000.
B. $155,000.
C. $160,000.
D. $175,000.
E. $165,000.
122. Using the information below for Singing Dolls, Inc., determine the total manufacturing
costs incurred during the year:
Work in Process, January 1…..……………….. 50,000
Work in Process, December 31………………. 37,000
Direct materials used…………………………….. $12,500
Total Factory overhead……………………….…. 5,500
Direct labor used….…….………………………… 26,500
A. $13,000.
B. $44,500.
C. $57,500.
D. $94,500.
E. $89,000.
123. Using the information below for Singing Dolls, Inc., determine cost of goods manufactured
for the year:
Work in Process, January 1…..……………….. 50,000
Work in Process, December 31………………. 37,000
Total Factory overhead……………………….…. 5,500
Direct materials used…………………………….. $12,500
Direct labor used….…….………………………… 26,500
A. $13,000.
B. $44,500.
C. $57,500.
D. $94,500.
E. $52,000.
124. Using the information below for Laurels Company; determine the manufacturing costs
added during the current year:
Direct materials used…………………………….. $5,000
Direct Labor……………………….……………….. 7,000
Total Factory overhead ….…………………….. 5,100
Beginning work in process……………………. 3,000
Ending work in process…………………………. 4,000
A. $12,000.
B. $16,100.
C. $17,100.
D. $18,100.
E. $13,600.
125. Using the information below for Laurels Company; determine the cost of goods
manufactured during the current year:
Direct materials used….………………………… $5,000
Direct Labor……………………………..…………. 7,000
Total Factory overhead ………………………… 5,100
Beginning work in process…..……………….. 3,000
Ending work in process….…………………….. 4,000
A. $12,000.
B. $16,100.
C. $17,100.
D. $18,100.
E. $13,600.
126. Using the information below for Sundar Company; determine the total manufacturing costs
added during the current year:
Direct materials used…………………………….. $19,000
Direct labor used……………………..…………… 24,500
Factory overhead ……………………………..….. 55,100
Beginning work in process……………………. 10,700
Ending work in process…………………………. 11,300
A. $98,600.
B. $43,500.
C. $98,000.
D. $42,900.
E. $79,000.
127. Using the information below for Sundar Company; determine the cost of goods
manufactured during the current year:
Direct materials used…………………………….. $19,000
Direct labor used……………………..…………… 24,500
Factory overhead ……………………………..….. 55,100
Beginning work in process……………………. 10,700
Ending work in process…………………………. 11,300
A. $98,600.
B. $43,500.
C. $98,000.
D. $42,900.
E. $79,000.
128. Total manufacturing costs incurred during the year do not include:
A. Direct materials used.
B. Factory supplies used.
C. Work in Process inventory, beginning balance.
D. Direct labor.
E. Depreciation of factory machinery.
129. Which of the following accounts would appear on a schedule of cost of goods
manufactured?
A. Raw materials, factory insurance expired, indirect labor.
B. Raw materials, work in process, finished goods.
C. Direct labor, delivery equipment, and depreciation on factory equipment.
D. Direct materials, indirect labor, sales salaries.
E. Direct labor, factory repairs and maintenance, wages payable.
130. Which of the following represents the correct formula for calculating cost of goods
manufactured?
A. Direct materials used + direct labor + factory overhead + beginning work in process + ending
work in process.
B. Direct materials used + direct labor + factory overhead + beginning work in process – ending
work in process.
C. Direct materials used + direct labor + factory overhead – beginning work in process + ending
work in process.
D. Direct materials used + direct labor + factory overhead – beginning work in process – ending
work in process.
E. Direct materials used + direct labor – factory overhead + beginning work in process – ending
work in process.
131. Current information for the Healey Company follows:
Beginning raw materials inventory…………. $15,200
Raw material purchases………………………… 60,000
Ending raw materials inventory……………… 16,600
Beginning work in process inventory……... 22,400
Ending work in process inventory………….. 28,000
Direct labor…..……….……………………………. 42,800
Total factory overhead….………………………. 30,000
All raw materials used were traceable to specific units of product. Healey Company’s direct
materials used for the year is:
A. $58,600.
B. $60,000.
C. $75,200.
D. $76,600.
E. $61,400.
132. Current information for the Healey Company follows:
Beginning raw materials inventory…………. $15,200
Raw material purchases…………….………….. 60,000
Ending raw materials inventory……………… 16,600
Beginning work in process inventory......... 22,400
Ending work in process inventory………….. 28,000
Direct labor…..……….……………………………. 42,800
Total factory overhead….………………………. 30,000
All raw materials used were traceable to specific units of product. Healey Company’s total
manufacturing costs for the year are:
A. $125,800.
B. $128,600.
C. $131,400.
D. $137,000.
E. $139,000.
133. Current information for the Healey Company follows:
Beginning raw materials inventory…………. $15,200
Raw material purchases…………….………….. 60,000
Ending raw materials inventory……………… 16,600
Beginning work in process inventory......... 22,400
Ending work in process inventory………….. 28,000
Direct labor…..……….……………………………. 42,800
Total factory overhead….………………………. 30,000
All raw materials used were traceable to specific units of product. Healey Company’s Cost of
Goods Manufactured for the year is:
A. $125,800.
B. $128,600.
C. $131,400.
D. $137,000.
E. $139,000.
134. Current information for the Stellar Corporation follows:
Beginning work in process inventory......... 17,900
Ending work in process inventory………….. 19,300
Direct materials………………………………..….. 147,000
Direct labor…..……….……………………………. 85,000
Total factory overhead….………………………. 63,100
Stellar Corporation’s Cost of Goods Manufactured for the year is:
A. $295,100.
B. $296,500.
C. $313,000.
D. $275,800.
E. $293,700.
135. Use the following data to determine the cost of goods manufactured.
Beginning finished goods inventory……….. $ 10,800
Direct labor…..……….……………………………. 30,600
Beginning work in process inventory……… 7,200
General and administrative expenses………. 13,500
Direct materials used…………………………….. 40,500
Ending work in process inventory………..... 9,000
Indirect labor………………………….……………. 6,300
Ending finished goods inventory……………. 9,500
Indirect materials ….….…………………………. 13,500
Depreciation—factory equipment…........... 7,500
A. $102,000.
B. $110,100.
C. $ 96,600.
D. $113,700.
E. $100,200.
136. Use the following data to compute total factory overhead costs for the month.
Sales commissions……………………….. 10,800
Direct labor…..……….……………………………. 39,600
Indirect materials…………………………. 15,200
Factory manager salaries………………………. 7,200
Factory supplies…………………………………… 9,000
Indirect labor………………………….……………. 6,300
Depreciation—office equipment………… 5,000
Direct materials…………………………… 40,500
Corporate office salaries……………………….. 42,500
Depreciation—factory equipment…........... 7,500
A. $141,100.
B. $125,300.
C. $ 45,200.
D. $ 84,800.
E. $ 58,300.
137. Use the following data to compute total manufacturing costs for the month.
Sales commissions……………………….. 10,800
Direct labor…..……….……………………………. 39,600
Indirect materials…………………………. 15,200
Factory manager salaries………………………. 7,200
Factory supplies…………………………………… 9,000
Indirect labor………………………….……………. 6,300
Depreciation—office equipment………… 5,000
Direct materials…………………………… 40,500
Corporate office salaries……………………….. 42,500
Depreciation—factory equipment…........... 7,500
A. $141,100.
B. $125,300.
C. $ 45,200.
D. $ 84,800.
E. $ 58,300.
138. Use the following information to compute the cost of goods manufactured:
Beginning raw materials ………………..…….. $5,500
Ending raw materials……………………………. 4,000
Direct labor…..……….……………………………. 12,250
Raw material purchases ……………………….. 7,400
Depreciation on factory equipment............ 6,500
Factory repairs and maintenance……….…… 3,300
Beginning finished goods inventory……….. 10,200
Ending finished goods inventory……………. 8,900
Beginning work in process inventory......... 5,700
Ending work in process inventory………….. 6,300
A. $36,650.
B. $30,950.
C. $30,650.
D. $30,350.
E. $31,650.
139. The following information pertains to the Packer Corporation. Calculate the cost of goods
sold for the period:
Beginning Raw Materials $30,000
Ending Raw Materials $70,000
Beginning Work in Process Inventory $40,000
Ending Work in Process Inventory $46,000
Beginning Finished Goods Inventory $72,000
Ending Finished Goods Inventory $68,000
Cost of Goods Manufactured for the period $246,000
A. $250,000.
B. $290,000.
C. $242,000.
D. $258,000.
E. $246,000.
140. The following information pertains to the Frameworks Corporation for May. Calculate the
cost of goods sold for the period:
Beginning Finished Goods Inventory $19,500
Ending Finished Goods Inventory $18,000
Cost of Goods Manufactured $126,800
A. $164,300.
B. $126,800.
C. $125,300.
D. $146,300.
E. $128,300.
141. Using the information below, calculate the cost of goods manufactured for the period.
Beginning Raw Materials Inventory $25,000
Ending Raw Materials Inventory $30,000
Beginning Work in Process Inventory $55,000
Ending Work in Process Inventory $64,000
Beginning Finished Goods Inventory $80,000
Ending Finished Goods Inventory $67,000
Cost of Goods Sold for the period $540,000
Sales revenues for the period $1,254,000
Operating expenses for the period $232,000
A. $553,000.
B. $536,000.
C. $549,000.
D. $527,000.
E. $525,000.
142. Using the information below, calculate gross profit for the period.
Beginning Raw Materials Inventory $25,000
Ending Direct Materials Inventory $30,000
Beginning Work in Process Inventory $55,000
Ending Work in Process Inventory $64,000
Beginning Finished Goods Inventory $80,000
Ending Finished Goods Inventory $67,000
Cost of Goods Sold for the period $540,000
Sales revenues for the period $1,254,000
Operating expenses for the period
$232,000
A. $714,000.
B. $482,000.
C. $1,022,000.
D. $187,000.
E. $727,000.
143. Using the information below, calculate cost of goods sold for the period.
Sales revenues for the period $1,304,000
Operating expenses for the period
$239,000
Finished Goods Inventory, January 1
36,000
Finished Goods Inventory, December 31
41,000
Cost of goods manufactured for the period $540,000
A. $774,000.
B. $769,000.
C. $530,000.
D. $535,000.
E. $448,000.
144. Using the information below, calculate gross profit for the period.
Sales revenues for the period $1,304,000
Operating expenses for the period
$239,000
Finished Goods Inventory, January 1
36,000
Finished Goods Inventory, December 31
41,000
Cost of goods manufactured for the period $540,000
A. $774,000.
B. $769,000.
C. $530,000.
D. $535,000.
E. $448,000.
145. Using the information below, calculate net income for the period.
Sales revenues for the period $1,304,000
Operating expenses for the period
$239,000
Finished Goods Inventory, January 1
36,000
Finished Goods Inventory, December 31
41,000
Cost of goods manufactured for the period $540,000
A. $774,000.
B. $769,000.
C. $530,000.
D. $535,000.
E. $448,000.
146. An internal control system consists of the policies and procedures managers use to do all of
the following except:
A. Urge adherence to company policies.
B. Promote efficient operations.
C. Ensure reliable accounting.
D. Determine pricing for products.
E. Protect assets.
147. The schedule of cost of goods manufactured is divided into four parts consisting of all of the
following except:
A. Direct materials.
B. Computation of cost of goods sold.
C. Overhead.
D. Computation of cost of goods manufactured.
E. Direct labor.
148. All of the following statements regarding manufacturing costs are true except:
A. Direct material costs that increase in total with volume of production are called variable costs.
B. The reporting of fixed and variable costs separately is not helpful to managers in analyzing
cost behavior.
C. When overhead costs vary with production, they are called variable overhead.
D. When overhead costs don’t vary with production, they are called fixed overhead.
E. Overhead can be both variable and fixed.
149. Using the information below, compute the raw materials inventory turnover:
Raw Materials Used $85,500
Beginning Raw Materials Inventory $8,000
Ending Raw Materials Inventory $9,000
A. 11.02.
B. 382.02.
C. 10.06.
D. 9.94.
E. 9.50.
150. Using the information below, compute the Days’ sales in raw materials inventory:
Raw Materials Used $85,500
Beginning Raw Materials Inventory $8,000
Ending Raw Materials Inventory $9,000
A. 11.02.
B. 36.3.
C. 10.06.
D. 9.94.
E. 38.4.
151. Using the information below, compute the raw materials inventory turnover:
Raw Materials Used $121,600
Beginning Raw Materials Inventory $18,000
Ending Raw Materials Inventory $20,200
A. 6.76.
B. 6.02.
C. 54.0.
D. 60.6.
E. 6.37.
152. Using the information below, compute the Days’ sales in raw materials inventory:
Raw Materials Used $121,600
Beginning Raw Materials Inventory $18,000
Ending Raw Materials Inventory $20,200
A. 6.76.
B. 6.02.
C. 54.0.
D. 60.6.
E. 6.37.
153. Just-in-time manufacturing techniques can be useful in _____________ days’ sales in raw
materials inventory.
A. keeping constant.
B. changing upward.
C. adding to.
D. lowering.
E. increasing.
154. Which of the following statements is true regarding product and period costs?
A. Office salaries expense and factory maintenance are both product costs.
B. Office rent is a product cost and supervisors’ salaries expense is a period cost.
C. Factory rent is a product cost and advertising expense is a period cost.
D. Delivery expense is a product cost and indirect materials is a period cost.
E. Sales commissions and indirect labor are both period costs.
155. A company’s prime costs total $4,500,000 and its conversion costs total $5,500,000. If
direct materials are $2,000,000, calculate the overhead costs:
A. $2,500,000.
B. $3,500,000.
C. $2,000,000.
D. $1,000,000.
E. $3,000,000.
156. If the cost of the beginning work in process inventory is $60,000, costs of goods
manufactured is $890,000, direct materials cost is $330,000, direct labor cost is $210,000, and
overhead cost is $315,000, calculate the ending work in process inventory:
A. $35,000.
B. $25,000.
C. $45,000.
D. $350,000.
E. $355,000.
157. If the cost of the beginning work in process inventory is $60,000, direct materials cost is
$350,000, direct labor cost is $216,000, and overhead cost is $319,000, and the ending work in
process inventory is $55,000, calculate the cost of goods manufactured:
A. $1,000,000.
B. $571,000.
C. $885,000.
D. $890,000.
E. $945,000.
158. Calculate the cost of goods manufactured using the following information:
Direct materials $298,500
Direct labor 132,000
Factory overhead costs 264,000
General and administrative expenses 85,500
Selling expenses 48,800
Work in Process inventory, January 1 118,500
Work in Process inventory, December 31 125,900
Finished goods inventory, January 1 232,100
Finished goods inventory, December 31 238,700
A. $680,500.
B. $701,900.
C. $687,100.
D. $674,600.
E. $772,600.
159. Calculate the cost of goods sold using the following information:
Direct materials $298,500
Direct labor 132,000
Factory overhead costs 264,000
General and administrative expenses 85,500
Selling expenses 48,800
Work in Process inventory, January 1 118,500
Work in Process inventory, December 31 125,900
Finished goods inventory, January 1 232,100
Finished goods inventory, December 31 238,700
A. $680,500.
B. $701,900.
C. $687,100.
D. $674,600.
E. $772,600.
160. Match the following terms with the appropriate definition.
__________ (1) Direct materials
__________ (2) Indirect costs
__________ (3) Product costs
__________ (4) Prime costs
__________ (5) Fixed costs
__________ (6) Direct labor
__________ (7) Period costs
__________ (8) Conversion costs
__________ (9) Factory overhead
__________ (10) Variable costs
(a) Costs that flow directly to the current income statement as expenses.
(b) Costs that change in proportion to changes in volume of activity.
(c) The efforts of employees who physically convert materials to finished products.
(d) Manufacturing expenditures that cannot be separately or readily traced to finished goods.
(e) Expenditures necessary and integral to finished products.
(f) Expenditures incurred in the process of converting raw materials to finished products;
include direct labor and factory overhead.
(g) Tangible components of a finished product separately and readily traced through the
manufacturing process.
(h) Expenditures directly associated with the manufacture of finished products; include direct
materials and direct labor.
(i) Costs that do not change in total with changes in the volume of activity.
(j) Costs that are incurred for the benefit of more than one cost object.
1. G; 2. J; 3. E; 4. H; 5. I; 6. C; 7. A; 8. F; 9. D; 10. B
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 14-C2
Learning Objective: 14-C3
Learning Objective: 14-P1
Topic: Cost Classification
Topic: Comparing Product and Period Costs
Topic: Income Statement
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161. Match the following terms to the appropriate definitions.
__________ (1) Prime costs
__________ (2) Continuous improvement
__________ (3) Raw materials inventory
__________ (4) Balanced scorecard
__________ (5) Just-in-time manufacturing
__________ (6) Work in Process inventory
__________ (7) Lean business model
__________ (8) Customer orientation
__________ (9) Managerial accounting
__________(10) Raw materials inventory turnover
(a) An idea that rejects the notions of “good enough” or “acceptable” and challenges
employees and managers to continually experiment with new and improved business
practices.
(b) Goods a company acquires to use in making products.
(c) Reveals how many times a company uses its raw materials inventory in production during a
period.
(d) A system that acquires inventory and produces only when needed.
(e) Aids in continuous improvement by augmenting financial measures with information on the
drivers or indicators of future financial performance along the four
dimensions of (1) financial, (2) customer, (3) internal business processes; (4) learning and
growth.
(f) Expenditures directly associated with the manufacture of finished goods; includes direct
materials and direct labor.
(g) The idea that employees understand the changing needs and wants of their
customers and align their management and operating practices accordingly.
(h) Products in the process of being manufactured but not yet complete.
(i) A model whose goal is to eliminate waste while satisfying the customer and providing a
positive return to the company.
(j) An activity that provides financial and nonfinancial information to an organization’s
managers and other internal decision makers.
1. F; 2. A; 3. B; 4. E; 5. D; 6. H; 7. I; 8. G; 9. J; 10. C
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Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
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Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 14-A1
Learning Objective: 14-C1
Learning Objective: 14-C4
Learning Objective: 14-C6
Learning Objective: 14-P1
Topic: Raw Material Inventory Turnover and Days’ Sales
Topic: Purpose of Managerial Accounting
Topic: Balance Sheet
Topic: Trends in Managerial Accounting
Topic: Income Statement
162. For each of the characteristics below, identify whether it is a focus of financial accounting
or managerial accounting. Use the letter F to identify financial accounting and M to identify
managerial accounting.
_____ 1. Users are generally investors, creditors, analysts, and regulators.
_____ 2. Used to assist managers in making planning and control decisions.
_____ 3. Information is structured and controlled by GAAP.
_____ 4. Information is available quickly without the need to wait for an audit.
_____ 5. Information is mainly historical with some predictions.
_____ 6. Emphasis of the information is a company’s projects, processes, and divisions.
_____ 7. Information is mostly monetary, but includes nonmonetary information.
1. F; 2. M; 3. F; 4. M; 5. F; 6. M; 7. M
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 2 Medium
Learning Objective: 14-C1
Topic: Purpose of Managerial Accounting
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Short Answer Questions
163. Identify and describe the three categories of manufacturing costs.
164. What is managerial accounting and how is it used to aid decision makers?
165. There are many differences between financial and managerial accounting. Identify and
explain at least three of these differences.
166. Explain what is meant by the “lean business model” and why many businesses have adopted
it.
167. Define fraud and give at least two examples of employee fraud.
168. List the four goals of an internal control system.
169. An employee devises a payroll scheme that costs the employer $150. The employer
discovers the fraud but decides not to confront the employee since the amount of the fraud is
small. Discuss why this course of action is not advisable.
170. Define and contrast period costs and product costs. How are they reported in the financial
statements of a manufacturing company?
171. What are the three types of inventories that are carried by manufacturers? Describe each
type of inventory.
172. What is the main difference between the income statement of a manufacturer and that of a
merchandiser?
173. What does the days’ sales in raw materials inventory ratio reveal?
174. What are prime costs? What are conversion costs?
175. What are the components of the schedule of cost of goods manufactured? Describe each
component.
176. The following cost items relate to the Henning Company. Classify each cost as a variable
cost or a fixed cost by placing an X in the appropriate column. Each cost should be evaluated in
terms of the volume of units of finished products produced. Also indicate with an X for each item
if it is a product cost or a period cost.
Variable or fixed
cost?
Product or period cost?
Cost item Variable Fixed Product Period
Executive salary
Direct labor
Direct materials
Depreciation of
factory equipment
Indirect labor
Delivery expense
Television advertising
Indirect materials
177. For each item shown below, classify it as a product cost or a period cost, by placing an X in
the appropriate column. For each item that is a product cost, also indicate whether it is a direct
cost or an indirect cost with respect to a unit of finished product.
Product or period cost? Direct or indirect cost?
Cost item
Product
Period
Direct
Indirect
Administrative salaries
Direct labor
Advertising
Property tax on the factory
Factory maintenance
Direct materials
Depreciation on factory
equipment
Interest expense
Factory supplies
178. Marv’s Furniture and Fixtures produces seats for movie theaters. Listed below are selected
cost items for the seat production. Classify each cost as either fixed or variable, and either a
product or a period cost by placing an x in the appropriate boxes.
Cost by behavior Cost by function
Variable Fixed Product Period
Fabric for seats…………
Assembly labor……………………………
Factory property taxes……………..
Accounting staff salaries…………..
Sales office rent……………………
Sales manager’s salary……………..
Depreciation on factory
equipment………………………….
Sales commissions…………………
179. Brotherton Company is a manufacturer of Blu-ray discs. Place each of the following costs
in the appropriate column.
Product cost
Cost item
Period
cost
Direct
materials
Direct
labor
Factory
overhead
a. Factory maintenance salary, $40,000
b. Salary of factory supervisor, $70,000
c. Salary of production worker, $42,000
d. Salary of the company’s president,
$100,000
e. Television advertising, $25,000
f. Property tax on factory, $15,000
g. Sales commissions, $65,000
h. Depreciation on factory equipment,
$17,000
i. Plastic used in the manufacture of the
discs, $14,000
180. The following costs are incurred by Gonzalez Manufacturing Co. Classify each cost item as
either a period cost or a product cost. If the cost is a product cost, identify it as a prime and/or
conversion cost.
Period Cost
Product Cost
Prime Cost
Conversion
Cost
Factory property taxes…………..………….……….
Payroll taxes for assembly labor…........………..
Depreciation of factory equipment.......………..
Insurance on delivery vehicles…..……...……….
Indirect materials used……………………...……….
Wages of production workers...............……….
Production supervisor’s salary…………………….
Advertising……………….…………………….………..
Direct materials used………………………..……….
Sales salaries…………………………………………….
181. Walter Products and Sandburg Industries report the following information at December 31:
WALTER SANDBURG
Accounts Receivable…………………………………. $41,000 $68,000
Cash……………………………………………………….. 6,000 7,000
Finished Goods Inventory…………………………..
25,000
Work in Process Inventory………………………….
40,000
Merchandise Inventory……………..………………. 48,000
Prepaid Expenses………………………….………….. 1,000 2,000
Raw Materials Inventory…….…………………….. 21,000
Required:
(a) Which company is a manufacturer? Explain.
(b) Prepare the Current Asset Section of the Balance Sheet for the manufacturer.
182. Thornton Foods bakes and sells 2,000 dozen muffins each week to food service operations.
Among the costs are bakers’ salaries, $24,000; production management salaries, $16,000;
production equipment operating costs, $32,000; and flour and ingredient costs, $15,000. Using
this information, compute: (a) prime costs and (b) conversion costs.
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183. A manufacturing company’s finished goods inventory on January 1 was $68,000; cost of
goods manufactured was $147,000; and the December 31 finished goods inventory was $77,000.
What is the cost of goods sold for that year?
184. A manufacturing company’s beginning finished goods inventory was $29,000; cost of goods
manufactured was $316,000; and the ending finished goods inventory was $31,000. What is the
cost of goods sold for that year?
185. Calculate Cost of Goods Sold for the following two companies:
Beginning Inventory:
LEWIS, INC. MERCER CO.
Merchandise…………………………
$250,000
Finished Goods…………….………
$550,000
Cost of Goods Purchased……........
460,000
Cost of Goods Manufactured………
688,000
Ending Inventory:
Merchandise…………………………
128,000
Finished Goods…………….……… 350,000
186. The Tacky Company manufactures staples. Costs for October were direct labor, $84,000;
indirect labor, $36,700; direct materials, $55,900; factory maintenance, $4,800; factory utilities,
$3,200; and insurance on plant and equipment, $700. What is Tacky Company’s factory overhead
for October?
187. The Langston Company manufactures coats. Costs for February were as follows:
Direct materials $19,650
Direct labor 15,210
Factory insurance 950
Sales commissions 4,700
Corporate executive salaries 5,500
Factory supervisor salary 3,500
Indirect materials 1,920
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Required: Calculate the total manufacturing cost for February.
188. Information for Maxim Manufacturing is presented below. Compute both the cost of goods
manufactured and the cost of goods sold for Maxim Manufacturing.
Beginning raw materials inventory……………….. $36,800
Beginning work in process inventory…............. 21,200
Direct labor……………………….………………………. 81,000
Beginning finished goods inventory….………….. 64,000
Total factory overhead…………..……………………. 126,000
Raw materials purchased………..…………………… 21,500
Ending raw materials inventory………..………….. 40,000
Ending work in process inventory……………...... 20,000
Ending finished goods inventory………………….. 46,000
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189. Information for Underwood Industries is presented below. Compute the cost of goods
manufactured.
Beginning Ending
Raw materials inventory $26,800 30,100
Work in process inventory 41,200 39,000
Finished goods inventory 54,000 53,500
Raw materials purchased 93,500
Direct labor 61,000
Total factory overhead 117,300
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190. Information for Eastman Industries is presented below. Compute the cost of goods
manufactured.
Beginning work in process inventory………....... 21,200
Ending work in process inventory………............ 20,000
Raw materials used in production $46,800
Direct labor……………………….………………………. 81,000
Total factory overhead…………..……………………. 106,000
191. Use the following information to prepare the schedule of cost of goods manufactured for
Graffstone Company for the month ended June 30.
Work in Process inventory, May 31 ….............. $12,600
Work in Process inventory, June 30………………. 16,500
Direct materials used during June………………... 21,000
Direct labor used during June………………………. 31,000
Factory overhead:
Indirect material……………………………….……. 6,400
Indirect labor…………………………………..…….. 9,200
Factory rent…………………………………………… 12,000
Factory depreciation………………….…………… 15,000
Factory utilities……………………..………………. 18,400
192. Duncan Crafts manufactures specialty key chains for tourist attractions. On January 1, the
firm had 300 souvenir attraction disks used in the production of the chains that cost $3 each; and
600 completed key chains that cost $6 each. During the year Duncan Crafts purchased 1,500
souvenir disks costing $3 each and produced 1,100 key chains. Compute the total cost of raw
materials inventory at December 31.
193. Compute the ending work in process inventory for a manufacturer with the following
information.
Raw materials purchased 131,700
Raw materials used in production 65,400
Direct labor used 44,000
Total factory overhead used 101,600
Work in process inventory, beginning of year 32,500
Cost of goods manufactured 212,900
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194. The following items for Neptune Company are used to compute the cost of goods
manufactured and the cost of goods sold. Indicate how each item should be used in the
calculations by filling in the blanks with “+” if the item is to be added, “-” if the item is to be
subtracted, or “0” if the item is not used in the calculation. The first item is completed as an
example.
Cost of Goods Cost of Goods
Manufactured Sold
Beginning finished goods inventory…..…........... ___0___ __+__
Ending finished goods inventory….…….............. _______ ______
Direct labor………..…………….............................. _______ ______
Indirect labor…………………..……………................ _______ ______
Beginning work in process inventory................. _______ ______
Ending work in process inventory ….................. _______ ______
General and administrative expenses….………..... _______ ______
Indirect materials………………………………………... _______ ______
Beginning raw materials inventory….………........ _______ ______
Ending raw materials inventory…..……………...... _______ ______
Raw material purchases…..……………..…….......... _______ ______
Depreciation of factory building….……………...... _______ ______
Cost of goods manufactured _______ ______
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195. Information for Stanton, Inc., as of December 31 follows. Prepare a schedule of cost of
goods manufactured for the year ended December 31.
Administrative salaries…………………………………..... $ 35,000
Depreciation of factory equipment..….................... 25,000
Depreciation of delivery vehicles .......................... 6,000
Direct labor…………………………………………………….. 68,000
Factory supplies used………………..………................. 9,000
Finished goods inventory, January 1 .………..…....... 57,000
Finished goods inventory, December 31 ................ ?
Factory insurance……..……………..……….................. 15,500
Interest expense………………………………………....…... 12,000
Factory utilities ………………………………………………. 14,000
Factory maintenance.…………………..….................... 7,500
Raw materials inventory, January 1……..…............. 5,000
Raw materials inventory, December 31…............... 4,000
Raw material purchases ………………....................... 125,000
Rent on factory building..……………........................ 25,000
Repairs of factory equipment…………..……………..... 11,500
Sales commissions…………………............................. 37,500
Work in Process inventory, January 1 …................. 3,500
Work in Process inventory, December 31 ……......... 2,700
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196. Information for the Deuce Manufacturing Company follows. Compute the cost of goods
manufactured for this company.
Beginning raw materials inventory….…........... $ 53,200
Beginning work in process, inventory………….. 78,400
Ending raw materials inventory…………………… 58,100
Ending work in process, inventory………………. 98,000
Direct labor…………………………………………….…. 149,800
Total factory overhead…..…….…………………….. 105,000
Raw material purchases ………………..……………
210,000
197. Information for Jersey Metalworks as of December 31 follows. Prepare (a) the company’s
schedule of cost of goods manufactured for the year ended December 31; (b) prepare the
company’s income statement that reports separate categories for selling and general and
administrative expenses.
Administrative salaries expense…………………………. $ 135,000
Depreciation expense—Factory equipment............. 52,400
Depreciation expense—Delivery vehicles............... 36,200
Depreciation expense—Office equipment............... 24,800
Advertising expense…..………..………....................... 22,350
Direct labor…………………………………………………….. 268,000
Factory supplies used…..………..…........................... 12,000
Income taxes expense….…………………..…................ 91,500
Indirect labor……………………………………..…..…..….. 35,000
Indirect material……………..………............................ 24,000
Factory insurance…….………..……............................ 15,500
Factory utilities……………………………………………….. 14,000
Factory maintenance……………………………………..…. 7,500
Inventories
Raw materials inventory, January 1.….................. 32,000
Raw materials inventory, December 31................ 28,000
Work in Process inventory, January 1…................ 33,780
Work in Process inventory, December 31............. 37,460
Finished goods inventory, January 1……..……....... 56,970
Finished goods inventory, December 31..….......... 62,000
Raw materials purchases…..…..…............................ 325,000
Rent expense—Factory…………………………………….. 50,000
Rent expense—Office space…………..………….......... 24,000
Rent expense—Selling Space….……………............... 24,000
Sales salaries expense…………………………………...…. 97,500
Sales………………………………………………..…..…..…... 1,452,000
Sales discounts…..…………………..…......................... 29,000
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198. Martinez Company makes leather cowboy hats. Each hat requires ½ yard of leather to
produce. On December 31, 2014, the company had (a) 75 hats in Finished Goods Inventory and
(b) 60 yards of leather at a cost of $12 per yard in Raw Materials Inventory. During 2015, the
company purchased 850 more yards of leather at $12 per yard and manufactured 1,600 hats.
Determine the unit and dollar amounts of Raw Materials Inventory in leather at December 31,
2015.
199. ___________________ is an activity that provides financial and nonfinancial information to
an organization’s managers and other internal decision makers.
200. ___________________ is the process of setting goals and making plans to achieve them.
201. ____________________ is the process of monitoring planning decisions and evaluating an
organization’s activities and employees.
202. The purpose of managerial accounting information is to help ________________ users
make decisions while the purpose of financial accounting is to help _____________ users make
decisions.
203. A _________________ system means that a company acquires or produces inventory only
when needed.
204. The model whose goal is to eliminate waste while satisfying the customer and providing a
positive return to the company is the _____________________.
205. _____________________ rejects the notions of “good enough” or “acceptable” and
challenges employees and managers to continuously experiment with new and improved
business practices.
206. The ______________ aids continuous improvement by augmenting financial measures with
information on the drivers or indicators of future financial performance along four dimensions:
(1) financial, (2) customer, (3) internal business processes, and (4) learning and growth.
207. _______________ is the deliberate misuse of the employer’s assets for the employee’s
personal gain.
208. Policies and procedures used by management to monitor and control business activities are
known as ____________________________.
209. _______________ are beliefs that distinguish right from wrong.
210. The process of identifying costs as direct or indirect is referred to as classifying costs by
_______________.
211. A _________________ cost changes in total in proportion to changes in the volume of
activity.
212. A _________________ cost does not change in total in proportion to changes in the volume
of activity within the relevant range.
213. Expenditures necessary and integral to the manufacture of finished products are
________________ costs.
214. Expenditures that flow directly to the current income statement and are not reported as
assets are ___________________ costs.
215. _____________________ inventory consists of goods a company acquires to use in making
products.
216. ____________________ inventory consists of products in the process of being
manufactured but not yet complete.
217. ____________________ inventory consists of completed products ready for sale by a
manufacturer.
218. A manufacturer’s inventory that is not completely finished is called ________________ .
219. One of the main differences between the calculation of cost of goods sold for a
merchandiser and that of a manufacturer is that the calculation includes cost of goods purchased
for the merchandiser, but the manufacturer replaces that with __________________________.
220. ___________________________ reveals how much raw materials inventory is available in
terms of the number of days’ sales.
221. ___________________________ reveals how many times a company uses its raw materials
inventory in production during a period.
222. Expenditures incurred in the process of converting raw materials to finished goods, that
include direct labor and factory overhead are known as _________________________.
223. Expenditures directly associated with the manufacture of finished goods that include direct
materials and direct labor are _____________________ costs.
224. Crane, Inc. reported the following data regarding costs and inventories for the current year:
beginning goods-in-process inventory, $4,000; beginning finished goods inventory, $2,000; cost
of goods manufactured, $11,500; operating expenses, $3,000; ending finished goods inventory,
$1,000; ending goods-in-process inventory, $1,500. Cost of goods sold for Crane, Inc. equals
____________________.
225. Waters, Inc. reported the following data regarding costs and inventories for the current year:
beginning finished goods inventory, $5,000; cost of goods manufactured, $21,500; ending
finished goods inventory, $4,000. Cost of goods sold for Waters, Inc. equals
____________________.
226. For a manufacturer, the cost of goods sold can be computed by adding the beginning
finished goods inventory to ________________________ and then subtracting the ending
finished goods inventory.