Verified Test Bank | Building Blocks Of Managerial – Ch2

Managerial Accounting, 6e (Braun et al.)

Chapter 2 Building Blocks of Managerial Accounting

2.1 Distinguish among service, merchandising, and manufacturing companies

1) Service companies must carry a large amount of inventory to meet consumer demand.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

2) Manufacturing companies usually have three types of inventory.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

3) Retailers sell their products to consumers.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

4) Merchandising companies include both wholesalers and retailers.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

5) All companies have the same types of inventories.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

6) Only manufacturing companies have finished goods inventory.

Diff: 2

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

7) Which of the following types of companies has raw materials, work in process and finished goods inventory?

A) Retailers

B) Manufacturers

C) Wholesalers

D) Service companies

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

8) Which type of company makes up the largest sector of the United States economy?

A) Manufacturers

B) Merchandising

C) Wholesalers

D) Service companies

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

9) The balance sheet of a service company has

A) raw materials inventory only.

B) little or no inventory.

C) three categories of inventory.

D) two categories of inventory.

Diff: 1

LO: 2-1

EOC: S2-1

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

10) Schlabig & Associates, a public accounting firm that provides business consulting to a consumer, is what type of company?

A) Manufacturer

B) Retailer

C) Service

D) Wholesaler

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

11) Jiffy Lube, an automotive maintenance company, is primarily what type of company?

A) Manufacturer

B) Retailer

C) Wholesaler

D) Service

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

12) Among other products, Nabisco makes Oreo cookies. Which type of company is Nabisco?

A) Service

B) Manufacturer

C) Retailer

D) Wholesaler

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

13) Which type of company typically produces its own inventory?

A) Manufacturer

B) Service company

C) Retailer

D) Wholesaler

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

14) Before these materials are used to manufacture its cars, Toyota classifies steel, glass, and plastic as

A) raw materials inventory.

B) finished goods inventory.

C) work in process inventory.

D) merchandise inventory.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

15) Before these materials are used to manufacture cabinets, a woodworker classifies lumber, paint, and glue as

A) finished goods inventory.

B) work in process inventory.

C) raw materials inventory.

D) merchandise inventory.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

16) Macy's (the department store chain) classifies its clothing held for sale as

A) merchandise inventory.

B) raw materials inventory.

C) work in process inventory.

D) finished goods inventory.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

17) American Eagle Outfitters classifies the denim jeans on the shelves at its retail locations as

A) finished goods inventory.

B) work in process inventory.

C) merchandise inventory.

D) raw materials inventory.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

18) How would Chevrolet classify its partially completed vehicles?

A) Finished goods inventory

B) Raw materials inventory

C) Work in process inventory

D) Supplies inventory

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

19) Which of the following is a characteristic of a service company?

A) Service companies make a product.

B) Service companies have a single category of inventory.

C) Service companies generally have no tangible products to sell.

D) Service companies transform raw materials into finished goods.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

20) A snow removal business would be classified as a

A) manufacturing company.

B) merchandising company.

C) simple company.

D) service company.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

21) An accounting firm would be classified as a

A) manufacturing company.

B) merchandising company.

C) simple company.

D) service company.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

22) Toshiba Corporation makes computer chips. Toshiba Corporation would be classified as a

A) merchandising company.

B) manufacturing company.

C) service company.

D) simple company.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

23) Which type of company has three categories of inventory?

A) A manufacturing company

B) A merchandising company

C) A service company

D) All of these companies

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

24) A ________ company's balance sheet reports just one inventory called "Inventory."

A) service

B) merchandising

C) manufacturing

D) All of these types of companies

Diff: 1

LO: 2-1

EOC: S2-1

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

25) All of the following items would be found in raw materials inventory for a furniture manufacturer except

A) wood.

B) fabric.

C) steel framing.

D) assembly worker wages.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

26) Which of the following items could be found in work in process inventory at a candy bar manufacturer?

A) Candy bars made but not coated in chocolate

B) Cocoa products to make candy bars

C) Sugar products to make candy bars

D) Candy bars completed but not yet sold

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

27) Enter the letter of the type of each company category on the line in front of each statement. Letters may be used more than once or not at all.

A. service company

B. merchandising company

C. manufacturing company

________ generally has no or minimal inventory

________ has three types of inventory

________ has one class of inventory only

________ Ford Motor Company is an example of this company category

________ Walmart is an example of this company category

Diff: 1

LO: 2-1

EOC: S2-1

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

28) On the line in front of each statement, enter the letter corresponding to the term that best fits that statement. You may use a letter more than once and some letters may not be used at all.

________ has a single category of inventory

________ resells products previously purchased ready-made from a supplier

________ produces its own inventory

________ transforms raw materials into a new finished product

________ completed goods that have not been sold

________ partially completed items of manufacturers

________ steel, glass, tires, upholstery, and fabric that Toyota uses to manufacture products

Diff: 2

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

29) Describe service, merchandising, and manufacturing companies.

Diff: 2

LO: 2-1

EOC: S2-1; S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

30) Explain the difference between raw materials inventory, work in process inventory, and finished goods inventory.

Diff: 1

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

31) Describe a company that has some elements of all three types of companies. It is part service company, part manufacturer, and part merchandiser.

Diff: 2

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

32) Explain the type of inventory that is characteristic at a service company.

Diff: 2

LO: 2-1

EOC: S2-2

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

2.2 Describe the value chain and its elements

1) Controlling costs across the whole value chain often requires a trade-off between the individual elements of the value chain.

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

2) All of the components of manufacturing — from research and development through customer service after the sale — are part of a firm's value chain.

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

3) The activities in the value chain must take place in a specific order.

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

4) The value chain concept helps companies control costs over the value chain as a whole.

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

5) Research and development is needed to improve products and to design new products.

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

6) Receipt of materials is part of the firm's value chain.

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

7) A company's distribution system is an important part of the value chain.

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

8) Which of the following value chain elements is associated with the costs of shipping inventory to the customer in a merchandising company?

A) Design

B) Distribution

C) Production and Purchases

D) Customer Service

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

9) All of the following are part of a company's value chain except

A) design.

B) distribution.

C) administration.

D) marketing.

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

10) Which of the following activities is not included in the value chain?

A) Reporting

B) Design

C) Production

D) Customer service

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

11) All of the following activities are included in the value chain except

A) customer service.

B) design.

C) safety.

D) production.

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

12) The value chain is used by

A) service, manufacturing, and merchandising businesses.

B) only service and manufacturing businesses.

C) only service and merchandising businesses.

D) only manufacturing and merchandising businesses.

Diff: 2

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

13) Collectively, all costs such as distribution, marketing, and design are part of

A) downstream activities.

B) fixed costs.

C) the value chain.

D) manufacturing costs.

Diff: 2

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

14) What is the promotion of products and services known as?

A) Customer service

B) Marketing

C) Distribution

D) Design

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

15) All of the following relate to part of the value chain for a clothing company except

A) cost of advertising new products.

B) administrative costs.

C) cost of shipping products to retailers.

D) salaries of clothing designers.

Diff: 2

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

16) Which element of the value chain would depreciation on a factory be classified as?

A) Design

B) Distribution

C) Research and development

D) Production

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

17) Testing ways to increase the strength of your product would be classified as which element of the value chain?

A) Design

B) Distribution

C) Production

D) Research and development

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

18) Which element of the value chain would a technical support hotline for customers be considered?

A) Design

B) Customer service

C) Distribution

D) Marketing

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

19) Advertising expenses would be considered which element of the value chain?

A) Customer service

B) Marketing

C) Production

D) Research and development

Diff: 1

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

20) The costs associated with reengineering machinery and its location within the factory to increase efficiency would be considered which element of the value chain?

A) Customer service

B) Marketing

C) Research and development

D) Design

Diff: 2

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

21) The costs incurred to transport merchandise to a company's retail store would be considered to be what element of the value chain?

A) Marketing

B) Customer service

C) Production or purchases

D) Research and development

Diff: 2

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

22) Sweet Southern Tea provided the following expense information for May:

What is the total cost of research and development of the value chain?

A) $73,600

B) $70,000

C) $55,700

D) $195,700

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

23) Sweet Southern Tea provided the following expense information for May:

What is the total cost for the production category of the value chain?

A) $502,000

B) $204,400

C) $235,300

D) $333,100

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

24) Sweet Southern Tea provided the following expense information for May:

What is the total cost for the design category of the value chain?

A) $267,300

B) $189,000

C) $197,200

D) $125,200

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

25) Sweet Southern Tea provided the following expense information for May:

What is the total cost for the distribution category of the value chain?

A) $218,700

B) $23,600

C) $20,500

D) $152,600

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

26) Sweet Southern Tea provided the following expense information for May:

What is the total cost for the marketing category of the value chain?

A) $69,400

B) $188,200

C) $197,600

D) $267,900

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

27) Sweet Southern Tea provided the following expense information for May:

What is the total cost for the customer service category of the value chain?

A) $83,700

B) $16,500

C) $74,200

D) $10,400

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

28) Bert's Bottles provided the following expense information for July:

What is the total cost of research and development?

A) $57,700

B) $77,800

C) $65,500

D) $188,700

Diff: 21

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

29) Bert's Bottles provided the following expense information for July:

What is the total cost for the production category of the value chain?

A) $461,500

B) $309,300

C) $149,300

D) $147,800

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

30) Bert's Bottles provided the following expense information for July:

What is the total cost for the design category of the value chain?

A) $245,700

B) $187,800

C) $179,900

D) $123,900

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

31) Bert's Bottles provided the following expense information for July:

What is the total cost for the distribution category of the value chain?

A) $40,200

B) $43,800

C) $219,800

D) $173,200

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

32) Bert's Bottles provided the following expense information for July:

What is the total cost for the marketing category of the value chain?

A) $71,300

B) $180,800

C) $186,700

D) $245,800

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

33) Bert's Bottles provided the following expense information for July:

What is the total cost for the customer service category of the value chain?

A) $61,400

B) $12,500

C) $20,700

D) $76,300

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

34) Irresistible Lemonade Company processes fresh lemonade. The company has the following expenses for July:

What is the total cost for the research and development category of the value chain?

A) $75,800

B) $81,300

C) $46,900

D) $198,500

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

35) Irresistible Lemonade Company processes fresh lemonade. The company has the following expenses for July:

What is the total cost for the production category of the value chain?

A) $466,700

B) $60,600

C) $305,000

D) $202,900

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

36) Irresistible Lemonade Company processes fresh lemonade. The company has the following expenses for July:

What is the total cost for the design category of the value chain?

A) $122,800

B) $197,900

C) $153,300

D) $273,500

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

37) Irresistible Lemonade Company processes fresh lemonade. The company has the following expenses for July:

What is the total cost for the distribution category of the value chain?

A) $29,000

B) $25,100

C) $223,300

D) $152,700

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

38) Irresistible Lemonade Company processes fresh lemonade. The company has the following expenses for July:

What is the total cost for the marketing category of the value chain?

A) $275,300

B) $34,500

C) $152,800

D) $199,700

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

39) Lucas Family Orange Groves processes a variety of fresh juices. The company has the following expenses for July:

What is the total cost for the customer service category of the value chain?

A) $2,400

B) $33,700

C) $80,900

D) $9,900

Diff: 2

LO: 2-2

EOC: E2-19A; E2-31B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

40) Delivery expenses are charged to which of the following areas?

A) Distribution

B) Customer service

C) Production or purchases

D) Marketing

Diff: 2

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

41) A product support hotline would be considered

A) marketing.

B) distribution.

C) production or purchases.

D) customer service.

Diff: 2

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

42) Place the value chain elements in the correct order by numbering them from 1 to 6.

________ Design

________ Customer Service

________ Marketing

________ Research and Development

________ Distribution

________ Production or Purchases

Diff: 2

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

43) Place the letter for the appropriate value chain activity on the line in front of each item. Letters may be used more than once or not at all. Assume a manufacturer.

________ depreciation expense on equipment in factory

________ delivery expense

________ toll free line for customer orders

________ customer support hot line

________ assembly line workers' wages

Diff: 2

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

44) Name and briefly describe the activities that make up the value chain.

Diff: 2

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

45) Classify each of the following business costs into one of the six value chain elements.

A. cost of a commercial during a TV program

B. cost of shipping goods to customers

C. costs associated with repairing products under warranty

D. costs of developing a new product

E. cost of making a prototype of a new product

F. cost of labor for machine operator in factory

Diff: 3

LO: 2-2

EOC: S2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

2.3 Distinguish between direct and indirect costs

1) The total cost of a cost object can only include the direct costs that are directly traced to that cost object.

Diff: 2

LO: 2-3

EOC: S2-5

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

2) If a company wants to determine a product's cost, it must assign both direct and indirect costs.

Diff: 2

LO: 2-3; 2-4

EOC: S2-5

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

3) Costs can be either direct or indirect, depending upon the cost object.

Diff: 1

LO: 2-3

EOC: S2-5

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

4) Direct costs can be traced to specific units.

Diff: 1

LO: 2-3

EOC: S2-5

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

5) Indirect costs cannot be traced to the cost objects, so they are allocated.

Diff: 1

LO: 2-3

EOC: S2-5

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

6) Direct costs for one cost object will always be direct costs for any cost object.

Diff: 2

LO: 2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

7) An indirect cost for one cost object can be a direct cost for a different cost object.

Diff: 2

LO: 2-3

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

8) Which of the following is not an example of an indirect cost incurred in manufacturing automobiles?

A) Plant supervisor salary

B) Machinery depreciation in the factory

C) Plant utilities

D) Cost of the automobile engines

Diff: 2

LO: 2-3

EOC: S2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

9) A factory janitor's wages would be classified as ________ when determining the cost of a manufactured product.

A) an indirect cost

B) a direct cost

C) a period cost

D) none of the above

Diff: 1

LO: 2-3; 2-4

EOC: S2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

10) A salesperson's salary would be classified as ________ when determining the cost of a manufactured product.

A) a direct cost

B) a period cost

C) an indirect cost

D) none of the above

Diff: 1

LO: 2-3; 2-4

EOC: S2-5

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

11) The cost of lighting the factory would be classified as ________ when determining the cost of a manufactured product.

A) an indirect cost

B) a direct cost

C) a period cost

D) none of the above

Diff: 1

LO: 2-3; 2-4

EOC: S2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

12) Which of the following would not be considered a direct cost of a mattress and box spring?

A) Fabric

B) Lumber

C) Glue

D) Steel

Diff: 1

LO: 2-3

EOC: S2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

13) All of the following would be considered a direct material for a kitchen cabinet except

A) wood.

B) stain.

C) sandpaper.

D) hinges.

Diff: 1

LO: 2-3

EOC: S2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

14) If the Ford Focus is the cost object, classify each of the following costs as indirect or direct, respectively: property taxes for the manufacturing plant, engines for the cars, and janitor wages for the factory.

A) Indirect, direct, and indirect

B) Indirect, direct, and direct

C) All are indirect.

D) All are direct.

Diff: 1

LO: 2-3

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

15) If a frozen pizza plant is the cost object, classify each of the following costs as direct or indirect, respectively: pizza ingredients, cafeteria workers wages, and janitorial supplies.

A) Direct, indirect, and indirect

B) Direct, indirect, and direct

C) All are direct.

D) All are indirect.

Diff: 1

LO: 2-3

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

16) Classify each of the following costs as direct or indirect as it relates to one Best Buy retail location: CFO salary, that Best Buy's sales associates, that Best Buy's property insurance, and the legal department for Best Buy.

A) Direct, indirect, indirect, and direct

B) Indirect, direct, direct, and indirect

C) All are indirect.

D) All are direct.

Diff: 1

LO: 2-3

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

2.4 Identify product costs and period costs

1) An example of direct labor would be which of the following?

A) Salary of a production manager

B) Salary of the vice-president of operations

C) Wages of factory security

D) Wages of assembly line personnel

Diff: 1

LO: 2-4

EOC: S2-7

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

2) Which of the following is an example of direct labor?

A) Wages of a managerial accountant

B) Wages of a machine operator

C) Salary of the vice-president of operations

D) Wages of the CFO

Diff: 1

LO: 2-4

EOC: S2-7

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

3) Which statement describes direct materials in a manufacturing setting?

A) Direct materials are used to determine total manufacturing overhead.

B) Direct materials are used to determine total product costs.

C) Direct materials cannot be separately and conveniently traced.

D) Direct materials do not become part of the finished product.

Diff: 2

LO: 2-4

EOC: S2-7

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

4) Which of the following is an example of indirect labor in a manufacturing plant?

A) Chief financial officer

B) Machine operators

C) Salespersons

D) Plant managers

Diff: 1

LO: 2-4

EOC: S2-7

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

5) Which of the following are classified as manufacturing overhead?

A) Indirect labor and indirect materials

B) Direct materials and direct labor

C) All materials

D) Factory rent and direct labor

Diff: 2

LO: 2-4

EOC: S2-7

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

6) Which of the following is an example of manufacturing overhead expense in a factory?

A) Wages of machine operators

B) Wages of administrators in the corporate office

C) Wages of factory maintenance personnel

D) Salaries of salespersons

Diff: 2

LO: 2-4

EOC: S2-7

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

7) Prime costs consist of

A) direct materials and direct labor.

B) direct labor and manufacturing overhead.

C) direct materials and manufacturing overhead.

D) direct materials, direct labor and manufacturing overhead.

Diff: 1

LO: 2-4

EOC: S2-5

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

8) Conversion costs consist of

A) direct materials and direct labor.

B) direct labor and manufacturing overhead.

C) direct materials and manufacturing overhead.

D) direct materials, direct labor and manufacturing overhead.

Diff: 1

LO: 2-4

EOC: S2-5

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

9) Custom Creations Furniture Company manufactures furniture at its Akron, Ohio, factory. Some of its costs from the past year include:

Prime costs for Custom Creations Furniture Company totaled

A) $93,200.

B) $208,300.

C) $211,600.

D) $377,600.

Diff: 2

LO: 2-3; 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

10) Custom Creations Furniture Company manufactures furniture at its Akron, Ohio, factory. Some of its costs from the past year include:

Conversion costs for Custom Creations Furniture Company totaled

A) $377,300.

B) $212,200.

C) $467,300.

D) $197,600.

Diff: 2

LO: 2-3; 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

11) Custom Creations Furniture Company manufactures furniture at its Akron, Ohio, factory. Some of its costs from the past year include:

Direct material costs for Custom Creations Furniture Company totaled

A) $82,300.

B) $10,300.

C) $96,300.

D) $92,600.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

12) Custom Creations Furniture Company manufactures furniture at its Akron, Ohio, factory. Some of its costs from the past year include:

Direct labor costs for Custom Creations Furniture Company totaled

A) $305,200.

B) $115,600.

C) $115,000.

D) $281,300.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

13) Custom Creations Furniture Company manufactures furniture at its Akron, Ohio, factory. Some of its costs from the past year include:

Manufacturing overhead costs for Custom Creations Furniture Company totaled

A) $130,500.

B) $260,400.

C) $235,600.

D) $323,100.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

14) Custom Creations Furniture Company manufactures furniture at its Akron, Ohio, factory. Some of its costs from the past year include:

Product costs for Custom Creations Furniture Company totaled

A) $474,400.

B) $449,400.

C) $375,200.

D) $491,000.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

15) Ultra Trail Running Company manufactures trail running shoes at its Wyoming factory. Some of its costs from the past year include:

Prime costs for Ultra Trail Running Company totaled

A) $201,000.

B) $96,600.

C) $197,500.

D) $242,700.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

16) Ultra Trail Running Company manufactures trail running shoes at its Wyoming factory. Some of its costs from the past year include:

Conversion costs for Ultra Trail Running Company totaled

A) $200,000.

B) $370,300.

C) $176,500.

D) $274,300.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

17) Ultra Trail Running Company manufactures trail running shoes at its Wyoming factory. Some of its costs from the past year include:

Direct material costs for Ultra Trail Running Company totaled

A) $15,600.

B) $99,600.

C) $96,200.

D) $80,600.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

18) Ultra Trail Running Company manufactures trail running shoes at its Wyoming factory. Some of its costs from the past year include:

Direct labor costs for Ultra Trail Running Company totaled

A) $227,500.

B) $220,200.

C) $100,000.

D) $60,200.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

19) Ultra Trail Running Company manufactures trail running shoes at its Wyoming factory. Some of its costs from the past year include:

Manufacturing overhead costs for Ultra Trail Running Company totaled

A) $174,100.

B) $80,600.

C) $152,100.

D) $221,800.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

20) Use the correct number to designate each item below. Assume each item is for a manufacturer.

1. direct materials

2. period costs

3. manufacturing overhead

4. direct labor

A) ________ rent expense on factory building

B) ________ sales supplies used

C) ________ factory supplies used

D) ________ indirect materials used

E) ________ wages of assembly line personnel

F) ________ cost of primary material used to make product

G) ________ depreciation expense on office equipment

H) ________ rent expense on office facilities

I) ________ insurance expired on factory equipment

J) ________ utilities incurred in the office

K) ________ advertising expense

L) ________ taxes paid on factory building

Diff: 2

LO: 2-4

EOC: S2-7

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

21) Differentiate between:

A. direct materials versus indirect materials

B. direct labor versus indirect labor

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

22) Indirect manufacturing costs should be included in manufacturing overhead.

Diff: 1

LO: 2-4

EOC: S2-7

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

23) A product cost could be the cost of the marketing and distribution of a product.

Diff: 2

LO: 2-4

EOC: S2-6

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

24) Product costs consist of manufacturing overhead, direct labor and direct materials.

Diff: 1

LO: 2-4

EOC: S2-6

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

25) Indirect materials, indirect labor, and indirect manufacturing costs are what type of product cost?

A) Direct labor

B) Direct materials

C) Manufacturing overhead

D) Prime costs

Diff: 1

LO: 2-4

EOC: S2-7

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

26) Which of the following would not be considered a product cost of a manufacturer?

A) Direct labor

B) Direct materials

C) Manufacturing overhead

D) Freight out

Diff: 2

LO: 2-4

EOC: S2-6

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

27) Period costs are

A) always recorded as an expense when incurred.

B) always considered part of the inventory.

C) expensed only when the inventory is sold.

D) none of the above

Diff: 1

LO: 2-4

EOC: S2-6

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

28) All of the following are period costs except

A) distribution expenses.

B) direct labor expenses.

C) marketing expenses.

D) research and development expenses.

Diff: 1

LO: 2-4

EOC: S2-7

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

29) Product costs for a manufactured product include

A) the costs of direct materials, direct labor and manufacturing overhead.

B) marketing and research and development costs.

C) the costs of direct materials and direct labor only.

D) none of the above

Diff: 1

LO: 2-4

EOC: S2-6

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

30) Where would period costs be found on the financial statements?

A) Under current assets on the balance sheet

B) Under current liabilities on the balance sheet

C) As operating expenses on the income statement in the period incurred

D) As operating expenses on the income statement for a previous period

Diff: 2

LO: 2-4

EOC: S2-5

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

31) Which of the following types of cost include all of the costs associated with production of a product?

A) Product

B) Direct

C) Period

D) Indirect

Diff: 2

LO: 2-4

EOC: S2-5

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

32) Manufacturing overhead costs for a product include

A) direct material.

B) operating expenses.

C) indirect manufacturing costs.

D) prime costs.

Diff: 2

LO: 2-4

EOC: S2-5

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

33) When do product costs become expenses?

A) When direct materials are purchased

B) When the manufacturing process begins

C) When the manufacturing process is completed

D) When the product is sold

Diff: 2

LO: 2-4

EOC: S2-5

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

34) Indirect materials and indirect labor are ________ for a manufactured product.

A) overhead and period costs

B) operating and period costs

C) overhead and product costs

D) operating and product costs

Diff: 2

LO: 2-4

EOC: S2-7

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

35) Manufacturers consider selling and administrative costs to be

A) period costs.

B) conversion costs.

C) product costs.

D) prime costs.

Diff: 2

LO: 2-4

EOC: S2-6

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

36) Which of the following is an example of a period cost when manufacturing products?

A) Depreciation expense on factory equipment

B) Advertising expense

C) Indirect materials used in the factory

D) Property taxes on the plant

Diff: 1

LO: 2-4

EOC: S2-6

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

37) Which of the following is an example of a product cost when manufacturing products?

A) Depreciation on administrative office equipment

B) Depreciation on retail building

C) Sales salaries and commissions

D) Depreciation on factory equipment

Diff: 2

LO: 2-4

EOC: S2-6

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

38) When manufacturing products, direct labor and direct materials are classified as

A) period costs and expensed when incurred.

B) product costs and expensed when the goods are sold.

C) product costs and expensed when incurred.

D) period costs and expensed when the goods are sold.

Diff: 2

LO: 2-4

EOC: S2-7

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

39) Certain materials used in a manufacturing plant cannot be traced to a specific unit. What are these materials called?

A) General materials

B) Direct materials

C) Indirect materials

D) Finished materials

Diff: 2

LO: 2-4

EOC: S2-5

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

40) Rent on a factory building would be considered to be a ________ cost.

A) product

B) period

C) direct

D) none of the above

Diff: 2

LO: 2-4

EOC: S2-6

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

41) The ________ element in the value chain would contain product costs for a manufacturer.

A) research and development

B) production

C) design

D) distribution

Diff: 2

LO: 2-4

EOC: S2-5

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

42) Country Furniture Company manufactures furniture at its Akron, Ohio, factory. Some of its costs from the past year include:

Period costs for Country Furniture Company totaled

A) $42,600.

B) $129,900.

C) $45,100.

D) $68,700.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

43) Wooden Shed Company manufactures custom wooden sheds. Some of its costs from the past year include:

Product costs for Wooden Shed Company totaled

A) $280,700.

B) $350,300.

C) $375,600.

D) $372,800.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

44) Wooden Shed Company manufactures custom wooden sheds. Some of its costs from the past year include:

Period costs for Wooden Shed Company totaled

A) $43,300.

B) $35,700.

C) $17,100.

D) $66,500.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

45) Winner's Sporting Equipment manufactures sporting goods. Selected costs from the past year include:

Product costs for Winner's Sporting Equipment totaled

A) $727,800.

B) $749,500.

C) $618,800.

D) $742,300.

Diff: 3

LO: 2-4

EOC: E2-21A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

46) Winner's Sporting Equipment manufactures sporting goods. Selected costs from the past year include:

Period costs for Winner's Sporting Equipment totaled

A) $95,140.

B) $91,200.

C) $190,800.

D) $112,100.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

47) Happy Feet Running Company manufactures running shoes and has the following costs during the past month:

What are the total period costs for Happy Feet Running Company for the month?

A) $50,950

B) $40,950

C) $84,815

D) $78,065

Diff: 3

LO: 2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

48) Happy Feet Running Company manufactures running shoes and has the following costs during the past month:

What is the total manufacturing overhead for Happy Feet Running Company for the month?

A) $52,175

B) $46,925

C) $44,225

D) $64,425

Diff: 3

LO: 2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

49) Happy Feet Running Company manufactures running shoes and has the following costs during the past month:

What is the total direct materials cost for Happy Feet Running Company for the month?

A) $66,000

B) $89,900

C) $81,000

D) $87,250

Diff: 3

LO: 2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

50) Happy Feet Running Company manufactures running shoes and has the following costs during the past month:

What is the total for direct labor cost for Happy Feet Running Company for the month?

A) $15,400

B) $42,500

C) $51,900

D) $10,000

Diff: 2

LO: 2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

51) Happy Feet Running Company manufactures running shoes and has the following costs during the past month:

What are prime costs for Happy Feet Running Company for the month?

A) $133,250

B) $124,250

C) $97,250

D) $91,000

Diff: 3

LO: 2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

52) Happy Feet Running Company manufactures running shoes and has the following costs during the past month:

What are conversion costs for Happy Feet Running Company for the month?

A) $101,650

B) $68,835

C) $64,585

D) $89,585

Diff: 3

LO: 2-4

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

53) ABC Company makes wooden furniture. Identify each of the following as either a product cost or a period cost. If it is a product cost, classify it as direct materials, direct labor, or manufacturing overhead.

A. ________ Insurance on the plant building

B. ________ Cost of shipping the furniture to the customers

C. ________ Assembly line workers' wages

D. ________ Depreciation on plant equipment

E. ________ Salesmen's salaries

F. ________ Cost of various types of wood

G. ________ Insurance on delivery trucks

H. ________ Plant forklift operator's salary

Diff: 3

LO: 2-4

EOC: S2-7

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

54) Indicate whether each of the following costs is a product cost or a period cost. Assume it is for a manufacturer.

A. ________ direct materials used in factory

B. ________ factory utilities

C. ________ salespersons' commissions

D. ________ salary of plant manager

E. ________ indirect materials used in factory

F. ________ depreciation expense on store equipment

G. ________ indirect labor incurred in factory

H. ________ advertising expense

I. ________ direct labor incurred in factory

J. ________ factory machinery repairs and maintenance

K. ________ depreciation expense on factory machinery

L. ________ supplies used in store

M. ________ plant insurance expired

Diff: 2

LO: 2-4

EOC: S2-6

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

55) Direct labor for a company was $145,600; manufacturing overhead was $300,100; and direct materials were $270,500. Conversion costs would total

A) $570,600.

B) $716,200.

C) $416,100.

D) $445,700.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

56) Direct materials for a company were $500,900; manufacturing overhead was $251,000; and direct labor was $770,100. Conversion costs would total

A) $1,021,100.

B) $1,271,000.

C) $1,522,000.

D) $751,900.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

57) Direct labor for a company was $145,200; manufacturing overhead was $300,200; and direct materials were $270,800. Prime costs would total

A) $716,200.

B) $445,400.

C) $416,000.

D) $571,000.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

58) Direct materials for a company were $500,800; manufacturing overhead was $250,600; and direct labor was $770,700. Prime costs would total

A) $1,021,300.

B) $1,271,500.

C) $1,522,100.

D) $751,400.

Diff: 2

LO: 2-4

EOC: E2-21A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

59) Product costs include all of the following except

A) direct materials used.

B) cleaning products for the factory.

C) assembly line workers.

D) advertising.

Diff: 1

LO: 2-4

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

60) Which of the following would not be considered period costs?

A) Depreciation of factory equipment

B) Utilities of retail location

C) Depreciation on sales force vehicles

D) Property insurance on corporate headquarters

Diff: 1

LO: 2-4

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

61) Manufacturing overhead includes

A) direct materials, direct labor, and factory overhead.

B) only indirect materials and indirect labor.

C) indirect materials, indirect labor, and all other indirect costs related to the manufacturing facility.

D) only labor, both direct and indirect.

Diff: 1

LO: 2-4

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

62) An example of a period cost would be the

A) salary of the CEO.

B) materials purchased to manufacture the product.

C) salary to the factory supervisor.

D) property insurance paid for the manufacturing facility.

Diff: 1

LO: 2-4

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

63) Period costs are generally also known as

A) factory overhead.

B) prime costs.

C) annual expenses.

D) operating expenses.

Diff: 1

LO: 2-4

AACSB: Reflective thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

64) Pink Ribbon Shoppe, a clothing retailer, had the following total costs as grouped by value chain element:

What were the company's period costs?

A) $206,600

B) $279,400

C) $100,300

D) $136,000

Diff: 2

LO: 2-4

EOC: E2-18A; E2-30B

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

65) The following average cost per unit is calculated when the company produces and sells 50,000 units:

Based on the above average cost per unit, answer the following questions:

1. What is the total product cost at 40,000 units?

2. What is the total MOH at 45,000 units?

Diff: 3

LO: 2-4

AACSB: Application of knowledge

2.5 Prepare the income statement for service, merchandising, and manufacturing companies

1) Product costs and period costs receive similar treatment when presented in the financial statements.

Diff: 1

LO: 2-5

EOC: S2-12

AACSB: Reflective thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

2) The income statement of manufacturing companies is more complex than that of service or merchandising companies.

Diff: 1

LO: 2-5

EOC: S2-11

AACSB: Reflective thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

3) The financial statements of a merchandiser are more complex than those of a manufacturer.

Diff: 1

LO: 2-5

EOC: E2-22A

AACSB: Reflective thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

4) Service companies have the most complex accounting with regard to the income statement.

Diff: 1

LO: 2-5

EOC: E2-22A

AACSB: Reflective thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

5) Cost of goods sold is a major expense of service companies.

Diff: 1

LO: 2-5

EOC: E2-22A

AACSB: Reflective thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

6) The schedule of cost of goods manufactured is prepared before the income statement for a manufacturing company.

Diff: 1

LO: 2-5

EOC: E2-25A

AACSB: Reflective thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

7) Which of the following items is not used when calculating the cost of goods manufactured?

A) Direct materials used

B) Direct labor

C) Salesperson salaries

D) Manufacturing overhead

Diff: 2

LO: 2-5

EOC: E2-24A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

8) Before operating income can be determined for a manufacturer, which of the following is calculated?

A) Cost of goods available for sale

B) Cost of goods sold

C) Cost of goods manufactured

D) All of the above

Diff: 2

LO: 2-5

EOC: E2-24A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

9) The only difference in the balance sheets of various types of businesses (for example, manufacturing vs. service) is

A) current liabilities.

B) current assets.

C) investments.

D) equity.

Diff: 2

LO: 2-5

EOC: E2-22A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

10) The balance sheet of a service company would include which of the following?

A) Factory equipment depreciation

B) Cost of goods manufactured

C) Accounts receivable

D) Cost of goods sold

Diff: 1

LO: 2-5

EOC: E2-22A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

11) The income statement of a retailer would include which of the following?

A) Cost of goods sold

B) Value of inventory

C) Accounts payable

D) Accounts receivable

Diff: 1

LO: 2-5

EOC: E2-23A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

12) The income statements for both a merchandiser and manufacturer would include which of the following?

A) Operating expenses

B) Direct labor incurred

C) Direct materials used

D) Cost of goods manufactured

Diff: 1

LO: 2-5

EOC: E2-23A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

13) A merchandiser's purchases are equivalent to a manufacturer's

A) cost of goods sold.

B) cost of goods manufactured.

C) raw materials inventory.

D) work in process inventory.

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

14) Tooty Fruity Beverage Company's operating activities for the year are listed below.

What is the cost of goods available for sale?

A) $140,200

B) $153,000

C) $80,100

D) $135,000

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

15) Tooty Fruity Beverage Company's operating activities for the year are listed below.

What is the cost of goods sold for the year?

A) $152,500

B) $134,400

C) $140,200

D) $80,300

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

16) Tooty Fruity Beverage Company's operating activities for the year are listed below.

What is the gross profit for the year?

A) $160,900

B) $301,000

C) $81,000

D) $167,100

Diff: 3

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

17) Muddy Paws Dog Toy Company's operating activities for the year are listed below.

What is the cost of goods available for sale?

A) $1,400,600

B) $749,900

C) $50,300

D) $1,751,100

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

18) Muddy Paws Dog Toy Company's operating activities for the year are listed below.

What is the cost of goods sold for the year?

A) $1,399,700

B) $749,900

C) $50,000

D) $1,750,500

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

19) Muddy Paws Dog Toy Company's operating activities for the year are listed below.

What is the gross profit for the year?

A) $50,000

B) $749,600

C) $1,500,500

D) $98,800

Diff: 3

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

20) Fun Science Toys' operating activities for the year are listed below.

What is the cost of goods available for sale?

A) $163,400

B) $201,000

C) $97,300

D) $174,000

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

21) Fun Science Toys' operating activities for the year are listed below.

What is the cost of goods sold for the year?

A) $202,500

B) $164,600

C) $174,700

D) $96,400

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

22) Fun Science Toys' operating activities for the year are listed below.

What is the gross profit for the year?

A) $158,700

B) $333,000

C) $96,000

D) $169,000

Diff: 3

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

23) In addition to cost of goods manufactured, which of the following is needed to compute the cost of goods sold for a manufacturer?

A) Beginning work in process inventory less ending work in process inventory

B) Ending work in process inventory less beginning work in process inventory

C) Ending finished goods

D) Beginning finished goods inventory less ending finished goods inventory

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

24) For a manufacturer, beginning work in process would be equal to

A) manufacturing costs incurred in the period - ending work in process inventory.

B) cost of goods manufactured - ending work in process inventory + manufacturing costs incurred in the period.

C) ending work in process inventory + manufacturing costs incurred in the period.

D) cost of goods manufactured + ending work in process inventory - manufacturing costs incurred in the period.

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

25) Wanda's Wand Company reports the following data for its first year of operation.

What are the total manufacturing costs to account for?

A) $201,400

B) $246,100

C) $431,900

D) $136,000

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

26) Wanda's Wand Company reports the following data for its first year of operation.

What is the cost of goods sold?

A) $365,600

B) $455,700

C) $752,000

D) $521,200

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

27) Youngstown Rubber reports the following data for its first year of operation.

What are the total manufacturing costs to account for?

A) $1,520,400

B) $1,161,100

C) $1,841,800

D) $839,700

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

28) Youngstown Rubber reports the following data for its first year of operation.

What is the cost of goods sold?

A) $1,031,200

B) $811,000

C) $840,200

D) $1,842,400

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

29) Fit Apparel Company reports the following data for its first year of operation.

What are the total manufacturing costs to account for?

A) $185,700

B) $336,100

C) $245,700

D) $155,300

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

30) Fit Apparel Company reports the following data for its first year of operation.

What is the cost of goods sold?

A) $155,600

B) $341,700

C) $84,700

D) $160,300

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

31) Blazing Bike reports the following data for its first year of operation.

What are the total manufacturing costs to account for?

A) $3,500

B) $92,700

C) $42,200

D) $74,900

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

32) Blazing Bike reports the following data for its first year of operation.

What is the cost of goods sold?

A) $22,300

B) $43,100

C) $76,300

D) $72,400

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

33) Page's sells books. The following information summarizes the company's operating expenses for the year:

What is cost of goods available for sale?

A) $117,000

B) $64,800

C) $120,000

D) $102,500

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

34) Page's sells books. The following information summarizes the company's operating expenses for the year:

What is operating income?

A) $21,500

B) $102,400

C) $112,200

D) $6,900

Diff: 3

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

35) The Seashell Factory sells beach goods to tourists. The following information summarizes the company's operating expenses for the year:

What is gross profit?

A) $61,000

B) $33,900

C) $142,900

D) $88,100

Diff: 2

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

36) Paper Clip Company sells office supplies. The following information summarizes the company's operating activities for the year:

What is cost of goods sold?

A) $85,700

B) $89,900

C) $108,700

D) $112,900

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

37) Paper Clip Company sells office supplies. The following information summarizes the company's operating activities for the year:

What is operating income?

A) $153,900

B) $57,400

C) $35,400

D) $38,200

Diff: 3

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

38) Paper Clip Company sells office supplies. The following information summarizes the company's operating activities for the year:

What is gross profit?

A) $70,100

B) $40,900

C) $85,400

D) $57,500

Diff: 3

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

39) Paper Clip Company sells office supplies. The following information summarizes the company's operating activities for the year:

What are total operating expenses?

A) $34,500

B) $20,300

C) $24,400

D) $24,300

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

40) Company X sells widgets. The following information summarizes the company's operating activities for the year:

What is cost of goods sold?

A) $10,500

B) $6,400

C) $9,000

D) $14,200

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

41) Company X sells widgets. The following information summarizes the company's operating activities for the year:

What is operating income?

A) $12,800

B) $23,500

C) $15,500

D) $15,200

Diff: 3

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

42) Company X sells widgets. The following information summarizes the company's operating activities for the year:

What is gross profit?

A) $14,400

B) $21,600

C) $15,600

D) $11,800

Diff: 3

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

43) Company X sells widgets. The following information summarizes the company's operating activities for the year:

What are total operating expenses?

A) $3,500

B) $2,200

C) $4,100

D) $4,900

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

44) Greenscape, Inc. sells lawn decor. Selected financial information for the most recent year follows.

Beginning merchandise inventory on January 1 was $33,400.

Ending merchandise inventory on December 31 was $35,200.

Purchases during the year were $92,800.

Selling and administrative expenses were $75,900.

Sales for year were $262,200.

What was cost of goods sold?

A) $161,400

B) $94,600

C) $91,000

D) $93,500

Diff: 2

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

45) Greenscape, Inc. sells lawn decor. Selected financial information for the most recent year follows.

Beginning merchandise inventory on January 1 was $33,300.

Ending merchandise inventory on December 31 was $35,400.

Purchases during the year were $92,500.

Selling and administrative expenses were $75,900.

Sales for year were $262,500.

What was gross profit?

A) $151,200

B) $170,000

C) $186,600

D) $172,100

Diff: 2

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

46) Greenscape, Inc. sells lawn decor. Selected financial information for the most recent year is as follows:

Beginning merchandise inventory on January 1 was $33,900.

Ending merchandise inventory on December 31 was $36,000.

Purchases during the year were $92,600.

Selling and administrative expenses were $75,500.

Sales for year were $263,000.

What was operating income for the year?

A) $90,500

B) $97,000

C) $94,900

D) $92,800

Diff: 2

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

47) Greenscape, Inc. sells lawn decor to consumers in the marketplace. The managerial accountant reported the following financial information that reflects the 20XX data:

Beginning merchandise inventory on January 1: $234,000

Ending merchandise inventory on December 31: $135,200

Purchases: $952,400

Selling and administrative expenses: $175,700

Sales revenue for the year: $2,262,800

Cost of goods sold: $1,051,200

Salary and wage expenses: $250,300

Rent and utility expenses: $75,100

Compute the operating income.

A) $710,500

B) $124,000

C) $184,100

D) $83,500

Diff: 2

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

48) Selected financial information for Shadyside Manufacturing is presented in the following table (000s omitted).

What was the cost of direct materials used?

A) $740

B) $440

C) $560

D) $480

Diff: 2

LO: 2-5

EOC: E2-24A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

49) Selected financial information for Shadyside Manufacturing is presented in the following table (000s omitted).

What was the cost of goods manufactured?

A) $1,670

B) $1,390

C) $1,490

D) $1,580

Diff: 3

LO: 2-5

EOC: E2-24A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

50) Selected financial information for Shadyside Manufacturing is presented in the following table (000s omitted).

What was cost of goods sold?

A) $1,570

B) $1,450

C) $1,640

D) $980

Diff: 3

LO: 2-5

EOC: E2-24A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

51) Selected financial information for Shadyside Manufacturing is presented in the following table (000s omitted).

What was operating income?

A) $2,840

B) $4,800

C) $4,130

D) $2,510

Diff: 3

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

52) Selected financial information for Greek Food Producers is presented in the following table (000s omitted).

What was the cost of direct materials used?

A) $990

B) $710

C) $210

D) $500

Diff: 2

LO: 2-5

EOC: E2-24A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

53) Selected financial information for Greek Food Producers is presented in the following table (000s omitted).

What was cost of goods manufactured?

A) $1,990

B) $1,180

C) $1,790

D) $1,690

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

54) Selected financial information for Greek Food Producers is presented in the following table (000s omitted).

What was cost of goods sold?

A) $1,180

B) $1,360

C) $770

D) $1,550

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

55) Selected financial information for Greek Food Producers is presented in the following table (000s omitted).

What was operating income?

A) $4,610

B) $5,300

C) $3,940

D) $3,150

Diff: 3

LO: 2-5

EOC: E2-26A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

56) Selected information regarding a company's most recent quarter follows (all data in thousands).

What was manufacturing overhead for the quarter?

A) $530

B) $220

C) $860

D) $160

Diff: 3

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

57) Selected information regarding a company's most recent quarter follows (all data in thousands).

What was the cost of direct materials used for the quarter?

A) $200

B) $490

C) $1,610

D) $820

Diff: 3

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

58) Selected information regarding a company's most recent quarter follows (all data in thousands).

What was cost of goods sold?

A) $1,260

B) $660

C) $990

D) $850

Diff: 2

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

59) Selected information regarding a company's most recent quarter follows (all data in thousands).

What was the beginning finished goods inventory?

A) $2,120

B) $550

C) $670

D) $850

Diff: 3

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

60) Selected information regarding a company's most recent quarter follows (all data in thousands).

What was the ending raw materials inventory?

A) $460

B) $780

C) $180

D) $850

Diff: 3

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

61) Selected information regarding a company's most recent quarter follows (all data in thousands).

What was manufacturing overhead for the quarter?

A) $160

B) $530

C) $660

D) $450

Diff: 3

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

62) Selected information regarding a company's most recent quarter follows (all data in thousands).

What was the cost of direct materials used for the quarter?

A) $1,010

B) $1,320

C) $530

D) $170

Diff: 3

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

63) Selected information regarding a company's most recent quarter follows (all data in thousands).

What was cost of goods sold?

A) $1,120

B) $1,880

C) $2,560

D) $1,030

Diff: 2

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

64) Selected information regarding a company's most recent quarter follows (all data in thousands).

What was the beginning finished goods inventory?

A) $2,340

B) $470

C) $600

D) $2,470

Diff: 3

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

65) Selected information regarding a company's most recent quarter follows (all data in thousands).

What was the ending raw materials inventory?

A) $680

B) $350

C) $190

D) $230

Diff: 3

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

66) Gross profit is calculated by

A) subtracting cost of goods sold from sales.

B) adding sales to operating expenses.

C) subtracting operating expenses from sales.

D) adding profit to sales.

Diff: 1

LO: 2-5

AACSB: Reflective thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

67) Sales minus cost of goods sold equals gross profit.

Diff: 1

LO: 2-5

AACSB: Reflective thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

68) Cost of goods manufactured reflects

A) goods sold during the period.

B) goods completed during the period.

C) goods still in the factory at the end of the period.

D) goods not yet started at the end of the period.

Diff: 2

LO: 2-5

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

69) Direct materials used reflects

A) materials used to package the finished product for distribution/shipping to the customers.

B) all materials used throughout the company including but not limited to office materials, shipping materials, all raw materials, etc.

C) materials directly traced to the finished product that are requisitioned into the factory to be used in production.

D) materials acquired for use in production but that have not been requisitioned by the production supervisor yet.

Diff: 2

LO: 2-5

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

70) Direct materials used is the same thing as raw materials purchased.

Diff: 1

LO: 2-5

AACSB: Reflective thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

71) Zoolander Inc. manufacturers high end fashion accessories and has provided the following data for the latest quarter ended March 31st:

Calculate direct materials used for Zoolander Inc.'s first quarter.

A) $66,400

B) $44,000

C) $21,600

D) $31,000

Diff: 3

LO: 2-5

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

72) Zoolander Inc. manufacturers high end fashion accessories and has provided the following data for the latest quarter ended March 31st:

Calculate cost of goods manufactured for Zoolander Inc.'s first quarter.

A) $202,100

B) $205,700

C) $195,300

D) $330,300

Diff: 3

LO: 2-5

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

73) Zoolander Inc. manufacturers high end fashion accessories and has provided the following data for the latest quarter ended March 31st:

Calculate cost of goods sold for Zoolander Inc.'s first quarter.

A) $208,300

B) $15,600

C) -$800

D) $190,300

Diff: 3

LO: 2-5

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

74) Zoolander Inc. manufacturers high end fashion accessories and has provided the following data for the latest quarter ended March 31st:

Calculate gross profit for Zoolander Inc.'s first quarter.

A) $284,250

B) $448,000

C) $456,700

D) $494,250

Diff: 2

LO: 2-5

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

75) Zoolander Inc. manufacturers high end fashion accessories and has provided the following data for the latest quarter ended March 31st:

Calculate operating income for Zoolander Inc.'s first quarter.

A) $277,250

B) $443,000

C) $453,700

D) $486,250

Diff: 3

LO: 2-5

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

76) The main difference between the current assets on the balance sheet of a service company and a manufacturer is that a manufacturer has

A) inventory and a service company does not.

B) cost of goods sold and a service company does not.

C) accounts receivable and a service company does not.

D) accounts payable and a service company does not.

Diff: 1

LO: 2-5

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

77) Use the appropriate letter(s) to indicate if the following costs would be found on the income statement of a

A. service company.

B. merchandising company.

C. manufacturing company.

You may use more than one letter for each answer.

________ Revenue

________ Salaries expense

________ Customer service expense

________ Cost of goods manufactured

________ Cost of goods sold

Diff: 2

LO: 2-5

EOC: E2-22A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

78) Compute the missing amounts.

Diff: 3

LO: 2-5

EOC: E2-27A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

79) Kitch Company sells collectibles. The following information summarizes Kitch Company's operating activities for the most recent year:

Required: Prepare an income statement for the most recent year.

Diff: 3

LO: 2-5

EOC: E2-23A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

80) Swirzoff Company sells office supplies. The following information summarizes Swirzoff's operating activities for the past year:

Required: Prepare an income statement for Swirzoff Company, a merchandiser, for the year ended December 31.

Diff: 3

LO: 2-5

EOC: E2-23A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

81) North Pacific Company used $65,000 of direct materials and incurred $43,000 of direct labor costs during the most recent year. Indirect labor amounted to $1,700 while indirect materials used totaled $1,800. Other operating costs pertaining to the factory included utilities of $4,300; maintenance of $6,800; supplies of $1,500; depreciation expense of $8,900; and property taxes of $2,400. There was no beginning or ending finished goods inventory, but work in process inventory began the year with a $6,400 balance and ended the year with a $7,800 balance.

Required: Prepare a schedule of cost of goods manufactured for North Pacific Company for the year ended December 31.

Diff: 3

LO: 2-5

EOC: E2-25A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

82) The following amounts were taken from the general ledger of the Excellent Manufacturing Company. Compute the cost of goods manufactured and the cost of goods sold for the company for the year.

Diff: 3

LO: 2-5

EOC: E2-24A

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

83) Lighthouse Merchandise Group is a global operation that sells lighthouse merchandise to consumers and groups in the marketplace. The managerial accountant reported the following information:

Lighthouse Merchandise Group

Income Statement

Month Ended October 31, 20XX

Compute the cost of goods available for sale at Lighthouse Merchandise Group. What is the cost of goods sold?

Diff: 2

LO: 2-5

EOC: S-10

AACSB: Analytical thinking

Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations.

2.6 Describe costs that are relevant and irrelevant for decision making

1) Over the long-term, all costs are uncontrollable.

Diff: 1

LO: 2-6

EOC: S2-15

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

2) Differential cost is the difference in cost between two alternatives.

Diff: 1

LO: 2-6

EOC: S2-15

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

3) Decision making is guided only by differential costs.

Diff: 2

LO: 2-6

EOC: S2-15

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

4) Irrelevant factors should not be considered when making decisions.

Diff: 1

LO: 2-6

EOC: S2-14

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

5) You are trying to decide whether or not to sell back your accounting textbook at the end of the class. The cost you paid for the book is not relevant to your decision.

Diff: 2

LO: 2-6

EOC: E2-28A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

6) Sunk costs are irrelevant to the decision making process.

Diff: 1

LO: 2-6

EOC: S2-14

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

7) Costs that remain the same among alternatives are

A) sunk costs.

B) irrelevant costs.

C) controllable costs.

D) uncontrollable costs.

Diff: 1

LO: 2-6

EOC: S2-14

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

8) Which of the following types of information differs between alternatives and can affect the future?

A) Historical

B) Irrelevant

C) Relevant

D) Predictable

Diff: 1

LO: 2-6

EOC: S2-14

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

9) Which of the following represents a sunk cost?

A) A historical cost that is always relevant

B) A historical cost that is never relevant

C) An outlay expected to be incurred in the future

D) A cost that is relevant to any decision

Diff: 2

LO: 2-6

EOC: S2-15

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

10) Subtracting the costs of one alternative from the costs of the other alternative would be called the ________ cost.

A) sunk

B) imported

C) alternative

D) differential

Diff: 2

LO: 2-6

EOC: S2-15

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

11) When deciding to buy a new computer, all of the following should be considered except for the

A) cost of the new computer.

B) cost of the old computer.

C) games that come with the new computer.

D) warranty on the new computer.

Diff: 2

LO: 2-6

EOC: E2-28A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

12) When making a decision to buy a new computer, all of the following should be considered except

A) differential costs.

B) relevant costs.

C) qualitative characteristics.

D) sunk costs.

Diff: 2

LO: 2-6

EOC: E2-28A

AACSB: Analytical thinking

Learning Outcome: Describe the basics of managerial accounting and its function within an organization.

13) A company is deciding whether to purchase production equipment that can produce units more quickly than the current equipment. Which of the following costs would be relevant to its decision?

A) The cost of the new equipment