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Exam 10: An Introduction to Management Accounting

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Question 71

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Karen is a Certified Management Accountant and is bound by the IMA's Standards of Ethical Conduct. Her superior has asked her to try to influence the firm's outside auditors with expensive gifts and favors. If Karen complies, she will violate the competence standard.

A) True
B) False

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Question 72

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Is McDonald's a manufacturing company or a service company? How do they record the cost of materials, labor, and overhead?

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McDonald's and other restaurants are con...

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Question 73

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What are upstream costs? What upstream costs would be incurred by a company that produces and sells computer software programs?

What is the effect on the balance sheet of recording a $200 cash purchase of raw materials?

Which of the following statements is true with regard to product costs versus general, selling, and administrative costs?

The Sarbanes-Oxley Act allows, but does not require, a corporation to establish a whistleblower policy.

Steuben Company produces dog houses. During 2013, Steuben Company incurred the following costs: $\begin{array}{lr}\text { Rent on manufacturing facility } & \$ 250,000 \\ \text { Office manager's salary } & 150,000 \\ \text { Wages of factory machine operators } & 110,000 \\\text { Depreciation on manufacturing equipment } & 50,000 \\\text { Insurance and taxes on selling and administrative offices } & 30,000 \\ \text { Direct materials purchased and used } & 170,000\end{array}$ Based on the above information, which of the following would not be treated as a product cost:

Which of the following is not a reason management might be tempted to classify costs as assets rather than expensing them during periods in which production exceeds sales?

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

The following information relates to Cruz Manufacturing for 2013: $\begin{array} { l c r } \text { Raw materials used } & \$ & 20,000 \\\text { Direet hbor wages } & & 60,000 \\\text { Sales salaries and commissions } & & 50,000 \\\text { Depreciation on producticn equipment } & & 4,000 \\\text { Rent on manufacturing facilities } & & 30,000 \\\text { Packaging and shipping supplies } & & 6,000 \\\text { Sales revenue } & & 190,000 \\\text { Unis produced and sold } & & 10,000 \\\text { Selling price per unit } & \$ & 20.00\end{array}$ Based on this information, what is the company's cost of goods sold for 2013?

Which of the following items would be reported directly on the income statement as a period cost?

Managerial accounting focuses primarily on the performance of the company as a whole.

Steuben Company produces dog houses. During 2013, Steuben Company incurred the following costs: $\begin{array}{lr}\text { Rent on manufacturing facility } & \$ 250,000 \\ \text { Office manager's salary } & 150,000 \\ \text { Wages of factory machine operators } & 110,000 \\\text { Depreciation on manufacturing equipment } & 50,000 \\\text { Insurance and taxes on selling and administrative offices } & 30,000 \\ \text { Direct materials purchased and used } & 170,000\end{array}$ Based on the above information, the amount of period costs shown on Steuben's 12/31/2013 income statement is:

Misclassifying a product cost as a period cost will usually cause the income statement to be incorrect, but the balance sheet will not be affected.

The Giga Company produces tablet computers. The following information is provided: $\begin{array}{lr}\text { a) Materials used } & \$ 216,000 \\\text { b) Advertising } & \$ 40,000 \\\text { c) Insurance, factory } & \$ 20,000 \\\text { d) Admunistrative salaries } & \$ 50,000 \\\text { e) Property taxes, factory } & \$ 12,000 \\\text { f) Utilities, admunistrative building } & \$ 22,000\\\text { g) Factory bbor } & \$ 80,000 \\\text { h) Sales commissions } & \$ 56,000 \\\text { i) Factory superviso's salary } & \$ 60,000 \\\text { j) Research and development } & \$ 18,000 \\\text { k) Depreciation. factory } & \$ 12,000 \\\text { l) Depreciation, office } & \$ 8,000 \\\text { m) Indirect materials } & \$ 14,000\end{array}$ 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. $\begin{array} { | l | l | l | l | } \hline { \text { Item } } & \text { Period cost } & \text { Direct product cost } & \text { lnderect product cost } \\\hline \text { a) } & & & \\\hline \text { b) } & & & \\\hline \text { c) } & & & \\\hline \text { d) } & & & \\\hline \text { e) } & & & \\\hline \text { f) } & & & \\\hline \text {g) } & & & \\\hline \text { h) } & & & \\\hline \text { i) } & & & \\\hline \text {j) } & & & \\\hline \text { k) } & & & \\\hline \text { l) } & & & \\\hline \text { m) } & & & \\\hline \text { Total } & & & \\\hline\end{array}$

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

Arizona Company provided the following information regarding its most recent year of operations: $\begin{array}{|l|r|}\hline \text { Administrative salaries } & \$ 24,000 \\\hline \text { Direct labor } & 48,000 \\\hline \text { Direct raw material } & 80,000 \\\hline \text { Marketing and distribution costs } & 60,000 \\\hline \text { Overhead costs } & 36,000\\\hline \text { Product design and testing } & 30,000 \\\text { Research and development } & 40,000 \\\hline \text { Sales revenues } & 410,000 \\\hline \text { Sales salaries and commissions } & 54,000 \\\hline \text { Warranty costs } & 4,000\\\hline\\\hline \text { Number of units produced } & 20,000 \\\hline \text { Number of units sold } & 20,000\\\hline\end{array}$ Required: Determine the following amounts: (a) Total product costs (b) Total upstream costs (c) Total downstream costs (d) Product cost per unit (e) Total cost per unit, including product costs and upstream and downstream costs (f) The selling price per unit that would be required if the company wishes to earn a profit margin equal to 25% of total cost (g) Comment on the company's profitability at its current selling price

As a Certified Management Accountant, Derek is bound by the standards of ethical conduct issued by the Institute of Management Accountants. According to the standards, Derek has a responsibility to:

Which of the following costs would be classified as a direct cost for a company that produces motorcycles?

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