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Exam 10: An Introduction to Management Accounting

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Question 31

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

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This standard requires accountants to co...

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Question 32

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Which of the following is not classified as manufacturing overhead?

A) Product delivery costs
B) Supervisory labor
C) Factory insurance
D) Production supplies

E) A) and D)
F) A) and B)

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Question 33

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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.

If product costs are misclassified as selling costs, the cost per unit will be understated.

The following information relates to Minimart's 2012 accounting period: $\begin{array}{|l|r|}\hline \text { Raw materials used } & \$ 17,000 \\\hline \text { Direct labor wages and salaries } & 33,000 \\\hline \text { Sales salaries } & 25,000 \\\hline \text { Depreciation on manufacturing equipment } & 3,000 \\\hline \text { Rent on manufacturing facilities } & 4,000 \\\hline \text { Administrative supplies and utilities } & 5,000 \\\hline \text { Sales revenue } & 105,000 \\\hline \text { Units of products produced } & 4,000 \\\hline \text { Units of products sold } & 4,000 \\\hline\end{array}$ Based on this information, Minimart's total manufacturing costs for 2012 equal:

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

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

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

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

Upstream costs are classified as product costs and downstream costs are classified as period costs for financial reporting purposes.

Reno Company provided the following information regarding its operations for the month ending September 30, 2013: $\begin{array} { | l | r | } \hline \text { Administrative costs } & \$ 30,000 \\\hline \text { Depreciation on factory equipment } & 12,000 \\\hline \text { Indirect materials } & 2,000 \\\hline \text { Marketing and distribution costs } & 24,000 \\\hline \text { Salaries for factory supervisors } & 20,000 \\\hline \text { Wages for production workers } & 26,000 \\\hline \text { Raw materials used } & 38,000 \\\hline \text { Sales revenue } & 196,000 \\\hline \text { Selling costs } & 18,000 \\\hline \text { Utilities for production facilities } & 8,000 \\\hline & \\\hline \text { Number of units produced } & 20,000 \\\hline \text { Number of units sold } & 15,000 \\\hline\end{array}$ 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, 2013.

Steuben Company produces dog houses. During 2013, Steuben Company incurred the following costs: $\begin{array}{lr}\text { Rent on manufacturing facility } & \$ 250,000 \\ \text { Office manager's salary } & 150,000 \\ \text { Wages of factory machine operators } & 110,000 \\\text { Depreciation on manufacturing equipment } & 50,000 \\\text { Insurance and taxes on selling and administrative offices } & 30,000 \\ \text { Direct materials purchased and used } & 170,000\end{array}$ Wages paid to factory machine operators in producing the dog houses should be categorized as:

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

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

The Szakos Company engaged in the following transactions during 2013: a) Acquired $50,000 of cash by issuing common stock to owners b) Paid $10,000 to acquire manufacturing equipment c) Paid $5,000 cash for materials used in production d) Paid $2,000 for wages of production workers e) Paid $8,000 in general, selling, and administrative costs f) Recognized $1,000 of depreciation on the manufacturing equipment g) Sold inventory for $18,000 cash h) The cost of the inventory sold was $6,500 Required: Show the balance sheet and income statement effects of the transactions by completing the financial statement model provided.

What inventory holding costs would be incurred by a business that holds a large amount of inventory?

The Jacobson Manufacturing Company was started at the beginning of the current year when it acquired $200,000 from its owners. During the year, the company incurred the following costs, all for cash: $\begin{array} { | l| r | } \hline \text { Direct material costs } & \$ 80,000 \\\hline \text { Direct labor costs } & 100,000 \\\hline \text { Overhead costs } & 40,000 \\\hline \text { Selling and administrative costs } & 60,000\\\hline\end{array}$ The company produced 10,000 units of product and sold 8,000 units. The average selling price was $34 per unit; all sales were for cash. The accountant who prepared the firm's financial statements misclassified the selling and administrative costs as product costs. Required: Demonstrate the impact of the error on the company's income statement and balance sheet by completing the following schedule: $\begin{array} { | l | l | l | } \hline & \text { Scenario 1: With the error } & \text { Soenario 2: Without the error } \\\hline \text { Income statement: } & & \\\hline \text { Revenue } & & \\\hline \text { Less: Cost of goods sold } & & \\\hline \text { Oross margin } & & \\\hline \begin{array} { c } \text { Less: Selling, general, and } \\\text { administrative expenses }\end{array} & & \\\hline \text { Net income } & & \\\hline & & \\\hline \text { Balance sheet: } & & \\\hline \text { Assets } & & \\\hline \text { Cash } & & \\\hline \text { Inventory } & & \\\hline \text { Total assets } & & \\\hline \text { Equity } & & \\\hline \text { Common stock } & & \\\hline \text { Retsined earnings } & & \\\hline \text { Total equity } & & \\\hline\end{array}$

Which of the following costs should not be recorded as an expense?

Average costs are used for internal decision-making, but actual costs are required for calculating cost of goods sold.

Complete the following table to compare and contrast financial and managerial accounting. $\begin{array} { | l | l | l | } \hline \text { Characteristic } & \text { Finsecial Accomaning } & \text { Managerial Acceunting } \\\hline \text { Users } & & \\\hline \text { Level of aggegation } & & \\\hline \text { Regulation } & & \\\hline \text { Characteristics of information } & & \\\hline \text { Time horizon } & & \\\hline \text { Reportang frequency } & & \\\hline\end{array}$