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Exam 10: An Introduction to Management Accounting

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Question 51

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During its first year of operations, Forrest Company paid $47,290 for direct materials and $50,700 in wages for production workers. Lease payments, utility costs, and depreciation on factory equipment totaled $14,300. General, selling, and administrative expenses were $20,700. The average cost to produce one unit was $5.70. How many units were produced during the period?

A) 20,823
B) 19,700
C) 23,332
D) None of these.

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

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Question 52

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Fortune Company had beginning raw materials inventory of $16,000. During the period, the company purchased $92,000 of raw materials on account. If the ending balance in raw materials was $10,000, the amount of raw materials transferred to work in process is:

A) $86,000.
B) $98,000.
C) $102,000.
D) $92,000.

E) B) and D)
F) A) and B)

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Question 53

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A manufacturing business paid $3,000 to purchase inventory. As a result, assets would increase by $3,000.

Tisdale Company started the year with the following beginning account balances: Raw Materials Inventory, $42,000; Work in Process Inventory, $90,000; and Finished Goods Inventory, $20,000. During the year, the company purchased $60,000 of raw materials and ended the year with $16,000 of raw materials. Direct labor costs for the year were $120,000 and a total of $36,000 of manufacturing overhead costs were incurred. Ending work in process was $82,000 and ending finished goods was $35,000. Goods were sold to customers during the year for $360,000. How much gross margin would be reported for the year?

Which of the following transactions would cause net income for the period to decrease?

The Juarez Corporation incurred the following transactions during its first year of operations. (Assume all transactions involve cash) .Acquired $1,000 of capital from the owners.Purchased $400 of direct raw materials.Used $300 of these direct raw materials in the production process.Paid production workers $400 cash.Paid $200 for manufacturing overhead.Started and completed 200 units of inventory.Sold 50 units at a price of $6 each.Paid $40 for selling and administrative expenses.The amount of cost of goods manufactured would be:

Unlike direct material and direct labor costs, overhead costs must be allocated to products.

What is a value chain? And what relationship is there between the value chain and activity-based management?

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

Management accountants have a responsibility to be credible. What does this ethical standard require of management accountants?

Select the incorrect statement regarding service companies.

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

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 materials amounted to:

Choose the answer that is not a distinguishing characteristic of financial accounting information.

Levenworth Company incurs unnecessary costs each period because of the excess quantities of inventory maintained to meet unexpected customer demand. The costs of inventory financing, storage, supervision, and obsolescence could most likely be reduced by which of the following practices?

During its first year of operations, Forrest Company paid $30,000 for direct materials and $50,000 in wages for production workers. Lease payments, utility costs, and depreciation on factory equipment totaled $15,000. General, selling, and administrative expenses were $20,000. The average cost to produce one unit was $2.50. How many units were produced during the period?

Average costs are used for internal decision-making, but actual costs are required for calculating cost of goods sold.

Reno Company provided the following information regarding its operations for the month ending September 30: $\begin{array}{ll}\text { Acministrative salaries } & 30,000 \\\text { Depreciation on factory equipment } & 12,000 \\\text { Indirect materials } & 2,000 \\\text { Marketing and distribution costs } & 24,000 \\\text { Salaries for factory supervisors } & 20,000 \\\text { Wages for production workers} & 26,000 \\\text { Raw materials used} & 38,000\\\text { Sales revenues}&196,000\\\text { Selling costs}&18,000\\\text { Utilities for production facilities}&8,000\\\text { Number of units produced}&20,000\\\text {Number of units sold }&15,000\end{array}$ Required:Compute the firm's total manufacturing overhead cost.Prepare a schedule of inventory costs that shows total product costs, ending inventory, and cost of goods sold; andPrepare an income statement for the month ending September 30.

Benchmarking involves the identification of the best practices used by world-class competitors. Discuss the following widely recognized best practices: activity-based management and just-in-time inventory.

Randall Company manufactures chocolate bars. The following were among Randall's manufacturing costs during the current year: $\begin{array}{llr} \text { Wages}\\\\ \text { Machine operators } &\$340,000\\ \text { Selling and administrative personnel } &\$79,000\\ \text { Materials used } &\\\\ \text { Lubricant for oiling machiner} &\$29,000\\ \text { Cocoa, sugar, and other raw materials } &\$290,000\\ \text {Packacinc materials } &\$230,000\\\end{array}$ Randall's direct labor costs amounted to: