Managerial Accounting -- Exam 1 (chapter 15, 16, 18) Exam verified solutions and explanations.

Managerial Accounting -- Exam 1 (chapter 15, 16, 18) Exam verified solutions and explanations financial accounting - Correct Answers: info is report3ed at fixed intervals (monthly, quarterly, yearly, in general-purpose financial statements managerial accounting - Correct Answers: designed to meet the specific needs of a company's management -directing daily operations -planning future operations -developing business strategies historical data - Correct Answers: provide objective measures of past operations estimated data - Correct Answers: provide subjective estimates about future decisions verticals - Correct Answers: referred to as business units b/c they're often structured as separate businesses w/in the parent company -develop products that are sold directly to customers horizontals - Correct Answers: departments w/in the company that aren't responsible for developing products -provide services to the various verticals and other horizontals (management process) 1. Planning - Correct Answers: -used in developing the company's objectives (goals) & translating these objectives into courses of action Strategic planning - Correct Answers: developing long-term actions to achieve the company's objectives -involve periods of 5-10 years Operational planning - Correct Answers: develops short term actions for managing the day-to-day operations of the company (management process) 2. directing - Correct Answers: process by which managers run day-to-day operations (management process) 3. controlling - Correct Answers: monitoring operating results and comparing actual results w/ the expected results management by exception - Correct Answers: the philosophy of controlling by comparing actual and expected results (management process) 4. improving - Correct Answers: continuous process improvement -the philosophy of continually improving employees, business processes, and products --objective = to eliminate the source of problems in a process (management process) 5. decision making - Correct Answers: inherent in each of the preceding management processes -in managing a company, management must continually decide among alternative actions cost - Correct Answers: a sacrifice made to obtain some benefit cost object - Correct Answers: a segment of operations -may be a product, a sale territory, a department, or an activity (research and development) direct costs - Correct Answers: can be identified w/ and traced to a cost object indirect costs - Correct Answers: cannot be identified w/ or traced to a cost object direct materials cost - Correct Answers: to be classified, must be both: -an integral part of the finished product -a significant portion of the total cost of the product (EX: the cost of the wood used in producing a guitar, the cost of electronic components for a TV, silicon wafers for microcomputer chips, tires for an automobile) direct labor cost - Correct Answers: the cost of employee wages that is an internal part of the finished product -must meet both: --an integral part of the finished product --a significant portion of the total cost of the product (EX: the wages of employees who cut guitars out of raw lumber & assemble them, mechanics' wages for repairing a car, machine operators' wages for manufacturing tools, assemblers' wages for assembling a laptop computer) factory over (manufacturing overhead or factory burden) - Correct Answers: costs other than direct materials cost and direct labor that are incurred in the manufacturing process -all are indirect costs of the product (EX: heating & lighting the factory, repairing & maintaining factory equipment, property taxes on factory buildings and land, insurance on factory buildings, depreciation of factory plant & equipment) prime costs - Correct Answers: direct materials & direct labor costs conversion costs - Correct Answers: direct labor and factory overhead costs -the costs of converting there materials into a finished product materials inventory (raw materials inv.) - Correct Answers: consists of the costs of the direct & indirect materials that have not yet entered the manufacturing process work in process inventory - Correct Answers: consists of the direct materials, direct labor, & factory overhead costs for products that have entered the manufacturing process, but are not yet completed (in process) finished goods inventory - Correct Answers: consists of completed (or finished) products that have not been sold utilization rate - Correct Answers: measures the use of a fixed asset in serving customers relative to the asset's capacity -higher rate = favorable -lower rate = unfavorable job order cost system - Correct Answers: provides product costs for each quantity of product that is manufactured -used by companies that manufacture custom products for customers or batches of similar products process cost system - Correct Answers: provides product costs for each manufacturing department/process -used by companies that manufacture units of a product that are indistinguishable from each other & are manufactured using a continuous production process materials ledger - Correct Answers: a separate account for each type of material -increases (debits) are based on receiving reports, which is supported by the supplier's invoice -decreases (credits) are based on materials requisitions receiving report - Correct Answers: prepared when materials that have been ordered are received & inspected materials requisition - Correct Answers: serve as the basis for recording materials used -materials for use in manufacturing are related when this is received job cost sheets - Correct Answers: make up the work in process subsidiary ledger time tickets - Correct Answers: used when employees work on an individual job -records the amount of time they have worked on a specific job cost allocation - Correct Answers: process by which factory overhead or other costs are assigned to a cost object activity base (allocation base or activity driver) - Correct Answers: the factory overhead costs that are allocated to jobs using a common measure related to each job predetermined factory overhead rate - Correct Answers: estimated total factory overhead costs [DIVIDED BY] estimated activity base undersupplied factory overhead - Correct Answers: if the applied overhead is less than the actual overhead incurred, the factory overhead account will have a debit balance over applied factory overhead - Correct Answers: if he applied overhead is more than the actual overhead incurred, the factory overhead account will have a credit balance finished goods ledger - Correct Answers: -cost data for units manufactured -cost data for units sold -cost data for units on hand --the finished goods account is a controlling account the this subsidiary period costs - Correct Answers: -used in generating revenue during the current period -not involved in the manufacturing process -recoded as the expenses of the current period ---selling expenses ---administrative expenses product costing - Correct Answers: determining the cost of a product --direct materials --direct labor ----both direct costs --factory overhead ----indirect cost single plant wide factory overhead rate method - Correct Answers: factory overhead costs are allocated to products using only one rate total budgeted factory overhead [DIVIDED BY] total budgeted plant wide allocation base multiple production department factory overhead rate method - Correct Answers: uses diff. rates for each production department to allocate factory overhead costs to products budgeted department factory overhead [DIVIDED BY] budgeted department allocation rate activity-based costing (ABC) method - Correct Answers: provides an alternative approach for allocating factory overhead that uses multiple factory overhead rates based on diff. activities activities - Correct Answers: the types of work, or actions, involved in a manufacturing/service process activity rates - Correct Answers: budgeted activity costs are assigned to products using factory overhead rates for each activity budgeted activity cost [DIVIDED BY] total activity-base usage activity base - Correct Answers: used b/c the base is related to an activity activity overhead allocated - Correct Answers: activity-base usage X activity rate factory overhead cost per unit - Correct Answers: total factory overhead cost [DIVIDED BY] total units of estimated production