@PROFDOCDIGITALLIBRARIES
TEST BANK
Intermediate Accounting 18th Edition by Donald E. Kieso, Jerry J.
Weygandt & Terry D. Warfield
CHAPTER 1
MANAGERIAL ACCOUNTING
CHAPTER LEARNING OBJECTIVES
1. Identify the features of managerial accounting and the functions of management. The
primary users of managerial accounting reports, issued as frequently as needed, are internal
users, who are officers, department heads, managers, and supervisors in the company. 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. It may be very detailed, and may extend beyond the accrual accounting system.
The reporting standard is relevance to the decision being made. No independent audits are
required in managerial accounting.
The functions of management 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.
2. Describe the classes of manufacturing costs and the differences between product and
period 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
,@PROFDOCDIGITALLIBRARIES
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. Manufacturing costs are typically incurred at the manufacturing facility.
Product costs are costs that are a necessary and integral part of producing the finished
product. Product costs are also called inventoriable costs. 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. They are expensed as incurred.
3. Demonstrate how to compute cost of goods manufactured and prepare financial
statements for a manufacturer. Companies add the cost of the beginning work in process
inventory 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 inventory from
the total cost of work in process to arrive at the cost of goods manufactured.
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
,
TEST BANK
Intermediate Accounting 18th Edition by Donald E. Kieso, Jerry J.
Weygandt & Terry D. Warfield
CHAPTER 1
MANAGERIAL ACCOUNTING
CHAPTER LEARNING OBJECTIVES
1. Identify the features of managerial accounting and the functions of management. The
primary users of managerial accounting reports, issued as frequently as needed, are internal
users, who are officers, department heads, managers, and supervisors in the company. 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. It may be very detailed, and may extend beyond the accrual accounting system.
The reporting standard is relevance to the decision being made. No independent audits are
required in managerial accounting.
The functions of management 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.
2. Describe the classes of manufacturing costs and the differences between product and
period 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
,@PROFDOCDIGITALLIBRARIES
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. Manufacturing costs are typically incurred at the manufacturing facility.
Product costs are costs that are a necessary and integral part of producing the finished
product. Product costs are also called inventoriable costs. 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. They are expensed as incurred.
3. Demonstrate how to compute cost of goods manufactured and prepare financial
statements for a manufacturer. Companies add the cost of the beginning work in process
inventory 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 inventory from
the total cost of work in process to arrive at the cost of goods manufactured.
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
,
