Question 1

Which of the following reflects the formula to calculate gross margin percent?

Accepted Answer

Gross margin percent is calculated by dividing gross margin by sales revenue.

Question 2

What would generally NOT be found on the income statement of a service organization?

Accepted Answer

Cost of goods sold is a term used in the income statement to refer to the cost of producing goods sold, which is not relevant to service organizations as they do not produce goods. Instead, they provide services. Therefore, cost of goods sold would not be found on the income statement of a service organization.

Question 3

During the month of May, Blackburn Inc. had cost of goods manufactured of $120,000, direct materials cost of $60,000, direct labour cost of $37,000, and manufacturing overhead cost of $26,000. The work-in-process balance at May 31 equalled $10,000. What was the work-in-process balance on May 1?

Accepted Answer

The correct answer is A because the work-in-process balance on May 1 is equal to the cost of goods manufactured for May minus the direct materials cost, direct labour cost, and manufacturing overhead cost for May, plus the work-in-process balance at May 31.

Question 4

Which statement best describes the income statement of a manufacturer?

Accepted Answer

The income statement of a manufacturer, like any other business, covers a certain period of time (e.g. a month, a quarter, a year). Option B is incorrect because the income statement of a manufacturer will include all types of costs, not just manufacturing costs. Options C and D are also incorrect because the income statement shows expenses, revenues, and net income, not the ending balances of inventory accounts.

Question 5

Which term is used for the cost of the partially completed goods at the end of the period?

Accepted Answer

The cost of the partially completed goods at the end of the period is called the ending work-in-process inventory. This includes the cost of raw materials, direct labor, and overhead incurred to produce the partially completed goods that are still in the production process. Option A is the cost of goods manufactured, which includes the cost of goods completed during the period. Option B is the cost of finished goods that are ready for sale at the end of the period. Option D is the beginning work-in-process inventory, which is the cost of partially completed goods from the previous period that are still in production at the start of the current period.

Question 6

Refer to TechCom Inc. What was the per-unit conversion cost last month?

Accepted Answer

The answer of Refer to TechCom Inc. What was the...

Question 7

What is the formula to calculate operating income?

Accepted Answer

Operating income is calculated by subtracting both the cost of goods sold and selling and administrative expenses from sales revenue.

Question 8

Refer to TechCom Inc. What was the total per-unit prime cost last month?

Accepted Answer

The answer of Refer to TechCom Inc. What was the...

Question 9

Information from the records of Island Timberlands Inc. for November is as follows: Sales $820,000
Selling and administrative expenses 140,000
Direct materials purchases 176,000
Direct labour 200,000
Manufacturing overhead 270,000
Direct materials, November 1 24,000
Work-in-process, November 1 50,000
Finished goods, November 1 46,000
Direct materials, November 30 28,000
Work-in-process, November 30 56,000
Finished goods, November 30 38,000
What is the net income for the month of November?

Accepted Answer

Net income is calculated as Sales minus Cost of Goods Sold (COGS) and Selling and Administrative Expenses. COGS is calculated as: Opening Finished Goods + Cost of Goods Manufactured - Closing Finished Goods. Cost of Goods Manufactured is: Opening WIP + Direct Materials Used + Direct Labour + Manufacturing Overhead - Closing WIP. Direct Materials Used is: Opening Direct Materials + Purchases - Closing Direct Materials. After calculating these, subtract COGS and Selling and Administrative Expenses from Sales to find net income.

Question 10

Blue Water Inc. had a gross margin for the month of February totalling $92,000. The company sold 6,000 units during the month at a sales price of $30 per unit. What was the amount of cost of goods sold for the month?

Accepted Answer

First, we need to calculate the total sales revenue for the month of February.

Sales revenue = sales price per unit x number of units sold 
Sales revenue = $30 x 6,000 
Sales revenue = $180,000

Next, we can use the formula for calculating cost of goods sold:

Cost of goods sold = sales revenue - gross margin 
Cost of goods sold = $180,000 - $92,000 
Cost of goods sold = $88,000

Therefore, the answer is B, $88,000.

Question 11

What is the formula to calculate gross margin?

Accepted Answer

Gross margin is calculated as the difference between sales revenue and cost of goods sold.

Question 12

Refer to TechCom Inc. What were the total product costs last month?

Accepted Answer

The answer of Refer to TechCom Inc. What were the...

Question 13

Refer to TechCom Inc. What was the amount of cost of goods manufactured last month?

Accepted Answer

The answer of Refer to TechCom Inc. What was the...

Question 14

Assuming a separate schedule of cost of goods manufactured, which of the following is found on a manufacturer's income statement?

Accepted Answer

Cost of goods sold is found on a manufacturer's income statement, as it represents the total cost of the products produced and sold during the given period. Direct labour and direct materials are part of the cost of goods manufactured, which is a separate schedule used to calculate the cost of inventory produced during the period. Work-in-process is also part of the cost of goods manufactured and is not directly reported on the income statement.

Question 15

What would be found on the balance sheet of a manufacturer and NOT on the balance sheet of a service business?

Accepted Answer

Work-in-process is an inventory account that is specific to manufacturers, representing partially completed goods, and would not typically be found on the balance sheet of a service business.

Question 16

Which of the following would be found on the balance sheet of a manufacturer?

Accepted Answer

Work in progress inventory is an asset and would be listed on the balance sheet of a manufacturer.

Question 17

Which statement best describes cost of goods sold?

Accepted Answer

Cost of goods sold is the total product cost for the units sold during a period, which is an expense on the income statement. It represents the cost of resources used by a company to produce the goods sold, including materials, labor, and overhead. The balance sheet will show the inventory cost of the goods that haven't been sold yet. Therefore, option A is incorrect. Option B is a misconception as the revenue should always be more than the cost of goods sold to generate a profit, otherwise, the company would be running at a loss, and option D is incorrect since the cost of goods sold is recorded when the products are sold, not when they are manufactured.

Question 18

How many inventory accounts does a typical manufacturer have?

Accepted Answer

A typical manufacturer has three inventory accounts: raw materials, work-in-process, and finished goods.

Question 19

What three categories separate the expenses on a manufacturer's income statement?

Accepted Answer

The three categories that separate expenses on a manufacturer's income statement are production, selling, and administrative. Production expenses include the cost of raw materials, labor, and overhead associated with manufacturing goods. Selling expenses include the costs associated with promoting and distributing products. Administrative expenses include the costs associated with managing the business, such as salaries, rent, and utilities for the office.

Question 20

What can generally be found on the income statements of both a manufacturer and a service organization?

Accepted Answer

Selling and administrative expenses are common to both manufacturers and service organizations as they both incur costs related to selling their products or services and managing their operations.

Quiz 2: Basic Managerial Accounting Concepts

Which of the following reflects the formula to calculate gross margin percent?

What would generally NOT be found on the income statement of a service organization?

During the month of May, Blackburn Inc. had cost of goods manufactured of $120,000, direct materials cost of $60,000, direct labour cost of $37,000, and manufacturing overhead cost of $26,000. The work-in-process balance at May 31 equalled $10,000. What was the work-in-process balance on May 1?

Which statement best describes the income statement of a manufacturer?

Which term is used for the cost of the partially completed goods at the end of the period?

Refer to TechCom Inc. What was the per-unit conversion cost last month?

What is the formula to calculate operating income?

Refer to TechCom Inc. What was the total per-unit prime cost last month?

Blue Water Inc. had a gross margin for the month of February totalling $92,000. The company sold 6,000 units during the month at a sales price of $30 per unit. What was the amount of cost of goods sold for the month?

What is the formula to calculate gross margin?

Refer to TechCom Inc. What were the total product costs last month?

Refer to TechCom Inc. What was the amount of cost of goods manufactured last month?

Assuming a separate schedule of cost of goods manufactured, which of the following is found on a manufacturer's income statement?

What would be found on the balance sheet of a manufacturer and NOT on the balance sheet of a service business?

Which of the following would be found on the balance sheet of a manufacturer?

Which statement best describes cost of goods sold?

How many inventory accounts does a typical manufacturer have?

What three categories separate the expenses on a manufacturer's income statement?

What can generally be found on the income statements of both a manufacturer and a service organization?