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Exam 1: Management Accounting and Corporate Governance

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Question 61

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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.

A) True
B) False

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Question 62

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Jarvis Company provided the following information regarding its first year of operations: Required: Determine the following amounts: (a) Total overhead costs.(b) Total product costs.(c) Product cost per unit.(d) Total cost of ending finished goods inventory.(e) Total cost of goods sold. $\begin{array}{l}\begin{array} { | l | r | } \hline \text { Administrative salaries } & \$ 60,000 \\\hline \text { Depreciation on factory equipment } & 16,000 \\\hline \text { Indirect materials } & 4,000 \\\hline \text { Marketing costs } & 40,000 \\\hline \text { Salaries for factory supervisors } & 28,000 \\\hline \text { Wages for production workers } & 80,000 \\\hline \text { Raw materials used } & 100,000 \\\hline \text { Research and development } & 32,000 \\\hline \text { Rent on factory building } & 18,000 \\\hline \text { Sales revenues } & 432,000 \\\hline \text { Sales salaries and other selling costs } & 56,000 \\\hline\\\hline \text { Beginning inventory } & 0 \text { units } \\\hline \text { Number of units produced } & 20,000 \\\hline \text { Number of units sold } & 18,000 \\\hline\end{array}\end{array}$

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(a) Overhead costs:
(b) Product costs:
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Question 63

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Select the term from the list provided that best matches each of the following descriptions. The first is done for you. $\begin{array}{|c|l|l|}\hline \text { Answer } & \text { Description } & \text { List of terms } \\\hline 4 & \begin{array}{l}\text { A. An inventory flow system that minimizes the amount of } \\\text { inventory on hand }\end{array} & 1 \text {. Continuous improvement } \\\hline & \begin{array}{l}\text { B. The organization established by the accounting profession } \\\text { to develop accounting standards }\end{array} & \text { 2. Cost of goods sold } \\\hline & \begin{array}{l}\text { C. The area of accounting designed to meet information } \\\text { needs of internal users }\end{array} & \begin{array}{l}\text { 3. Financial Accounting } \\\text { Standards Board }\end{array} \\\hline & \begin{array}{l}\text { D. The government agency authorized to establish and } \\\text { regulate public company reporting practices }\end{array} & \text { 4. Just in time } \\\hline & \begin{array}{l}\text { E. Assessing the value chain to create new value-added } \\\text { activities }\end{array} & \text { 5. Managenal accounting } \\\hline & \begin{array}{l}\text { F. Tasks that do not contribute to a product's abulity to satisfy } \\\text { customer needs }\end{array} & 6 \text {. Nonvalue-added activities } \\\hline & \text { G. Costs incurred before the manufacturing process begins } & 7 \text {. Re-enganeening } \\\hline & \begin{array}{l}\text { H. The process of changing an or garization's production and } \\\text { delivery systems to make the organization more competitive }\end{array} & \text {. Upstream costs } \\\hline & \begin{array}{l}\text { I. The ongoung process through whach employees become } \\\text { more effective and leam to work more efficiently }\end{array} & \begin{array}{l}\text { 9. Secunties and Exchange } \\\text { Commission }\end{array} \\\hline & \begin{array}{l}\text { f. The term used for the amount of product costs expensed in } \\\text { the current period }\end{array} & \begin{array}{l}\text { 10. Activity-based } \\\text { management }\end{array} \\\hline\end{array}$

Management accountants have a responsibility to demonstrate integrity. What does this ethical standard require of management accountants?

Which of the following items would be reported directly on the income statement as a period cost?

Which of the following is a product cost for a construction company?

Because management accountants prepare and analyze financial information used by company decision-makers, they are considered to be at the forefront of corporate governance.

Manufacturing costs that cannot be traced to specific units of product in a cost-effective manner include:

Discuss three practical implications of misclassifying product and/or period costs.

As a Certified Management Accountant, Suzanne is bound by the standards of ethical conduct issued by the Institute of Management Accountants. During the course of business, Suzanne learned that her company has decided to discontinue a major product line. If she mentions this fact to her brother, who is a stockbroker, Suzanne could be in violation of the:

Which of the following statements concerning manufacturing costs is incorrect?

Steuben Company produces dog houses. During the current year, Steuben Company incurred the following costs: Based on the above information, which of the following would not be treated as a product cost: $\begin{array}{|l|r|}\hline\text { Rent on manufacturing facility } & \$ 250,000 \\\hline\text { Office manager's salary } & 150,000 \\\hline \text { Wages of factory machine operators } & 110,000 \\\hline \text { Depreciation on manufacturing equipment } & 50,000 \\\hline\text { Insurance and taxes on selling and administrative offices } & 30,000 \\\hline\text { Direct materials purchased and used } & 170,000\\\hline\end{array}$

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

The Sarbanes Oxley Act of 2002:

Financial accounting information is reported periodically, primarily at the end of each fiscal year. When is managerial accounting information reported to managers of an organization?

Assuming a company's inventory increased during the period, which of the following misclassifications may increase net income?

A merchandising business paid $2,500 to purchase inventory and $50 to have the inventory delivered to its customers. Its product costs were $2,550.

Arizona Company provided the following information regarding its most recent year of operations: 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 $\begin{array} { | l | r | } \hline \text { Administrative salaries } & \$ 24,000 \\\hline \text { Direct labor } & 48,000 \\\hline \text { Direct raw material } & 80,000 \\\hline \text { Marketing and distribution costs } & 60,000 \\\hline \text { Overhead costs } & 36,000 \\\hline \text { Product design and testing } & 30,000 \\\hline \text { Research and development } & 40,000 \\\hline \text { Sales revenues } & 410,000 \\\hline \text { Sales salaries and commissions } & 54,000 \\\hline \text { Warranty costs } & 4,000 \\\hline & \\\hline \text { Number of units produced } & 20,000 \\\hline \text { Number of units sold } & 20,000\\\hline \end{array}$

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

Choose the answer that is not a distinguishing characteristic of financial accounting information.