Chapter 16—Managerial Accounting Concepts and Principles Key
1. Accounting is an information system that provides essential data about the economic activities of an entity to
various users to aid them in making informed judgments and decisions.
2. Managerial accounting reports are prepared according to generally accepted accounting principles.
3. Managerial accounting information includes both historical and estimated data.
4. Since there are few rules to restrict how an organization chooses to arrange its own internal data for decision
making, managerial accounting provides ample opportunity for creativity and change.
5. A diagram of the operating structure of an organization is called an organization chart.
6. In most business organizations, the chief accountant is called the treasurer.
7. In most business organizations, the chief accountant is called the controller.
8. A staff department or unit is one that provides services, assistance, and advice to the departments with line or
other staff responsibilities.
9. The vice presidents of production and sales and the controller hold line positions in most large organizations.
10. A staff department has no direct authority over a line department.
11. The controller’s staff consists of management accountants responsible for systems and procedures, general
accounting, budgets, taxes, and cost accounting.
12. Managerial accounting reports must be useful to the user of the information.
13. Planning is the process of monitoring operating results and comparing actual results with the expected
results.
14. Planning is the process of developing the company’s objectives or goals and translating these objectives into
courses of action.
15. Control is the process of monitoring operating results and comparing actual results with the expected
results.
16. Managerial accounting provides useful information to managers on product costs.
17. The payment of dividends is an example of a cost.
18. A cost can be a payment of cash for the purpose of generating revenues.
19. The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory
overhead cost.
20. The cost of materials entering directly into the manufacturing process is classified as factory overhead cost.
21. The cost of wages paid to employees directly involved in converting materials to finished product is
classified as direct labor cost.
22. If the cost of employee wages is not a significant portion of the total product cost, the wages are classified
as direct materials cost.
23. For a construction contractor, the wages of carpenters would be classified as factory overhead cost.
24. For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.
25. Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are
classified as factory overhead cost.
26. Depreciation on factory plant and equipment is an example of factory overhead cost.
27. Cost of oil used to lubricate factory machinery and equipment is an example of a direct materials cost.
28. If the cost of materials is not a significant portion of the total product cost, the materials may be classified as
part of factory overhead cost.
29. Factory overhead cost is sometimes referred to as factory burden.
30. Conversion cost is the combination of direct labor cost and factory overhead cost.
31. Conversion cost is the combination of direct materials cost and factory overhead cost.
32. Factory overhead is an example of a product cost.
33. Direct labor costs are included in the conversion costs of a product.
34. The costs of materials and labor that do not enter directly into the finished product are classified as factory
overhead.
35. The costs of materials and labor that do not enter directly into the finished product are classified as cost of
goods sold.
36. Indirect labor would be included in factory overhead.
37. A cost object indicates how costs are related or identified.
38. Direct costs can be specifically traced to a cost object.
39. Indirect costs can be specifically identified to a cost object.
40. Nonmanufacturing costs are classified into two categories: selling and administrative.
41. Prime costs are the combination of direct labor costs and factory overhead costs.
42. Prime costs are the combination of direct materials and direct labor costs.
43. Conversion costs are the combination of direct labor, direct material and factory overhead costs.
44. Product costs are also referred to as inventoriable costs.
45. Period costs include direct materials and direct labor.
46. Period costs can be found in the balance sheet.
47. On the balance sheet for a manufacturing business, the cost of direct materials, direct labor, and factory
overhead are categorized as either materials inventory, work in process inventory, or finished goods inventory.
48. Only the value of the inventory that is sold will appear in the income statement.
49. The statement of cost of goods manufactured is an extension of the income statement for a manufacturing
company.
50. Managers use managerial information to evaluate performance of a company’s operation.
51. Managerial information is for external as well as internal stakeholders.
52. A report analyzing how many products need to be sold to cover operating costs is not typically a managerial
accounting report.
53. A report analyzing the dollar savings of purchasing new equipment to speed up the production process is a
managerial accounting report.
54. A performance report that identifies the amount of employee downtime is a financial accounting report.
55. Controlling deals with choosing goals and deciding how to achieve them.
56. Goods that are partway through the manufacturing process, but not yet complete, are referred to as materials
inventory.
57. Manufacturers use labor, plant, and equipment to convert direct materials into finished products.
58. Product costs are not expensed until the product is sold.
59. The plant manager’s salary in a manufacturing business would be considered an indirect cost.
60. Operating expenses are product costs and are expensed when the product is sold.
61. Period costs are operating costs that are expensed in the period in which the goods are sold.
62. Factory overhead includes all manufacturing costs except direct materials and direct labor.
63. Labor costs that are directly traceable to the product are part of factory overhead.
64. Product costs include direct labor and advertising expense.
65. Indirect labor and indirect materials would be part of factory overhead.
66. Prime costs consist of factory overhead and direct labor.
67. Conversion costs consist of product costs and period costs.
68. Prime costs consists of direct materials, indirect materials, and direct labor.
69. Managerial accounting uses only past data in reports to aid management in the decision making process.
70. In order to be useful to managers, management accounting reports should possess all of the following
characteristics EXCEPT:
71. What is the primary criterion for the preparation of managerial accounting reports?
72. Which of the following is most associated with managerial accounting?
73. Which of the following is most associated with financial accounting?
75. In most business organizations, the chief management accountant is called the:
76. All of the following employees hold line positions in Anthea Electric EXCEPT:
77. The controller’s staff often consists of several management accountants. All of the following would most
likely be on the controller’s staff EXCEPT:
78. Managerial accounting
79. Who are the individuals charged with the responsibility for directing the day-to-day operations of a
business?
80. Which of the following are basic phases of the management process?
81. What term is used to describe the process of monitoring operating results and comparing actual results with
the expected results?
82. What term is used to describe the process of developing the organization’s objectives and translating those
into courses of action?
83. Which of the following is the principle reason for preparing managerial accounting reports?
84. Which of the following is not a characteristic of useful managerial accounting reports?
85. Compute conversion costs given the following data: Direct Materials, $347,500; Direct Labor, $186,300;
Factory Overhead, $187,900; and Selling Expenses, $45,290.
86. Which of the following is false in regards to direct materials for an auto manufacturer?
87. The cost of a manufactured product generally consists of which of the following costs?
88. Materials must have which two qualities in order to be classified as direct materials?
89. Which of the following is an example of direct materials cost for an automobile manufacturer?
90. If the cost of direct materials is a small portion of total production cost, it may be classified as part of:
91. The cost of wages paid to employees directly involved in the manufacturing process in converting materials
into finished product is classified as:
92. Which of the following is an example of direct labor cost for an airplane manufacturer?
93. Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are
classified as:
94. Which of the following is an example of a factory overhead cost?
95. Another term often used to refer to factory overhead is:
96. Which of the following costs are referred to as conversion costs?
97. What term is used to refer to the cost of changing direct materials into a finished manufactured product?
98. Which of the following items would not be classified as part of factory overhead?
99. Which of the following is considered a part of factory overhead cost?
100. Which of the following manufacturing costs is an indirect cost of producing a product?
101. Prime costs are
102. Conversion costs are
103. Which of the following is not a prime cost?
104. The following are all product costs except:
105. Which one of the following will not be found on the balance sheet of a manufacturing company?
106. In the income statement of a manufacturing company, what replaces purchases in the cost of goods section
of a retail company?
107. What is the purpose of the Statement of Cost of Goods Manufactured?
108. Which of the following accounts will be found on the income statement?
109. All of the following are ways that managers use managerial information except
110. Cost of Materials Used $45,000
Direct Labor costs $48,000
Factory Overhead $39,000
Work in Process, beg. $28,000
Work in Process, end. $18,000
What is Cost of Goods Manufactured?
111. Cost of Materials Used $45,000
Direct Labor costs $48,000
Factory Overhead $39,000
Work in Process, beg. $28,000
Work in Process, end. $18,000
Finished Goods,beg. $28,000
Finished Goods, end. $18,000
What is Cost of Goods Sold?
112.
Beginning Raw Materials Inventory
$40,000
Materials purchased
$65,000
Ending Raw Materials Inventory
$30,000
What is the amount of Raw Materials Used?
113. A company manufactured 50,000 units of a product at a cost of $450,000. They sold 40,000 units for $15
each. What is the gross margin?
114.
Work in Process, Beginning
Work in Process, Ending
Direct Labor costs incurred
Cost of Goods Manufactured
Factory Overhead
What is the amount of Direct Materials used?
115. A company sells goods for $150,000 that cost $60,000 to manufacture. Which statement(s) are true?
116. Product costs
117. Which of the following would be least likely to be considered a managerial accounting report?
118. Managerial accountants would most likely prepare all of the following reports except:
119. Accounting designed to meet the needs of decision-makers inside the business is referred to as:
120. The primary goal of managerial accounting is to provide information to:
121. Goods that are partially completed by a manufacturer are referred to as:
122. A plant manager’s salary may be referred to as:
123. All of the following would probably be considered a direct material except:
124. Period costs include:
125. A product cost is:
126. Indirect labor and indirect materials are classified as:
127. An example of a period cost is:
128. Direct labor and direct materials are classified as:
129. Indirect costs incurred in a manufacturing environment that cannot be traced directly to a product are
130. Rent expense on a factory building would be treated as a(n):
131. Rent expense incurred on a factory building would be treated as a(n):
132. Which of the following is not a factory overhead cost?
133. All of the following are examples of indirect labor except:
134. Factory overhead includes: