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business
managerial accounting

Questions and Answers of Managerial Accounting

ABC systems should be used primarily for budgeting (spending) decisions. Do you agree? If you do not fully agree, indicate why you disagree. Be specific.
Traditional cost accounting systems typically distort product costs by overcosting the complex products and undercosting the simple products. ABC systems have been introduced primarily to correct
Most ABC systems should be initiated, planned, and controlled by top management personnel, such as the chief executive officer, because those managers are in a position to understand both the costs
Refer to the information in Problem 2. Record the information in the T-accounts.Data from Problem 2Sue Enterprises uses a normal job order costing system and a predetermined overhead rate based on
CMG uses a normal job order costing system and applies overhead on the basis of direct labor hours. At the beginning of 2022, management estimated that 250,000 direct labor hours would be worked and
Sue Enterprises uses a normal job order costing system and a predetermined overhead rate based on machine hours. At the beginning of 2022, Sue estimated the overhead for the year would be $720,000
The Moez Company uses a normal job order cost system. Other data:• There are three jobs that pass through the two production departments.• Job 401 and Job 402 were completed and sold during
Precious Glassworks, Inc., produces unique hand-blown glass light fixtures for custom-built homes and uses a job order costing system for its production costs. The company bases its predetermined
Refer to the information in Problem 4. Record the information in the T-accounts.Data from Problem 4.Precious Glassworks, Inc., produces unique hand-blown glass light fixtures for custom-built homes
Following are the 2022 estimated and actual recorded subsidiary ledger results from several jobs for an architectural firm:The president is concerned with the wide differences and with the loss on
Assume the same data from Problem 4. Record all necessary journal entries.Data from Problem 4DER, Inc., manufactures a single product. The following information is available for 2022:● Raw
The following information applies to Amanda Company for 2022:• Prime costs were $145,000.• Direct labor was one-third of conversion costs.• Sales were
Premium Manufacturers is a manufacturer. Positive selected account balances for the company as of January 1, 2022, were as follows:During the month of January, Premium Manufacturers had the following
HEW estimates 2022 factory overhead at $320,000 and direct labor cost at $200,000. Direct labor hours are estimated to be 20,000. Cost information for the month of April, 2022 is as follows:a. If
Managers should analyze underallocated overhead to determine why there was not enough overhead estimated. If overhead is overallocated, there is no need to analyze why it was overallocated. Do you
Mignon Company has estimated overhead of $50,000 in 2022 ($10,000 in Department 1 and $40,000 in Department 2), and estimates a total of 10,000 machine hours in each of its two departments (20,000
Explain what is meant by a normal costing system.
Why is overhead typically estimated and allocated as opposed to just traced to each job and recorded as indirect costs are paid?
Explain how seasonal fluctuations may affect overhead application.
If the under- or overallocated overhead amount is material, it should be recorded as a separate period expense (selling, general, and administrative). Do you agree? If you do not agree, explain why
Would it be unethical to intentionally develop the overhead rate by overestimating the total indirect costs or by using an incorrect driver (no cause and effect)?
In an attempt to reduce direct material costs, a company may be tempted to use less expensive materials from a different supplier with an “introductory cost offer.” Given the objective of
Give examples of both internally and externally generated data that a company could analyze to determine possible production delays.
How can predictive analytics be used by a public accounting firm to assess the risk of taking on a new client?
If overhead is overallocated, the actual overhead must be greater than the allocated overhead incurred. Do you agree? If you do not agree, explain why the statement is false.
Direct materials, direct labor, and overhead are usually recorded as incurred both in the general ledger and in each job cost account so that the actual overhead and the allocated overhead match. Do
Assume that a normal costing system is used. Estimated overhead was $100. Estimated practical capacity hours were 50. Actual hours worked were 54. What was the over- or underallocated overhead?
For each of the following, indicate whether the statement is true or false.a. The main difference between job order and process costing systems is the amount of detail captured for each product.b.
Under a normal costing system, overhead is typically recorded in the work in process account at the beginning of the year for the amount estimated and then allocated to specific jobs as each job is
Ellen’s Company produces boxes. In 2022, the company incurred the following costs: There were no balances in the beginning or ending work in process and finished goods inventories. The company
You have been hired by the company president to review the records of Fast Shipping Company. You found that the sales department has reported 20% of jobs as “sold,” even though the customers have
The accompanying diagram reflects the costs of various jobs for the month of September. a. Which job has proportionately more overhead relative to direct labor? Why do you think this would
Assume the following information for Donna Company for 2022. The company uses a normal cost system and a predetermined overhead rate based on direct labor hours.a. What is the predetermined overhead
For many companies today, an electronic match of purchase orders, purchase requisitions, and receiving reports automatically triggers an electronic payment to be made to the vendor. Such a practice
A job cost sheet is a report that summarizes the costs of direct materials, direct labor, overhead, selling, and administrative costs for a specific job. Do you agree? If you do not agree, explain
Indicate if any part of the following chart is incorrect. Direct materials Direct labor Overhead recorded Overhead rate Overhead allocation bases (drivers) Actual Costing Job Order System 1. Recorded
For each of the following document descriptions, give the letter of the document term that best fits the description.a. Purchase requisitionb. Purchase orderc. Receiving reportd. Job cost sheete.
Service companies do not need a job costing system since such companies do not manufacture a product. Do you agree? If you do not agree, explain why the statement is false
Describe some operational business decisions that can benefit from a job costing system.
Following are the current assets sections of the balance sheets for three different companies.a. Which company is a service company?b. Which company is a retailer?c. Which company is a
Give some strategic business decisions that can benefit from a job costing system.
Identify whether each of the following companies would likely use a job order system or a process costing system.a. Construction company that builds specific bridges and highwaysb. Bakery that makes
Affordable Tutoring Services had the following results for 2022:Included in the miscellaneous expense category are marketing costs, a legal retainer, accounting fees, and travel costs.a. Is this
Answer the questions regarding the partially completed T-accounts for XYZ Company for the month of May:<ART: Use minus signs instead of hyphens. Make sure a space follows the + signs for “+
The following information for 2022 applies to Sue, Inc., which makes pet items:a. Complete the T-accounts for raw materials, work in process, and finished goods.b. What are prime costs?c. What are
Assume the following information for NVO, a retailer, in 2022:a. What is cost of goods sold?b. What are selling and administrative costs?c. What additional information would be useful for NVO to
JKL produces boxes. In 2022, the company incurred the following costs:a. What is the amount of manufacturing overhead?b. What are product costs during the period?c. What are period costs? Indirect
Chapter 1, the Institute of Management Accounting’s Standards of Ethical Professional Practice were described as competence, confidentiality, integrity, and credibility. The president of Clever
For each of the following, indicate whether the statement is true or false.a. A carpenter’s salary for a company that builds houses is both a product cost and a prime cost.b. Raw materials
DER, Inc., manufactures a single product. The following information is available for 2022:● Raw materials: Beginning balance: $5,000. Purchased $40,000 on credit. Direct materials used in
Assume the same data from Problem 1. Record all necessary journal entries.Data from Problem 1Best Furniture had the following data in 2022:There were no changes in the work in process inventory or
Best Furniture had the following data in 2022:There were no changes in the work in process inventory or the finished goods inventory.a. What was cost of goods manufactured?b. What were period
For each of the following, indicate whether the cost is a direct cost or an indirect cost.a. Nurse practitioner in a doctor’s officeb. Server in a restaurantc. Housekeeper in a hoteld. Forklift
Assume the same data from Problem 1 except that the work in process inventory increased by $2,000 and the finished goods inventory decreased by $3,000.a. What was cost of goods manufactured?b. What
Identify whether each of the following costs is a product cost or a period cost.a. Depreciation on salesperson’s carb. Salary of factory supervisorc. Overtime premium paid on night shiftd.
Prime costs plus conversion costs equals the cost of goods manufactured. Do you agree? If you do not agree, explain why the statement is false.
Direct costs are the costs that actually become a part of the product. Indirect costs are the costs that are not used in production. Do you agree? If you do not agree, explain why the statement is
Describe the different inventory accounts for a manufacturing firm.
Suppose an accountant incorrectly classified direct labor costs as a period cost instead of a product cost. Explain the potential impact on the amount reported as net income.
The cost of goods available to be sold represents the total amount of product expenses reported on the income statement. Do you agree? If you do not agree, explain why the statement is false.
Discuss in terms of debits and credits how raw materials, work in process, and finished goods are increased.
For each of the following decisions or actions, indicate which of the three areas of managerial accounting apply. Select the best option by placing the corresponding letter in the space
A home improvement store is interested in tracking why customers return merchandise. An employee suggests developing a spreadsheet to track the reasons for returns. He suggests that the return
Differentiate between operational and strategic information needs.
For each of the following types of information, identify whether the information would be most applicable to financial (F) or managerial (M) accounting.i. Income statement given to owners (for
For each of the following, indicate whether the statement is True or False.a. Storyboarding is a financial accounting chart of accounts used by major corporations to prepare financial statements.b.
For the following scenarios, indicate which of the four standards in the IMA’s Statement of Ethical Professional Practice is being violated: (1) Competence; (2) Confidentiality; (3)
From a familiar setting, such as your classes or a job, describe a special decision made using managerial information, including both financial and nonfinancial information.
Paul wants to start a barbershop. He would like to have an extra $450 per month to help with his house payments. He has found a location that will rent him space for $425 per month, plus an
Suppose you are a recent accounting graduate and begin work for a well-known consulting firm, Shady Deals, Inc. As you are preparing the final journal entries and the financial statements for the
Classify each of the following as pertaining to the income statement or the balance sheet. If it is a balance sheetaccount, choose the proper category. A balance sheet and income statement example
Which actions are needed when analyzing and resolving potential ethical problems?
Indicate whether each of the following is True or False.a. The main objective of general financial accounting is to provide management with information to budget for the future and for the IRS to tax
For the following events, in the spaces provided, fill in the numbers of the account(s) increased and decreased when recording the entry in the first grid. Accounts may be used more than once, and
Describe the IMA’s Statement of Ethical Professional Practice.
The following is known about Pedro Company, which has a January fiscal year end:Answer the following questionsa. What were Long-Term Liabilities on 1/31/23?b. What was the total of Property, Plant,
For the following events, in the spaces provided, fill in the effect on net income on the Income Statement. Use:+ for increase– for decrease0 for no net effect Transactions a. Employees worked for
Explain the differences between the three means of gathering managerial accounting data.
Explain the three primary uses of managerial accounting information.
What are three means of gathering managerial accounting data?
How is management accounting information useful to the three functions of management?
How are information needs different for higher and lower levels of management in an organization?
The elements of the accounting information system are inputs, processes, and outputs. What are some inputs into the system?
One output of managerial reporting is an analysis of actual costs or a cost report. Provide three examples of cost items that could be found in a cost report for a bakery.
How are a budget and a simple performance report useful to analyze the results of operations?
With respect to the processing of managerial accounting information, how can efficiency be achieved with technology?
Besides a cost report, budget, and performance analysis, what are other outputs or tools available to management to achieveoperational and strategic goals?
Give three examples of qualitative information that are relevant in managerial accounting but not captured and reported in financial accounting.
Describe the three primary functions of managers within organizations that are necessary for long-term sustainability.
Describe the difference between structured and unstructured data. How does big data analysis use structured and unstructured data?
Differentiate between descriptive analytics, diagnostic analytics, predictive analytics, and prescriptive analytics.
Refer to the lawn service company illustration. Assume that the company wanted to offer an additional line of service covering fumigation, fertilizing, and landscaping. What information should the
What is meant by the cost-benefit constraint when developing managerial accounting systems?
United Forest Products (UFP) is a large timber and wood processing plant. UFP's performance-evaluation system pays its managers substantial bonuses if the company achieves annual budgeted profit
Why is it important to distinguish between the performance of a manager and the performance of the organization subunit for which the manager is responsible? Give examples.
Distinguish among measuring assets based on present value, current cost, and historical cost.
Describe economic value added.
“Residual income is not identical to ROI, although both measures incorporate income and investment into their computations.” Do you agree? Explain.
What are the six steps in designing an accounting-based performance measure?
Give two examples of financial performance measures and two examples of nonfinancial performance measures.

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