Midterm exam

Question 1

Distinguish financial accounting vs. managerial accounting

Answer 1

Financial is used primarily for outside use, investors, creditors, reporters. It is past only data, and is regulated by GAAP SEC and FASB. Managerial is past, present and future data that is used by insiders. Such as management, executives and operators. It is not regulated.

Question 2

Information is factual and is characterized by objectivity, reliability, consistency, and accuracy.

Answer 2

Financial

Question 3

Information is reported continuously and has a current or future orientation

Answer 3

Managerial

Question 4

Information is provided to outsiders, including investors, creditors, government agencies, analysts, and reporters

Answer 4

Financial

Question 5

Information is regulated by the SEC, FASB, and other sources of GAAP

Answer 5

Financial

Question 6

Information is based on estimates that are bounded by relevance and timeliness

Answer 6

Managerial

Question 7

Information is historically based and usually reported annually.

Answer 7

Financial

Question 8

Information is local and pertains to subunits of the organization

Answer 8

Managerial

Question 9

Information includes economic and nonfinancial data as well as financial data.

Answer 9

Managerial

Question 10

Information is global and pertains to the company as a whole

Answer 10

Financial

Question 11

j. Information is provided to insiders, including executives, managers, and employees

Answer 11

Managerial

Question 12

Product Cost

Answer 12

Product cost is the cost of material labor and other resources to make the product.

Question 13

Period Cost

Answer 13

Period costs include SG&A: selling costs (such as Cars for sales staff, Advertising costs, Promotion cost); general operating costs, and administrative costs (such as Depreciation on administration building, Research and development costs, Cost to rent office equipment, General office supplies), interest costs, and the cost of income taxes.

Question 14

Wages of production workers

Answer 14

Product Cost

Question 15

Advertising costs

Answer 15

SG&A

Question 16

Production supplies

Answer 16

Production Costs

Question 17

Research and development costs

Answer 17

SG&A

Question 18

Utilities used in manufacturing facility

Answer 18

Production Costs

Question 19

Real estate tax levied on a factory

Answer 19

Production Costs

Question 20

Just in Time Inventory Pros/Cons

Answer 20

Pros: less waste, more efficient, fresher in some cases, customer satisfaction (fast food) Cons: could possibly not be able to satisfy customer needs/wants. Lose out on profit.

Question 21

Fixed Cost

Answer 21

Remains the same regardless of production, etc. (rent, utilities, salary)

Question 22

Variable cost

Answer 22

Variable cost/unit always stays the same. Variable cost total decreases hen production decreases and increases when inventory increases. (materials, labor)

Question 23

Cost object

Answer 23

is any activity, product, process, or service to which accountants wish to trace costs

Question 24

Direct Costs

Answer 24

Costs that can be traced to cost objects in a cost-effective manner are called direct costs.

Question 25

Indirect Costs

Answer 25

Costs that cannot be traced to cost objects in a cost-effective manner are called indirect costs.

Question 26

Unit Level Activity

Answer 26

Unit-level activities are performed each time a unit is produced. For example, providing power to run processing equipment would be a unit-level activity.

Question 27

Batch Level Activities

Answer 27

Batch-level activities are performed each time a batch is handled or processed, regardless of how many units are in the batch. For example, setting up equipment and shipping customer orders are batch-level activities.

Question 28

Product level Activity

Answer 28

Product-level activities relate to specific products and must be carried out regardless of how many batches are run or units produced and sold. For example, designing or advertising a product would be product-level activities.

Question 29

Facility Level Activities

Answer 29

Facility-level activities are carried out regardless of which products are produced, how many batches are run, or how many units are made. For example, heating a factory and cleaning executive offices are facility-level activities.

Question 30

What are TWO primary characteristics that distinguish relevant from useless information

Answer 30

1. Relevant information differs among the alternatives under consideration.
2. Relevant information is future-oriented.

Question 31

Sunk Cost

Answer 31

has been incurred in a past transaction and cannot be changed. It is not relevant for making current decisions.

Question 32

Opportunity Cost

Answer 32

An opportunity cost is the sacrifice that is incurred in order to obtain an alternative opportunity.