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Chapter 16 Management Accounting: A Business Partner Answer Key
True / False Questions
1.
Managerial accounting refers to the preparation and use of accounting information
designed to meet the needs of decision makers inside and outside the business
organization.
2.
Management accounting encompasses the design and use of accounting information
systems inside the company to achieve the company's objectives.
3.
Management accounting reports may provide sufficient means of monitoring, evaluating
and rewarding performance.
4.
A value chain is a linked set of activities and resources necessary to create and deliver a
product or service to a customer.
5.
The three basic types of manufacturing costs are direct materials, direct labor and
manufacturing overhead.
6.
Manufacturing overhead is a term used to describe all manufacturing costs other than
direct materials and direct labor.
7.
Finished goods is comprised of direct materials purchased, direct labor, and manufacturing
overhead.
8.
Manufacturing overhead is considered an indirect cost, since overhead costs generally
cannot be traced conveniently and directly to specific units of product.
9.
Supervisor salaries, equipment repairs, depreciation of machinery, and indirect materials
are all examples of manufacturing overhead.
10.
Prime costs include direct materials and direct labor used in the production of goods and
services.
11.
Direct labor and overhead costs that are required to convert raw materials into finished
goods are considered to be conversion costs.
12.
The James Company has incurred the following costs of production:
Direct Materials $350,000
Direct Labor $475,000
Manufacturing Overhead $722,000
Selling and Administrative Costs $256,000
The James Company conversion costs are $1,197,000.
13.
The James Company has incurred the following costs of production:
Direct Materials $350,000
Direct Labor $475,000
Manufacturing Overhead $722,000
Selling and Administrative Costs $256,000
The James Company prime costs are $606,000.
14.
Product costs are offset against revenue in the period in which the related products are
manufactured, rather than the period in which the products are sold.
15.
Period costs are deducted from sales to arrive at gross profit.
16.
Product costs are charged directly to expense accounts.
17.
Product costs become part of inventory and are placed on the balance sheet until the
products are sold.
18.
Depreciation on a manufacturing facility is considered a period cost whereas depreciation
on a warehouse used to store finished goods is considered a product cost.
19.
As units are completed, their cost is transferred from the Work in Process Inventory
account to the Finished Goods Inventory account.
20.
All three inventory accounts (raw materials, work in process, and finished goods) are
considered current assets.
21.
When direct materials are applied to the production process, materials inventory is debited
and work in process is credited.
22.
A debit balance in the Direct Labor account represents a liability for wages payable.
23.
Costs to repair equipment are considered a direct cost.
24.
The costs of storing and delivering finished goods are allocated to the finished goods
account.
25.
A schedule of the cost of finished goods manufactured summarizes the flow of
manufacturing costs into and out of the finished goods inventory account.
26.
The "cost of finished goods manufactured", which appears on the bottom of the Schedule
of Finished Goods Manufactured, flows to the balance sheet and is reported as the ending
inventory balance.
Multiple Choice Questions
27.
The principal difference between managerial accounting and financial accounting is that
managerial accounting information is:
28.
Management accounting systems are designed to assist organizations in the performance
of all of the following functions
except
:
29.
The set of linked activities and resources needed to create and deliver a product or service
to the customer is referred to as:
30.
Which of the following is
not
a characteristic of managerial accounting?
31.
In comparison with a financial statement prepared in conformity with generally accepted
accounting principles, a managerial accounting report is more likely to:
32.
In comparison with a financial statement prepared in conformity with generally accepted
accounting principles, a managerial accounting report is less likely to:
33.
All of the following statements regarding management accounting's role in assigning
decision-making authority are true
except
:
34.
All of the following are true regarding benchmark studies
except
:
35.
The cost of the employee who installs the leather on the seats of a new automobile would
be considered:
36.
Manufacturing costs do
not
include:
37.
Which of the following should
not
be classified as a manufacturing cost?
38.
In an aircraft factory, the inventory of direct materials would
not
include:
39.
Manufacturing overhead is best described as:
40.
Which of the following costs would
not
be considered part of the manufacturing overhead
of a furniture manufacturer?
41.
Which of the following costs would
not
be considered part of the manufacturing overhead
of a chemical plant?
42.
The cost of the employee who computes total manufacturing costs would be considered
as:
43.
Direct labor costs in a paint factory would include wages of employees who:
44.
Which of the following is
not
a product cost?
45.
Costs that are traceable to a particular unit and are inventoriable are called:
46.
Which of the following is
not
a period cost?
47.
Which of the following is
not
a product cost?
