Chapter 10 - Fundamentals Of Accounting

1. Which of the following branches of accounting focuses more on historical data? a. Managerial accounting b. Financial accounting 2. Managerial accounting focuses on the needs of external users while financial accounting focuses on the needs of internal users. This statement is a. True b. False 3. Which of the following are characteristics of managerial accounting information? a. Provides information to the company9s management team b. Is future oriented c. Is more willing to sacrifice reliability to gain relevance than is financial accounting d. All of the answers describe characteristics of managerial accounting information 4. Which of the following describes the flow of product costs in a manufacturing company? a. Product costs are first accumulated in an asset account (inventory) and then transferred to an expense account (cost of goods sold) when the products are sold b. Product costs are first accumulated in an expense account (costs of goods sold) and then transferred to an asset account (inventory) when the goods are sold c. Product costs are recorded in an expense account (cost of goods sold) as the goods are being manufactured d. Product costs are never expensed 5. Which of the following costs would not be included as part of manufacturing overhead? a. Insurance on sales vehicles b. Depreciation of production equipment c. Lubricants for production equipment d. Maintenance workers salaries at the factory 6. Product costs are placed in which financial statement account when incurred? a. Cost of goods sold b. Inventory c. Selling expense d. Property, plant, and equipment 7. The cost of denim used to manufacture blue jeans would most likely be classified as a a. Indirect material b. Direct labor c. Direct material d. Manufacturing overhead 8. Celestin Manufacturing Company incurred $5,000 of depreciation on its manufacturing equipment during its first year of operation. During this year the company made 2,500 units of product and sold 2,000 units of product. Based on this information alone the company would show a. $5,000 of depreciation expense on its income statement b. $4,000 of cost of goods sold expense on its income statement c. $5,000 of inventory on its balance sheet d. $4,000 of inventory on its balance sheet 9. Brock Company makes candy. During the most recent accounting period Brock paid $3,000 for raw materials, $4,000 for labor, and $2,000 for overhead costs that were incurred to make candy. Brock started and completed 10,000 units of candy of which $8,000 were sold. Based on this information Brock would recognize which of the following amounts of expense on its income statement? a. $4,000 b. $9,000 c. $7,200 d. None of the above 10. Brock Company makes candy. During the most recent accounting period Brock paid $5,750 for raw materials, $6,750 for labor, and $7,500 for overhead costs that were incurred to make candy. Brock started and completed 19,802 units of candy of which 13,500 were sold. Based on this information the balance in the inventory account on Brock9s balance sheet would be a. $6,365 b. $6,302 c. $20,000 d. None of the above 11. Brock Company makes candy. During the most recent accounting period Brock paid $3,000 for raw materials, $4,000 for labor, and $2,000 for overhead costs that were incurred to make candy. Brock started and completed 10,000 units of candy of which $8,000 were sold. Based on this information the balance in the inventory account on Brock9s balance sheet would be a. $1,800 b. $2,000 c. $9.000 d. None of the above 12. In a manufacturing firm, costs incurred to research a more fuel efficient engine would be classified as a. Upstream costs b. Midstream costs c. Downstream costs d. Both midstream and downstream costs 13. The costs incurred to sell a product would be classified as a. Upstream costs b. Midstream costs c. Downstream costs d. None of the above 14. The primary difference between cost classifications for a manufacturing firm versus a merchandising firm is a. All costs for a merchandising firm are downstream costs for a manufacturing firm b. All downstream costs for merchandising firm are midstream costs for a manufacturing firm c. All midstream costs for a merchandising firm are upstream cost for a manufacturing firm d. All costs for a manufacturing firm are midstream costs for a merchandising firm 15. According to GAAP, which type of costs are classified as product cost? a. Downstream costs b. Midstream costs c. Upstream costs d. Both downstream and upstream costs 16. Use the following information to determine net income in the financial statements under GAAP: Assume the company wants to sell each boat for 20% more than the cost to produce the boat. a. $10,000,000 b. $3,000,000 c. $7,000,000 d. $5,000,000 17. The estimated amount of manufacturing overhead appears on the schedule of cost of goods manufactured and sold. This statement is a. True b. False 18. At the beginning of the current accounting period Blazer Company had a $40,000 balance in its Finished Goods Inventory account. During the period of cost of goods manufactured amounted to $280,000. The ending balance in the Finished Goods Inventory account was $42,000. Based on this information the amount of cost of goods sold is a. $280,000 b. $278,000 c. $282,000 d. The answer cannot be determined from the information provided 19. The following beginning and ending inventory balances apply to Holder Company: During the accounting period, the company purchased $234,000 of direct raw materials. It incurred $180,000 of direct labor costs for the year and allocated $260,000 of manufacturing overhead costs to work in process. There was no overapplied or underapplied overhead. Revenue from goods sold during the year was $800,000. The amount of cost of goods manufactured (amount transferred from WIP to finished goods) was a. $675,000 b. $673,000 c. $679,000 d. None of these 20. The following beginning and ending inventory balances apply to Holder Company: During the accounting period, the company purchased $234,000 of direct raw materials. It incurred $180,000 of direct labor costs for the year and allocated $260,000 of manufacturing overhead costs to work in process. There was no overapplied or underapplied overhead. Revenue from goods sold during the year was $800,000. What was Holder9s gross margin? a. $678,000 b. $126,000 c. $122,000 d. $106,000 21. Which of the following is not identified as an overreaching principle of ethical conduct in the Institute of Management Accountants9 (IMA) Statement of Professional Ethical Standards? a. Responsibility b. Opportunity c. Honesty d. Fairness 22. Which of the following items is not a feature of the 8integrity9 standard contained in IMA9s Statement of Professional Ethical Standards? a. Avoid even apparent conflicts of interest b. Refrain from engaging in conduct that would prejudice carrying out duties ethically c. Perform duties in accordance with relevant laws, regulations, and technical standards d. Abstain for engaging in duties that would discredit the profession 23. In an attempt to resolve an ethical conflict, a CMA is permitted to bypass the chain of command if his supervisory authorities are involved in the conflict. This statement is a. True b. False 24. Benchmarking involves a. Establishing standards used to evaluate management performance b. Copying or mimicking the practices used by highly successful competitors c. Identifying and avoiding the practices that motivate fraud d. Preventing bottlenecks in value added activities 25. A key component of total quality management (TQM) is a. Continuous improvement b. Zero defects c. Customer satisfaction d. All of the answers represent components of TQM