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Managerial Accounting, 1e (Cainas, Pope, Joszi) Chapter 1 Managerial Accounting: An Information System Learning Objective 1.1 1) Financial accounting emphasizes relevant, detailed information that may be used to forecast future performance. Answer: FALSE Objective: 1 AACSB: Application of knowledge 2) Managerial accounting requires accountants to follow generally accepted accounting principles (GAAP) when producing operational reports. Answer: FALSE Objective: 1 AACSB: Application of knowledge 3) The annual tax return filed with the Internal Revenue Service (IRS) is an example of a report generated from a financial accounting system. Answer: TRUE Objective: 1 AACSB: Application of knowledge 4) The number of defective materials received from vendors could be directly reported for managerial accounting but not financial accounting. Answer: TRUE Objective: 1 AACSB: Reflective thinking 5) Financial accounting and managerial accounting differ in that: A) financial reporting is focused on forecasted future performance. B) managerial accounting reporting requirements are based on the needs of management. C) managerial accounting information is primarily used by individuals external to the business. D) financial reporting provides relevant and detailed information. Answer: B Objective: 1 AACSB: Application of knowledge 6) The objective of financial accounting is to: A) provide summarized reports to external stakeholders for decision making. B) provide detailed information to operational and upper-level managers for decision making. C) generate reports that meet the needs of management. D) emphasize current, relevant performance. Answer: A Objective: 1 AACSB: Application of knowledge 1 Copyright © 2023 Pearson Education, Inc.

7) A report detailing the number of on-time deliveries by geographic area is most likely used by a(n): A) investor. B) upper-level manager. C) vendor. D) operations manager. Answer: D Objective: 1 AACSB: Reflective thinking 8) A staff accountant is provided with information about the projected profitability of a company's three product lines for the upcoming year. What is NOT a reason this represents a managerial report? A) The information was provided to an external user. B) The report's focus is on forecasted future performance. C) The information is detailed. D) The data is related to both financial and operational functions. Answer: A Objective: 1 AACSB: Reflective thinking 9) Which of the following uses managerial accounting information? A) City governments and universities. B) An International consulting firm. C) Small, individually owned business. D) All of the above. Answer: D Objective: 1 AACSB: Reflective thinking Learning Objective 1.2 1) Planning is a more important function than control because it is done first. Answer: FALSE Objective: 2 AACSB: Reflective thinking 2) Identify the appropriate order in which the specified managerial functions should be performed. A) Implementing & Controlling; Planning; Decision Making B) Decision Making; Implementing & Controlling; Planning C) Planning; Implementing & Controlling; Decision Making D) Implementing & Controlling; Decision Making; Planning Answer: C Objective: 2 AACSB: Application of knowledge 2 Copyright © 2023 Pearson Education, Inc.

3) Decreasing costs by 5% this year is an example of a long-term goal. Answer: FALSE Objective: 2 AACSB: Application of knowledge 4) Which is NOT an example of an activity performed in the planning stage? A) Compare the results of current year activities against the plan and investigate all significant deviations. B) Review historical sales data for the business and its competitors. C) Consider new products under development. D) Obtain certain economic and industry data to understand the current marketplace conditions. Answer: A Objective: 2 AACSB: Reflective thinking 5) Control involves comparing the company's plan (budget) to the actual results achieved and investigating unusual differences. Answer: TRUE Objective: 2 AACSB: Application of knowledge 6) Operational decisions relate to which markets, customers, services, or products to provide. Answer: FALSE Objective: 2 AACSB: Application of knowledge 7) The current challenge with obtaining data for decision making is identifying both relevant and useful data. Answer: TRUE Objective: 2 AACSB: Application of knowledge 8) Information must be presented in the form of a report to be useful for decision making. Answer: FALSE Objective: 2 AACSB: Application of knowledge 9) Planning is to setting goals and objectives as Decision Making is to: A) turning a business plan into action. B) selecting a course of action for the business. C) monitoring actual results against the plan. D) identifying a strategic vision for the business. Answer: B Objective: 2 AACSB: Application of knowledge 3 Copyright © 2023 Pearson Education, Inc.

Learning Objective 1.3 1) The information needs of operations and upper-level management are the same. Answer: FALSE Objective: 3 AACSB: Application of knowledge 2) Examples of daily reports received by operations managers include: payments received by customers, number of on-time deliveries, and customer satisfaction surveys. Answer: TRUE Objective: 3 AACSB: Reflective thinking 3) Upper-level managers are to "who are my biggest competitors?" as operations managers are to: A) "are my employees performing efficiently and effectively?" B) "do we require funding for upcoming warehouse upgrades?" C) "should I provide additional services to customers?" D) "what is my target market?" Answer: A Objective: 3 AACSB: Reflective thinking Learning Objective 1.4 1) Managers use managerial accounting information to create value for planning and control decisions but not for product costing and non-routine decisions. Answer: FALSE Objective: 4 AACSB: Application of knowledge 2) Planning and control decisions should include analysis of both financial and non-financial information. Answer: TRUE Objective: 4 AACSB: Application of knowledge 3) Identify the characteristics of information necessary for successful decision making. A) Nonfinancial, historical, and conservative. B) Historical, conservative, and useful. C) Timely, relevant, and useful. D) Relevant, prospective, and qualitative. Answer: C Objective: 4 AACSB: Reflective thinking

4) A non-routine decision is to switching accounting software as a product costing decision is to: A) considering expanding into a new state. B) evaluating the results of advertising. C) measuring customer satisfaction. D) identifying the direct manufacturing costs. Answer: D Objective: 4 AACSB: Reflective thinking 5) Identify the decisions or actions that management would perform during the planning and control process. A) Forecasting the profit at different sales levels; Identifying why production goals were not met B) Evaluating a new technology platform; Forecasting profit at different sales levels C) Evaluating a new technology platform; Buying or leasing new copier D) Analyzing whether to buy or lease a new copier; Determining the direct costs and margin of various product lines Answer: A Objective: 4 AACSB: Reflective thinking 6) Which of the following is NOT an example of a question asked when making a non-routine decision? A) Should we expand into the e-commerce (online) market? B) What are the costs involved with manufacturing a product? C) How should each of the products be priced to obtain a certain profit? D) Should we automate our operations by investing in new technology? Answer: B Objective: 4 AACSB: Reflective thinking Learning Objective 1.5 1) Prescriptive analytics is the simplest form of analytics that often summarizes past trends in the business. Answer: FALSE Objective: 5 AACSB: Application of knowledge 2) Why something happened is to diagnostic analytics as what is likely to happen is to: A) predictive analytics. B) descriptive analytics. C) prescriptive analytics. D) big data analytics. Answer: A Objective: 5 AACSB: Application of knowledge 5 Copyright © 2023 Pearson Education, Inc.

3) Prescriptive analytics is to machine learning as descriptive analytics is to: A) prediction models. B) root cause analysis. C) historical trends. D) artificial intelligence. Answer: C Objective: 5 AACSB: Reflective thinking 4) Unstructured data is data that is not standardized and cannot be used in data analytics or decision making. Answer: FALSE Objective: 5 AACSB: Application of knowledge 5) Unstructured data is to customer reviews as structured data is to: A) customer sales calls. B) comments on social media. C) digital photos. D) customer purchase data. Answer: D Objective: 5 AACSB: Reflective thinking Learning Objective 1.6 1) A managerial accounting system captures data (inputs), converts the data (process), and provides useful information for decision making (outputs). This is referred to as the IPO framework. Answer: TRUE Objective: 6 AACSB: Application of knowledge 2) Which of the following is NOT a correct statement regarding the input-process-output (IPO) framework? A) It includes the acquisition and evaluation of only quantitative information. B) It supports a data analytic approach to a management accounting system. C) The results can assist with improved managerial decision making. D) Emphasizes the importance of understanding how operations influence accounting information. Answer: A Objective: 6 AACSB: Application of knowledge

3) Identify the item that represents non-financial information that can be used as an input for decision making. A) Materials cost. B) Supplier quality. C) Employee wages. D) Selling price. Answer: B Objective: 6 AACSB: Reflective thinking 4) Qualitative information is easier to gather and analyze than? quantitative information. Answer: FALSE Objective: 6 AACSB: Application of knowledge 5) Technology has enabled data to be captured and processed much more efficiently. Answer: TRUE Objective: 6 AACSB: Application of knowledge 6) A performance report is an input to the managerial accounting system and compares budgeted amounts to actual amounts for decision making. Answer: FALSE Objective: 6 AACSB: Reflective thinking 7) Identify the qualitative information that could be used as an input in the decision making process. A) Number of units sold; supplier quality B) Online customer review comments; customer review ratings C) Customer review rating; Number of units sold D) Supplier quality; online customer review comments Answer: D Objective: 6 AACSB: Reflective thinking 8) Which of the following does NOT improve the usefulness of inputs in decision making? A) Capturing relevant data. B) Asking the right questions. C) Collecting a large volume of relevant and irrelevant data. D) Correct recording of data. Answer: C Objective: 6 AACSB: Application of knowledge

9) Which of the following would you not consider when evaluating the completeness and accuracy of the inputs into a managerial accounting system? A) The policies and procedures of the competitor. B) Reliability of software used to acquire the data. C) The ability of employees to commit fraud or errors. D) The skills and competencies of individuals if data is acquired manually. Answer: A Objective: 6 AACSB: Reflective thinking 10) An internal factor is to budgeting and financial planning as an external factor is to: A) customer satisfaction. B) the number of defective units. C) job complexity. D) gross domestic product (GDP) trends. Answer: D Objective: 6 AACSB: Application of knowledge 11) Major corporations use the technique of direct observation as the primary accounting system input to prepare financial statements. Answer: FALSE Objective: 6 AACSB: Application of knowledge 12) The cost-benefit constraint states that the cost of obtaining the inputs and processing into useful information for decision making must be less than the benefits obtained from the information. Answer: TRUE Objective: 6 AACSB: Application of knowledge 13) What are examples of methods used to obtain data (inputs)? A) Product costing, planning and controlling, and decision making. B) Descriptive analytics, diagnostic analytics, predictive analytics, prescriptive analytics. C) Structured data, unstructured data, financial data, nonfinancial data. D) Direct observation, interviewing, storyboarding. Answer: D Objective: 6 AACSB: Application of knowledge

14) Identify the statement that is true regarding information gathering. A) The three means to gather managerial accounting data include direct observation, interviewing, and storyboarding. B) Direct observation requires minimal time to acquire and record data. C) The most valuable interview data comes from inexperienced or new individuals. D) Storyboarding is typically performed one-on-one and results in a standardized report. Answer: A Objective: 6 AACSB: Application of knowledge 15) A company is looking to expand operations. Which of the following questions does upperlevel management not need to consider when gathering information to make the decision to expand operations? A) What are the additional costs that would be incurred? B) What descriptive analytics are available to assist with the decision? C) Do our competitors have a competitive advantage and are they expanding? D) What are customer demands and preferences? Answer: B Objective: 6 AACSB: Reflective thinking 16) Technology has made it harder to perform a "what-if" or sensitivity analysis. Answer: FALSE Objective: 6 AACSB: Reflective thinking 17) What is NOT an example of a technology that has made processing data into information easier? A) Spreadsheet programs (Microsoft Excel). B) Journals and ledgers (General Journal). C) Relational Databases (SAP). D) Visualization Tools (Tableau). Answer: B Objective: 6 AACSB: Reflective thinking 18) Output from a management accounting system should be easily understood by management and can only take the form of financial statements. Answer: FALSE Objective: 6 AACSB: Application of knowledge

19) Identify the item that would not appear on a managerial report for a boat rental company. A) Cost of gas B) Cost of boat slip lease C) Cost of inventory D) Wages paid to hourly employees Answer: C Objective: 6 AACSB: Reflective thinking 20) Management believes increased competition in the market is causing lower sales and profits for a company. What is a potential cause of customer dissatisfaction that management should analyze further? A) Problems with meeting scheduled deliveries. B) Expansion of the market to new participants. C) Increased social media advertising. D) Focused training to up-skill current employees. Answer: A Objective: 6 AACSB: Reflective thinking Learning Objective 1.7 1) The following table presents a comparison of the budgeted income statement and the actual income statement along with the calculation of the differences (variances).

Identify the statement that does not appropriately explain why you would or would not want to investigate the variance further. A) The selling and administrative expenses should not be investigated further because it is the smallest variance. B) Since a flexible budget was prepared, the only variances are due to changes in the selling price or in the cost per unit. C) The revenue variance should be investigated to figure out why the average selling price was higher than expectations. D) The gross profit and operating income variances do not need to be investigated further as they are functions of revenues, cost of goods sold, and selling & administrative expenses. Answer: A Objective: 7 AACSB: Reflective thinking 10 Copyright © 2023 Pearson Education, Inc.

2) Cruise lines were forced to stop sailing during the COVID-19 pandemic. What is NOT an example of a one-time (non-recurring) cost that cruise lines had to incur to restart sailings? A) Re-launch marketing costs. B) Repositioning the cruise ship to sail out of new ports. C) Implementation of new health and safety protocols. D) Purchasing food and beverages for sailing. Answer: D Objective: 7 AACSB: Reflective thinking 3) The following pie chart breaks down operating expenses by category.

Identify the statement that is false or unable to be answered based on the information provided within the pie chart. A) Advertising and salaries are the categories with the lowest spending. B) The company is most likely a service company. C) Maintenance costs are lower than expectations. D) Examples of website costs could be the fee for the domain name and monthly hosting costs. Answer: C Objective: 7 AACSB: Reflective thinking

4) The following bar chart compares budgeted costs to actual costs.

Identify the false statement. A) A line graph would be more helpful to show the differences between budgeted and actual costs across all categories. B) Actual total costs exceeded total budgeted costs. C) Multimedia capability is the only category with actual costs lower than expectations. D) Maintenance costs are greater than the combined cost of content management, salaries, and advertising. Answer: A Objective: 7 AACSB: Reflective thinking

5) Erin is looking to start a bookstore. The following monthly costs are identified. — Lease for bookstore $1000 per month — Utilities are $150 per month — Depreciation expense on furniture & fixtures is $520 per month — Repairs and maintenance is $70 per month — Average cost of each book sold $4 per book — Average selling price of each book $13 per book Assume, 130 books are sold in the first month. Which of the following statements is true? A) The gross margin is $4 per book. B) Total costs for the month are $1740. C) The operating loss for the month is $570. D) The bookstore needs to sell 60 more books to generate a profit. Answer: C Explanation: C) Monthly Income Statement Sales (130 books x $13 per book) $1690 COGS (130 books x 4 per book) 520 Gross margin 1170 Rent expense 1000 Utilities 150 Depreciation expense 520 Repairs and maintenance expense 70 Operating income (loss) (570) Objective: 7 AACSB: Analytical thinking

6) The following information is known about Ponte for the first year of operations. Sales Cost of goods sold Gross margin Selling & administrative expenses Operating income

$25,000 10,000 15,000 10,000 5,000

What other factors are not relevant to better understanding the results of the first year of operations? A) Is Ponte responsible for correcting product defects after customers receive the products? B) What is the bonus structure of the vendor supplying the materials? C) What is the quality of the products? D) Are there upcoming changes to regulations such as updates to the IRS Tax Code? Answer: B Objective: 7 AACSB: Reflective thinking

7) The following information is known about Lochs LLC for May: Operating income Cost of goods sold Gross margin

$1000 $15,000 $58,000

Which of the following statements is correct? A) Sales are $16,000 and selling & administrative expenses are $43,000. B) Sales are $59,000 and selling & administrative expenses are $43,000. C) Sales are $16,000 and selling & administrative expenses are $57,000. D) Sales are $73,000 and selling & administrative expenses are $57,000. Answer: D Explanation: D) Lochs LLC Income Statement Month of May Sales ??? COGS 15,000 Gross margin 58,000 SG&A expenses ??? Operating income 1000 Sales = COGS + Gross margin = $15,000 + $58,000 = $73,000 SG&A expenses = Gross margin - operating income = $58,000 - $1000 = $57,000 Objective: 7 AACSB: Analytical thinking Learning Objective 1.8 1) Effectiveness refers to achieving the goals, whereas efficiency relates to the resources used to create the actual results. Answer: TRUE Objective: 8 AACSB: Application of knowledge 2) If a sales call center employee answers customer complaints in less average time per call than budgeted, but many customers have to call back because the employee did not properly resolve the customer's concern or problem, the employee was effective but inefficient. Answer: FALSE Objective: 8 AACSB: Application of knowledge

3) You write yourself a check to cover the bonus that you did not receive last year due to economic cutbacks in your company. This does not violate one of the IMA ethical standards. Answer: FALSE Objective: 8 AACSB: Ethical understanding and reasoning 4) Identify the four standards in the IMA's Statement of Ethical Professional Practice. A) Confidentiality; Competence; Fairness; Justice B) Confidentiality; Competence; Credibility; Fairness C) Confidentiality; Competence; Credibility; Integrity D) Competence; Credibility; Integrity; Relevance Answer: C Objective: 8 AACSB: Ethical understanding and reasoning 5) Confidentiality is to telling individuals outside of the business about information that is not public knowledge as Competence is to: A) failing to record wages earned but unpaid because the employee does not understand accrual concepts. B) not disclosing the fact that a manager's spouse is a significant owner of one of the Company's main suppliers. C) withholding important relevant information related to a decision. D) reporting higher meals and entertainment expenses for a recent business trip. Answer: A Objective: 8 AACSB: Ethical understanding and reasoning 6) Which of the following situations violates the confidentiality standard outlined in the IMA's Statement on Ethical Professional Practice? A) You handwrite all financial statements because you do not know how to use Excel. B) You write yourself a check to cover the bonus that you did not receive last year due to economic cutbacks in your company. C) You tell your best friend about a new service line your company plans to release early next year. D) You do not tell your boss that your sibling holds a significant amount of stock in the company. Answer: C Objective: 8 AACSB: Ethical understanding and reasoning Learning Objective Appendix 1) The Statement of Cash Flows reports how much cash was earned and the liabilities owed for a period of time. Answer: FALSE Objective: Appx. AACSB: Application of knowledge 16 Copyright © 2023 Pearson Education, Inc.

2) The proper order of preparing financial statements is (1) income statement, (2) statement of retained earnings, (3) balance sheet, and (4) statement of cash flows. Answer: TRUE Objective: Appx. AACSB: Application of knowledge 3) The balance sheet is the only financial statement that reports as of a point in time. The income statement, statement of retained earnings, and statement of cash flows all report over a period of time. Answer: TRUE Objective: Appx. AACSB: Application of knowledge 4) Identify the transaction that increases net income. A) Signed a note with the bank and received financing. B) Recorded depreciation on equipment. C) Prepaid for several months of advertising and recorded with prepaid advertising account. D) Sold merchandise at more than cost. Answer: D Objective: Appx. AACSB: Application of knowledge 5) Identify the transaction that results in an increase to one account and a decrease to another account. A) Recorded depreciation on equipment. B) Employees worked for the week but will be paid next week. C) Purchased merchandise on credit. D) Paid rent for the month. Answer: D Objective: Appx. AACSB: Application of knowledge 6) Identify the improper account classification. A) Accumulated Depreciation is a balance sheet account. B) Unearned Revenue is an income statement account. C) Gain on sale of the building is an income statement account. D) Accounts payable is a balance sheet account. Answer: B Objective: Appx. AACSB: Application of knowledge

Managerial Accounting, 1e (Cainas, Pope, Joszi) Chapter 2 Understanding Product Costs Learning Objective 2.1 1) A service company uses labor, equipment, and manufacturing facilities to convert raw materials into finished goods. Answer: FALSE Objective: 1 AACSB: Application of knowledge 2) Merchandising companies are similar to service companies in that there is no Cost of Goods Sold account for tracking product costs. Answer: FALSE Objective: 1 AACSB: Application of knowledge 3) A company has to be classified as a service, merchandising, or manufacturing company. It cannot have elements of more than one type. Answer: FALSE Objective: 1 AACSB: Reflective thinking 4) Which of the following statements is correct?

A) Company A would periodically prepare a schedule of cost of goods manufactured. B) Company B could have raw materials, direct labor, and overhead costs. C) Company C manufactures its products in a manufacturing plant. D) Company B's Income Statement would report Cost of Goods Sold. Answer: C Objective: 1 AACSB: Reflective thinking

5) Which of the following accounts would typically not appear on a service company's financial statements? A) Accounts Payable. B) Selling, General, and Administrative Expenses. C) Inventory. D) Operating Income (Loss). Answer: C Objective: 1 AACSB: Application of knowledge 6) A merchandising company is to a grocery store as a manufacturing company is to: A) a home construction company. B) a gym. C) a book store. D) a law firm. Answer: A Objective: 1 AACSB: Reflective thinking Learning Objective 2.2 1) A cost object is anything for which costs are separately tracked. Cost objects can include products or services, processes, customers, or suppliers. Answer: TRUE Objective: 2 AACSB: Application of knowledge 2) Why is it important to accurately identify and capture data related to cost objects? A) To create efficient visualizations. B) To reduce ineffective or inefficient decisions. C) To achieve a desired level of operating income. D) To minimize income tax expense. Answer: B Objective: 2 AACSB: Reflective thinking 3) The classification of costs as direct or indirect depends on the cost object. Answer: TRUE Objective: 2 AACSB: Application of knowledge 4) Direct costs are costs that become a part of the product. Indirect costs are costs that do not become part of the product. Answer: FALSE Objective: 2 AACSB: Application of knowledge 2 Copyright © 2023 Pearson Education, Inc.

5) For a clothing manufacturer, ________ would typically include thread while ________ would typically include fabric and buttons. A) indirect labor, direct labor B) direct materials, indirect materials C) indirect materials, direct materials D) direct labor, indirect labor Answer: C Objective: 2 AACSB: Reflective thinking 6) Direct costs are to a tax accountant as indirect costs are to: A) server at a restaurant. B) veterinarian at the humane society. C) teller at a bank. D) office staff at a doctor's office. Answer: D Objective: 2 AACSB: Reflective thinking 7) The Roanoke Company reported the following information: Indirect labor Selling expenses Rent on factory Direct materials

$46,000 $23,000 $18,000 $53,000

What is the total indirect (manufacturing overhead) cost? A) $87,000 B) $140,000 C) $46,000 D) $64,000 Answer: D Explanation: D) Indirect costs are costs incurred in the manufacturing process that cannot easily and accurately be traced to a cost object. = indirect labor + rent on factory = $46,000 + $18,000 = $64,000 Selling expenses are considered to be a period cost and direct materials is considered to be a direct product cost. Objective: 2 AACSB: Analytical thinking

8) A carpenter's salary for a company that builds houses is both a period cost and a prime cost. Answer: FALSE Objective: 2 AACSB: Reflective thinking 9) Direct materials and direct labor combined are known as conversion costs. Answer: FALSE Objective: 2 AACSB: Application of knowledge 10) Which of the following is NOT a conversion cost for a computer manufacturer? A) Depreciation on the assembly machine. B) Circuit board. C) Utilities for the factory where the computers are manufactured. D) Assemblers. Answer: B Objective: 2 AACSB: Reflective thinking 11) For a bakery: Conversion costs are to salt and pepper as prime costs are to: A) eggs. B) depreciation on the oven. C) janitor's wages. D) insurance on the bakery. Answer: A Objective: 2 AACSB: Reflective thinking

12) The Green Light Company recorded the following quarterly manufacturing costs: Direct materials Direct labor Manufacturing overhead Selling and administrative costs

$39,000 71,000 82,000 47,000

What are the conversion costs? A) $153,000 B) $110,000 C) $86,000 D) $192,000 Answer: A Explanation: A) Conversion costs are the costs incurred to convert direct materials into a finished product. = direct labor + overhead = $71,000 + $82,000 = $153,000 Objective: 2 AACSB: Analytical thinking Learning Objective 2.3 1) The value chain is used by service and merchandising companies but not by manufacturing companies. Answer: FALSE Objective: 3 AACSB: Reflective thinking 2) Identify all elements of the value chain. A) Research and Development, Design, Production, Marketing, Distribution, Customer Service B) Research and Development, Design, Social Media, Marketing, Advertising, Customer Service C) Design, Implementation, Production, Marketing, Distribution, Customer Service D) Target market analysis, Design, Production, Advertising, Distribution, Customer Service Answer: A Objective: 3 AACSB: Application of knowledge 3) Wages for an IT employee that services the entire organization are period costs for manufacturers, retailers, and service organizations. Answer: TRUE Objective: 3 AACSB: Reflective thinking

4) If a manufacturer or a retailer must pay freight on inventory received from a vendor, the transportation cost is a product cost. Answer: TRUE Objective: 3 AACSB: Application of knowledge 5) In an environment where more employees work from home instead of in the office, what is a correct statement regarding costs? A) The period costs likely to increase are the cost of insurance and depreciation expense. B) The product costs will significantly decrease. C) The cost of leasing corporate headquarters could decrease. D) The period costs likely to decrease are corporate training and technology. Answer: C Objective: 3 AACSB: Application of knowledge 6) Identify the correct statement of when costs appear on the income statement. A) Product Costs: when product is sold Period Costs: when cost is depleted B) Product Costs: when product is incurred Period Costs: when cost is sold C) Product Costs: when product finishes production Period Costs: when cost is incurred D) Product Costs: when product is sold Period Costs: when cost is incurred Answer: D Objective: 3 AACSB: Application of knowledge 7) Which of the following is an example of a period cost? A) The salary of a factory supervisor. B) The salary of the chief executive officer. C) The depreciation of a machine used in production. D) Overtime premium paid to the night shift at the plant. Answer: B Objective: 3 AACSB: Application of knowledge

8) Period cost is to salary of a salesperson as product cost is to: A) salary of an administrative assistant. B) salary of a chief executive officer. C) salary of the computer technician for the office. D) salary of a factory supervisor. Answer: D Objective: 3 AACSB: Reflective thinking 9) The Shenandoah Company reported the following information: Indirect labor Selling expenses Rent Direct materials

$83,000 $53,000 $37,000 $94,000

Which of the following statements is incorrect assuming rent is 75% related to the factory and 25% to the headquarters? A) Total product costs are $214,000. B) Total manufacturing overhead costs are $110,750. C) Total prime costs are $94,000. D) Total period costs are $62,250. Answer: A Explanation: A) The incorrect answer relates to the calculation of product costs. For a manufacturer, product costs encompass all costs related to making the product, including direct materials, direct labor, and manufacturing overhead. = direct materials + direct labor + overhead* = $94,000 + 0 + $83,000 + $37,000 x 75% = $204,750 *overhead includes indirect labor and a portion of rent that relates to factory The correct answer allocates rent between product (75%) and period (25%) costs. Selling costs are considered to be a period cost. Objective: 3 AACSB: Analytical thinking Learning Objective 2.4 1) Raw materials, work in process, and finished goods accounts are inventory accounts and are presented in the current assets section of the balance sheet. Answer: TRUE Objective: 4 AACSB: Application of knowledge

2) Raw materials ending inventory plus work in process ending inventory equals finished goods ending inventory. Answer: FALSE Objective: 4 AACSB: Application of knowledge 3) The cost of goods finished during the period represents the cost of goods available for sale. Answer: FALSE Objective: 4 AACSB: Application of knowledge 4) If a company's cost of goods manufactured is less than its cost of goods sold for the period, finished goods inventory decreased during the period. Answer: TRUE Objective: 4 AACSB: Reflective thinking 5) Which of the following statements is incorrect? A) When materials are transferred to production, materials inventory decreases. B) When products are finished and moved out of production, the cost of goods sold increases. C) The incurrence of indirect materials results in an increase to overhead. D) When direct labor is used to manufacture products, work in process inventory increases. Answer: B Objective: 4 AACSB: Reflective thinking 6) Direct labor costs were incorrectly classified as a period cost. Less units were sold than were produced. What was the effect on the cost of goods sold reported on the income statement and on the current assets on the balance sheet? A) COGS is understated and current assets are understated. B) COGS is overstated and current assets are understated. C) COGS is overstated and current assets are overstated. D) There is no impact on COGS or current assets. Answer: A Objective: 4 AACSB: Reflective thinking 7) Cost of goods manufactured is to finished goods inventory as direct materials issued to production is to: A) work in process inventory. B) raw materials inventory. C) finished goods inventory. D) cost of goods sold. Answer: A Objective: 4 AACSB: Reflective thinking 8 Copyright © 2023 Pearson Education, Inc.

8) Identify the incorrect classification.

A) 7: Cost of Goods Sold B) 6: Cost of Goods Manufactured C) 4: Direct Labor D) 2: Indirect Materials Answer: D Objective: 4 AACSB: Reflective thinking

9) Which of the following graphs most efficiently answers the question, "Is the overall product cost driven by prime or conversion costs and by what percent"? A)

Answer: A Objective: 4 AACSB: Reflective thinking 10) The following line graph presents trends in product costs over time.

Which of the following questions would NOT be beneficial to investigate further based on the information presented in the line chart? A) What are the number of units manufactured each year? B) Has there been a change in the quality of raw materials purchased? C) Is depreciation on the factory building and equipment calculated using the straight-line or the units of production method? D) Are there any changes to the vendors over the past three years? Answer: C Objective: 4 AACSB: Reflective thinking

TEST BANK for Managerial Accounting 1st Edition by Cainas Jennifer, Jozsi Celina, Richmond Pope Kell