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Exam 10: An Introduction to Management Accounting

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Question 71

True/False

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Cash paid to production workers should be recorded as Wages Expense in the income statement for the period incurred.

A) True
B) False

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Question 72

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

A) $400,000.
B) $300,000.
C) $175,000.
D) $375,000.

E) A) and B)
F) A) and C)

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Question 73

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Product costs include materials, labor, and selling and administrative costs.

Select the incorrect statement regarding costs and expenses.

Describe the schedule of cost of goods manufactured and sold. What information does it include, and how is it used?

Costs associated with holding inventory include hidden costs, such as low employee motivation.

A potential negative effect of using a just-in-time inventory system is the immediate impact of labor strikes on the transportation system such as railroad.

The objective of a just-in-time inventory system is to totally eliminate all inventories.

An ongoing process through which employees strive to eliminate waste, reduce response time, minimize defects, and simplify the design and delivery of products and services to customers is known as benchmarking.

Which of the following statements regarding the schedule of cost of goods manufactured and sold is correct?

The following information relates to the operations of Cruz Manufacturing during the current year: $\begin{array}{llr} \text { Raw materials used } &\$10,000\\ \text { Direct labor wages } &30,000\\ \text { Sales salaries and commissions } &25,000\\ \text { Depreciation on production equipment } &2,000\\ \text { Rent on manufacturing facilities } &15,000\\ \text {Packaging and shipping supplies } &3,000\\ \text { Sales revenue } &95,000\\ \text {Units produced and sold } &10,000\\ \text { Selling price per unit } &\$10.00\\\end{array}$ Based on this information, what is the company's cost of goods sold? (Do not round intermediate calculations.)

What is the effect on the balance sheet of making cash sales of inventory to customers for profit?

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

Which of the following types of labor costs will never flow through the inventory account?

Ting Company started the accounting period with the following beginning balances:Raw Materials Inventory, $21,000; Work in Process Inventory, $45,000; and Finished Goods Inventory, $10,000. During the accounting period, the company purchased $30,000 of raw materials and ended the period with $8,000 in raw material inventory. Direct labor costs for the period were $60,000 and $63,000 of manufacturing overhead costs was allocated to work in process. Ending work in process was $41,000 and ending finished goods was $17,500. Goods were sold during the period for $162,500. The amount of cost of goods manufactured (i.e., amount transferred from work in process to finished goods) would be:

Select the incorrect statement regarding upstream and downstream costs.

What costs are treated as product costs for a manufacturing company?

Managerial accounting is designed to satisfy needs of external users including creditors, investors, and governmental agencies.

Kirsten believes her company's overhead costs are driven (affected) by the number of direct labor hours because the production process is very labor intensive. During the period, the company produced 5,000 units of Product A requiring a total of 1,600 labor hours and 2,500 units of Product B requiring a total of 400 labor hours. What allocation rate should be used if the company incurs overhead costs of $20,000?

Select the incorrect statement regarding the relationship between type of user and type of information.