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Exam 1: Management Accounting and Corporate Governance

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Question 41

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Unlike manufacturers,service companies do not have an inventory of products.

A) True
B) False

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Question 42

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

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B) False

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Question 43

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How does the Sarbanes-Oxley Act of 2002 affect the responsibilities of the managers of publicly held US corporations?

The following information relates to Marshall Manufacturing's current accounting period: $\begin{array} {| l | r | } \hline \text { Raw materials used } & \$ 34,000 \\\hline \text { Direct labor wages } & 66,000 \\\hline \text { Sales salaries and commissions } & 50,000 \\\hline \text { Depreciation on production equipment } & 6,000 \\\hline \text { Rent on manufacturing facilities } & 4,000 \\\hline \text { Administrative supplies and utilities } & 10,000 \\\hline \text { Sales revenue } & 210,000 \\\hline \text { Units produced } & 10,000 \\\hline \text { Units sold } & 10,000 \\\hline\end{array}$ Based on this information,what is the company's net income?

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?

Discuss three practical implications of misclassifying product and/or period costs.

Steuben Company produces dog houses.During the current year,Steuben Company incurred the following costs: $\begin{array}{c}\begin{array}{|l|}\hline \text { Rent on manufacturing facility}\\\hline \text { Office manager's salary}\\\hline \text { Wages of factory machine operators } \\\hline\text { Depreciation on manufacturing equipment } \\\hline \text { Insurance and taxes on selling and administrative offices } \\ \hline\text { Direct materials purchased and used }\\ \hline\end{array}\begin{array}{r|}\hline\$ 250,000 \\\hline150,000 \\\hline110,000 \\\hline50,000 \\\hline30,000 \\\hline170,000\\\hline\end{array}\end{array}$ Wages paid to factory machine operators in producing the dog houses should be categorized as:

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

The biggest challenge in computing the total cost per unit of a product is determining the amount of overhead cost that should be assigned to each unit.

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?

A company that uses a just in time inventory system:

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.

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.

Who are the primary users of financial accounting information? Who are the primary users of managerial accounting information?

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

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.

Costs that are not classified as product costs are normally expensed in the period incurred.

What inventory holding costs would be incurred by a business that holds a large amount of inventory?

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?

Steuben Company produces dog houses.During the current year,Steuben Company incurred the following costs: $\begin{array}{c}\begin{array}{|l|}\hline \text { Rent on manufacturing facility}\\\hline \text { Office manager's salary}\\\hline \text { Wages of factory machine operators } \\\hline\text { Depreciation on manufacturing equipment } \\\hline \text { Insurance and taxes on selling and administrative offices } \\ \hline\text { Direct materials purchased and used }\\ \hline\end{array}\begin{array}{r|}\hline\$ 250,000 \\\hline150,000 \\\hline110,000 \\\hline50,000 \\\hline30,000 \\\hline170,000\\\hline\end{array}\end{array}$ Based on the above information,which of the following would not be treated as a product cost: