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Exam 1: Management Accounting and Corporate Governance

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Question 41

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During its first year of operations,Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wages.Lease payments and utilities on the production facilities amounted to $17,000 while general,selling,and administrative expenses totaled $8,000.The company produced 5,000 units and sold 3,000 units at a price of $15.00 a unit. What is Silverman's cost of goods sold for the year?

A) $50,000
B) $24,600
C) $30,000
D) $41,000

E) A) and C)
F) None of the above

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Question 42

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Which of the following practices is not considered an effective means of reengineering business systems?

A) Identifying the best practices used by world-class competitors
B) Improving the accuracy of cost allocations
C) Increasing non-value added activities
D) All of these are effective means of reengineering business systems.

E) A) and B)
F) All of the above

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Question 43

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If a company misclassifies a general,selling and administrative cost as a product cost in a period when production exceeds sales:

The benefits of a just-in-time system would include all of the following except:

With respect to income taxes,managers would prefer to classify costs as assets rather than expenses.

Financial accounting information is reported periodically,primarily at the end of each fiscal year.When is managerial accounting information reported to managers of an organization?

Jarvis Company provided the following information regarding its first year of operations: $\begin{array}{lr}\text { Administrative salar1es } & \$ 60,000 \\\text { Depreciation on factory equipment } & 16,000 \\\text { Indirect materials } & 4,000 \\\text { Marketing costs } & 40,000\\\text { Salaries for factory supervisors } & 28,000 \\\text { Wages for production workers } & 80,000 \\\text { Raw materials used } & 100,000 \\\text { Research and development } & 32,000 \\\text { Rent on factory building } & 18,000\\\text {Sales revenues}&432,000\\\text {Sales salaries and other selling costs}&65,000\\\text { Beginning inventory}&\text{0 units}\\\text { Number of units produced}&20,000\\\text { Number of units sold}&18,000\end{array}$ Required: Determine the following amounts: (a)Total overhead costs. (b)Total product costs. (c)Product cost per unit. (d)Total cost of ending finished goods inventory. (e)Total cost of goods sold.

Distinguishing between product and period costs is sometimes guided by the value-added principle.

The philosophy of encouraging workers to achieve zero defects and high customer satisfaction is known as total quality management.

During her first year with the company,Ann mistakenly accumulated some of the company's period costs in ending inventory.Which of the following indicates how this error affects the company's financial statements assuming number of units produced exceeded number of units sold during the period?

Anton believes his company's overhead costs are driven (affected) by the number of machine hours because the production process is heavily automated.During the period,the company produced 3,000 units of Product A requiring a total of 100 machine hours and 2,000 units of Product B requiring a total of 25 machine hours.What allocation rate should be used if the company incurs overhead costs of $10,000?

Which of the following types of labor costs will never flow through the balance sheet?

Product costs are immediately recorded in expense accounts when the products are manufactured.

Depreciation on manufacturing equipment is an indirect product cost,while depreciation on office equipment is a period cost.

The Giga Company produces tablet computers.The following information is provided: $\begin{array}{lrr} \text { a) Materials used} &\$216,000\\ \text {b) Advertising } &\$40,000\\ \text { c) Insurance, factory } &\$20,000\\ \text {d) Administrative salaries } &\$50,000\\ \text {e) Property taxes, factory } &\$12,000\\ \text { f) Utilities, administrative building } &\$22,000\\ \text { g) Factory labor } &\$80,000\\ \text {h) Sales commissions } &\$56,000\\ \text {i) Factory supervisor's salary } &\$60,000\\ \text { j) Research and development } &\$18,000\\ \text { k) Depreciation, factory } &\$12,000\\ \text { l) Depreciation, office } &\$8,000\\ \text { m) Indirect materials} &\$14,000\\\end{array}$ Required: Classify each of the company's costs as a period cost (general,selling,and administrative cost)or as a direct or indirect product cost.Enter the dollar amount of the cost in the appropriate column.After entering all amounts,calculate the total general,selling,and administrative cost,the total direct product cost,and the total indirect product cost. $\begin{array} { | l | l | l | l | } \hline \text { Itern } & \text { Period cost } & \text { Direct product cost } & \text { Indirect product cost } \\\hline \text { a) } & & & \\\hline \text { b) } & & & \\\hline \text { c) } & & & \\\hline \text { d) } & & & \\\hline \text { e) } & & & \\\hline \text { f } & & & \\\hline \text { g) } & & & \\\hline \text { h) } & & & \\\hline \text { i) } & & & \\\hline \text { g) } & & & \\\hline \text {k) } & & & \\\hline \text { l) } & & & \\\hline \text {m)}&&&\\\hline \text {Total}&&&\\\hline\end{array}$

During its first year of operations,Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wages.Lease payments and utilities on the production facilities amounted to $17,000 while general,selling,and administrative expenses totaled $8,000.The company produced 5,000 units and sold 3,000 units at a price of $15.00 a unit. What was Silverman's net income for the first year in operation?

Which of the following most exemplifies the value-added principle?

A company uses sandpaper to prepare its product for finishing.Most manufacturers would classify the sandpaper as direct material because it is physically consumed in the production process.

Randall Company manufactures chocolate bars.The following were among Randall's manufacturing costs during the current year: $\begin{array}{lrr}\text { Wages }\\ \text { Machine operators } &\$300,000\\ \text { Selline and administrative personnel } &\$75,000\\\text { Materials used }\\ \text { Lubricant for oiling machinery } &\$25,000\\ \text { Cocoa, sugar, and other raw materials } &\$225,000\\ \text {Packaging materials } &\$190,000\\\end{array}$ Randall's direct labor costs amounted to:

A systematic problem-solving philosophy that encourages front line workers to achieve zero defects is known as: