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Exam 1: Management Accounting and Corporate Governance

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Question 51

True/False

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A potential negative effect of using a just-in-time inventory system is the immediate impact of labor strikes on the transportation system such as railroad.

A) True
B) False

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Question 52

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Karen is a Certified Management Accountant and is bound by the IMA's Standards of Ethical Conduct.Her superior has asked her to try to influence the firm's outside auditors with expensive gifts and favors.If Karen complies,she will violate the competence standard.

A) True
B) False

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Question 53

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Which of the following transactions would cause net income for the period to decrease?

During its first year of operations,Connor Company paid $50,000 for direct materials and $36,000 in wages for production workers.Lease payments and utilities on the production facilities amounted to $14,000.General,selling,and administrative expenses were $16,000.The company produced 5,000 units and sold 4,000 units for $30.00 a unit.The average cost to produce one unit is which of the following amounts?

What are indirect costs,and how are the indirect costs incurred to make products accounted for?

Does the term "cost" mean the same thing as the term "expense?" Explain your answer.

The primary difference between manufacturing companies and service companies is that the products provided by service companies are consumed immediately.

Discuss the regulation of financial accounting,and compare to the level of regulation of managerial accounting information.

All costs incurred prior to delivery of the product to the customer are referred to as upstream costs.

For a manufacturing company,both direct labor costs and indirect labor costs are classified as product costs.

Complete the following table to compare and contrast financial and managerial accounting. $\begin{array} { | l | l | l | } \hline \text { Characteristic } & \text { Financial Accounting } & \text { Managerial Accumting } \\\hline \text { Users } & & \\\hline \text { Level of agpregation } & & \\\hline \text { Regulation } & & \\\hline \text { Characteristic of information } & & \\\hline \text { Tirne horizon } & & \\\hline \text { Reporting frequency } & & \\\hline\end{array}$

Under the terms of the Sarbanes-Oxley Act,a company and its external auditor are required to report on the effectiveness of the company's system of internal controls.

For a manufacturing company,product costs include all of the following except:

The time spent moving a product from one processing department to the next processing department is an example of a value-added activity.

Opportunity,pressure and rationalization are the three elements of the fraud triangle.

What is the fraud triangle? Which element of the fraud triangle is most closely connected with internal controls?

Arizona Company provided the following information regarding its most recent year of operations: $\begin{array}{lrr} \text { Administrative salaries} &\$24,000\\ \text { Direct labor } &48,000\\ \text {Direct raw material } &80,000\\ \text { Marketing and distribution costs} &60,000\\ \text { Overheads costs } &36,000\\ \text {Product design and testing } &30,000\\ \text { Research and development } &40,000\\ \text {Sales revenues } &410,000\\ \text { Sales salaries and commissions } &54,000\\ \text { Warranty costs } &4,000\\\\ \text { Number of units produced } &20,000\\ \text { Number of units sold } &20,000\\\end{array}$ Required: Determine the following amounts: (a)Total product costs (b)Total upstream costs (c)Total downstream costs (d)Product cost per unit (e)Total cost per unit,including product costs and upstream and downstream costs (f)The selling price per unit that would be required if the company wishes to earn a profit margin equal to 25% of total cost (g)Comment on the company's profitability at its current selling price

Levenworth Company incurs unnecessary costs each period because of the excess quantities of inventory maintained to meet unexpected customer demand.The costs of inventory financing,storage,supervision,and obsolescence could most likely be reduced by which of the following practices?

Reno Company provided the following information regarding its operations for the month ending September 30: $\begin{array}{lrr} \text { Administrative costs } &\$30,000\\ \text { Depreciation on factory equipment} &12,000\\ \text {Indirect materials } &2,000\\ \text {Marketing and distribution costs } &24,000\\ \text {Salaries for factory supervisors } &20,000\\ \text { Wages for production worker's } &26,000\\ \text { Raw materials used } &38,000\\ \text { Sales revenue } &196,000\\ \text {Selling costs } &18,000\\ \text {Utilities for production facilities } &8,000\\\\ \text {Number of units produced } &20,000\\ \text { Number of units sold} &15,000\\\end{array}$ Required: 1)Compute the firm's total manufacturing overhead cost. 2)Prepare a schedule of inventory costs that shows total product costs,ending inventory,and cost of goods sold; and 3)Prepare an income statement for the month ending September 30.

Misclassifying a product cost as a period cost will usually cause the income statement to be incorrect,but the balance sheet will not be affected.