CHAPTER 1
MANAGERIAL ACCOUNTING
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY
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Multiple Choice Questions
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Brief Exercises
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Test Bank for Managerial Accounting, Sixth Edition
1 – 2
Completion Statements
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sg This question also appears in the Study Guide.
st This question also appears in a self-test at the student companion website.
SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE
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Learning Objective 1
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Learning Objective 2
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Learning Objective 3
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Learning Objective 4
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Learning Objective 5
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Managerial Accounting
1 – 3
Learning Objective 6
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Learning Objective 7
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Learning Objective 8
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Note: TF = True-False BE = Brief Exercise C = Completion
MC = Multiple Choice Ex = Exercise
CHAPTER LEARNING OBJECTIVES
1. Explain the distinguishing features of managerial accounting. The primary users of
managerial accounting reports are internal users, who are officers, department heads,
managers, and supervisors in the company. Managerial accounting issues internal reports as
frequently as the need arises. The purpose of these reports is to provide special-purpose
information for a particular user for a specific decision. The content of managerial accounting
reports pertains to subunits of the business may be very detailed, and may extend beyond the
double-entry accounting system. The reporting standard is relevance to the decision being
made. No independent audits are required in managerial accounting.
2. Identify the three broad functions of management. The three functions are planning,
directing, and controlling. Planning requires management to look ahead and to establish
objectives. Directing involves coordinating the diverse activities and human resources of a
company to produce a smooth-running operation. Controlling is the process of keeping the
activities on track.
3. Define the three classes of manufacturing costs. Manufacturing costs are typically
classified as either (1) direct materials, (2) direct labor, or (3) manufacturing overhead. Raw
materials that can be physically and directly associated with the finished product during the
manufacturing process are called direct materials. The work of factory employees that can be
physically and directly associated with converting raw materials into finished goods is
considered direct labor. Manufacturing overhead consists of costs that are indirectly
associated with the manufacture of the finished product.
Test Bank for Managerial Accounting, Sixth Edition
1 – 4
4. Distinguish between product and period costs. Product costs are costs that are a
necessary and integral part of producing the finished product. Product costs are also called
inventoriable costs. Under the expense recognition principle, these costs do not become
expenses until the company sells the finished goods inventory. Period costs are costs that are
identified with a specific time period rather than with a salable product. These costs relate to
nonmanufacturing costs and therefore are not inventoriable costs.
5. Explain the difference between a merchandising and a manufacturing income statement.
The difference between a merchandising and a manufacturing income statement is in the cost
of goods sold section. A manufacturing cost of goods sold section shows beginning and
ending finished goods inventories and the cost of goods manufactured.
6. Indicate how cost of goods manufactured is determined. Companies add the cost of the
beginning work in process to the total manufacturing costs for the current year to arrive at the
total cost of work in process for the year. They then subtract the ending work in process from
the total cost of work in process to arrive at the cost of goods manufactured.
7. Explain the difference between a merchandising and a manufacturing balance sheet.
The difference between a merchandising and a manufacturing balance sheet is in the current
assets section. The current assets section of a manufacturing company’s balance sheet
presents three inventory accounts: finished goods inventory, work in process inventory, and
raw materials inventory.
8 Identify trends in managerial accounting. Managerial accounting has experienced many
changes in recent years. Improved practices include a focus on managing the value chain
through techniques such as just-in-time inventory, total quality management, activity-based
costing, and theory of constraints. The balanced scorecard is now used by many companies
in order to attain a more comprehensive view of the company‘s operations. Finally, companies
are now evaluating their performance with regard to their corporate social responsibility.
TRUE-FALSE STATEMENTS
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.
Managerial Accounting
1 – 5
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. Direct materials costs and indirect materials costs are manufacturing overhead.
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. Both direct labor cost and indirect labor cost are product costs.
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.
Test Bank for Managerial Accounting, Sixth Edition
1 – 6
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 shows the cost of completed goods available for sale to
customers.
28. The balanced scorecard approach attempts to maintain as little inventory on hand as
possible.
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. Managerial accounting is primarily concerned with managers and external users.
Managerial Accounting
1 – 7
32. Planning involves coordinating the diverse activities and human resources of a company
to produce a smooth running operation.
33. 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.
34. Product costs are also called inventoriable costs.
35. Direct materials become a cost of the finished goods manufactured when they are
acquired, not when they are used.
36. The sum of the direct materials costs, direct labor costs, and beginning work in process is
the total manufacturing costs for the year.
37. In a manufacturing company balance sheet, manufacturing inventories are reported in the
current assets section in the order of their expected use in production.
Answers to True-False Statements
38. 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.
39. Managerial accounting information is generally prepared for
a. stockholders.
b. creditors.
c. managers.
d. regulatory agencies.
Test Bank for Managerial Accounting, Sixth Edition
1 – 8
40. 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.
41. 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.
42. Managerial accounting is also called
a. management accounting.
b. controlling.
c. analytical accounting.
d. inside reporting.
43. Which of the following is not an internal user?
a. Creditor
b. Department manager
c. Controller
d. Treasurer
44. Managerial accounting does not encompass
a. calculating product cost.
b. calculating earnings per share.
c. determining cost behavior.
d. profit planning.
45. Managerial accounting is applicable to
a. service entities.
b. manufacturing entities.
c. not-for-profit entities.
d. all of these.
46. 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.
Managerial Accounting
1 – 9
47. Internal reports must be communicated
a. daily.
b. monthly.
c. annually.
d. as needed.
48. Financial statements for external users can be described as
a. user-specific.
b. general-purpose.
c. special-purpose.
d. managerial reports.
49. Managerial accounting reports can be described as
a. general-purpose.
b. macro-reports.
c. special-purpose.
d. classified financial statements.
50. The reporting standard for external financial reports is
a. industry-specific.
b. company-specific.
c. generally accepted accounting principles.
d. department-specific.
51. 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.
52. 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.
53. Internal reports are generally
a. aggregated.
b. detailed.
c. regulated.
d. unreliable.
Test Bank for Managerial Accounting, Sixth Edition
1 – 10
54. A distinguishing feature of managerial accounting is
a. external users.
b. general-purpose reports.
c. very detailed reports.
d. quarterly and annual reports.
55. What activities and responsibilities are not associated with management’s functions?
a. Planning
b. Accountability
c. Controlling
d. Directing
56. 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.
57. 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.
58. Which of the following is not a management function?
a. Constraining
b. Planning
c. Controlling
d. Directing
59. A manager that is establishing objectives is performing which management function?
a. Controlling
b. Directing
c. Planning
d. Constraining
60. The management function that requires managers to look ahead and establish objectives
is
a. controlling.
b. directing.
c. planning.
d. constraining.
Managerial Accounting
1 – 11
61. In determining whether planned goals are being met, a manager is performing the function
of
a. planning.
b. follow-up.
c. directing.
d. controlling.
62. Which of the following is not a separate management function?
a. Planning
b. Directing
c. Decision-making
d. Controlling
63. 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.
64. 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.
65. 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.
66. 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
Test Bank for Managerial Accounting, Sixth Edition
1 – 12
67. 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.
68. 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
69. 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
70. 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.
71. 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.
72. 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
73. Which of the following is not a manufacturing cost category?
a. Cost of goods sold
b. Direct materials
c. Direct labor
d. Manufacturing overhead
Managerial Accounting
1 – 13
74. 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.
75. 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.
76. 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
77. 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.
78. 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
79. Because of automation, which component of product cost is declining?
a. Direct labor
b. Direct materials
c. Manufacturing overhead
d. Advertising
Test Bank for Managerial Accounting, Sixth Edition
1 – 14
80. The product cost that is most difficult to associate with a product is
a. direct materials.
b. direct labor.
c. manufacturing overhead.
d. advertising.
81. 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.
82. 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
83. Which one of the following costs would not be inventoriable?
a. Period costs
b. Factory insurance costs
c. Indirect materials
d. Indirect labor costs
84. Direct materials and direct labor of a company total $8,000,000. If manufacturing
overhead is $4,000,000, what is direct labor cost?
a. $4,000,000
b. $8,000,000
c. $0
d. Cannot be determined from the information provided
85. 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
86. Sales commissions are classified as
a. overhead costs
b. period costs.
c. product costs.
d. indirect labor.
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87. 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.
88. 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
89. Product costs are also called
a. direct costs.
b. overhead costs.
c. inventoriable costs.
d. capitalizable costs.
90. 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.
91. As inventoriable costs expire, they become
a. selling expenses.
b. gross profit.
c. cost of goods sold.
d. sales revenue.
92. 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.
93. 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.
Test Bank for Managerial Accounting, Sixth Edition
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94. 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.
95. 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.
96. 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.
97. Kushman Combines, Inc. has $20,000 of ending finished goods inventory as of December
31, 2013. If beginning finished goods inventory was $10,000 and cost of goods sold was
$50,000, how much would Kushman report for cost of goods manufactured?
a. $70,000
b. $10,000
c. $60,000
d. $40,000
98. Cost of goods manufactured is calculated as follows:
a. Beginning WIP + direct materials used + direct labor + manufacturing overhead +
ending WIP.
b. Direct materials used + direct labor + manufacturing overhead – beginning WIP +
ending WIP.
c. Beginning WIP + direct materials used + direct labor + manufacturing overhead –
ending WIP.
d. Direct materials used + direct labor + manufacturing overhead – ending WIP –
beginning WIP.
99. 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.
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100. 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.
101. 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.
102. Dolan Company‘s accounting records reflect the following inventories:
Dec. 31, 2013 Dec. 31, 2012
Raw materials inventory $310,000 $260,000
Work in process inventory 300,000 160,000
Finished goods inventory 190,000 150,000
During 2013, $600,000 of raw materials were purchased, direct labor costs amounted to
$500,000, and manufacturing overhead incurred was $480,000.
The total raw materials available for use during 2013 for Dolan Company is
a. $910,000.
b. $460,000.
c. $550,000.
d. $860,000.
103. Dolan Company’s accounting records reflect the following inventories:
Dec. 31, 2013 Dec. 31, 2012
Raw materials inventory $310,000 $260,000
Work in process inventory 300,000 160,000
Finished goods inventory 190,000 150,000
During 2013, $600,000 of raw materials were purchased, direct labor costs amounted to
$500,000, and manufacturing overhead incurred was $480,000.
Dolan Company’s total manufacturing costs incurred in 2013 amounted to
a. $1,530,000.
b. $1,490,000.
c. $1,390,000.
d. $1,580,000.
104. Dolan Company’s accounting records reflect the following inventories:
Dec. 31, 2013 Dec. 31, 2012
Raw materials inventory $310,000 $260,000
Work in process inventory 300,000 160,000
Finished goods inventory 190,000 150,000
Test Bank for Managerial Accounting, Sixth Edition
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MC 104. (Cont.)
During 2013, $600,000 of raw materials were purchased, direct labor costs amounted to
$500,000, and manufacturing overhead incurred was $480,000.
If Dolan Company’s cost of goods manufactured for 2013 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.
105. 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
d. Beginning stage production costs associated with labor costs dealing with bringing in
raw materials from the shipping docks
106. Worth Company reported the following year-end information: beginning work in process
inventory, $180,000; cost of goods manufactured, $816,000; beginning finished goods
inventory, $252,000; ending work in process inventory, $220,000; and ending finished
goods inventory, $264,000. Worth Company’s cost of goods sold for the year is
a. $804,000.
b. $828,000.
c. $776,000.
d. $552,000.
107. Laflin 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 800,000
Manufacturing overhead 720,000
Laflin Company‘s cost of goods manufactured for the year is
a. $2,300,000.
b. $2,480,000.
c. $2,120,000.
d. $2,660,000.
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108. Benson Inc.’s accounting records reflect the following inventories:
Dec. 31, 2012 Dec. 31, 2013
Raw materials inventory $ 80,000 $ 64,000
Work in process inventory 104,000 116,000
Finished goods inventory 100,000 92,000
During 2013, Benson purchased $1,160,000 of raw materials, incurred direct labor costs
of $200,000, and incurred manufacturing overhead totaling $128,000.
How much raw materials were transferred to production during 2013 for Benson?
a. $1,392,000
b. $1,176,000
c. $1,160,000
d. $1,144,000
109. Benson Inc.’s accounting records reflect the following inventories:
Dec. 31, 2012 Dec. 31, 2013
Raw materials inventory $ 80,000 $ 64,000
Work in process inventory 104,000 116,000
Finished goods inventory 100,000 92,000
During 2013, Benson purchased $1,060,000 of raw materials, incurred direct labor costs
of $200,000, and incurred manufacturing overhead totaling $128,000.
How much is total manufacturing costs incurred during 2013 for Benson?
a. $1,392,000
b. $1,404,000
c. $1,388,000
d. $1,400,000
110. Benson Inc.’s accounting records reflect the following inventories:
Dec. 31, 2012 Dec. 31, 2013
Raw materials inventory $ 80,000 $ 64,000
Work in process inventory 104,000 116,000
Finished goods inventory 100,000 92,000
During 2013, Benson purchased $1,160,000 of raw materials, incurred direct labor costs
of $200,000, and incurred manufacturing overhead totaling $128,000.
Assume Benson’s cost of goods manufactured for 2013 amounted to $1,360,000. How
much would it report as cost of goods sold for the year?
a. $1,368,000
b. $1,400,000
c. $1,460,000
d. $1,352,000
Test Bank for Managerial Accounting, Sixth Edition
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111. Walker Company reported the following year-end information:
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 830,000
Direct labor 240,000
Manufacturing overhead 100,000
How much is Walker’s cost of goods manufactured for the year?
a. $834,000
b. $1,174,000
c. $1,170,000
d. $1,178,000
112. Ogleby Inc.’s accounting records reflect the following inventories:
Dec. 31, 2012 Dec. 31, 2013
Raw materials inventory $120,000 $ 96,000
Work in process inventory 156,000 174,000
Finished goods inventory 150,000 138,000
During 2013, Ogleby purchased $840,000 of raw materials, incurred direct labor costs of
$150,000, and incurred manufacturing overhead totaling $192,000.
How much is total manufacturing costs incurred during 2013 for Ogleby?
a. $1,188,000
b. $1,206,000
c. $1,182,000
d. $1,200,000
113. Ogleby Inc.’s accounting records reflect the following inventories:
Dec. 31, 2012 Dec. 31, 2013
Raw materials inventory $120,000 $ 96,000
Work in process inventory 156,000 174,000
Finished goods inventory 150,000 138,000
During 2013, Ogleby purchased $840,000 of raw materials, incurred direct labor costs of
$150,000, and incurred manufacturing overhead totaling $192,000.
How much would Ogleby Manufacturing report as cost of goods manufactured for 2013?
a. $1,164,000
b. $1,224,000
c. $1,218,000
d. $1,188,000
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114. Wasson 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 560,000
Direct labor 180,000
Manufacturing overhead 120,000
How much is Wasson’s total cost of work in process for the year?
a. $608,000
b. $863,000
c. $860,000
d. $898,000
115. Edmiston Company reported the following year-end information: beginning work in
process inventory, $80,000; cost of goods manufactured, $780,000; beginning finished
goods inventory, $50,000; ending work in process inventory, $70,000; and ending finished
goods inventory, $40,000. How much is Edmiston’s cost of goods sold for the year?
a. $780,000
b. $790,000
c. $770,000
d. $800,000
116. Using the following information, compute the direct materials used.
Raw materials inventory, January 1 $ 20,000
Raw materials inventory, December 31 40,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Finished goods, January 1 40,000
Finished goods, December 31 32,000
Raw materials purchases 1,400,000
Direct labor 560,000
Factory utilities 150,000
Indirect labor 50,000
Factory depreciation 400,000
Operating expenses 420,000
a. $1,460,000.
b. $1,420,000.
c. $1,400,000.
d. $1,380,000.
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117. Assuming that the direct materials used is $1,400,000, compute the total manufacturing
costs using the following information.
Raw materials inventory, January 1 $ 20,000
Raw materials inventory, December 31 40,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Finished goods, January 1 40,000
Finished goods, December 31 32,000
Raw materials purchases 1,400,000
Direct labor 560,000
Factory utilities 150,000
Indirect labor 50,000
Factory depreciation 400,000
Operating expenses 420,000
a. $2,560,000.
b. $2,554,000.
c. $2,360,000.
d. $2,980,000.
118. Using $2,500,000 as the total manufacturing costs, compute the cost of goods
manufactured using the following information.
Raw materials inventory, January 1 $ 20,000
Raw materials inventory, December 31 40,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Finished goods, January 1 40,000
Finished goods, December 31 32,000
Raw materials purchases 1,400,000
Direct labor 560,000
Factory utilities 150,000
Indirect labor 50,000
Factory depreciation 400,000
Operating expenses 420,000
a. $2,492,000.
b. $2,494,000.
c. $2,506,000.
d. $2,508,000.
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119. Using $2,540,000 as the cost of goods manufactured, compute the cost of goods sold
using the following information.
Raw materials inventory, January 1 $ 20,000
Raw materials inventory, December 31 40,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Finished goods, January 1 40,000
Finished goods, December 31 32,000
Raw materials purchases 1,400,000
Direct labor 560,000
Factory utilities 150,000
Indirect labor 50,000
Factory depreciation 400,000
Operating expenses 420,000
a. $2,546,000.
b. $2,508,000.
c. $2,532,000.
d. $2,548,000.
120. Using the following information, compute the cost of direct materials used.
Raw materials inventory, January 1 $ 30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
Raw materials purchases 1,500,000
Direct labor 690,000
Factory utilities 225,000
Indirect labor 75,000
Factory depreciation 500,000
Operating expenses 630,000
a. $1,590,000.
b. $1,530,000.
c. $1,500,000.
d. $1,470,000.
Test Bank for Managerial Accounting, Sixth Edition
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121. Assuming the cost of direct materials used is $1,500,000, compute the total manufacturing
costs using the information below.
Raw materials inventory, January 1 $ 30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
Raw materials purchases 1,500,000
Direct labor 690,000
Factory utilities 225,000
Indirect labor 75,000
Factory depreciation 500,000
Operating expenses 630,000
a. $2,990,000.
b. $2,981,000.
c. $2,690,000.
d. $3,620,000.
122. Assuming that the total manufacturing costs are $2,900,000, compute the cost of goods
manufactured using the information below.
Raw materials inventory, January 1 $ 30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
Raw materials purchases 1,500,000
Direct labor 690,000
Factory utilities 225,000
Indirect labor 75,000
Factory depreciation 500,000
Operating expenses 630,000
a. $2,888,000.
b. $2,891,000.
c. $2,909,000.
d. $2,912,000.
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123. Assuming that the cost of goods manufactured is $2,960,000 compute the cost of goods
sold using the following information.
Raw materials inventory, January 1 $ 30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
Raw materials purchases 1,500,000
Direct labor 690,000
Factory utilities 225,000
Indirect labor 75,000
Factory depreciation 500,000
Operating expenses 630,000
a. $2,969,000.
b. $2,912,000.
c. $2,948,000.
d. $2,972,000.
124. Samson Company reported total manufacturing costs of $300,000, manufacturing
overhead totaling $52,000, and direct materials totaling $64,000. How much is direct
labor cost?
a. Cannot be determined from the information provided.
b. $416,000
c. $416,000
d. $184,000
125. Given the following data for Mehring Company, compute (A) total manufacturing costs and
(B) cost of goods manufactured:
Direct materials used $230,000 Beginning work in process $30,000
Direct labor 150,000 Ending work in process 15,000
Manufacturing overhead 225,000 Beginning finished goods 38,000
Operating expenses 263,000 Ending finished goods 23,000
(A) (B)
a. $590,000 $620,000
b. $605,000 $590,000
c. $605,000 $620,000
d. $620,000 $635,000
Test Bank for Managerial Accounting, Sixth Edition
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126. Penner Company reported total manufacturing costs of $410,000, manufacturing
overhead totaling $78,000, and direct materials totaling $96,000. How much is direct
labor cost?
a. Cannot be determined from the information provided.
b. $584,000
c. $174,000
d. $236,000
127. Given the following data for Glennon Company, compute (A) total manufacturing costs
and (B) costs of goods manufactured:
Direct materials used $270,000 Beginning work in process $40,000
Direct labor 200,000 Ending work in process 20,000
Manufacturing overhead 300,000 Beginning finished goods 50,000
Operating expenses 350,000 Ending finished goods 30,000
(A) (B)
a. $750,000 $790,000
b. $770,000 $750,000
c. $770,000 $790,000
d. $790,000 $810,000
128. Barton Company has beginning work in process inventory of $144,000 and total
manufacturing costs of $686,000. If cost of goods manufactured is $640,000, what is the
cost of the ending work in process inventory?
a. $170,000.
b. $198,000.
c. $210,000.
d. $190,000.
129. Gammil Company has beginning and ending raw materials inventories of $96,000 and
$120,000, respectively. If direct materials used were $440,000, what was the cost of raw
materials purchased?
a. $440,000.
b. $470,000.
c. $416,000.
d. $464,000.
130. Molina Company has beginning and ending work in process inventories of $130,000 and
$145,000 respectively. If total manufacturing costs are $650,000, what is the total cost of
goods manufactured?
a. $780,000.
b. $795,000.
c. $635,000.
d. $665,000.
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131. Costas Company has beginning and ending raw materials inventories of $64,000 and
$80,000, respectively. If direct materials used were $290,000, what was the cost of raw
materials purchased?
a. $290,000.
b. $310,000.
c. $274,000.
d. $306,000.
132. Wood Company has beginning work in process inventory of $128,000 and total
manufacturing costs of $477,000. If cost of goods manufactured is $480,000, what is the
cost of the ending work in process inventory?
a. $110,000.
b. $131,000.
c. $140,000.
d. $125,000.
133. Given the following data for Harder Company, compute cost of goods manufactured:
Direct materials used $120,000 Beginning work in process $20,000
Direct labor 200,000 Ending work in process 10,000
Manufacturing overhead 150,000 Beginning finished goods 25,000
Operating expenses 175,000 Ending finished goods 15,000
a. $460,000
b. $470,000
c. $480,000
d. $490,000
134. 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
135. 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.
Test Bank for Managerial Accounting, Sixth Edition
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136. How have many companies significantly lowered inventory levels and costs?
a. They use activity-based costing.
b. They utilize a balanced scorecard system.
c. They have a just-in-time method.
d. They focus on total quality management.
137. What term describes all business processes associated with providing a product or
service?
a. The manufacturing chain
b. The product chain
c. The supply chain
d. The value chain
138. Which one of the following managerial accounting approaches attempts to allocate
manufacturing overhead in a more meaningful fashion?
a. Balanced scorecard
b. Just-in-time inventory
c. Activity-based costing
d. Total quality management
139. 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
140. 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
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
141. Many companies now focus on reducing defects in finished products with the goal of zero
defects. This is called
a. Activity-based costing.
b. Balanced scorecard.
c. Value chain.
d. Total quality management.
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142. 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.
143. The function that pertains to keeping the activities of the enterprise on track is
a. planning.
b. directing.
c. controlling.
d. accounting.
144. 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
145. 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
146. 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.
147. 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.
Test Bank for Managerial Accounting, Sixth Edition
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148. 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.
149. 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.
c. Work in Process Inventory has decreased.
d. Finished Goods Inventory has decreased.
150. 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.
151. 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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Answers to Multiple Choice Questions
BRIEF EXERCISES
BE 152
Presented below are Truck Company’s monthly manufacturing cost data related to its personal
computer products.
(a) Taxes on factory building $820,000
(b) Raw materials 66,000
(c) Depreciation on manufacturing equip. 210,000
(d) Wages for assembly line workers 340,000
Instructions
Enter each cost item in the following table, placing an “X” under the appropriate headings.
Product Costs
Direct Materials
Direct Labor
Manufacturing Overhead
(a)
(b)
(c)
(d)
Test Bank for Managerial Accounting, Sixth Edition
1 – 32
Solution 152 (3 min.)
BE 153
Determine whether each of the following costs should be classified as direct materials (DM),
direct labor (DL), or manufacturing overhead (MO).
a. ____ Depreciation on factory equipment
b. ____ Table legs used in manufacturing tables
c. ____ Wages paid to assembly line workers
d. ____ Factory rent
Solution 153 (2 min.)
BE 154
Indicate whether each of the following costs of a pencil manufacturer would be classified as direct
materials (DM), direct labor (DL), or manufacturing overhead (MO).
a. ____ Depreciation of pencil painting machinery
b. ____ Lead inserted into pencils
c. ____ Factory utilities
d. ____ Wages of assembly line worker
e. ____ Salary of supervisor
f. ____ Factory machinery maintenance
g. ____ Wood
h. ____ Eraser compound
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Solution 154 (4 min.)
BE 155
Presented below are Cricket Company’s monthly manufacturing cost data related to its personal
computer products.
a. Hard drives and memory sticks $30,000
b. Wages to assemble equipment $65,000
c. Insurance on manufacturing building $41,000
d. Wages for factory supervisors $64,000
Instructions
Enter each cost item in the following table, placing an ‘X’ under the appropriate headings.
Product Costs
Direct Materials
Direct Labor
Manufacturing Overhead
a.
b.
c.
d.
Solution 155 (2 min.)
Product Costs
Direct Materials
Direct Labor
Manufacturing Overhead
Test Bank for Managerial Accounting, Sixth Edition
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BE 156
Identify whether each of the following is classified as a product cost or a period cost.
______________ 1. Direct labor
______________ 2. Direct materials
______________ 3. Factory utilities
______________ 4. Repairs to office equipment
______________ 5. Property taxes on factory building
______________ 6. Sales salaries
Ans: N/A, LO: 4, Bloom: C, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: None, IMA:
Business Economics
Solution 156 (5 min.)
BE 157
Criba Company has the following data: direct labor $580,000, direct materials used $421,000,
total manufacturing overhead $206,000, and beginning work in process $47,000.
Instructions
Compute (a) total manufacturing costs and (b) total cost of work in process.
Solution 157 (5 min.)
BE 158
Presented below are incomplete 2013 manufacturing cost data for Swartnez Corporation.
Direct Materials Used
Direct Labor
Manufacturing Overhead
Total Manufacturing
Costs
(a)
$ 17,000
$42,000
?
$ 88,000
(b)
$148,000
?
$112,000
$480,000
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BE 158. (Cont.)
Instructions
Determine the missing amounts.
BE 159
Presented below are incomplete 2013 manufacturing cost data for Supreme Corporation.
Direct Materials Used
Direct Labor
Factory Overhead
Total Manufacturing Costs
(a)
$48,000
$72,000
?
$184,000
(b)
$95,000
?
$80,000
$305,000
(c)
?
$80,000
$120,000
$290,000
Direct Materials Used
Direct Labor
Factory Overhead
Total Manufacturing Costs
(a)
$48,000
$72,000
$184,000
(b)
$95,000
$80,000
$305,000
(c)
$270,000
Instructions
Determine the missing amounts.
BE 160
Raynor Company has the following data:
Direct labor $76,000
Direct materials used 84,000
Total manufacturing overhead 60,000
Ending work in process 30,000
Beginning work in process 45,000
Test Bank for Managerial Accounting, Sixth Edition
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BE 160. (Cont.)
Instructions
Compute (a) total manufacturing costs and (b) cost of goods manufactured.
BE 161
In alphabetical order below are current asset items for Sudler Company as of December 31,
2013. Prepare the current assets section of the company’s balance sheet as of the same date.
Accounts receivable $41,000
Cash 61,000
Finished goods 26,000
Prepaid expenses 3,000
Raw materials 17,000
Work in process 32,000
EXERCISES
Ex. 162
Financial accounting information and managerial accounting information have a number of
distinguishing characteristics. For each of the characteristics listed below, indicate which
characteristics are more closely related to financial accounting by placing the letter “F” in the
space to the left of the item and indicate those characteristics which are more closely associated
with managerial accounting by placing the letter “M” to the left of the item.
Managerial Accounting
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Ex. 162. (Cont.)
____ 1. General-purpose reports
____ 2. Reports are used internally
____ 3. Prepared in accordance with generally accepted accounting principles
____ 4. Special purpose reports
____ 5. Limited to historical cost data
____ 6. Reporting standard is relevance to the decision to be made
____ 7. Financial statements
____ 8. Reports generally pertain to the business as a whole
____ 9. Reports generally pertain to subunits
____ 10. Reports issued quarterly or annually
Ex. 163
Determine whether each of the following is classified as:
DM: Direct materials
DL: Direct labor
MO: Manufacturing overhead
_____ 1. Assembly line workers’ wages.
_____ 2. Factory supervisors’ salaries.
_____ 3. Steel used in manufacturing product.
_____ 4. Insurance on factory building.
_____ 5. Rivets and screws used in production.
_____ 6. Tires used in manufacturing vehicles.
Test Bank for Managerial Accounting, Sixth Edition
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Ex. 164
Presented below is a list of costs and expenses incurred in the factory by Nu-Way Corporation, a
manufacturer of recreational vehicles.
____ 1. Property taxes on the factory land
____ 2. Nails and glue used in production
____ 3. Cabinet maker’s wages
____ 4. Factory supervisors’ salaries
____ 5. Metal used in manufacturing
____ 6. Depreciation on factory machines
____ 7. Factory utilities
____ 8. Carpeting for the recreational vehicles
____ 9. Property taxes on the factory building
____ 10. Insurance on factory equipment
Instructions
Classify the above items into the following categories:
DM — Direct Materials
DL — Direct Labor
MO — Manufacturing Overhead
Ex. 165
For each item, identify all applicable cost labels. Use the following code in your answer:
1 — Product Cost
2 — Period Cost
a. Advertising ________
b. Direct materials used ________
c. Sales salaries ________
d. Indirect factory labor ________
e. Repairs to office equipment ________
f. Factory manager‘s salary ________
g. Direct labor ________
h. Indirect materials ________
Managerial Accounting
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Ex. 166
Kennedy Company reports the following costs and expenses in May.
Factory utilities $ 13,500 Direct labor $79,100
Depreciation on factory Sales salaries 48,400
equipment 12,650 Property taxes on factory
Depreciation on delivery trucks 3,800 building 2,500
Indirect factory labor 48,900 Repairs to office equipment 1,300
Indirect materials 70,800 Factory repairs 2,000
Direct materials used 157,600 Advertising 23,000
Factory manager‘s salary 8,000 Office supplies used 2,640
Instructions
From the information, determine the total amount of:
(a) Manufacturing overhead.
(b) Product costs.
(c) Period costs.
Test Bank for Managerial Accounting, Sixth Edition
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Ex. 167
Kwik Delivery Service reports the following costs and expenses in June 2013.
Indirect materials $ 8,400 Driver’s salaries $14,000
Depreciation on delivery Advertising 5,100
equipment 11,200 Delivery equipment
Dispatcher’s salary 5,000 repairs 300
Property taxes on office Office supplies 650
building 870 Office utilities 1,490
CEO’s salary 12,000 Repairs on office
Gas and oil for delivery trucks 3,200 equipment 180
Instructions
Determine the total amount of (a) delivery service (product) costs and (b) period costs.
Managerial Accounting
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Ex. 168
For each item listed below, indicate in the space to the left whether the item would be considered
a product cost or a period cost for a manufacturing company. Use the following code:
Pr = Product cost
Pe = Period cost
____ 1. Factory supervisory salaries
____ 2. Sales commissions
____ 3. Income tax expense
____ 4. Indirect materials used
____ 5. Indirect labor
____ 6. Office salaries expense
____ 7. Property taxes on factory building
____ 8. Sales manager’s salary
____ 9. Factory wages expense
____ 10. Direct materials used
Ex. 169
Yates Manufacturing Company incurs the following manufacturing costs and expenses during the
month of May.
1. Assembly line wages
2. Raw materials used directly in product
3. Depreciation on office equipment
4. Property taxes on factory building
5. Rent on factory building
6. Sales commissions
7. Depreciation on factory equipment
8. Factory utilities
9. Wages for factory maintenance workers
10. Advertising
11. Indirect materials used in production
12. Factory manager’s salary
Test Bank for Managerial Accounting, Sixth Edition
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Ex. 169. (Cont.)
Instructions
Complete the following matrix by placing an X mark under the appropriate headings.
Direct Direct Manufacturing Period
Cost Item Materials Labor Overhead Costs
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Ex. 170
Presented below are incomplete 2013 manufacturing cost data for Tardy Corporation.
Direct Materials
Used
Direct
Labor
Manufacturing
Overhead
Total
Manufacturing
Costs
Work in
Process
(1/1)
Work in
Process
(12/31)
Cost of
Goods
Manufactured
(a)
$38,000
$80,000
$48,000
?
$120,000
$96,000
?
(b)
$149,000
$53,000
$90,000
$292,000
?
$98,000
$311,000
(c)
$53,000
$116,000
$121,000
$290,000
$403,000
?
$515,000
Instructions
Determine the missing amounts.
Managerial Accounting
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Ex. 171
Among the items that Howard Print Shop accounts for are the following:
1. Direct labor ________
2. Office supplies used ________
3. Depreciation on printing machines ________
4. Finished goods inventory, 12/31 ________
5. Raw materials inventory, 1/1 ________
6. Cost of goods manufactured ________
7. Work in process, 1/1 ________
8. Office supplies inventory, 12/31 ________
9. Indirect labor ________
10. Heat and electricity for the print shop ________
Howard Print Shop prepares the following schedule and financial statements on a yearly basis:
(a) Cost of goods manufactured schedule.
(b) Income statement.
(c) Balance sheet.
Instructions
For each item, indicate by using the appropriate letter(s) the schedule and/or financial statements
in which the item will appear.
Test Bank for Managerial Accounting, Sixth Edition
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Ex. 172
Klein Company manufactures boats. During September, 2013, the company purchased 100
cellular phones at a cost of $130 each. Klein withdrew 70 phones from the warehouse during the
month. Twenty of these phones were installed in salespersons’ cars and the remaining 50 phones
were put in boats manufactured during the month.
Of the boats put into production during September, 2013, 80% were completed and transferred to
the company’s storage lot. Fifty percent of the boats completed during the month were sold by
September 30.
Instructions
Determine the cost of cellular phones that would appear in each of the following accounts at
September 30, 2013:
Raw materials inventory
Work in process inventory
Finished goods inventory
Cost of goods sold
Selling expenses
Ex. 173
Peters Manufacturing Company has the following data at June 30, 2013:
Raw materials inventory, June 1 $ 13,800
Work in process inventory, June 1 18,100
Finished goods inventory, June 1 43,500
Total manufacturing costs 430,000
Sales 590,000
Work in process inventory, June 30 30,400
Finished goods inventory, June 30 65,200
Raw materials inventory, June 30 18,000
Managerial Accounting
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Ex. 173. (Cont.)
Instructions
(a) Prepare an income statement through gross profit for the month of June.
(b) Indicate the balance sheet presentation of the June 30 inventories.
Ex. 174
Glavine Corporation incurred the following costs while manufacturing its product.
Materials used in product $ 120,000 Advertising expense $45,000
Depreciation on plant 60,000 Property taxes on plant 19,000
Property taxes on store 7,500 Delivery expense 21,000
Labor costs of assembly-line workers 110,000 Sales commissions 35,000
Factory supplies used 23,000 Salaries paid to sales clerks 50,000
Work-in-process inventory was $22,000 at January 1 and $15,500 at December 31. Finished
goods inventory was $65,000 at January 1 and $50,600 at December 31.
Instructions
(a) Compute cost of goods manufactured.
(b) Compute cost of goods sold.
Test Bank for Managerial Accounting, Sixth Edition
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Ex. 175
The following information is available for Elliot Company.
January 1, 2013 2013 December 31, 2013
Raw materials inventory $ 26,000 $30,000
Work in process inventory 13,500 22,200
Finished goods inventory 30,000 21,000
Materials purchased $170,000
Direct labor 220,000
Manufacturing overhead 180,000
Sales 800,000
Instructions
(a) Compute cost of goods manufactured.
(b) Prepare an income statement through gross profit.
Managerial Accounting
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Test Bank for Managerial Accounting, Sixth Edition
1 – 48
Ex. 176
Manufacturing cost data for Morton Company are presented below.
Case A Case B Case C
Direct materials used (a) $65,400 $130,000
Direct labor $ 57,000 76,000 (g)
Manufacturing overhead 46,500 81,600 102,000
Total manufacturing costs 185,650 (d) 263,700
Work-in-process, 1/1/13 (b) 16,500 (h)
Total cost of work-in-process 221,500 (e) 327,000
Work-in-process, 12/31/13 (c) 9,000 80,000
Cost of goods manufactured 180,275 (f) (i)
Instructions
Indicate the missing amount for each letter (a) through (i).
Managerial Accounting
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Ex. 177
From the account balances listed below, prepare a schedule of cost of goods manufactured for
Sampson Manufacturing Company for the month ended December 31, 2013.
Account Balances
Finished Goods Inventory, December 31 $42,000
Factory Supervisory Salaries 12,000
Income Tax Expense 18,000
Raw Materials Inventory, December 1 12,000
Work In Process Inventory, December 31 15,000
Sales Salaries Expense 14,000
Factory Depreciation Expense 8,000
Finished Goods Inventory, December 1 35,000
Raw Materials Purchases 95,000
Work In Process Inventory, December 1 20,000
Factory Utilities Expense 6,000
Direct Labor 70,000
Raw Materials Inventory, December 31 19,000
Sales Returns and Allowances 5,000
Indirect Labor 21,000
Test Bank for Managerial Accounting, Sixth Edition
1 – 50
Ex. 178
Rabid Manufacturing Company has the following data:
Direct labor $140,000
Direct materials used 151,000
Total manufacturing overhead 208,000
Beginning work in process 26,000
Instructions
Compute (a) total manufacturing costs and (b) total cost of work in process.
Ex. 179
The following costs and inventory data were taken from the accounts of Simon Company for
2012:
January 1, 2013 December 31, 2013
Inventories:
Raw materials $ 8,000 $ 7,000
Work in process 15,000 13,000
Finished goods 16,000 12,000
Costs incurred:
Raw materials purchases $93,000
Direct labor 42,000
Factory rent 8,000
Factory utilities 10,000
Indirect materials 4,000
Indirect labor 9,000
Operating expenses 17,000
Instructions
a. Prepare a schedule showing the amount of direct materials used in production during the
year.
b. Compute the amount of manufacturing overhead incurred during the year.
c. Prepare a schedule of Cost of Goods Manufactured for Simon Company for the year ended
December 31, 2013 in good form.
Managerial Accounting
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Ex. 179. (Cont.)
d. Prepare the Cost of Goods Sold section of the Income Statement for Simon Company for the
year ended December 31, 2013 in good form.
Test Bank for Managerial Accounting, Sixth Edition
1 – 52
Ex. 180
Manufacturing costs for Carson Company for selected months are as follows:
April July October
Beginning work in process $ 80,000 (f) $ 98,000
Direct materials used 280,000 $190,000 155,000
Direct labor 195,000 170,000 (j)
Manufacturing overhead (a) 150,000 90,000
Total manufacturing costs 890,000 510,000 450,000
Total cost of work in process (b) 640,000 (k)
Ending work in process 75,000 (g) (l)
Cost of goods manufactured (c) 525,000 385,000
Beginning finished goods (d) 38,000 (m)
Cost of goods available for sale 960,000 (h) 480,000
Ending finished goods (e) 75,000 (n)
Cost of goods sold 820,000 (i) 355,000
Instructions
Indicate the missing amounts. (Show computations.)
Managerial Accounting
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Ex. 181
Fill in the missing information on the cost of goods manufactured schedule of Noland
Manufacturing Company:
NOLAND MANUFACTURING COMPANY
Cost of Goods Manufactured Schedule
For the Year Ended December 31, 2013
Work in process (1/1) $320,000
Direct materials
Raw materials inventory (1/1) $ ?
Raw materials purchases 246,000
Raw materials available for use ?
Raw materials inventory (12/31) 37,000
Direct materials used $255,000
Direct labor ?
Manufacturing overhead
Indirect labor 19,000
Factory depreciation 38,000
Factory utilities 39,000
Total overhead ?
Total manufacturing costs ?
Total cost of work in process ?
Less: Work in process (12/31) 322,000
Cost of goods manufactured $440,000
Test Bank for Managerial Accounting, Sixth Edition
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Ex. 182
Data for the cost of direct materials for the month ended March 31, 2013, are as follows:
Materials inventory, March 1, 2011 $76,000
Materials inventory, March 31, 2011 70,000
During March, the company purchased $240,000 of raw materials on account from Reed
Company and $92,000 of raw materials for cash from Frye Company. In addition, $50,000 was
paid on the Reed account balance.
Instructions
Compute the cost of direct materials used during March.
Ex. 183
Presented below are incomplete 2013 manufacturing cost data for Tardy Corporation.
Direct Materials
Used
Direct Labor
Factory
Overhead
Total Manufacturing
Costs
(a)
$56,000
$72,000
$54,000
?
(b)
?
$53,000
$90,000
$252,000
(c)
$53,000
?
$96,000
$300,000
$54,000
$90,000
$96,000
Instructions
Determine the missing amounts.
Managerial Accounting
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Ex. 184
Indicate whether each of the following would appear on the:
A—Cost of goods manufactured schedule
B—Income statement
C—Balance sheet
Note: If it would appear in more than just one, indicate which ones.
______ 1. Cost of goods sold
______ 2. Finished goods inventory, 12/31
______ 3. Direct materials used
______ 4. Raw materials inventory, 1/1
______ 5. Insurance on factory equipment
______ 6. Work in process, 12/31
______ 7. Indirect labor
______ 8. Property taxes on office building
Ex. 185
Listed below are current asset items for Lester Company at December 31, 2013.
Finished goods inventory $35,000 Short-term investments $25,000
Cash 20,000 Raw materials inventory 17,000
Prepaid expenses 2,000 Work in process inventory 18,000
Accounts receivable 4,000 Supplies 500
Instructions
Prepare the current assets section of the balance sheet. (Include a complete heading.)
Test Bank for Managerial Accounting, Sixth Edition
1 – 56
COMPLETION STATEMENTS
186. Financial accounting information is prepared mainly for ______________ users, while
managerial accounting information is prepared primarily for ______________ users.
187. The types of reports prepared in managerial accounting are often ______________-
purpose reports prepared for a specific decision.
188. Managerial accounting reports generally pertain to ______________ of a business and
may be very detailed.
189. Three broad managerial functions are: (1)______________, (2)______________, and
(3)______________.
190. The ______________ function is concerned with setting goals and objectives for the
entity.
191. Exercising good judgment in performing the managerial functions and choosing among
alternative courses of action is called ______________.
192. The three cost elements in manufacturing a product are (1)______________,
(2)______________, and (3)______________.
193. The work of factory employees that can be physically and directly associated with
converting raw materials into products is classified as ______________.
194. Indirect materials and indirect labor are classified as ______________.
195. Each of the manufacturing cost components is a ______________ cost.
196. A major difference between the income statements of a merchandising company and a
manufacturing company is that the cost of goods sold section of a merchandising
company shows cost of goods______________, whereas a manufacturing company
shows cost of goods ______________.
197. ___________________ is added to direct labor and manufacturing overhead to get total
manufacturing costs for the current period.
198. The ending work in process inventory is subtracted from the total cost of work in process
to calculate ______________________.
199. A manufacturing company computes cost of goods sold by adding cost of goods
manufactured to the ___________________ and subtracting the __________________.
Test Bank for Managerial Accounting, Sixth Edition
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200. A manufacturing company usually has three inventory accounts which are
(1)___________________, (2)___________________, and (3)___________________.
MATCHING
201. Match the items in the two columns below by entering the appropriate code letter in the
space provided.
A. Managerial accounting F. Work in process inventory
B. Financial accounting G. Direct materials
C. Planning H. Manufacturing overhead
D. Directing I. Period costs
E. Controlling J. Value chain
_____ 1. The cost of products that are partially complete.
_____ 2. The function of keeping activities in accordance with plans.
_____ 3. Primarily concerned with internal users and reports pertain to subunits of the entity.
_____ 4. Materials that can be physically and directly associated with manufacturing a
product.
_____ 5. The function of setting goals and objectives.
_____ 6. Indirect costs of manufacturing a product.
_____ 7. Primarily concerned with external users and reports pertain to the entity as a whole.
_____ 8. Costs that are noninventoriable.
_____ 9. All business processes associated with providing a product or service.
Managerial Accounting
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Matching 201 (Cont.)
_____ 10. The function of coordinating diverse activities to produce a smooth-running
operation.
SHORT-ANSWER ESSAY QUESTIONS
S-A E 202
Financial and managerial accounting are both concerned with the economic events of an
enterprise. Similarities between financial and managerial accounting do exist, but they do have a
different focus. Briefly distinguish between financial and managerial accounting as they relate to
(1) the primary users, (2) the type and frequency of reports, (3) the purpose of reports, and (4) the
content of reports.
S-A E 203
Julie Mills is studying for her accounting mid-term examination. Summarize for Julie what she
should know about management functions.
Test Bank for Managerial Accounting, Sixth Edition
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Solution 203
Julie should know that the management of an organization performs three broad functions:
(1) Planning requires management to look ahead and to establish objectives.
(2) Directing involves coordinating the diverse activities and human resources of a company to
produce a smooth-running operation.
(3) Controlling is the process of keeping the company’s activities on track.
S-A E 204
A manufacturing company makes the products that it sells. Briefly identify and define the cost
elements that are incurred in making a product. After product cost elements are identified, how is
the cost of goods manufactured for a period determined?
S-A E 205
Kevin Scott is confused about the differences between a product cost and a period cost. Explain
the differences to Kevin.
S-A E 206
Assume you have just taken a position as controller for a new company that manufactures and
sells wrought iron wall hangings. Although the founder of the company, who is the president and
CEO, is a great artisan, she has very limited knowledge of accounting.
Instructions
To help your new boss better understand accounting for a manufacturing organization, prepare a
response to her in which you: (1) identify, (2) describe, and (3) provide examples of the three
manufacturing costs and the three inventory accounts used in accounting for a manufacturing
company.
Managerial Accounting
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Solution 206
S-A E 207 (Ethics)
Million Dollar Mills is a textile manufacturing firm located in the southern United States. The
company carefully prepares all financial statements in accordance with GAAP, and gives a copy
of all financial statements to each department. In addition, the company keeps records on quality
control, safety, and environmental pollution by the company. It then prepares “scorecards” for
each department indicating their performance. Recently, the financial impact of the second set of
information was added, and the information has been used in the evaluation of employees for
merit pay and promotions.
At the most recent employee meeting, Tyler Hanes, marketing manager, expressed his
discomfort with the system. He said there was no guarantee that the second set of information
was fair, since there were no generally accepted principles for this kind of information. He also
said that it was kind of like keeping two sets of books—one following all legal requirements, and
the other one actually used by the company.
Required:
1. Is it ethical to evaluate managers in the way described? Explain briefly.
2. Name at least two safeguards the company could build into its system to ensure the ethical
treatment of employees.
Solution 207
Test Bank for Managerial Accounting, Sixth Edition
1 – 62
Solution 207 (Cont.)
S-A E 208 (Communication)
Volumetrica, a producer of audio equipment for large computer systems, is reviewing its policies
as part of a biannual self-examination of the company. As part of this process, all managers have
been asked to carefully examine costs and determine as closely as possible which costs are
direct and which are indirect.
Linda Bedard and Sam Hilton, managers of different manufacturing departments in the same
building, have been working together. They found the following four costs that could be
economically traced to the products, but have historically been a part of overhead:
• Cost of setting up the machinery for a different production run.
• Cost of minor assembly components such as knobs and switches.
• Cost of packaging, which is quite different for each model.
• Cost of inspecting and testing each model.
None of the costs is significant by itself, but together these four costs make up between 10 and
15% of the total cost of the product. Linda favors “leaving well enough alone,” as she puts it, and
leaving these costs in overhead. She is afraid that her volunteering to trace these costs will result
in her having to trace many more costs in the future. Sam, on the other hand, prefers to have the
product cost as accurate as possible. He points out that these costs are already known, and the
process would require little extra work.
Required:
You have been called on in your function as accounting manager to resolve the dispute. Write a
memo to Linda and Sam, supporting one or the other position. Be sure to adequately defend your
position, but be brief.
Managerial Accounting
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Solution 208