Test bank managerial accounting by kieso weygandt 5e ch01

CHAPTER 1
MANAGERIAL ACCOUNTING
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S
TAXONOMY
Item

SO

BT

Item

SO

BT

Item

SO

BT

Item

SO

BT

7
8
8

8
8
8
9
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1

K
K
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K
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C
K

115.
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128.
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167.
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6
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SO

BT

37.
38.
sg
39.
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42.

2
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K
C
K
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K

AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP
AP

AP
AP
C
C
K
C
K
K

139.
140.
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145.
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a
147.
a
148.
a
149.
a
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sg
151.
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sg

153.
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154.
st
155.
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156.
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157.
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158.
st
159.
sg
160.

8
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9
1
2

4
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C
C
K
C
C
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K
K
K
C
C
K
C
K
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C
K
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K

K

AP
AP

169.
170.

6
7

AP
AP

True-False Statements
1.
2.
3.
4.
5.
6.
7.
8.
9.

1
1
1
1
1

2
2
2
2

C
K
K
K
K
K
C
K
K

10.
11.
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18.

3
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3
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C
K
K
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C
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K
C
K

19.
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25.
26.
27.

4
4
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5
5

6
6
7
7

K
K
K
K
K
K
C
C
K

28.
29.
30.
31.
32.
33.
a
34.
a
35.
sg
36.

sg
sg

Multiple Choice Questions
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.

1
1
1

1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2

K
C
K
C
K
C
K
C

C
K
K
K
K
C
C
K
K
K
K
C
K
C
K
C

67.
68.
69.
70.
71.
72.
73.
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77.
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79.

80.
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90.

2
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3
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3
3
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3
3

3
3
4
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4
4

K
C
C
K
C
K
K
K
C
C
K
K
C
K
C
K
K
C
K
K
C
C
AP

C

91.
92.
93.
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
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114.

4
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4
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5
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6
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6
6
6
6
6
6

C
C
C
K
C
K
K
C

C
C
C
AP
K
C
C
K
AP
AP
AP
K
AP
AP
AP
AP

Brief Exercises
161.
162.

3
3

K
K

163.
164.

3
3

K
K

165.
166.

4
6

C
AP


1-2

Test Bank for ISV Managerial Accounting, Fourth Edition

Exercises
171.
172.
173.
174.

1
3
3
4

C
C
C
C

175.
176.
177.
178.

4
4
5,6
5–7

C
C
AP
C

179.
180.
181.
182.

5–7
5–7
6
6

AP
AP
AP
AP

183.
184.
185.
186.

6
6
6
6

AP
AN
AN
AP

187.
188.
189.

6
6,7
7

AP

C
AP

4
5
6

K
K
K

202.
203.
204.

6
6
7

K
K
K

Completion Statements
190.
191.
192.
sg
st
a

1
1
1

K
K
K

193.
194.
195.

2
2
2

K
K
K

196.
197.
198.

3
3
3

K

K
K

199.
200.
201.

This question also appears in the Study Guide.
This question also appears in a self-test at the student companion website.
This question covers a topic in an Appendix to the chapter.

SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE
Item

Type

Item

Type

Item

1.
2.
3.
4.

TF
TF
TF

TF

5.
36.
43.
44.

TF
TF
MC
MC

45.
46.
47.
48.

6.
7.
8.

TF
TF
TF

9.
37.
60.

TF

TF
MC

61.
62.
63.

10.
11.
12.
13.
14.

TF
TF
TF
TF
TF

15.
38.
69.
70.
71.

TF
TF
MC
MC
MC

72.
73.
74.
75.
76.

16.
17.
18.
19.

TF
TF
TF
TF

20.
39.
87.
88.

TF
TF
MC
MC

89.
90.
91.

92.

21.
22.
23.

TF
TF
TF

40.
97.
98.

TF
MC
MC

99.
100.
101.

Type

Item

Type

Item

Study Objective 1
MC
49. MC
53.
MC
50. MC
54.
MC
51. MC
55.
MC
52. MC
56.
Study Objective 2
MC
64. MC
67.
MC
65. MC
68.
MC
66. MC
152.
Study Objective 3
MC
77. MC
82.
MC
78. MC
83.

MC
79. MC
84.
MC
80. MC
85.
MC
81. MC
86.
Study Objective 4
MC
93. MC
153.
MC
94. MC
154.
MC
95. MC
165.
MC
96. MC
174.
Study Objective 5
MC
115. MC
128.
MC
120. MC
155.
MC

124. MC
156.

Type

Item

Type

Item

Type

MC
MC
MC
MC

57.
58.
59.
151.

MC
MC
MC
MC

171.
190.

191.
192.

Ex
C
C
C

MC
MC
MC

193.
194.
195.

C
C
C

MC
MC
MC
MC
MC

161.
162.
163.
164.

172.

BE
BE
BE
BE
Ex

173.
196.
197.
198.

Ex
C
C
C

MC
MC
BE
Ex

175.
176.
199.

Ex
Ex
C

MC
MC
MC

157.
177.
178.

MC
Ex
Ex

179.
180.
200.

Ex
Ex
C


Managerial Accounting

24.
25.
41.
102.
103.
104.

105.
106.

TF
TF
TF
MC
MC
MC
MC
MC

107.
108.
109.
110.
111.
112.
113.
114.

MC
MC
MC
MC
MC
MC
MC
MC

116.
117.
118.
119.
121.
122.
123.
125.

Study Objective 6
MC 126. MC
166.
MC 127. MC
167.
MC 129. MC
168.
MC 130. MC
169.
MC 131. MC
177.
MC 132. MC
178.
MC 158. MC
179.
MC 159. MC
180.
Study Objective 7

26.
27.

TF
TF

28.
42.

TF
TF

133.
134.

MC
MC

160.
170.

MC
BE

178.
179.

1-3

BE
BE
BE

BE
Ex
Ex
Ex
Ex

181.
182.
183.
184.
185.
186.
187.
188.

Ex
Ex
Ex
Ex
Ex
Ex
Ex
Ex

201.
202.
203.

C
C

C

Ex
Ex

180.
188.

Ex
Ex

189.
204.

Ex
C

MC
MC
MC

145.
146.

MC
MC

MC

150.

MC

Study Objective 8
29.
30.
31.

TF
TF
TF

32.
33.
135.

TF
TF
MC

136. MC
137. MC
138. MC

139.
140.
141.

MC
MC

MC

142.
143.
144.

Study Objective a9
34.

TF

35.

TF

147. MC

148.

MC

149.

Note: TF = True-False
BE = Brief Exercise
C = Completion
MC = Multiple Choice
Ex = Exercise
The chapter also contains one set of ten Matching questions and five Short-Answer Essay
questions.

CHAPTER STUDY OBJECTIVES
1. Explain the distinguishing features of managerial accounting. The primary users of
managerial accounting reports are internal users, who are officers, department heads,
managers, and supervisors in the company. Managerial accounting issues internal reports as
frequently as the need arises. The purpose of these reports is to provide special-purpose
information for a particular user for a specific decision. The content of managerial accounting
reports pertains to subunits of the business, may be very detailed, and may extend beyond
the double-entry accounting system. The reporting standard is relevance to the decision being
made. No independent audits are required in managerial accounting.
2. Identify the three broad functions of management. The three functions are planning,
directing, and controlling. Planning requires management to look ahead and to establish
objectives. Directing involves coordinating the diverse activities and human resources of a
company to produce a smooth-running operation. Controlling is the process of keeping the
activities on track.
3. Define the three classes of manufacturing costs. Manufacturing costs are typically
classified as either (1) direct materials, (2) direct labor, or (3) manufacturing overhead. Raw
materials that can be physically and directly associated with the finished product during the
manufacturing process are called direct materials. The work of factory employees that can be
physically and directly associated with converting raw materials into finished goods is
considered direct labor. Manufacturing overhead consists of costs that are indirectly
associated with the manufacture of the finished product.


1-4

Test Bank for ISV Managerial Accounting, Fourth Edition

4. Distinguish between product and period costs. Product costs are costs that are a
necessary and integral part of producing the finished product. Product costs are also called

inventoriable costs. Under the matching principle, these costs do not become expenses until
the company sells the finished goods inventory. Period costs are costs that are identified with
a specific time period rather than with a salable product. These costs relate to
nonmanufacturing costs and therefore are not inventoriable costs.
5. Explain the difference between a merchandising and a manufacturing income
statement. The difference between a merchandising and a manufacturing income statement
is in the cost of goods sold section. A manufacturing cost of goods sold section shows
beginning and ending finished goods inventories and the cost of goods manufactured.
6. Indicate how cost of goods manufactured is determined. Companies add the cost of the
beginning work in process to the total manufacturing costs for the current year to arrive at the
total cost of work in process for the year. They then subtract the ending work in process from
the total cost of work in process to arrive at the cost of goods manufactured.
7. Explain the difference between a merchandising and a manufacturing balance sheet.
The difference between a merchandising and a manufacturing balance sheet is in the current
assets section. The current assets section of a manufacturing company's balance sheet
presents three inventory accounts: finished goods inventory, work in process inventory, and
raw materials inventory.
8. Identify trends in managerial accounting. Managerial accounting has experienced many
changes in recent years. Among these are a shift toward addressing the needs of service
companies and improving practices to better meet the needs of managers. Improved
practices include a focus on managing the value chain through techniques such as just-intime inventory and technological applications such as enterprise resource management,
computer-integrated manufacturing, and B2B e-commerce. In addition, techniques such as
just-in-time inventory, total quality management, the theory of constraints, and activity-based
costing are improving decision making. Finally, the balanced scorecard is now used by many
companies in order to attain a more comprehensive view of the company’s operations.
a

9. Prepare a worksheet and closing entries for a manufacturing company. The worksheet
for the cost of good manufactured needs two additional columns. In these columns, manufacturing companies enter the beginning inventories of raw materials and work in process as
debits and the ending inventories as credits. All manufacturing costs are entered as debits. To

close all of the accounts that appear in the cost of goods manufactured schedule, manufacturers use a Manufacturing Summary account.


Managerial Accounting

1-5

TRUE-FALSE STATEMENTS
1.

Reports prepared in financial accounting are general-purpose reports, whereas reports
prepared in managerial accounting are usually special-purpose reports.

2.

Managerial accounting information generally pertains to an entity as a whole and is highly
aggregated.

3.

Managerial accounting applies to all forms of business organizations.

4.

Determining the unit cost of manufacturing a product is an output of financial accounting.

5.

Managerial accounting internal reports are prepared more frequently than are classified
financial statements.

6.

The management function of organizing and directing is mainly concerned with setting
goals and objectives for the entity.

7.

The Sarbanes-Oxley Act replaces generally accepted accounting principles in a
manufacturing company.

8.

Controlling is the process of determining whether planned goals are being met.

9.

Decision-making is an integral part of the planning, directing, and controlling functions.

10.

Both direct labor cost and indirect labor cost are product costs.

11.

Manufacturing costs that cannot be classified as direct materials or direct labor are
classified as manufacturing overhead.

12.

Raw materials are equal to direct materials minus indirect materials.

13.

Raw materials that can be conveniently and directly associated with a finished product are
called materials overhead.

14.

The total cost of a finished product does not generally contain equal amounts of materials,
labor, and overhead costs.

15.

Direct materials costs and indirect materials costs are manufacturing overhead.

16.

Period costs include selling and administrative expenses.

17.

Indirect materials and indirect labor are both inventoriable costs.

18.

Direct materials and direct labor are the only product costs.

19.

Total period costs are deducted from total cost of work in process to calculate cost of
goods manufactured.

20.

Period costs are not inventoriable costs.


1-6

Test Bank for ISV Managerial Accounting, Fourth Edition

21.

Ending finished goods inventory appears on both the balance sheet and the income
statement of a manufacturing company.

22.

The beginning work in process inventory appears on both the balance sheet and the cost
of goods manufactured schedule of a manufacturing company.

23.

In calculating gross profit for a manufacturing company, the cost of goods manufactured is
deducted from net sales.

24.

Finished goods inventory does not appear on a cost of goods manufactured schedule.

25.

If the ending work in process inventory is greater than the beginning work in process
inventory, then the cost of goods manufactured will be less than total manufacturing costs
for the period.

26.

Finished goods inventory for a manufacturing company is equivalent to merchandise
inventory for a merchandising company.

27.

Raw materials inventory is not an asset until it is used to make a product.

28.

Raw materials inventory shows the cost of completed goods available for sale to
customers.

29.

The supply chain is all the activities associated with providing a product or service.

30.

Many companies have significantly lowered inventory levels and costs using just-in-time
inventory methods.

31.

The theory of constraints is used to measure performance.

32.

The focus of a TQM system is to reduce defects in finished products.

33.

The balanced scorecard approach attempts to maintain as little inventory on hand as
possible.

a

34.

In preparing closing entries for a manufacturing company, all revenue and expense
account balances are closed to a Manufacturing Summary account.

a

35.

To balance the Cost of Goods Manufactured columns of a worksheet for a manufacturing
company, an entry must be made in the income statement debit column.

Additional True-False Questions
36.

Managerial accounting is primarily concerned with managers and external users.

37.

Planning involves coordinating the diverse activities and human resources of a company
to produce a smooth running operation.

38.

When the physical association of raw materials with the finished product is too small to
trace in terms of cost, they are usually classified as indirect materials.

39.

Product costs are also called inventoriable costs.


Managerial Accounting

1-7

40.

Direct materials become a cost of the finished goods manufactured when they are
acquired, not when they are used.

41.

The sum of the direct materials costs, direct labor costs, and beginning work in process is
the total manufacturing costs for the year.

42.

In a manufacturing company balance sheet, manufacturing inventories are reported in the
current assets section in the order of their expected use in production.

Answers to True-False Statements
Item

1.
2.
3.
4.
5.
6.

Ans.

T
F
T
F
T
F

Item

7.
8.
9.

10.
11.
12.

Ans.

F
T
T
T
T
F

Item

13.
14.
15.
16.
17.
18.

Ans.

Item

F
T
F
T

T
F

19.
20.
21.
22.
23.
24.

Ans.

F
T
T
F
F
T

Item

25.
26.
27.
28.
29.
30.

Ans.

Item

Ans.

T
T
F
F
F
T

31.
32.
33.
a
34.
a
35.
36.

F
T
F
F
T
F

Item

37.

38.
39.
40.
41.
42.

MULTIPLE CHOICE QUESTIONS
43.

Managerial accounting applies to each of the following types of businesses except
a. service firms.
b. merchandising firms.
c. manufacturing firms.
d. Managerial accounting applies to all types of firms.

44.

Managerial accounting information is generally prepared for
a. stockholders.
b. creditors.
c. managers.
d. regulatory agencies.

45.

Managerial accounting information
a. pertains to the entity as a whole and is highly aggregated.
b. pertains to subunits of the entity and may be very detailed.
c. is prepared only once a year.
d. is constrained by the requirements of generally accepted accounting principles.

46.

The major reporting standard for presenting managerial accounting information is
a. relevance.
b. generally accepted accounting principles.
c. the cost principle.
d. the current tax law.

47.

Managerial accounting is also called
a. management accounting.
b. controlling.
c. analytical accounting.
d. inside reporting.

Ans.

F
T
T
F
F
F


1-8

Test Bank for ISV Managerial Accounting, Fourth Edition

48.

Which of the following is not an internal user?
a. Creditor
b. Department manager
c. Controller
d. Treasurer

49.

Managerial accounting does not encompass
a. calculating product cost.
b. calculating earnings per share.
c. determining cost behavior.
d. profit planning.

50.

Managerial accounting is applicable to
a. service entities.
b. manufacturing entities.
c. not-for-profit entities.
d. all of these.

51.

Management accountants would not
a. assist in budget planning.
b. prepare reports primarily for external users.

c. determine cost behavior.
d. be concerned with the impact of cost and volume on profits.

52.

Internal reports must be communicated
a. daily.
b. monthly.
c. annually.
d. as needed.

53.

Financial statements for external users can be described as
a. user-specific.
b. general-purpose.
c. special-purpose.
d. managerial reports.

54.

Managerial accounting reports can be described as
a. general-purpose.
b. macro-reports.
c. special-purpose.
d. classified financial statements.

55.

The reporting standard for external financial reports is

a. industry-specific.
b. company-specific.
c. generally accepted accounting principles.
d. department-specific.


Managerial Accounting

1-9

56.

Which of the following statements about internal reports is not true?
a. The content of internal reports may extend beyond the double-entry accounting
system.
b. Internal reports may show all amounts at market values.
c. Internal reports may discuss prospective events.
d. Most internal reports are summarized rather than detailed.

57.

In an analogous sense, external user is to internal user as generally accepted accounting
principles are to
a. timely.
b. special-purpose.
c. relevance to decision.
d. SEC.

58.

Internal reports are generally
a. aggregated.
b. detailed.
c. regulated.
d. unreliable.

59.

A distinguishing feature of managerial accounting is
a. external users.
b. general-purpose reports.
c. very detailed reports.
d. quarterly and annual reports.

60.

What activities and responsibilities are not associated with management's functions?
a. Planning
b. Accountability
c. Controlling
d. Directing

61.

Planning is a function that involves
a. hiring the right people for a particular job.
b. coordinating the accounting information system.
c. setting goals and objectives for an entity.
d. analyzing financial statements.

62.

The managerial function of controlling
a. is performed only by the controller of a company.
b. is only applicable when the company sustains a loss.
c. is concerned mainly with operating a manufacturing segment.
d. includes performance evaluation by management.

63.

Which of the following is not a management function?
a. Constraining
b. Planning
c. Controlling
d. Directing


1 - 10

Test Bank for ISV Managerial Accounting, Fourth Edition

64.

A manager that is establishing objectives is performing which management function?
a. Controlling
b. Directing
c. Planning
d. Constraining

65.

The management function that requires managers to look ahead and establish objectives
is
a. controlling.
b. directing.
c. planning.
d. constraining.

66.

In determining whether planned goals are being met, a manager is performing the function
of
a. planning.
b. follow-up.
c. directing.
d. controlling.

67.

Which of the following is not a separate management function?
a. Planning
b. Directing
c. Decision-making
d. Controlling

68.

Directing includes
a. providing a framework for management to have criteria to terminate employees when
needed.

b. running a department under quality control standards universally accepted.
c. coordinating a company's diverse activities and human resources to produce a
smooth-running operation.
d. developing a complex performance ranking system to give certain high performers
good raises.

69.

Both direct materials and indirect materials are
a. raw materials.
b. manufacturing overhead.
c. merchandise inventory.
d. sold directly to customers by a manufacturing company.

70.

The work of factory employees that can be physically and directly associated with
converting raw materials into finished goods is
a. manufacturing overhead.
b. indirect materials.
c. indirect labor.
d. direct labor.

71.

Which one of the following would not be classified as manufacturing overhead?
a. Indirect labor
b. Direct materials
c. Insurance on factory building
d. Indirect materials

Managerial Accounting

1 - 11

72.

Manufacturing costs include
a. direct materials and direct labor only.
b. direct materials and manufacturing overhead only.
c. direct labor and manufacturing overhead only.
d. direct materials, direct labor, and manufacturing overhead.

73.

Which one of the following is not a direct material?
a. A tire used for a lawn mower
b. Plastic used in the covered case for a home PC
c. Steel used in the manufacturing of steel-radial tires
d. Lubricant for a ball-bearing joint for a large crane

74.

Which one of the following is not a cost element in manufacturing a product?
a. Manufacturing overhead
b. Direct materials
c. Office salaries
d. Direct labor

75.

A manufacturing process requires small amounts of glue. The glue used in the production
process is classified as a(n)
a. period cost.
b. indirect material.
c. direct material.
d. miscellaneous expense.

76.

The wages of a timekeeper in the factory would be classified as
a. a period cost.
b. direct labor.
c. indirect labor.
d. compliance costs.

77.

Which one of the following is not considered as material costs?
a. Partially completed motor engines for a motorcycle plant
b. Bolts used in manufacturing the compressor of an engine
c. Rivets for the wings of a new commercial jet aircraft
d. Lumber used to build tables

78.

Which of the following is not a manufacturing cost category?
a. Cost of goods sold
b. Direct materials

c. Direct labor
d. Manufacturing overhead

79.

As current technology changes manufacturing processes, it is likely that direct
a. labor will increase.
b. labor will decrease.
c. materials will increase.
d. materials will decrease.


1 - 12

Test Bank for ISV Managerial Accounting, Fourth Edition

80.

For the work of factory employees to be considered as direct labor, the work must be
conveniently and
a. materially associated with raw materials conversion.
b. periodically associated with raw materials conversion.
c. physically associated with raw materials conversion.
d. promptly associated with raw materials conversion.

81.

Which of the following is not classified as direct labor?
a. Bottlers of beer in a brewery
b. Copy machine operators at a copy shop

c. Wages of supervisors
d. Bakers in a bakery

82.

Cotter pins and lubricants used irregularly in a production process are classified as
a. miscellaneous expense.
b. direct materials.
c. indirect materials.
d. nonmaterial materials.

83.

Which of the following is not another name for the term manufacturing overhead?
a. Factory overhead
b. Pervasive costs
c. Burden
d. Indirect manufacturing costs

84.

Because of automation, which component of product cost is declining?
a. Direct labor
b. Direct materials
c. Manufacturing overhead
d. Advertising

85.

The product cost that is most difficult to associate with a product is

a. direct materials.
b. direct labor.
c. manufacturing overhead.
d. advertising.

86.

Manufacturing costs that cannot be classified as either direct materials or direct labor are
known as
a. period costs.
b. nonmanufacturing costs.
c. selling and administrative expenses.
d. manufacturing overhead.

87.

Which one of the following is an example of a period cost?
a. A change in benefits for the union workers who work in the New York plant of a
Fortune 1000 manufacturer
b. Workers' compensation insurance on factory workers' wages allocated to the factory
c. A box cost associated with computers
d. A manager's salary for work that is done in the corporate head office


Managerial Accounting

1 - 13

88.

Which one of the following costs would not be inventoriable?
a. Period costs
b. Factory insurance costs
c. Indirect materials
d. Indirect labor costs

89.

Direct materials and direct labor of a company total $6,000,000. If manufacturing
overhead is $3,000,000, what is direct labor cost?
a. $3,000,000
b. $6,000,000
c. $0
d. Cannot be determined from the information provided

90.

Which of the following are period costs?
a. Raw materials
b. Direct materials and direct labor
c. Direct labor and manufacturing overhead
d. Selling expenses

91.

Sales commissions are classified as
a. overhead costs
b. period costs.
c. product costs.
d. indirect labor.

92.

Product costs consist of
a. direct materials and direct labor only.
b. direct materials, direct labor, and manufacturing overhead.
c. selling and administrative expenses.
d. period costs.

93.

Which one of the following represents a period cost?
a. The VP of Sales' salary and benefits
b. Overhead allocated to the manufacturing operations
c. Labor costs associated with quality control
d. Fringe benefits associated with factory workers

94.

Product costs are also called
a. direct costs.
b. overhead costs.
c. inventoriable costs.
d. capitalizable costs.

95.

For inventoriable costs to become expenses under the matching principle,
a. the product must be finished and in stock.
b. the product must be expensed based on its percentage-of-completion.

c. the product to which they attach must be sold.
d. all accounts payable must be settled.


1 - 14

Test Bank for ISV Managerial Accounting, Fourth Edition

96.

As inventoriable costs expire, they become
a. selling expenses.
b. gross profit.
c. cost of goods sold.
d. sales revenue.

97.

A manufacturing company calculates cost of goods sold as follows:
a. Beginning FG inventory + cost of goods purchased – ending FG inventory.
b. Ending FG inventory – cost of goods manufactured + beginning FG inventory.
c. Beginning FG inventory – cost of goods manufactured – ending FG inventory.
d. Beginning FG inventory + cost of goods manufactured – ending FG inventory.

98.

A manufacturing company reports cost of goods manufactured as a(n)
a. current asset on the balance sheet.
b. administrative expense on the income statement.
c. component in the calculation of cost of goods sold on the income statement.

d. component of the raw materials inventory on the balance sheet.

99.

The subtotal, "Cost of goods manufactured" appears on
a. a merchandising company's income statement.
b. a manufacturing company's income statement.
c. both a manufacturing and a merchandising company's income statement.
d. neither a merchandising nor a manufacturing company's income statement.

100.

Cost of goods manufactured in a manufacturing company is analogous to
a. Ending inventory in a merchandising company.
b. Beginning inventory in a merchandising company.
c. Cost of goods available for sale in a merchandising company.
d. Cost of goods purchased in a merchandising company.

101.

Cost of goods sold
a. only appears on merchandising companies' income statements.
b. only appears on manufacturing companies' income statements.
c. appears on both manufacturing and merchandising companies' income statements.
d. is calculated exactly the same for merchandising and manufacturing companies.

102.

Hollern Combines, Inc. has $10,000 of ending finished goods inventory as of December
31, 2008. If beginning finished goods inventory was $5,000 and cost of goods sold was

$20,000, how much would Hollern report for cost of goods manufactured?
a. $22,500
b. $5,000
c. $25,000
d. $15,000

103.

Cost of goods manufactured is calculated as follows:
a. Beginning WIP + direct materials used + direct labor + manufacturing overhead
ending WIP.
b. Direct materials used + direct labor + manufacturing overhead – beginning WIP
ending WIP.
c. Beginning WIP + direct materials used + direct labor + manufacturing overhead
ending WIP.
d. Direct materials used + direct labor + manufacturing overhead – ending WIP
beginning WIP.

+
+
–
–


Managerial Accounting

1 - 15

104.

If the amount of "Cost of goods manufactured" during a period exceeds the amount of
"Total manufacturing costs" for the period, then
a. ending work in process inventory is greater than or equal to the amount of the
beginning work in process inventory.
b. ending work in process is greater than the amount of the beginning work in process
inventory.
c. ending work in process is equal to the cost of goods manufactured.
d. ending work in process is less than the amount of the beginning work in process
inventory.

105.

On the costs of goods manufactured schedule, depreciation on factory equipment
a. is not listed because it is included with Depreciation Expense on the income
statement.
b. appears in the manufacturing overhead section.
c. is not listed because it is not a product cost.
d. is not an inventoriable cost.

106.

On the costs of goods manufactured schedule, the item raw materials inventory (ending)
appears as a(n)
a. addition to raw materials purchases.
b. addition to raw materials available for use.
c. subtraction from raw materials available for use.
d. subtraction from raw materials purchases.

Use the following information for questions 107–109.
Carly Manufacturing Company's accounting records reflect the following inventories:

Dec. 31, 2008
Dec. 31, 2007
Raw materials inventory
$310,000
$260,000
Work in process inventory
300,000
160,000
Finished goods inventory
190,000
150,000
During 2008, $500,000 of raw materials were purchased, direct labor costs amounted to
$600,000, and manufacturing overhead incurred was $480,000.
107.

The total raw materials available for use during 2008 for Carly Manufacturing Company is
a. $810,000.
b. $260,000.
c. $450,000.
d. $760,000.

108.

Carly Manufacturing Company's total manufacturing costs incurred in 2008 amounted to
a. $1,530,000.
b. $1,490,000.
c. $1,390,000.
d. $1,580,000.

109.

If Carly Manufacturing Company's cost of goods manufactured for 2008 amounted to
$1,390,000, its cost of goods sold for the year is
a. $1,500,000.
b. $1,250,000.
c. $1,350,000.
d. $1,430,000.


1 - 16

Test Bank for ISV Managerial Accounting, Fourth Edition

110.

What is work in process inventory generally described as?
a. Costs applicable to units that have been started in production but are only partially
completed
b. Costs associated with the end stage of manufacturing that are almost always
complete and ready for customers
c. Costs strictly associated with direct labor
d. Beginning stage production costs associated with labor costs dealing with bringing in
raw materials from the shipping docks

111.

Utley Manufacturing Company reported the following year-end information: beginning
work in process inventory, $180,000; cost of goods manufactured, $516,000; beginning
finished goods inventory, $252,000; ending work in process inventory, $220,000; and
ending finished goods inventory, $264,000. Utley Manufacturing Company's cost of goods

sold for the year is
a. $504,000.
b. $528,000.
c. $476,000.
d. $252,000.

112.

Neeley Manufacturing Company reported the following year-end information:
Beginning work in process inventory
$1,080,000
Beginning raw materials inventory
300,000
Ending work in process inventory
900,000
Ending raw materials inventory
480,000
Raw materials purchased
960,000
Direct labor
900,000
Manufacturing overhead
600,000
Neeley Manufacturing Company's cost of goods manufactured for the year is
a. $2,280,000.
b. $2,460,000.
c. $2,100,000.
d. $2,640,000.

Use the following information for questions 113–115.

Hopkins Manufacturing Inc.'s accounting records reflect the following inventories:
Raw materials inventory
Work in process inventory
Finished goods inventory

Dec. 31, 2007
$ 80,000
104,000
100,000

Dec. 31, 2008
$ 64,000
116,000
92,000

During 2008, Hopkins purchased $760,000 of raw materials, incurred direct labor costs of
$100,000, and incurred manufacturing overhead totaling $128,000.
113.

How much is raw materials transferred to production during 2008 for Hopkins Manufacturing?
a. $992,000
b. $776,000
c. $760,000
d. $744,000


Managerial Accounting

1 - 17

114.

How much is total manufacturing costs incurred during 2008 for Hopkins?
a. $992,000
b. $1,004,000
c. $988,000
d. $1,000,000

115.

Assume Hopkins Manufacturing’s cost of goods manufactured for 2008 amounted to
$960,000. How much would it report as cost of goods sold for the year?
a. $968,000
b. $1,000,000
c. $1,060,000
d. $952,000

116.

McNally Manufacturing Company reported the following year-end information:
Beginning work in process inventory
$ 46,000
Beginning raw materials inventory
24,000
Ending work in process inventory
50,000
Ending raw materials inventory
20,000
Raw materials purchased
680,000

Direct labor
240,000
Manufacturing overhead
100,000
How much is McNally Manufacturing’s cost of goods manufactured for the year?
a. $684,000
b. $1,024,000
c. $1,020,000
d. $1,028,000

Use the following information for questions 117–118.
Modine Manufacturing Inc.'s accounting records reflect the following inventories:
Raw materials inventory
Work in process inventory
Finished goods inventory

Dec. 31, 2007
$120,000
156,000
150,000

Dec. 31, 2008
$ 96,000
174,000
138,000

During 2008, Modine purchased $1,140,000 of raw materials, incurred direct labor costs of
$150,000, and incurred manufacturing overhead totaling $192,000.
117.

How much is total manufacturing costs incurred during 2008 for Modine?
a. $1,488,000
b. $1,506,000
c. $1,482,000
d. $1,500,000

118.

How much would Modine Manufacturing report as cost of goods manufactured for 2008?
a. $1,464,000
b. $1,524,000
c. $1,518,000
d. $1,488,000


1 - 18
119.

Test Bank for ISV Managerial Accounting, Fourth Edition
Sauder Manufacturing Company reported the following year-end information:
Beginning work in process inventory
Beginning raw materials inventory
Ending work in process inventory
Ending raw materials inventory
Raw materials purchased
Direct labor
Manufacturing overhead

$ 35,000
18,000

38,000
15,000
510,000
180,000
75,000

How much is Sauder Manufacturing’s total cost of work in process for the year?
a. $513,000
b. $768,000
c. $765,000
d. $803,000
120.

Hardigan Manufacturing Company reported the following year-end information: beginning
work in process inventory, $80,000; cost of goods manufactured, $980,000; beginning
finished goods inventory, $50,000; ending work in process inventory, $70,000; and ending
finished goods inventory, $40,000. How much is Hardigan’s cost of goods sold for the
year?
a. $980,000
b. $990,000
c. $970,000
d. $1,000,000

Use the following information for questions 121–124.
Raw materials inventory, January 1
Raw materials inventory, December 31
Work in process, January 1
Work in process, December 31
Finished goods, January 1
Finished goods, December 31

Raw materials purchases
Direct labor
Factory utilities
Indirect labor
Factory depreciation
Selling and administrative expenses

$

20,000
40,000
18,000
12,000
40,000
32,000
1,000,000
460,000
150,000
50,000
400,000
420,000

121.

Direct materials used is
a. $1,060,000.
b. $1,020,000.
c. $1,000,000.
d. $980,000.

122.

Assume your answer to question 121 above is $1,000,000. Total manufacturing costs
equal
a. $2,060,000.
b. $2,054,000.
c. $1,860,000.
d. $2,480,000.


Managerial Accounting

1 - 19

123.

Assume your answer to question 122 above is $2,000,000. Cost of goods manufactured
equals
a. $1,992,000.
b. $1,994,000.
c. $2,006,000.
d. $2,008,000.

124.

Assume your answer to question 123 above is $2,040,000. The cost of goods sold is
a. $2,046,000.
b. $2,008,000.
c. $2,032,000.
d. $2,048,000.

Use the following information for questions 125–128:
Raw materials inventory, January 1
Raw materials inventory, December 31
Work in process, January 1
Work in process, December 31
Finished goods, January 1
Finished goods, December 31
Raw materials purchases
Direct labor
Factory utilities
Indirect labor
Factory depreciation
Selling and administrative expenses

$

30,000
60,000
27,000
18,000
60,000
48,000
1,500,000
690,000
225,000
75,000
600,000
630,000

125.

Direct materials used is
a. $1,590,000.
b. $1,530,000.
c. $1,500,000.
d. $1,470,000.

126.

Assume your answer to question 125 above is $1,500,000. Total manufacturing costs
equal
a. $3,090,000.
b. $3,081,000.
c. $2,790,000.
d. $3,720,000.

127. Assume your answer to question 126 above is $3,000,000. Cost of goods manufactured
equals
a. $2,988,000.
b. $2,991,000.
c. $3,009,000.
d. $3,012,000.
128.

Assume your answer to question 127 above is $3,060,000. The cost of goods sold is
a. $3,069,000.
b. $3,012,000.
c. $3,048,000.
d. $3,072,000.

1 - 20

Test Bank for ISV Managerial Accounting, Fourth Edition

129.

Samson Company reported total manufacturing costs of $130,000, manufacturing
overhead totaling $26,000, and direct materials totaling $32,000. How much is direct labor
cost?
a. Cannot be determined from the information provided.
b. $188,000
c. $58,000
d. $72,000

130.

Given the following data for Mehring Company, compute (A) total manufacturing costs and
(B) costs of goods manufactured:
Direct materials used
Direct labor
Manufacturing overhead
Operating expenses
a.
b.
c.
d.

(A)

$465,000
$480,000
$480,000
$495,000

$180,000
75,000
225,000
263,000

Beginning work in process
Ending work in process
Beginning finished goods
Ending finished goods

$30,000
15,000
38,000
23,000

(B)
$495,000
$465,000
$495,000
$510,000

131.

Penner Company reported total manufacturing costs of $195,000, manufacturing
overhead totaling $39,000, and direct materials totaling $48,000. How much is direct labor

cost?
a. Cannot be determined from the information provided.
b. $282,000
c. $87,000
d. $108,000

132.

Given the following data for Glennon Company, compute (A) total manufacturing costs
and (B) costs of goods manufactured:
Direct materials used
Direct labor
Manufacturing overhead
Operating expenses
a.
b.
c.
d.

133.

(A)
$620,000
$640,000
$640,000
$660,000

$240,000
100,000
300,000

350,000

Beginning work in process
Ending work in process
Beginning finished goods
Ending finished goods

$40,000
20,000
50,000
30,000

(B)
$660,000
$620,000
$660,000
$680,000

Which one of the following does not appear on the balance sheet of a manufacturing
company?
a. Finished goods inventory
b. Work in process inventory
c. Cost of goods manufactured
d. Raw materials inventory


Managerial Accounting

1 - 21

134.

The equivalent of finished goods inventory for a merchandising firm is referred to as
a. purchases.
b. cost of goods purchased.
c. merchandise inventory.
d. raw materials inventory.

135.

What term describes all activities associated with providing a product or service?
a. The manufacturing chain
b. The product chain
c. The supply chain
d. The value chain

136.

How have many companies significantly lowered inventory levels and costs?
a. They use activity-based costing.
b. They utilize an enterprise resource planning system.
c. They have a just-in-time method.
d. They focus on a total quality management system.

137.

Which one of the following managerial accounting approaches attempts to allocate manufacturing overhead in a more meaningful fashion?
a. Theory of constraints
b. Just-in-time inventory
c. Activity-based costing

d. Total-quality management

138.

What is one primary benefit of an enterprise resource planning (ERP) system?
a. It reduces inventory levels.
b. It permits companies to be more streamlined in production.
c. It replaces research and development in a company.
d. It requires an increased emphasis on product quality.

139.

What is “balanced” in the balanced scorecard approach?
a. The number of products produced
b. The emphasis on financial and non-financial performance measurements
c. The amount of costs allocated to products
d. The number of defects found on each product

140.

For what purpose is the theory of constraints used?
a. To reduce product defects
b. To balance performance measurement
c. To identify and manage constraints that bottle-neck operations
d. To reduce inventory levels

141.

Which one of the following characteristics would likely be associated with a just-in-time
inventory method?

a. Ending inventory of work in process that would allow several production runs
b. A backlog of inventory orders not yet shipped
c. Minimal finished goods inventory on hand
d. An understanding with customers that they may come to the showroom and select
from inventory on hand


1 - 22

Test Bank for ISV Managerial Accounting, Fourth Edition

142.

Which one of the following is a cost that would not likely be associated with computerintegrated manufacturing?
a. Manufacturing overhead associated with allocation of equipment depreciation
b. Direct labor costs of a welder on the production floor
c. Manufacturing overhead associated with allocation of the plant lease to the latest
production run
d. Direct materials cost with several fuse plates for a new automobile

143.

Which one of the following is an activity not associated with TQM?
a. Tightening the bolts on a chassis so that the frame will not drop out
b. Redesigning the gas tank after fuel efficiency standards are not being met
c. Verifying the 10 check points associated with producing the highest quality loaf of
bread
d. Ensuring that the mattress just manufactured meets the standard of comfort of a
random factory line worker

144.

What is ERP’s primary benefit?
a. It can eliminate stand alone systems that do not share information easily for management’s use.
b. It allows management to rely on the simplest way to utilize information systems in a
manufacturing environment.
c. It permits line workers to perform accounting and marketing tasks.
d. It calculates year end bonuses to a precision not available in traditional information
systems management.

145.

Some companies implement systems to reduce defects in finished products with the goal
of achieving zero defects. What are these systems called?
a. Activity-based costing systems
b. Enterprise resource planning systems
c. Value chain systems
d. Total quality management systems

146.

Many companies now manufacture products that are untouched by human hands. What
do they use to achieve this?
a. Activity-based costing
b. Computer-integrated manufacturing
c. Enterprise resource planning systems
d. Total quality management systems

a

147. When a company prepares a worksheet for a manufacturing company, to which column is
the Indirect Labor account extended?
a. To the adjustment columns
b. To the income statement columns
c. To the cost of goods manufactured columns
d. To the balance sheet columns

a

148. When a worksheet is prepared for a manufacturing company, an offsetting entry must be
made to balance the cost of goods manufactured columns. Where does the offsetting
entry appear?
a. In the balance sheet debit column
b. In the income statement debit column
c. In the balance sheet credit column
d. In the income statement credit column


Managerial Accounting

1 - 23

a

149. Which one of the following accounts would not appear in the cost of goods manufactured
columns of a worksheet?
a. Ending Work in Process Inventory
b. Ending Finished Goods Inventory
c. Raw Materials Inventory
d. Direct Labor

a

150. When making closing entries for a manufacturing company, to which account do all
accounts that appear on the cost of goods manufactured schedule get closed?
a. Income Summary
b. Materials, Labor, and Overhead
c. Manufacturing Summary
d. Finished Goods Inventory

Additional Multiple Choice Questions
151.

Financial and managerial accounting are similar in that both
a. have the same primary users.
b. produce general-purpose reports.
c. have reports that are prepared quarterly and annually.
d. deal with the economic events of an enterprise.

152.

The function that pertains to keeping the activities of the enterprise on track is
a. planning.
b. directing.
c. controlling.
d. accounting.

153.

Property taxes on a manufacturing plant are an element of a

a.
b.
c.
d.

Product Cost
Yes
Yes
No
No

Period Cost
No
Yes
Yes
No

154.

For a manufacturing company, which of the following is an example of a period cost rather
than a product cost?
a. Depreciation on factory equipment
b. Wages of salespersons
c. Wages of machine operators
d. Insurance on factory equipment

155.

For a manufacturing firm, cost of goods available for sale is computed by adding the
beginning finished goods inventory to

a. cost of goods purchased.
b. cost of goods manufactured.
c. net purchases.
d. total manufacturing costs.


1 - 24

Test Bank for ISV Managerial Accounting, Fourth Edition

156.

If the cost of goods manufactured is less than the cost of goods sold, which of the
following is correct?
a. Finished Goods Inventory has increased.
b. Work in Process Inventory has increased.
c. Finished Goods Inventory has decreased.
d. Work in Process Inventory has decreased.

157.

The principal difference between a merchandising and a manufacturing income statement
is the
a. cost of goods sold section.
b. extraordinary item section.
c. operating expense section.
d. revenue section.

158.

If the total manufacturing costs are greater than the cost of goods manufactured, which of
the following is correct?
a. Work in Process Inventory has increased.
b. Finished Goods Inventory has increased.
c. Work in Process Inventory has decreased.
d. Finished Goods Inventory has decreased.

159.

The sum of the direct materials costs, direct labor costs, and manufacturing overhead
incurred is the
a. cost of goods manufactured.
b. total manufacturing overhead.
c. total manufacturing costs.
d. total cost of work in process.

160.

The inventory accounts that show the cost of completed goods on hand and the costs
applicable to production that is only partially completed are, respectively
a. Work in Process Inventory and Raw Materials Inventory.
b. Finished Goods Inventory and Raw Materials Inventory.
c. Finished Goods Inventory and Work in Process Inventory.
d. Raw Materials Inventory and Work in Process Inventory.


Managerial Accounting

1 - 25

Answers to Multiple Choice Questions
Item

Ans.

43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.

d
c
b
a
a
a
b

d
b
d
b
c
c
d
c
b
c

Item

Ans.

60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.

75.
76.

Item

b
c
d
a
c
c
d
c
c
a
d
b
d
d
c
b
c

77.
78.
79.
80.
81.
82.
83.

84.
85.
86.
87.
88.
89.
90.
91.
92.
93.

Ans.

Item

Ans.

Item

Ans.

a
a
b
c
c
c
b
a
c

d
d
a
d
d
b
b
a

94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.

c
c
c

d
c
b
d
c
c
c
d
b
c
d
a
c
a

111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.

126.
127.

a
b
b
b
a
c
b
d
d
b
d
a
c
d
d
a
c

Item

128.
129.
130.
131.
132.
133.
134.

135.
136.
137.
138.
139.
140.
141.
142.
143.
144.

Ans.

d
d
c
d
c
c
c
d
c
c
b
b
c
c
b
a
a

Item

145.
146.
147.
148.
149.
150.
151.
152.
153.
154.
155.
156.
157.
158.
159.
160.

Ans.

d
b
c
b
b
c
d
c

a
b
b
c
a
a
c
c

BRIEF EXERCISES
BE 161
Presented below are Truck Company’s monthly manufacturing cost data related to its personal
computer products.
(a)
(b)
(c)
(d)

Taxes on factory building
Raw materials
Depreciation on manufacturing equip.
Wages for assembly line workers

$820,000
66,000
210,000
340,000

Instructions
Enter each cost item in the following table, placing an “X” under the appropriate headings.

Direct Materials

Product Costs
Direct Labor

Factory Overhead

(a)
(b)
(c)
(d)
Solution 161 (3 min.)
Direct Materials
(a)
(b)
(c)
(d)

Product Costs
Direct Labor

Factory Overhead
X

X
X
X