Ivy / MBA PrepWorks: Managerial Accounting
Comprehensive Resource To Help You Ace 2026-2027
Includes Frequently Tested Questions With ELABORATED
100% Correct COMPLETE SOLUTIONS
Guaranteed Pass First Attempt!!
Current Update!!
1. What is Cost Classification? - ANSWER Initially classifying costs as either
Period Costs or Product Costs.
2. What are Period Costs? - ANSWER Operating costs expensed in the
accounting period incurred (non-inventory costs); e.g., salary is the biggest
for service companies.
3. What are Product Costs? - ANSWER Costs of purchasing or making a
product; recorded as an asset (inventory) then expensed when sold
(becomes COGS).
4. What are Direct Costs? - ANSWER Easily and cost-effectively traced to a
product, department, or cost object.
5. What are Direct Materials? - ANSWER Raw materials used in
production; become a physical part of the finished product and are easily
traced to it.
,6. What is Direct Labor? - ANSWER Labor of employees converting raw
materials to finished goods; easily traced to the finished product.
7. What are Indirect Costs? - ANSWER Cannot be easily or cost-effectively
traced but are necessary to make the product.
8. What is Manufacturing Overhead? - ANSWER Indirect product costs
associated with production; all manufacturing costs except Direct Materials
and Direct Labor; includes indirect materials (e.g., supplies), indirect labor
(e.g., janitor/supervisor salary), and others (e.g., rent, insurance,
depreciation).
9. What is a Service Company? - ANSWER Sells services instead of
products; all costs are Period Costs; no inventory, so no Product Costs.
10.What are Period Costs in a Merchandising Company? - ANSWER All
costs other than the merchandiser's inventory.
11.What are Product Costs in a Merchandising Company? - ANSWER All
inventory costs; run through one inventory account, then to COGS when
sold (matches sales revenue).
12.What is a Manufacturing Company? - ANSWER Produces end-products
by converting raw materials using labor, supplies, equipment, and facilities.
, 13.What are Period Costs in a Manufacturing Company? - ANSWER All
costs other than inventoriable costs.
14.What are Product Costs in a Manufacturing Company? - ANSWER All
inventoriable costs; flow through three inventory accounts: Direct Materials
Inventory (Raw Materials), Work-in-Process Inventory (started but not
complete), Finished Goods Inventory (complete but not sold).
15.What is a Variance? - ANSWER The difference between an actual
amount and the budgeted amount.
16.What is a Favorable Variance (F)? - ANSWER Actual amount increases
operating income (e.g., actual revenue > budgeted revenue; actual
expenses < budgeted expenses).
17.What is an Unfavorable Variance (U)? - ANSWER Actual amount
decreases operating income (e.g., actual revenue < budgeted revenue;
actual expenses > budgeted expenses).
18.Why are unit costs important in product costing? - ANSWER Help
managers set selling prices, compute COGS for the income statement, and
compute inventory cost for the balance sheet.
19.What are the two main types of traditional product costing systems? -
ANSWER Job Order Costing and Process Costing.
Comprehensive Resource To Help You Ace 2026-2027
Includes Frequently Tested Questions With ELABORATED
100% Correct COMPLETE SOLUTIONS
Guaranteed Pass First Attempt!!
Current Update!!
1. What is Cost Classification? - ANSWER Initially classifying costs as either
Period Costs or Product Costs.
2. What are Period Costs? - ANSWER Operating costs expensed in the
accounting period incurred (non-inventory costs); e.g., salary is the biggest
for service companies.
3. What are Product Costs? - ANSWER Costs of purchasing or making a
product; recorded as an asset (inventory) then expensed when sold
(becomes COGS).
4. What are Direct Costs? - ANSWER Easily and cost-effectively traced to a
product, department, or cost object.
5. What are Direct Materials? - ANSWER Raw materials used in
production; become a physical part of the finished product and are easily
traced to it.
,6. What is Direct Labor? - ANSWER Labor of employees converting raw
materials to finished goods; easily traced to the finished product.
7. What are Indirect Costs? - ANSWER Cannot be easily or cost-effectively
traced but are necessary to make the product.
8. What is Manufacturing Overhead? - ANSWER Indirect product costs
associated with production; all manufacturing costs except Direct Materials
and Direct Labor; includes indirect materials (e.g., supplies), indirect labor
(e.g., janitor/supervisor salary), and others (e.g., rent, insurance,
depreciation).
9. What is a Service Company? - ANSWER Sells services instead of
products; all costs are Period Costs; no inventory, so no Product Costs.
10.What are Period Costs in a Merchandising Company? - ANSWER All
costs other than the merchandiser's inventory.
11.What are Product Costs in a Merchandising Company? - ANSWER All
inventory costs; run through one inventory account, then to COGS when
sold (matches sales revenue).
12.What is a Manufacturing Company? - ANSWER Produces end-products
by converting raw materials using labor, supplies, equipment, and facilities.
, 13.What are Period Costs in a Manufacturing Company? - ANSWER All
costs other than inventoriable costs.
14.What are Product Costs in a Manufacturing Company? - ANSWER All
inventoriable costs; flow through three inventory accounts: Direct Materials
Inventory (Raw Materials), Work-in-Process Inventory (started but not
complete), Finished Goods Inventory (complete but not sold).
15.What is a Variance? - ANSWER The difference between an actual
amount and the budgeted amount.
16.What is a Favorable Variance (F)? - ANSWER Actual amount increases
operating income (e.g., actual revenue > budgeted revenue; actual
expenses < budgeted expenses).
17.What is an Unfavorable Variance (U)? - ANSWER Actual amount
decreases operating income (e.g., actual revenue < budgeted revenue;
actual expenses > budgeted expenses).
18.Why are unit costs important in product costing? - ANSWER Help
managers set selling prices, compute COGS for the income statement, and
compute inventory cost for the balance sheet.
19.What are the two main types of traditional product costing systems? -
ANSWER Job Order Costing and Process Costing.
