Chapter 10 An Introduction to Managerial Accounting TEST BANK......2019/2020
An Introduction to Managerial AccountingA. An ongoing process where continuous improvement is the goal
B. A competitive management program that emphasizes quality
C. Information gathering and reporting activities that are restricted to those
activities that add value in excess of their cost
D. Managerial accounting information is measured in economic, physical, and
financial terms7. Which of the following is a product cost for a construction company?
A. Cost of transporting raw materials to the job site
B. Selling costs
C. Wages paid to the company's office manager
D. All of these
8. Which of the following costs would not be classified as overhead for a company
that produces small appliances?
A. Assembly labor
B. Plant supervisory labor
C. Indirect material costs
D. Plant utilities costs
9. For a manufacturing company, product costs include all of the following except:
A. direct material costs.
B. direct labor costs.
C. research and development costs.
D. overhead costs.10.During its first year of operations, Beta Company paid $16,000 for direct material
and $17,000 in wages for production workers. Lease payments and utilities on the
production facilities amounted to $7,000. General, selling, and administrative
expenses were $6,000. The company produced 5,000 units and sold 4,000 units
at a price of $15.00 a unit. The average cost to produce one unit is which of the
11.During its first year of operations, Vail Company paid $15,000 for direct materials,
paid production employees $10,000 and paid general, selling, and administrative
expenses of $5,000. Assuming that the average cost to produce one unit was $16
and that 2,000 units were produced during the period, how much overhead was
D. None of these
12.Why do accountants normally calculate cost per unit as an average?
A. Determining the exact cost of a product is virtually impossible.
B. Some manufacturing-related costs cannot be accurately traced to specific units
C. Even when producing multiple units of the same product, normal variations
occur in the amount of materials and labor used.
D. All of these are justifications for computing average unit costs.13.Which of the following costs is not considered to be a product cost?
A. Raw materials costs
B. Depreciation of delivery vehicles
C. Wages paid to production workers
D. Factory utilities costs
14.Select the incorrect statement regarding costs and expenses.
A. Some costs are initially recorded as expenses while others are initially
recorded as assets.
B. Expenses are incurred when assets are used to generate revenue.
C. Manufacturing-related costs are initially recorded as expenses.
D. Non-manufacturing costs should be expensed in the period in which they are
15.Which of the following should be recorded as an asset?
A. Paid for the current month's advertising cost
B. Paid rent on the warehouse used to store finished goods
C. Paid salary for the vice president of marketing
D. Paid for raw materials to be used in production
16.Which of the following should not be recorded as an expense?
A. Paid office salaries
B. Paid factory maintenance costs
C. Paid product advertising costs
D. Paid sales commissions17.Which of the following transactions would cause net income for the period to be
A. Paid $1,600 cash for raw material cost
B. Paid administrative salaries of $2,500
C. Depreciated production equipment for $3,000
D. Purchased $5,000 of merchandise inventory
18.Which of the following statements is true with regard to product costs versus
general, selling, and administrative costs?
A. Product costs associated with unsold units appear on the income statement as
B. General, selling, and administrative costs appear on the balance sheet.
C. Product costs associated with units sold appear on the Income Statement as
cost of goods sold expense.
D. All of these
19.Which of the following statements is incorrect with regard to product costs?
A. Product costs flow from the balance sheet to the income statement.
B. Unlike direct material and direct labor costs, overhead costs must be allocated
D. Product costs are expensed in the period incurred.
E. Depreciation on manufacturing equipment is an indirect product cost.20.Which of the following statements concerning product costs versus general,
selling, and administrative costs is true?
A. Product costs incurred during the period will always appear as inventory on the
B. General, selling, and administrative costs are always expensed when cash is
C. Product costs may be divided between the balance sheet and income
D. General, selling, and administrative costs sometimes appear as inventory on
the balance sheet.
During its first year of operations, Martin Company paid $4,000 for direct
materials and $8,500 for production workers' wages. Lease payments and utilities
on the production facilities amounted to $7,500 while general, selling, and
administrative expenses totaled $3,000. The company produced 5,000 units and
sold 4,000 units at a price of $7.50 a unit.
21.What is the amount of gross margin for the first year?
22.What is the amount of finished goods inventory for the first year?
D. $16,00023.What was Martin's net income for the first year in operation?
24.Manufacturing costs that cannot be traced to specific units of product in a costeffective manner are
A. manufacturing overhead costs.
B. general, selling, and administrative costs.
C. indirect costs.
D. both A and C.
25.What is the effect on the financial statements of recording a $100 purchase of raw
A. Item A
B. Item B
C. Item C
D. Item D26.What is the effect on the financial statements of making cash sales of inventory to
A. Item A
B. Item B
C. Item C
D. Item D
27.Which of the following types of labor costs will not initially flow through the
A. Salaries for sales staff
B. Plant supervision
C. Material handling
D. Assembly labor
28.Which of the following is not classified as manufacturing overhead?
A. Indirect material
B. Supervisory labor
C. Factory insurance
D. Product delivery costs29.Abby believes her company's overhead costs are driven (affected) by the number
of machine hours because the production process is heavily automated. During
the period, the company produced 3,000 units of Product A requiring a total of
200 machine hours and 2,000 units of Product B requiring a total of 50 machine
hours. What allocation rate should be used if the company incurs overhead costs
A. $2 per unit
B. $2 per machine hour
C. $40 per unit
D. $40 per machine hour
The following information relates to Minimart's 2012 accounting period:
30.Based on this information, Minimart's total manufacturing costs for 2012 equal
D. $50,00031.Minimart's work in process inventory at the beginning of 2012 was $12,000, and
work in process inventory at the end of 2012 was $10,000. Minimart's cost of
goods manufactured in 2012 equal
32.All of the following are upstream costs except:
A. Research and development.
B. Selling costs.
C. Design costs.
D. Costs to build a prototype product.
33.Select the incorrect statement regarding upstream and downstream costs.
A. Profitability analysis should consider only manufacturing and downstream
B. Companies must recover the total cost of developing, producing, and delivering
C. Pricing decisions must consider both upstream and downstream costs.
D. The total cost per unit includes upstream, manufacturing, and downstre