Managerial Accounting I

Question 1

The costs of manufacturing a product can be classified as follows:

Answer 1

1) Direct materials
2) Direct labor
3) Manufacturing overhead

Question 2

Are tangible inputs to the manufacturing process that feasibly can be traced to the product. All cost of bringing materials to the production line are included in the cost.

Answer 2

Direct materials

Question 3

Is the cost of human labor that can feasibly be traced to the product.

Answer 3

Direct labor

Question 4

Consist of all costs of manufacturing that are not direct materials or direct labor.

Answer 4

Manufacturing overhead

Question 5

Manufacturing costs are often grouped as follows:

Answer 5

1) Prime cost

2) Conversion cost

Question 6

Equals direct materials plus direct labor

Answer 6

Prime cost

Question 7

Equals direct labor plus manufacturing overhead

Answer 7

Conversion cost

Question 8

On the basis of whether they are capitalized to the cost of products produced or not, cost are classified as follows:

Answer 8

1) Product costs

2) Period costs

Question 9

Are capitalized as part of finished goods inventory. They eventually become a component of cost of goods sold.

Answer 9

Product costs

Question 10

Are expensed as incurred

Answer 10

Period costs

Question 11

Are associated with a particular cost object in an economically feasible way.

Answer 11

Direct Costs

Question 12

Cannot be associated with a particular cost object in an economically feasible way and must be allocated to that object.

Answer 12

Indirect costs

Question 13

Are indirect costs shared by two or more users

Answer 13

Common costs

Question 14

Vary directly with the volume of production.

Answer 14

Variable costs

Question 15

Vary directly and proportionally with changes in volume.

Answer 15

Variable costs in total

Question 16

In total remain unchanged in the short run regardless of production level.

Answer 16

Fixed costs

Question 17

Varies indirectly with the activity level.

Answer 17

Fixed cost per unit

Question 18

Combine fixed and variable elements.

Answer 18

Mixed (semivariable) costs

Question 19

Mixed (semivariable) costs can be computed using:

Answer 19

1) High-low method

2) Regression method

Question 20

The fixed portion of manufacturing overhead is included in the cost of each product.

Answer 20

Absorption (Full) costing

Question 21

Under absorption (Full) costing, product cost includes:

Answer 21

All manufacturing cost, both fixed and variable costs.

Question 22

Product cost includes only variable manufacturing costs.

Answer 22

Variable (Direct) Costing

Question 23

Under absorption (Full) and Variable (Direct) costing: when production and sales are equal for a period:

Answer 23

The two methods report the same operating income

Question 24

Under absorption (Full) and Variable (Direct) costing: when production and sales are not equal for a period:

Answer 24

The two methods report different operating income

Question 25

Under absorption (Full) and Variable (Direct) costing: when production exceeds sales, ending inventory increases.

Answer 25

Under absorption costing some fixed cost are still in ending inventory and

Under variable costing all fixed costs have been expensed,

Operating income is higher under absorption costing

Question 26

Under absorption (Full) and Variable (Direct) costing: when production is less than sales, ending inventory decreases.

Answer 26

Under absorption costing fixed costs in beginning inventory are expensed and

Under variable costing only the current period’s fixed costs are expensed,

Operating income is higher under variable costing

Question 27

For external financial reporting is prohibited by U.S. GAAP and IFRS.

Answer 27

Variable costing, it is better suited than absorption costing for managerial accounting.

Question 28

Assigns costs to inventoriable goods or services. It applies to relatively homogeneous product that are mass produced on a continuous basis (e.g., petroleum products, thread, and computer monitors)

Answer 28

Process cost accounting

Question 29

Some units are unfinished at the end of the period. For each department to account adequately for costs attached to its unfinished units, the units must be restated in terms of

Answer 29

Equivalent units of production (EUP)

Question 30

Equivalent units of productions (EUP) calculations, three groups of units are:

Answer 30

1) Units in beginning work-in-process (beginning WIP)
2) Units started and completed during the current period
3) Units in ending work-in-process (ending WIP)

Question 31

= Units transferred out + Ending WIP - Units started

Answer 31

Beginning WIP

Question 32

= Units transferred out - Beginning WIP

Answer 32

Units started and completed

Question 33

= Units started - Ending WIP

Answer 33

Units started and completed

Question 34

= Beginning WIP + Units started - Units transferred out

Answer 34

Ending WIP

Question 35

Methods used for calculating EUP.

Answer 35

1) Weighted-average method

2) First-in, first-out (FIFO) method

Question 36

Treats the beginning WIP as started and completed during the current period.

Answer 36

The weighted-average method

Question 37

Calculating The weighted-average method:

Answer 37

EUP = Units transferred to next department or finished goods + Equivalent units in ending work-in-process inventory

Question 38

Only includes work done in the current period in the calculation.

Answer 38

The First-in, first-out (FIFO) method

Question 39

Calculating The First-in, first-out (FIFO) method:

Answer 39

EUP = Equivalent units to complete beginning inventory + Units started and completed during the period + Equivalent units n ending work-in-process inventory

Question 40

Occurs under normal operating conditions. It is treated as a product cost and absorbed into the cost of good output.

Answer 40

Normal spoilage

Question 41

Is not expected to occur under normal, efficient operating conditions. It is typically treated as a period cost (a loss).

Answer 41

Abnormal spoilage

Question 42

Consists of materials left over from the production process.

Answer 42

Scrap

Question 43

If scrap is sold,

Answer 43

It reduces factory overhead.

Question 44

If scrap is discarded,

Answer 44

It is absorbed into the cost of good output.

Question 45

Is a response to the significant increase in the incurrence of indirect costs resulting from the rapid advance of technology.

Answer 45

Activity-Based Costing (ABC)

Question 46

Under Activity-Based Costing (ABC), indirect costs are:

Answer 46

Attached to activities that are then rationally allocated to end products.

Question 47

Activity-Based systems involve:

Answer 47

1) Identifying organizational activities that result in overhead.
2) Assigning the costs of resources consumed by the activities.
3) Assigning the costs of the activities by appropriate cost drivers to final object objects.