Managerial Accounting 10Th Weygandt Test Bank

Managerial Accounting, 10e (Weygandt)

Chapter 1 Managerial Accounting

1) Reports prepared in financial accounting are general-purpose reports while reports prepared in managerial accounting are usually special-purpose reports.

Answer: TRUE Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: Communication Min.: 1

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

Answer: FALSE Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: Communication Min.: 1

3) All forms of business organizations need managerial accounting information. Answer: TRUE Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: Communication Min.: 1

4) Determining the unit cost of manufacturing a product is an output of financial accounting. Answer: FALSE Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / FSA

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

5) Managerial accounting internal reports are prepared more frequently than financial statements that are distributed externally.

Answer: TRUE

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: Communication Min.: 1

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

Answer: FALSE Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Decision Analysis

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: Leadership Min.: 1

7) The controller of a company is responsible for all of the accounting and finance issues a company faces. Answer: FALSE Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: Ethics / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

8) Controlling is the process of determining whether planned goals are being met. Answer: TRUE Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Internal Controls

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: Leadership Min.: 1

9) Decision-making is an integral part of the planning, directing, and controlling functions. Answer: TRUE

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Decision Analysis

AICPA: BB: Strategic Perspective; FC: None; PC: Leadership Min.: 1

10) Direct materials costs and indirect materials costs are both included in manufacturing overhead.

Answer: FALSE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

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

Answer: TRUE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

12) The balance in the raw materials inventory account is equal to total direct materials minus total indirect materials.

Answer: FALSE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

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

Answer: FALSE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

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

Answer: TRUE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

15) Both direct labor cost and indirect labor cost are product costs. Answer: TRUE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

16) Period costs include selling and administrative expenses. Answer: TRUE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

17) Indirect materials and indirect labor are both inventoriable costs. Answer: TRUE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

18) Direct materials and direct labor are the only product costs.

Answer: FALSE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

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

Answer: FALSE

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

20) Period costs are not inventoriable costs.

Answer: TRUE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

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

Answer: TRUE

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

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

Answer: FALSE

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

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

Answer: FALSE

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

24) Finished goods inventory does not appear on a cost of goods manufactured schedule. Answer: TRUE Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

25) If ending work in process inventory is greater than beginning work in process inventory, then cost of goods manufactured will be less than total manufacturing costs for the period.

Answer: TRUE

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

26) The finished goods inventory account for a manufacturing company is equivalent to the inventory account for a merchandising company.

Answer: TRUE

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

27) Raw materials inventory shows the cost of completed goods available for sale to customers. Answer: FALSE Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

28) The balanced scorecard approach attempts to maintain minimal inventories on hand. Answer: FALSE Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: K

AACSB / IMA: None / Performance Measurement

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

29) The supply chain is all the activities associated with providing a product or service. Answer: FALSE Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: K

AACSB / IMA: None / Performance Measurement

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

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

Answer: TRUE

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

31) Managerial accounting is primarily concerned with managers and external users.

Answer: FALSE

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management.

Bloom: K

AACSB / IMA: None / Business Economics

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

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

Answer: FALSE

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: None Min.: 1

33) When the physical association of raw materials with the finished product is too difficult to trace, these costs are usually classified as indirect materials.

Answer: TRUE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

34) Product costs are also called inventoriable costs.

Answer: TRUE

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

35) Direct materials become a cost of goods manufactured when these items are acquired, not when the items are used.

Answer: FALSE

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

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

Answer: FALSE Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

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.

Answer: FALSE Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

38) Managerial accounting is used in each of the following types of businesses EXCEPT A) service firms.

B) merchandising firms.

C) manufacturing firms.

D) Managerial accounting is used in all types of firms.

Answer: D Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

39) Managerial accounting information is generally prepared for A) stockholders.

B) creditors.

C) managers.

D) regulatory agencies.

Answer: C

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

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. Answer: B Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

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 laws.

Answer: A Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

42) Managerial accounting is also called

A) management accounting.

B) controlling.

C) analytical accounting.

D) inside reporting.

Answer: A Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

43) Which of the following is NOT an internal user?

A) creditor

B) department manager

C) controller

D) treasurer Answer: A Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: C

AACSB / IMA: None / Business Economics

AICPA: BB: None; FC: Reporting; PC: Professional Behavior Min.: 1

44) Managerial accounting does NOT encompass A) calculating product cost.

B) calculating earnings per share.

C) determining cost behavior.

D) profit planning.

Answer: B

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / FSA

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

45) Managerial accounting is applicable to A) service entities.

B) manufacturing entities.

C) not-for-profit entities.

D) all of these.

Answer: D

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

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.

Answer: B

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

47) Internal reports are prepared and distributed

A) daily.

B) monthly.

C) annually.

D) as needed. Answer: D Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

48) Financial statements for external users can be described as A) user-specific.

B) general-purpose.

C) special-purpose.

D) managerial reports. Answer: B Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

49) Managerial accounting reports can be described as A) general-purpose.

B) macro-reports.

C) special-purpose.

D) classified financial statements. Answer: C Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

50) Which of the following statements about internal reports is NOT true?

A) The content of internal reports may extend beyond the accrual accounting system.

B) Internal reports may show all amounts at market values.

C) Internal reports may discuss prospective events.

D) Internal reports are generally highly summarized rather than detailed. Answer: D

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

51) While the preparation of financial statements for external users is guided by GAAP, the guideline for the preparation of managerial accounting reports for internal users is

A) timeliness.

B) special-purpose.

C) relevance to decision.

D) aggregation.

Answer: C

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

52) Internal managerial accounting reports are generally A) aggregated.

B) detailed.

C) regulated.

D) unreliable. Answer: B

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

53) A distinguishing feature of managerial accounting is that A) it is prepared for external users.

B) it produces general-purpose reports.

C) it generally results in very detailed reports.

D) it publishes quarterly and annual reports.

Answer: C

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

54) What activities and responsibilities are NOT associated with managerial functions?

A) planning

B) accountability

C) controlling

D) directing

Answer: B

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: Professional Behavior Min.: 1

55) 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.

Answer: C

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: None Min.: 1

56) 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.

Answer: D

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: C

AACSB / IMA: None / Decision Analysis

AICPA: BB: None; FC: None; PC: Project Management

Min.: 1

57) Which of the following is NOT a management function?

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

Answer: A

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management.

Bloom: K

AACSB / IMA: None / Decision Analysis

AICPA: BB: None; FC: None; PC: Project Management

Min.: 1

58) A manager that is establishing objectives is performing which management function? A) controlling B) directing C) planning D) constraining Answer: C

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: C

AACSB / IMA: None / Decision Analysis

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: Project Management

Min.: 1

59) The management function that requires managers to look ahead and establish objectives is A) controlling.

B) directing.

C) planning.

D) constraining.

Answer: C

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Decision Analysis

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: Project Management

Min.: 1

60) In determining whether planned goals are being met, a manager is performing the function of A) planning.

B) follow-up.

C) directing.

D) controlling.

Answer: D

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: C

AACSB / IMA: None / Decision Analysis

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: Project Management Min.: 1

61) Which of the following is NOT a separate management function?

A) planning

B) directing

C) decision-making

D) controlling

Answer: C

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Decision Analysis

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: Project Management

Min.: 1

62) 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 smoothrunning operation.

D) developing a complex performance ranking system to give certain high performers good raises.

Answer: C

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management.

Bloom: C

AACSB / IMA: None / Decision Analysis

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: Project Management

Min.: 1

63) 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.

Answer: A

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

64) 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.

Answer: D

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

65) 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

Answer: B

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

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.

Answer: D

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

67) 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 an iPhone

C) steel used in the manufacturing of steel-radial tires

D) lubricant for a ball-bearing joint for a large crane

Answer: D

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

68) 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

Answer: C Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

69) 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.

Answer: B

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

70) The wages of a janitor in the factory would be classified as

A) a period cost.

B) direct labor.

C) indirect labor.

D) compliance costs.

Answer: C Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

71) Which one of the following is NOT considered a raw material costs?

A) partially completed motor engines for a motorcycle factory

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

Answer: A

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

72) Which of the following is NOT a manufacturing cost category?

A) cost of goods sold

B) direct materials

C) direct labor

D) manufacturing overhead

Answer: A

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

73) As 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.

Answer: B

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

74) 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.

Answer: C

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

75) 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

Answer: C

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

76) 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.

Answer: C

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

77) 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

Answer: B

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

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

A) direct labor

B) direct materials

C) manufacturing overhead

D) advertising

Answer: A

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

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

A) direct materials.

B) direct labor.

C) manufacturing overhead.

D) advertising.

Answer: C

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management Min.: 1

80) 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.

Answer: D

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

81) 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 factory of a Fortune 1000 manufacturer

B) workers' compensation insurance on factory workers' wages allocated to the factory

C) packaging materials for finished products

D) payroll accountant's salary for work that is done in the corporate head office

Answer: D

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

82) Which one of the following costs would NOT be inventoriable?

A) period costs

B) factory insurance costs

C) indirect materials

D) indirect labor costs

Answer: A

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

83) 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

Answer: D

Diff: 2

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: AP

AACSB / IMA: Analytic / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 2

84) 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

Answer: D

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

85) Sales commissions are classified as

A) overhead costs

B) period costs.

C) product costs.

D) indirect labor.

Answer: B

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

86) 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.

Answer: B

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

87) Product costs are also called

A) direct costs.

B) overhead costs.

C) inventoriable costs.

D) capitalizable costs.

Answer: C

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

88) In accordance with the matching principle, inventoriable costs are expensed when

A) the product is finished and in stock.

B) the product has been returned.

C) the product to which the costs attach is sold.

D) all accounts payable have been settled.

Answer: C

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

89) When goods are sold, their inventoriable costs are transferred to

A) selling expenses.

B) gross profit.

C) cost of goods sold.

D) sales revenue.

Answer: C

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

90) 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.

Answer: D

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

91) 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.

Answer: C

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

92) 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.

Answer: B

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

93) 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.

Answer: D

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

94) 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.

Answer: C

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

95) Kushman Combines, Inc. has $20,000 of ending finished goods inventory as of December 31, 2027. 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

Answer: C

Explanation: $50,000 - $10,000 + $20,000 = $60,000

(Cost of goods sold - Beginning finished goods inventory + Ending finished goods inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 3

96) 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. Answer: C

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 2

97) If the cost of goods manufactured during a period exceeds the total manufacturing costs for the period, then

A) ending work in process inventory is greater than or equal to beginning work in process inventory.

B) ending work in process inventory is greater than beginning work in process inventory.

C) ending work in process inventory is equal to the cost of goods manufactured.

D) ending work in process inventory is less than the beginning work in process inventory.

Answer: D

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 2

98) On a cost 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.

Answer: B

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

99) On the cost of goods manufactured schedule, the ending raw materials inventory is reported 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) component of manufacturing overhead.

Answer: C

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

100) Dolan Company's accounting records reflect the following inventories:

Dec. 31, 2027

Dec. 31, 2026

During 2027, $800,000 of raw materials were purchased, direct labor costs amounted to $670,000, and manufacturing overhead incurred was $640,000. (Assume that all raw materials used were direct materials.) The total raw materials available for use during 2027 for Dolan Company is

A) $1,110,000.

B) $660,000.

C) $750,000.

D) $1,060,000.

Answer: D

Explanation: $260,000 + $800,000 = $1,060,000

(Beginning raw materials inventory + Purchases = Raw materials available) Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 3

101) Dolan Company's accounting records reflect the following inventories:

Dec. 31, 2027

Dec. 31, 2026

During 2027, $800,000 of raw materials were purchased, direct labor costs amounted to $670,000, and manufacturing overhead incurred was $640,000. (Assume that all raw materials used were direct materials.) Dolan Company's total manufacturing costs incurred in 2027 amounted to

A) $2,060,000.

B) $2,020,000.

C) $1,920,000.

D) $2,110,000.

Answer: A

Explanation: $260,000 + $800,000 - $310,000 = $750,000; $750,000 + $670,000 + $640,000 = $2,060,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used; Raw materials used + Direct labor + Manufacturing overhead incurred = Total manufacturing costs)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 3

102) Dolan Company's accounting records reflect the following inventories:

Dec. 31, 2027

Dec. 31, 2026

During 2027, $800,000 of raw materials were purchased, direct labor costs amounted to $670,000, and manufacturing overhead incurred was $640,000. (Assume that all raw materials used were direct materials.)

If Dolan Company's cost of goods manufactured for 2027 amounted to $1,890,000, its cost of goods sold for the year is

A) $2,000,000.

B) $1,750,000.

C) $1,850,000.

D) $1,930,000.

Answer: C

Explanation: $150,000 + $1,890,000 - $190,000 = $1,850,000

(Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory = Cost of goods sold)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 3

103) 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

Answer: A

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

104) Worth Company reported the following year-end information: beginning work in process inventory, $180,000; cost of goods manufactured, $866,000; 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) $854,000.

B) $878,000.

C) $826,000.

D) $602,000.

Answer: A

Explanation: $252,000 + $866,000 - $264,000 = $854,000

(Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory = Cost of goods sold)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 3

105) 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

Raw materials purchased

Direct labor

Manufacturing overhead 720,000

Laflin Company's cost of goods manufactured for the year is

A) $2,400,000.

B) $2,580,000.

C) $2,220,000.

D) $2,760,000.

Answer: B

Explanation: $300,000 + $960,000 - $480,000 = $780,000; $1,080,000 + $780,000 + $900,000 + $720,000 - $900,000 = $2,580,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used; Beginning work in process inventory + Raw materials used + Direct labor + Manufacturing overhead incurred - Ending work in process inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 3

106) Benson Inc.'s accounting records reflect the following inventories:

Dec. 31, 2026

Dec. 31, 2027

During 2027, Benson purchased $1,450,000 of raw materials, incurred direct labor costs of $250,000, and incurred manufacturing overhead totaling $160,000. (Assume that all raw materials used were direct materials.) What was the cost of raw materials transferred to production during 2027 for Benson?

A) $1,386,000

B) $1,466,000

C) $1,450,000

D) $1,434,000

Answer: B

Explanation: $80,000 + $1,450,000 - $64,000 = $1,466,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 5

107) Benson Inc.'s accounting records reflect the following inventories:

Dec. 31, 2026

Dec. 31, 2027

During 2027, Benson purchased $1,450,000 of raw materials, incurred direct labor costs of $250,000, and incurred manufacturing overhead totaling $160,000. (Assume that all raw materials used were direct materials.) What total manufacturing costs were incurred during 2027 for Benson?

A) $1,864,000

B) $1,876,000

C) $1,860,000

D) $1,872,000

Answer: B

Explanation: $80,000 + $1,450,000 - $64,000 = $1,466,000; $1,466,000 + $250,000 + $160,000 = $1,876,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used; Raw materials used + Direct labor + Manufacturing overhead incurred = Total manufacturing costs)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 5

108) Benson Inc.'s accounting records reflect the following inventories:

Dec. 31, 2026

Dec. 31, 2027

During 2027, Benson purchased $1,450,000 of raw materials, incurred direct labor costs of $250,000, and incurred manufacturing overhead totaling $160,000. (Assume that all raw materials used were direct materials.) Assume Benson's cost of goods manufactured for 2027 amounted to $1,660,000. What amount would the company report as cost of goods sold for the year?

A) $1,668,000

B) $1,568,000

C) $1,760,000

D) $1,652,000

Answer: A

Explanation: $100,000 + $1,660,000 - $92,000 = $1,668,000

(Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory = Cost of goods sold)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

109) Walker Company reported the following year-end information:

What is Walker's cost of goods manufactured for the year?

A) $834,000

B) $1,374,000

C) $1,370,000

D) $1,378,000

Answer: C

Explanation: $24,000 + $830,000 - $20,000 = $834,000; $46,000 + $834,000 + $440,000 + $100,000 - $50,000 = $1,370,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used; Beginning work in process inventory + Raw materials used + Direct labor + Manufacturing overhead incurred - Ending work in process inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

110) Ogleby Inc.'s accounting records reflect the following inventories:

Dec. 31, 2026

Dec. 31, 2027 Raw

During 2027, Ogleby purchased $980,000 of raw materials, incurred direct labor costs of $175,000, and incurred manufacturing overhead totaling $224,000. (Assume that all raw materials used were direct materials.) What total manufacturing costs was incurred during 2027 for Ogleby?

A) $1,385,000

B) $1,403,000

C) $1,379,000

D) $1,415,000

Answer: B

Explanation: $120,000 + $980,000 - $96,000 = $1,004,000; $1,004,000 + $175,000 + $224,000 = $1,403,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used; Raw materials used + Direct labor + Manufacturing overhead incurred = Total manufacturing costs)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 5

111) Ogleby Inc.'s accounting records reflect the following inventories:

Dec. 31, 2026

Dec. 31, 2027

During 2027, Ogleby purchased $980,000 of raw materials, incurred direct labor costs of $175,000, and incurred manufacturing overhead totaling $224,000. (Assume that all raw materials used were direct materials.) What would Ogleby Manufacturing report as cost of goods manufactured for 2027?

A) $1,229,000

B) $1,397,000

C) $1,391,000

D) $1,385,000

Answer: D

Explanation: $120,000 + $980,000 - $96,000 = $1,004,000; $156,000 + $1,004,000 + $175,000 + $224,000 - $174,000 = $1,385,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used; Beginning work in process inventory + Raw materials used + Direct labor + Manufacturing overhead incurred - Ending work in process inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

112) Wasson Company reported the following year-end information:

What is Wasson's total cost of work in process for the year?

A) $925,000

B) $893,000

C) $890,000

D) $928,000

Answer: D

Explanation: $18,000 + $560,000 - $15,000 = $563,000; $35,000 + $563,000 + $210,000 + $120,000 = $928,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used; Beginning work in process inventory + Raw materials used + Direct labor + Manufacturing overhead incurred = Total cost of work in process)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 5

113) Edmiston Company reported the following year-end information: beginning work in process inventory, $80,000; cost of goods manufactured, $750,000; beginning finished goods inventory, $50,000; ending work in process inventory, $70,000; and ending finished goods inventory, $40,000. What is Edmiston's cost of goods sold for the year?

A) $750,000

B) $760,000

C) $740,000

D) $770,000

Answer: B

Explanation: $50,000 + $750,000 - $40,000 = $760,000

(Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory = Cost of goods sold)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

114) A company compiled the following information for the current year. (Assume that all raw materials used were direct materials.)

Raw materials inventory, January 1

Raw materials inventory, December 31

Work in process inventory, January 1

Work in process inventory, December 31

Finished goods inventory, January 1

Finished goods inventory, December 31

What amount of the direct materials were used during the period?

A) $1,760,000

B) $1,720,000

C) $1,700,000

D) $1,680,000

Answer: D

Explanation: $20,000 + $1,700,000 - $40,000 = $1,680,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

115) A company compiled the following information for the current year. (Assume that all raw materials used were direct materials.)

Raw materials inventory, January 1

Raw materials inventory, December 31

Work in process inventory, January 1

Work in process inventory, December 31

Finished goods inventory, January 1

Finished goods inventory, December 31

If direct materials used were $1,700,000, what were the total manufacturing costs for the period?

A) $3,060,000

B) $3,066,000

C) $2,860,000

D) $3,480,000

Answer: A

Explanation: $1,700,000 + $760,000 + $150,000 + $50,000 + $400,000 = $3,060,000

(Direct materials used + Direct labor + Factory utilities + Indirect labor + Factory depreciation = Total manufacturing costs)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

116) A company compiled the following information for the current year. (Assume that all raw materials used were direct materials.)

Raw materials inventory, January 1

Raw materials inventory, December 31

Work in process inventory, January 1

Work in process inventory, December 31

Finished goods inventory, January 1

Finished goods inventory, December 31

If the total manufacturing costs are $3,000,000, what is the cost of goods manufactured for the period?

A) $3,014,000

B) $2,994,000

C) $3,006,000

D) $3,008,000

Answer: C

Explanation: $18,000 + $3,000,000 - $12,000 = $3,006,000

(Beginning work in process inventory + Total manufacturing costs - Ending work in process inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

117) A company compiled the following information for the current year. (Assume that all raw materials used were direct materials.)

Raw materials inventory, January 1

Raw materials inventory, December 31

Work in process inventory, January 1

Work in process inventory, December 31

Finished goods inventory, January 1

Finished goods inventory, December 31

If the cost of goods manufactured is $3,040,000, what is cost of goods sold for the period?

A) $3,046,000

B) $3,008,000

C) $3,032,000

D) $3,048,000

Answer: D

Explanation: $40,000 + $3,040,000 - $32,000 = $3,048,000

(Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory = Cost of goods sold)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 5

118) A company compiled the following information for the current year. (Assume that all raw materials used were direct materials.)

Raw materials inventory, January 1 $

Raw materials inventory, December 31

Work in process inventory, January 1

Work in process inventory, December 31

Finished goods inventory, January 1

Finished goods inventory, December 31

What is the cost of direct materials used during the period?

A) $1,740,000

B) $1,830,000

C) $1,800,000

D) $1,770,000

Answer: D

Explanation: $30,000 + $1,800,000 - $60,000 = $1,770,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 5

119) A company compiled the following information for the current year. (Assume that all raw materials used were direct materials.)

Raw materials inventory, January 1 $

Raw materials inventory, December 31

Work in process inventory, January 1

Work in process inventory, December 31

Finished goods inventory, January 1

Finished goods inventory, December 31

If the cost of direct materials used is $1,800,000 during a period, what are total manufacturing costs?

A) $3,490,000

B) $3,499,000

C) $3,190,000

D) $4,120,000

Answer: A

Explanation: $1,800,000 + $890,000 + $225,000 + $75,000 + $500,000 = $3,490,000

(Direct materials used + Direct labor + Factory utilities + Indirect labor + Factory depreciation = Total manufacturing costs)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

120) A company compiled the following information for the current year. (Assume that all raw materials used were direct materials.)

Raw materials inventory, January 1 $

Raw materials inventory, December 31

Work in process inventory, January 1

Work in process inventory, December 31

Finished goods inventory, January 1

Finished goods inventory, December 31

Assuming that total manufacturing costs are $3,400,000, what is the cost of goods manufactured for the period?

A) $3,421,000

B) $3,391,000

C) $3,409,000

D) $3,142,000

Answer: C

Explanation: $27,000 + $3,400,000 - $18,000 = $3,409,000

(Beginning work in process inventory + Total manufacturing costs - Ending work in process inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

121) A company compiled the following information for the current year. (Assume that all raw materials used were direct materials.)

Raw materials inventory, January 1 $

Raw materials inventory, December 31

Work in process inventory, January 1

Work in process inventory, December 31

Finished goods inventory, January 1

Finished goods inventory, December 31

If the cost of goods manufactured is $3,460,000, what is cost of goods sold for the period?

A) $3,469,000

B) $3,412,000

C) $3,448,000

D) $3,472,000

Answer: D

Explanation: $60,000 + $3,460,000 - $48,000 = $3,472,000

(Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory = Cost of goods sold)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 5

122) Samson Company reported total manufacturing costs of $320,000, manufacturing overhead totaling $52,000, and direct materials totaling $64,000. What is the company's direct labor cost?

A) Cannot be determined from the information provided.

B) $268,000

C) $256,000

D) $204,000

Answer: D

Explanation: $320,000 - $64,000 - $52,000 = $204,000

(Total manufacturing costs - Direct materials - Manufacturing overhead = Direct labor cost)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 5

123) Given the following data for Mehring Company, what are (A) total manufacturing costs and (B) cost of goods manufactured?

Direct

A) (A) - $620,000; (B) - $650,000

B) (A) - $635,000; (B) - $620,000

C) (A) - $635,000; (B) - $650,000

D) (A) - $650,000; (B) - $665,000

Answer: C

Explanation: $230,000 + $150,000 + $255,000 = $635,000; $30,000 + $635,000 - $15,000 = $650,000

(Direct materials + Direct labor + Manufacturing overhead = Total manufacturing costs; Beginning work in process inventory + Total manufacturing costs - Ending work in process inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

124) Penner Company reported total manufacturing costs of $450,000, manufacturing overhead totaling $78,000, and direct materials totaling $96,000. What is the company's direct labor cost?

A) Cannot be determined from the information provided.

B) $624,000

C) $354,000

D) $276,000

Answer: D

Explanation: $450,000 - $96,000 - $78,000 = $276,000

(Total manufacturing costs - Direct materials - Manufacturing overhead = Direct labor cost)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 3

125) Given the following data for Glennon Company, what are (A) total manufacturing costs and (B) costs of goods manufactured?

Direct materials used $270,000 Beginning work in process

A) (A) - $700,000; (B) - $740,000

B) (A) - $720,000; (B) - $700,000

C) (A) - $720,000; (B) - $740,000

D) (A) - $740,000; (B) - $760,000

Answer: C

Explanation: $270,000 + $200,000 + $250,000 = $720,000; $40,000 + $720,000 - $20,000 = $740,000

(Direct materials + Direct labor + Manufacturing overhead = Total manufacturing costs; Beginning work in process + Total manufacturing costs - Ending work in process = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

126) Barton Company has beginning work in process inventory of $144,000 and total manufacturing costs of $686,000. If cost of goods manufactured is $660,000, what is the cost of the ending work in process inventory?

A) $150,000

B) $118,000

C) $190,000

D) $170,000

Answer: D

Explanation: $144,000 + $686,000 - X = $660,000; X = $170,000

(Beginning work in process inventory + Total manufacturing costs - Ending work in process inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

127) Gammil Company has beginning and ending raw materials inventories of $96,000 and $120,000, respectively. If direct materials used were $490,000, what was the cost of raw materials purchased?

A) $490,000

B) $520,000

C) $466,000

D) $514,000

Answer: D

Explanation: $96,000 + X - $120,000 = $490,000; X = $514,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Raw materials used)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 3

128) Molina Company has beginning and ending work in process inventories of $130,000 and $145,000, respectively. If total manufacturing costs are $680,000, what is the total cost of goods manufactured?

A) $810,000

B) $825,000

C) $665,000

D) $695,000

Answer: C

Explanation: $130,000 + $680,000 - $145,000 = $665,000

(Beginning work in process inventory + Total manufacturing costs - Ending work in process inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 3

129) Costas Company has beginning and ending raw materials inventories of $64,000 and $80,000, respectively. If direct materials used were $310,000, what was the cost of raw materials purchased?

A) $310,000

B) $330,000

C) $294,000

D) $326,000

Answer: D

Explanation: $64,000 + X - $80,000 = $310,000; X = $326,000

(Beginning raw materials inventory + Purchases - Ending raw materials inventory = Direct materials used)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 3

130) Wood Company has beginning work in process inventory of $138,000 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) $120,000

B) $141,000

C) $150,000

D) $135,000

Answer: D

Explanation: $138,000 + $477,000 - X = $480,000; X = $135,000

(Beginning work in process inventory + Total manufacturing cost - Ending work in process inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 3

131) Given the following data for Harder Company, what is the cost of goods manufactured?

Direct

$120,000

A) $490,000

B) $500,000

C) $510,000

D) $520,000

Answer: C

Explanation: $20,000 + $120,000 + $200,000 + $180,000 - $10,000 = $510,000

(Beginning work in process inventory + Direct materials used + Direct labor + Manufacturing overhead - Ending work in process inventory = Cost of goods manufactured)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 3

132) 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

Answer: C

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

133) The equivalent account to finished goods inventory for a merchandising firm is referred to as

A) purchases.

B) cost of goods purchased.

C) inventory.

D) raw materials inventory.

Answer: C

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

134) 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.

Answer: C

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

135) Which of the following terms describes the 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

Answer: D

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: K

AACSB / IMA: None / Performance Measurement

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

136) Which of the following managerial accounting approaches attempts to allocate manufacturing overhead more accurately?

A) balanced scorecard

B) just-in-time inventory

C) activity-based costing

D) total quality management

Answer: C

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

137) 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

Answer: B

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: C

AACSB / IMA: None / Performance Measurement

AICPA: BB: None; FC: None; PC: Measurement Analysis and Interpretation

Min.: 1

138) Which of the following characteristics would likely be associated with a just-in-time inventory method?

A) ending work in process inventory 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

Answer: C

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management Min.: 1

139) 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.

Answer: D

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: K

AACSB / IMA: None / Performance Measurement

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: Project Management Min.: 1

140) 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.

Answer: D

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

141) The managerial function that pertains to keeping the activities of the enterprise on track is

A) planning.

B) directing.

C) controlling.

D) accounting.

Answer: C

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management.

Bloom: K

AACSB / IMA: None / Performance Measurement

AICPA: BB: Process and Research Management; FC: None; PC: Project Management

Min.: 1

142) Property taxes on a manufacturing facility are an element of a

A) Product Cost - Yes ; Period Cost- No

B) Product Cost - Yes ; Period Cost- Yes

C) Product Cost - No ; Period Cost- Yes

D) Product Cost - No ; Period Cost- No

Answer: A

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

143) 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

Answer: B

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

144) 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.

Answer: B

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

145) If cost of goods manufactured is less than 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.

Answer: C

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

146) The principal difference between the income statements of a merchandising company's and a manufacturing company is the

A) cost of goods sold section.

B) operating income section.

C) operating expense section.

D) revenue section.

Answer: A

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

147) If total manufacturing costs are greater than 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.

Answer: A

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

148) 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.

Answer: C

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

149) 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.

Answer: C

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

150) Presented below are Truck Company's monthly manufacturing cost data related to its personal computer products. (Assume that all raw materials used were direct materials.)

(a) Taxes on factory building

$820,000

(b) Raw materials transferred to production 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)

Answer: (3 min.)

Product Costs

Direct Materials Direct Labor Manufacturing Overhead (a) X (b) X (c) X (d) X

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 3

151) 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

Answer: (2 min.)

a. MO

b. DM

c. DL

d. MO

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 2

152) 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 used in pencils

h. ________ Eraser compound

Answer: (4 min.)

a. MO

b. DM

c. MO

d. DL

e. MO

f. MO

g. DM

h. DM

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 4

153) Presented below are Cricket Company's monthly manufacturing cost data related to its personal computer products.

a. Hard drives and memory sticks

b. Wages to assemble equipment

c. Insurance on manufacturing building

d. Wages for factory supervisors

Instructions

$30,000

$65,000

$41,000

$64,000

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)

Answer: (2 min.)

Product Costs

Direct Materials Direct Labor Manufacturing Overhead (a) X

(b) X (c) X

(d) X

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 2

154) 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

Answer: (5 min.)

1. Product cost 4. Period cost

2. Product cost 5. Product cost

3. Product cost 6. Period cost

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

155) Criba Company has the following data: direct labor $560,000, direct materials used $421,000, total manufacturing overhead $206,000, and beginning work in process inventory $47,000.

Instructions

Compute (a) total manufacturing costs and (b) total cost of work in process.

Answer: (5 min.)

(a) Direct labor

$ 560,000

Direct materials used 421,000

Total manufacturing overhead 206,000

Total manufacturing costs

$1,187,000

(b) Beginning work in process inventory $ 47,000

Total manufacturing costs 1,187,000

Total cost of work in process

Diff: 2

$1,234,000

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

156) Presented below are incomplete 2027 manufacturing cost data for Swartnez Corporation.

(a) $ 22,000 $42,000 ? $ 88,000 (b) $148,000 ? $112,000 $460,000

Instructions

Determine the missing amounts.

Answer: (3 min.)

(a) Total manufacturing costs $88,000

Less: Direct materials used (22,000)

Less: Direct labor (42,000)

Equals: Manufacturing overhead $24,000

(b) Total manufacturing costs $460,000

Less: Direct materials (148,000)

Less: Manufacturing overhead (112,000)

Equals: Direct labor $200,000

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 3

157) Presented below are incomplete 2027 manufacturing cost data for Supreme Corporation. Direct Materials Used

(a) $48,000

? $194,000 (b) $95,000 ? $80,000 $305,000 (c) ? $80,000 $120,000 $260,000

Instructions

Determine the missing amounts. Answer: (4 min.)

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 4

158) Raynor Company has the following data:

process inventory 45,000

Instructions

Compute (a) total manufacturing costs and (b) cost of goods manufactured. Answer: (5 min.)

(a) Direct labor $ 76,000 Direct materials used 84,000 Total manufacturing overhead 65,000 Total manufacturing costs $225,000

(b) Beginning work in process $ 45,000

Total manufacturing costs 225,000

Less ending work in process (30,000)

Cost of goods manufactured $240,000

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 5

159) Sudler Company's current assets on December 31, 2027, are listed below in alphabetical order. Prepare the current assets section of the company's balance sheet as of the same date.

Answer: (4 min.) Current Assets

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 4

160) 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.

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

Answer: (7-11 min.)

1. F 6. M

2. M 7. F

3. F 8. F

4. M 9. M

5. F 10. F

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 7

161) 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. Small tools used in production

6. Tires used in manufacturing vehicles

Answer: (5 min.)

1. DL 4. MO

2. MO 5. MO

3. DM 6. DM

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

162) Presented below is a list of costs and expenses incurred in the factory by Nu-Way Corporation, a manufacturer of teardrop travel trailers.

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. USB ports installed in the travel trailers

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

Answer: (8-10 min.)

1. MO 6. MO

2. MO 7. MO

3. DL 8. DM

4. MO 9. MO

5. DM 10. MO

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 8

163) 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

Answer: (6-9 min.)

c.

d.

e.

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 6

164) Kennedy Company reports the following costs and expenses in May.

Instructions

From the information, determine the total amount of:

(a) manufacturing overhead

(b) product costs

(c) period costs

Answer: (10-12 min.) (a)

(c)

Diff: 2

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: AP

AACSB / IMA: Analytic / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 12

165) Kwik Delivery Service reports the following costs and expenses in June 2027.

Instructions

Determine the total amount of (a) delivery service (product) costs and (b) period costs.

Answer: (10-12 min.)

(a) Delivery service (product) costs:

(b) Period costs:

Diff: 2

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: AP

AACSB / IMA: Analytic / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 10

166) 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

Answer: (7-10 min.)

1. Pr 6. Pe

2. Pe 7. Pr

3. Pe 8. Pe

4. Pr 9. Pr

5. Pr 10. Pr

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 7

167) 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

Instructions

Complete the following matrix by placing an X mark under the appropriate headings.

Direct Direct Manufacturing Period Cost Item Materials Labor Overhead Costs

Answer: (10-15 min) Direct Direct Manufacturing Period Cost Item Materials Labor Overhead Costs 1. X 2. X 3. X 4. X 5. X 6. X 7. X 8. X 9. X 10. X 11. X 12. X Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 10

168) Presented below are incomplete 2027 manufacturing cost data for Tardy Corporation.

Direct Materials

Instructions

Determine the missing amounts. Answer: (6 min.)

Direct Materials

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer. Bloom: AN

AACSB / IMA: Analytic / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 6

169) 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 inventory, 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.

Answer: (8-12 min.)

1. Direct labor (a)

2. Office supplies used (b)

3. Depreciation on printing machines (a)

4. Finished goods inventory, 12/31 (b), (c)

5. Raw materials inventory, 1/1 (a)

6. Cost of goods manufactured (a), (b)

7. Work in process inventory, 1/1 (a)

8. Office supplies inventory, 12/31 (c)

9. Indirect labor (a)

10. Heat and electricity for the print shop (a) Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 8

170) Klein Company manufactures boats, each of which is equipped with a cellular phone. During September, 2027, the company purchased 100 cellular phones at a cost of $110 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. The remaining phones are to be installed in boats in the next production run.

Of the boats put into production during September, 2027, 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 on September 30, 2027:

Raw materials inventory

Work in process inventory

Finished goods inventory

Cost of goods sold

Selling expenses

Answer: (12-17 min.)

Raw materials: (100 - 70) × $110 = $3,300

Work in process: (50 × 20%) × $110 = $1,100

Finished goods: (50 × 80% × 50%) × $110 = $2,200

Cost of goods sold: (50 × 80% × 50%) × $110 = $2,200

Selling expenses: 20 × $110 = $2,200

Costs to account for: 100 × $110 = $11,000

Raw materials inventory $ 3,300

Work in process inventory 1,100

Finished goods inventory 2,200

Cost of goods sold 2,200

Selling expenses 2,200

Total $11,000

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 12

171) Peters Manufacturing Company has the following data on June 30, 2027:

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 580,000

Work in process inventory, June 30 30,400

Finished goods inventory, June 30 55,200

Raw materials inventory, June 30 18,000

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. Answer: (10-15 min.)

(a) PETERS MANUFACTURING COMPANY (Partial) Income Statement For the Month Ended June 30, 2027

Sales.............................................................................. $580,000

Cost of goods sold

Finished goods inventory, June 1.......................... $ 43,500 Cost of goods manufactured.................................. 417,700*

Cost of goods available for sale ............................ 461,200

Finished goods inventory, June 30........................ 55,200

Cost of goods sold 406,000

Gross profit ................................................................... $ 174,000

*$18,100 + $430,000 - $30,400 = $417,700

(b) PETERS MANUFACTURING COMPANY (Partial) Balance Sheet June 30, 2027

Current assets Cash $ XXXX Accounts receivable................................................ XXXX

Inventories: Finished goods................................................... $55,200 Work in process................................................. 30,400 Raw materials 18,000 103,600

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer. Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 10

172) Glavine Corporation incurred the following costs while manufacturing its product:

Work in process inventory was $27,000 on January 1 and $15,500 on December 31. Finished goods inventory was $65,000 on January 1 and $50,600 on December 31. (Assume all raw materials used were direct materials.)

Instructions

(a) Compute cost of goods manufactured.

(b) Compute cost of goods sold.

Answer: (10-12 min.)

(a)

(b)

in process inventory, 1/1

.........................................

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 10

173) The following information is available for Elliot Company. (Assume all raw materials used were direct materials.)

January 1, 2027 2027 December 31, 2027

Instructions

(a) Compute cost of goods manufactured.

(b) Prepare an income statement through gross profit. Answer: (12-16 min.)

(a)

Work in process inventory, 1/1........................ $ 18,500

Direct materials

Materials inventory, 1/1 $ 26,000 Materials purchased................................... 170,000 Materials available for use 196,000 Less: Materials inventory, 12/31................ 30,000

Direct materials used........................................ $166,000

labor ......................................................

..................................

...........................

............................

(b) Sales .............................................................. $800,000 Cost of goods sold Finished goods inventory, 1/1.................... $ 30,000 Cost of goods manufactured 572,300

Cost of goods available for sale................. 602,300

Less: Finished goods inventory, 12/31 ...... 21,000 Cost of goods sold................................ 581,300

Gross profit ...................................................... $218,700 Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 12

174) Manufacturing cost data for Morton Company are presented below. (Assume all raw materials used were direct materials.)

Case A

Direct materials used (a) $75,400 $130,000

Direct labor $ 57,000 76,000 (g)

Manufacturing overhead 46,500 81,600 102,000

Total manufacturing costs 195,650 (d) 283,700

Work in process inventory, 1/1/27 (b) 16,500 (h)

Total cost of work-in-process 221,500 (e) 327,000

Work in process inventory, 12/31/27 (c) 9,000 80,000

Cost of goods manufactured 180,275 (f) (i)

Instructions

Indicate the missing amount for each letter (a) through (i).

Answer: (12-16 min.)

A + $57,000 + $46,500 = $195,650 $249,500 - $9,000 = F A = $92,150 F = $240,500

$195,650 + B = $221,500

$130,000 + G + $102,000 = $283,700 B = $25,850 G = $51,700

$221,500 - C = $180,275

$283,700 + H = $327,000 C = $41,225 H = $43,300

$75,400 + $76,000 + $81,600 = D

$327,000 - $80,000 = I D = $233,000 I = $247,000

$233,000 + $16,500 = E E = $249,500

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 12

175) From the account balances listed below, prepare a schedule of cost of goods manufactured for Sampson Manufacturing Company for the month ended December 31, 2027. (Assume all raw materials used were direct materials.)

Answer: (12-16 min.)

SAMPSON MANUFACTURING COMPANY

Cost of Goods Manufactured Schedule For the Month Ended December 31, 2027

Work in process inventory, December 1 $ 25,000

Direct materials

Raw materials inventory, December 1 $ 12,000

Raw materials purchases 105,000

Total raw materials available for use 117,000 Less: Raw materials inventory, December 31 19,000

Less: Work in process inventory, December 31 15,000

Cost of goods manufactured $225,000 Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 12

176) Rapid Manufacturing Company has the following data:

Instructions

Compute (a) total manufacturing costs and (b) total cost of work in process. Answer: (6 min.)

(a) Direct labor

(b) Beginning work in process inventory

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 6

177) The following costs and inventory data were taken from the accounts of Simon Company for 2027. (Assume all raw materials used were direct materials.)

January 1, 2027

December 31, 2027 Inventories:

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, 2027, in good form.

d. Prepare the Cost of Goods Sold section of the Income Statement for Simon Company for the year ended December 31, 2027, in good form.

Answer: (18-20 min.)

a.

Raw materials inventory, beginning $ 8,000

Raw materials purchases 98,000

Raw materials available for use 106,000

Less: Raw materials inventory, ending 7,000

Direct materials used $ 99,000

b.

c.

overhead:

Indirect labor 9,000

Total manufacturing overhead $33,000

SIMON COMPANY

Schedule of Cost of Goods Manufactured For the Year Ended December 31, 2027

Work in process inventory, beginning $ 15,000

Direct materials

Raw materials inventory, beginning $ 8,000

Less: Raw materials inventory, ending 7,000

Less: Work in process inventory, ending 13,000

Cost of goods manufactured $176,000 d.

SIMON COMPANY

(Partial) Income Statement

For the Year Ended December 31, 2027

Finished goods inventory, January 1 $ 16,000 Cost of goods manufactured 176,000 Cost of goods available for sale 192,000

Less: Finished goods inventory, December 31 12,000

Cost of goods sold $180,000

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 18

178) Manufacturing costs for Carson Company for selected months are as follows. (Assume all raw materials used were direct materials.)

April

Beginning work in process inventory

July

October

$ 80,000 (f) $ 88,000

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 860,000 510,000 450,000

Total cost of work in process (b) 640,000 (k)

Ending work in process inventory 75,000 (g) (l)

Cost of goods manufactured (c) 515,000 385,000

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).

Answer: (12-17 min.)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

(k)

(l)

(m)

(n)

Diff: 2

$385,000 ($860,000 - $280,000 - $195,000)

$940,000 ($860,000 + $80,000)

$865,000 ($940,000 - $75,000)

$95,000 ($960,000 - $865,000)

$140,000 ($960,000 - $820,000)

$130,000 ($640,000 - $510,000)

$125,000 ($640,000 - $515,000)

$553,000 ($515,000 + $38,000)

$478,000 ($553,000 - $75,000)

$205,000 ($450,000 - $155,000 - $90,000)

$538,000 ($88,000 + $450,000)

$153,000 ($538,000 - $385,000)

$95,000 ($480,000 - $385,000)

$125,000 ($480,000 - $355,000)

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 12

179) Fill in the missing information on the cost of goods manufactured schedule of Noland Manufacturing Company. (Assume all raw materials used were direct materials.)

NOLAND MANUFACTURING COMPANY

Cost of Goods Manufactured Schedule For the Year Ended December 31, 2027

Work in process inventory (1/1)

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

Direct labor ?

Manufacturing

$340,000

?

Total manufacturing costs ?

Total cost of work in process ?

Less: Work in process inventory (12/31) 322,000

Cost of goods manufactured $480,000

Answer: (6-9 min.)

NOLAND MANUFACTURING COMPANY

Cost of Goods Manufactured Schedule For the Year Ended December 31, 2027

Work in process inventory (1/1)

Direct materials

Raw materials inventory (1/1) $ 46,000

Raw materials purchases 246,000

Raw materials available for use 292,000

Raw materials inventory (12/31) 37,000

Direct

$340,000

Less: Work in process inventory (12/31)

Cost of goods manufactured $480,000

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 6

180) Data for the cost of direct materials for the month ended March 31, 2027, are as follows:

Raw materials inventory, March 1, 2027

$76,000

Raw materials inventory, March 31, 2027 70,000

During March, the company purchased $260,000 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. (Assume all raw materials used were direct materials.)

Instructions

Compute the cost of direct materials used during March. Answer: (5-7 min.)

Raw materials inventory, March 1 $ 76,000

Raw materials purchases ($260,000 + $92,000) 352,000

Total raw materials available for use 428,000

Less: Raw materials inventory, March 31 70,000

Direct materials used during March $358,000

Note: Payment on account to Reed is irrelevant to the direct materials used calculation. Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 5

181) Presented below are incomplete 2027 manufacturing cost data for Tardy Corporation.

Direct

(a)

? (b) ? $53,000 $90,000 $252,000

(c) $53,000 ? $96,000 $310,000

Instructions

Determine the missing amounts. Answer: (5 min.)

Direct

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: AN

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 5

182) 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 inventory, 12/31

______ 7. Indirect labor

______ 8. Property taxes on office building

Answer: (5 min.)

1. B 5. A

2. B, C 6. A, C

3. A 7. A

4. A 8. B

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: C

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 5

183) Listed below are current asset items for Lester Company on December 31, 2027.

Instructions

Prepare the current assets section of the balance sheet. (Include a complete heading.)

Answer: (6-9 min.)

LESTER COMPANY

(Partial) Balance Sheet December 31, 2027

Diff: 2

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer. Bloom: AP

AACSB / IMA: Analytic / Reporting

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 6

184) Financial accounting information is prepared mainly for ________ users while managerial accounting information is prepared primarily for ________ users. Answer: external, internal Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

185) The types of reports prepared in managerial accounting are often ________-purpose reports prepared for a specific decision.

Answer: special Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

186) Managerial accounting reports generally pertain to ________ of a business and may be very detailed.

Answer: subunits Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

187) Three broad managerial functions are: (1)________, (2)________, and (3)________. Answer: planning, directing, controlling Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Performance Measurement

AICPA: BB: Process and Research Management; FC: None; PC: Project Management Min.: 1

188) The ________ function is concerned with setting goals and objectives for the entity. Answer: planning Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management. Bloom: K

AACSB / IMA: None / Performance Measurement

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: Project Management Min.: 1

189) Exercising good judgment in performing the managerial functions and choosing among alternative courses of action is called ________.

Answer: decision making

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management.

Bloom: K

AACSB / IMA: None / Decision Analysis

AICPA: BB: Process and Resource Management Perspectives; FC: None; PC: Project Management Min.: 1

190) The three cost elements in manufacturing a product are (1)________, (2)________, and (3)________.

Answer: direct materials, direct labor, manufacturing overhead Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

191) The work of factory employees that can be physically and directly associated with converting raw materials into products is classified as ________.

Answer: direct labor

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

192) Indirect materials and indirect labor are classified as ________. Answer: manufacturing overhead Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

193) Each of the manufacturing cost components is a ________ cost.

Answer: product

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

194) A major difference between the income statements of a merchandising company and that of a manufacturing company is that the cost of goods sold section of a merchandising company shows cost of goods________ while a manufacturing company shows cost of goods ________.

Answer: purchased, manufactured

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

195) ________ is added to direct labor and manufacturing overhead to compute total manufacturing costs for the current period.

Answer: Direct materials used

Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 1

196) The ending work in process inventory is subtracted from the total cost of work in process to calculate ________.

Answer: cost of goods manufactured Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None

Min.: 1

197) A manufacturing company computes cost of goods sold by adding cost of goods manufactured to the ________ and subtracting the ________.

Answer: beginning finished goods inventory, ending finished goods inventory Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Reporting

AICPA: BB: None; FC: Reporting; PC: None Min.: 1

198) A manufacturing company usually has three inventory accounts which are (1)________, (2)________, and (3)________.

Answer: Finished Goods Inventory, Work in Process Inventory, Raw Materials Inventory Diff: 1

LO: 3. Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None

Min.: 1

199) Match the items in the two columns below by entering the appropriate code letter in the space provided.

A. Managerial accounting

B. Financial accounting

C. Planning

F. Work in process inventory

G. Direct materials

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 not inventoriable

9. All business processes associated with providing a product or service

10. The function of coordinating diverse activities to produce a smooth-running operation

Answer: 1. F, 2. E, 3. A, 4. G, 5. C, 6. H, 7. B, 8. I, 9. J, 10. D

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: K

AACSB / IMA: None / Cost Management

AICPA: BB: None; FC: Measurement Analysis and Interpretation; PC: None Min.: 3

200) 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.

Answer: Financial accounting is primarily concerned with external users such as stockholders and creditors, while the primary users of managerial accounting are those within the company (internal users) such as officers, managers, supervisors, etc. Quarterly and annual classified financial statements are the end product of financial accounting. Internal reports that are prepared as often as needed are the result of managerial accounting. The financial statements produced by financial accounting are general-purpose reports which are highly aggregated, pertain to the enterprise as a whole, and are constrained by generally accepted accounting principles. The internal reports prepared by management accountants are special purpose reports which are detailed, pertain to subunits of the enterprise, and may contain any information relevant to the decision at hand.

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management.

Bloom: K

AACSB / IMA: Communication / Cost Management

AICPA: BB: None; FC: Reporting; PC: Communication

Min.: 5

201) Julie Mills is studying for her accounting mid-term examination. Summarize for Julie what she should know about management functions.

Answer: 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.

Diff: 1

LO: 1. Identify the features of managerial accounting and the functions of management.

Bloom: K

AACSB / IMA: Communication / Reporting

AICPA: BB: None; FC: Reporting; PC: Communication

Min.: 5

202) 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?

Answer: Costs incurred to manufacture a product include direct materials which can be physically and directly associated with the finished product; direct labor, which is the work of factory employees which can be physically and directly associated with the finished product; and manufacturing overhead, those manufacturing costs which are indirectly associated with production of the finished product. Cost of goods manufactured is computed by adding the cost of direct materials used, direct labor, and manufacturing overhead to the beginning work in process inventory and subtracting the ending work in process inventory.

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: Communication / Reporting, Cost Management

AICPA: BB: None; FC: Reporting, Measurement Analysis and Interpretation; PC: Communication

Min.: 5

203) Kevin Scott is confused about the differences between a product cost and a period cost. Explain the differences to Kevin.

Answer: Product costs, or inventoriable costs, are costs that are a necessary and integral part of producing the finished product. 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.

Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: Communication / Reporting, Cost Management

AICPA: BB: None; FC: Reporting, Measurement Analysis and Interpretation; PC: Communication

Min.: 5

204) 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.

Answer: The three manufacturing costs are: direct materials, direct labor, and manufacturing overhead. Raw materials that can be physically and directly associated with the finished product during the manufacturing process are called direct materials. The iron used in making the wall hangings is an example of direct materials. The work of factory employees that can be physically and directly associated with converting raw materials to finished goods is considered direct labor. Manufacturing overhead consists of costs that are indirectly associated with the manufacture of the finished product. These costs may also be manufacturing costs that cannot be classified as direct materials or direct labor. Manufacturing overhead includes indirect materials, indirect labor, depreciation on factory buildings and machinery, utilities, insurance, taxes and maintenance on factory facilities.

The three inventory accounts are: raw materials, work in process, and finished goods. Raw materials inventory represents the cost of the materials and parts that are to be used in the manufacturing process. The iron purchased to make the wall hangings would be considered raw materials until the time it was put into production. Work in process inventory is the cost applicable to units that have been started into production but are only partially complete. Wall hangings on the assembly line that are in various stages of completion would be work in process. The finished goods inventory represents the cost of completed goods that have not been sold. Diff: 1

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: K

AACSB / IMA: Communication / Reporting, Cost Management

AICPA: BB: None; FC: Reporting, Measurement Analysis and Interpretation; PC: Communication

Min.: 5

205) (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 the 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.

Answer: 1. It is ethical for a company to use all available data in order to evaluate managers, and even to collect data not routinely available. In fact, such a method seems preferable to one in which the company may only use specified financial data in its evaluation of a manager's performance. It does not imply a departure from GAAP, nor that the company does not actually use the information prepared according to GAAP. It supplements the standard reports, it does not replace them.

2. The company should make certain that the appropriate information is calculated in the same way each period. All the relevant data should be collected and reported each period. New data should be limited. The qualitative information should be complemented, not replaced, by the regular financial information.

Diff: 1

LO: 4. Discuss trends in managerial accounting. Managerial accounting has experienced many changes in recent years, including a shift toward service companies as well as emphasis on ethical behavior.

Bloom: K

AACSB / IMA: Ethics / Business Applications, Performance Measurement

AICPA: BB: None; FC: Reporting; PC: Communication, Ethical Conduct

Min.: 5

206) (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 an email to Linda and Sam, supporting one or the other position. Be sure to adequately defend your position but be brief.

Answer:

TO: Linda Bedard and Sam Hilton

FROM: Nancy West, Accounting Manager

RE: Tracing overhead

I strongly support the tracing of as much of what is now overhead directly to the products as possible (sorry, Linda). Besides giving more accurate product costs now, as Sam says, it will help us considerably in the future. The more we know about which products generate which costs, the better we can evaluate their profitability. Otherwise, we just assign them some amount of overhead, which may be either more or less than they actually cost.

Thank you both for your hard work. It is true, as Linda says, that our reviews will (temporarily) cause us more work (sorry, Sam). However, I think you'll both agree that the benefits of knowing the costs of our products better will make the effort well worthwhile.

So, let's start tracing the four costs you mentioned now. Once we have the glitches ironed out, we'll share the results with the other departments.

(signed)

Diff: 3

LO: 2. Describe the classes of manufacturing costs and the differences between product and period costs.

Bloom: E

AACSB / IMA: Communication / Reporting, Cost Management

AICPA: BB: None; FC: Reporting, Measurement Analysis and Interpretation; PC: Communication

Min.: 5

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