Deck 1: Introduction to Financial Statements

Question 1

Both direct labor cost and indirect labor cost are product costs.

Answer 1

True

Question 2

Period costs are not inventoriable costs.

Answer 2

True

Question 3

Direct materials costs and indirect materials costs are manufacturing overhead.

Answer 3

False

Question 4

The management function of organizing and directing is mainly concerned with setting goals and objectives for the entity.

Question 5

Manufacturing costs that cannot be classified as direct materials or direct labor are classified as manufacturing overhead.

Question 6

Total period costs are deducted from total cost of work in process to calculate cost of goods manufactured.

Question 7

Managerial accounting information generally pertains to an entity as a whole and is highly aggregated.

Question 8

Determining the unit cost of manufacturing a product is an output of financial accounting.

Question 9

Period costs include selling and administrative expenses.

Question 10

Direct materials and direct labor are the only product costs.

Question 11

Managerial accounting internal reports are prepared more frequently than are classified financial statements.

Question 12

Reports prepared in financial accounting are general-purpose reports, whereas reports prepared in managerial accounting are usually special-purpose reports.

Question 13

Raw materials are equal to direct materials minus indirect materials.

Question 14

Controlling is the process of determining whether planned goals are being met.

Question 15

The total cost of a finished product does not generally contain equal amounts of materials, labor, and overhead costs.

Question 16

Decision-making is an integral part of the planning, directing, and controlling functions.

Question 17

The Sarbanes-Oxley Act replaces generally accepted accounting principles in a manufacturing company.

Question 18

Raw materials that can be conveniently and directly associated with a finished product are called materials overhead.

Question 19

Indirect materials and indirect labor are both inventoriable costs.

Question 20

Managerial accounting applies to all forms of business organizations.

Question 21

The balanced scorecard approach attempts to maintain as little inventory on hand as possible.

Question 22

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.

Question 23

Many companies have significantly lowered inventory levels and costs using just-in-time inventory methods.

Question 24

The sum of the direct materials costs, direct labor costs, and beginning work in process is the total manufacturing costs for the year.

Question 25

In a manufacturing company balance sheet, manufacturing inventories are reported in the current assets section in the order of their expected use in production.

Question 26

Raw materials inventory shows the cost of completed goods available for sale to customers.

Question 27

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.

Question 28

Planning involves coordinating the diverse activities and human resources of a company to produce a smooth running operation.

Question 29

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.

Question 30

Finished goods inventory does not appear on a cost of goods manufactured schedule.

Question 31

The supply chain is all the activities associated with providing a product or service.

Question 32

Finished goods inventory for a manufacturing company is equivalent to merchandise inventory for a merchandising company.

Question 33

Managerial accounting is primarily concerned with managers and external users.

Question 34

Direct materials become a cost of the finished goods manufactured when they are acquired, not when they are used.

Question 35

Ending finished goods inventory appears on both the balance sheet and the income statement of a manufacturing company.

Question 36

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.

Question 37

The beginning work in process inventory appears on both the balance sheet and the cost of goods manufactured schedule of a manufacturing company.

Question 38

Managerial accounting information is generally prepared for

A)stockholders.
B)creditors.
C)managers.
D)regulatory agencies.

Question 39

In calculating gross profit for a manufacturing company, the cost of goods manufactured is deducted from net sales.

Question 40

Product costs are also called inventoriable costs.

Question 41

Which of the following is not an internal user?

A)Creditor
B)Department manager
C)Controller
D)Treasurer

Question 42

A manager that is establishing objectives is performing which management function?

A)Controlling
B)Directing
C)Planning
D)Constraining

Question 43

Managerial accounting reports can be described as

A)general-purpose.
B)macro-reports.
C)special-purpose.
D)classified financial statements.

Question 44

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.

Question 45

What activities and responsibilities are not associated with management's functions?

A)Planning
B)Accountability
C)Controlling
D)Directing

Question 46

Managerial accounting is also called

A)management accounting.
B)controlling.
C)analytical accounting.
D)inside reporting.

Question 47

Managerial accounting does not encompass

A)calculating product cost.
B)calculating earnings per share.
C)determining cost behavior.
D)profit planning.

Question 48

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.

Question 49

Which of the following is not a management function?

A)Constraining
B)Planning
C)Controlling
D)Directing

Question 50

Financial statements for external users can be described as

A)user-specific.
B)general-purpose.
C)special-purpose.
D)managerial reports.

Question 51

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.

Question 52

Internal reports must be communicated

A)daily.
B)monthly.
C)annually.
D)as needed.

Question 53

The management function that requires managers to look ahead and establish objectives is

A)controlling.
B)directing.
C)planning.
D)constraining.

Question 54

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.

Question 55

Managerial accounting is applicable to

A)service entities.
B)manufacturing entities.
C)not-for-profit entities.
D)all of these.

Question 56

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.

Question 57

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.

Question 58

Internal reports are generally

A)aggregated.
B)detailed.
C)regulated.
D)unreliable.

Question 59

A distinguishing feature of managerial accounting is

A)external users.
B)general-purpose reports.
C)very detailed reports.
D)quarterly and annual reports.

Question 60

The reporting standard for external financial reports is

A)industry-specific.
B)company-specific.
C)generally accepted accounting principles.
D)department-specific.

Question 61

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

Question 62

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

Question 63

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

Question 64

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

Question 65

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.

Question 66

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.

Question 67

Which of the following is not a separate management function?

A)Planning
B)Directing
C)Decision-making
D)Controlling

Question 68

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

Question 69

Which of the following is not a manufacturing cost category?

A)Cost of goods sold
B)Direct materials
C)Direct labor
D)Manufacturing overhead

Question 70

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.

Question 71

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.

Question 72

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.

Question 73

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.

Question 74

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.

Question 75

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.

Question 76

The product cost that is most difficult to associate with a product is

A)direct materials.
B)direct labor.
C)manufacturing overhead.
D)advertising.

Question 77

In determining whether planned goals are being met, a manager is performing the function of

A)planning.
B)follow-up.
C)directing.
D)controlling.

Question 78

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.

Question 79

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

Question 80

Because of automation, which component of product cost is declining?

A)Direct labor
B)Direct materials
C)Manufacturing overhead
D)Advertising