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business
managerial accounting

Questions and Answers of Managerial Accounting

What are the three major elements of product costs in a manufacturing company?
Distinguish between the following(a) Direct materials(b) Indirect materials(c) Direct labor(d) Indirect labor and(e) Manufacturing overhead.
Explain the difference between a product cost and a period cost.
Describe how the income statement of a manufacturing company differs from the income statement of a merchandising company.
Describe the schedule of cost of goods manufactured. How does it tie into the income statement?
Describe how the inventory accounts of a manufacturing company differ from the inventory account of a merchandising company.
Why are product costs sometimes called inventoriable costs? Describe the flow of such costs in a manufacturing company from the point of incurrence until they finally become expenses on the income
Is it possible for cost-such as salaries or depreciation to end up as assets on the balance sheet? Explain.
What is meant by the term cost behavior?
A variable cost is a cost that varies per unit of product, whereas a fixed cost is constant per unit of product. Do you agree? Explain.
How do fixed costs create difficulties in costing units of product?
Why is manufacturing overhead considered an indirect cost of a unit of product?
Define the following terms, differential cost, opportunity cost, and sunk cost.
Only variable costs can be differential costs. Do you agree? Explain.
Mary Adams is employed by Acme Company. Last week she worked 34 hours assembling one of the company’s products and was idle 6 hours due to material short-ages. Acme’s employees are engaged at
John Olsen operates a stamping machine on the assembly line of Drake Manufacturing Company. Last week Mr. Olsen worked 45 hours. His basic wage rate is $14 per hour, with time and a half for overtime
Costs associated with the quality of conformance can be broken down into four broad groups. What are these four groups and how do they differ?
In their efforts to reduce the total cost of quality, should companies generally focus on decreasing prevention costs and appraisal costs?
What is probably the most effective way to reduce a company’s total quality costs?
What are the main uses of quality cost reports?
Why are managers often unaware of the magnitude of quality costs?
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a
A product cost is also known as an inventoriable cost. Classify the following costs as either product (inventoriable) costs or period (non-inventoriable) costs in a manufacturing company.1.
Last month Cyber Games, a computer game retailer, had total sales of $1,450,000, selling expenses of $210,000, and administrative expenses of $180,000. The company had beginning merchandise inventory
Lompac Products manufactures a variety of products in its factory. Data for the most recent month’s operations appear below:
Below are a number of costs that are incurred in a variety of organization.Required:Classify each cost as being variable or fixed with respect to the number of units of product or services sold by
Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics.Required:For each cost incurred at Northwest Hospital, indicate
Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics. The hospital’s Radiology Department is considering replacing
Several days ago you took your TV set into a shop to have some repair work done. When you later picked up the set, the bill showed a $75 charge for labor. This charge represented two hours of service
Listed below are a number of costs that are incurred in connection with a company’s quality control system.a.Productk.Net cost of scrapb.Product recalls.l.Depreciation of test
The Devon Motor Company produces motorcycles. During April, the company purchased 8,000 batteries at a cost of $10 per battery. Devon withdrew 7,600 batteries from the storeroom during the month. Of
The following cost and inventory data are taken from the accounting records of Mason Company for the year just completed:Costs incurred:Direct labor
Below are listed various costs that are found in organizations.1. Hamburger buns in a Wendy’s outlet.2. Advertising by a dental office.3. Apples processed and canned by Del Monte.4. Shipping canned
Paul Clark is employed by Aerotech Products and assembles a component part for one of the company’s product lines. He is paid $14 per hour for regular time and time and a half (i.e., $21 per hour)
Listed below are a number of costs typically found in organizations.1. Property taxes, factory.2. Boxes used for packaging detergent produced by the company.3. Salespersons’ commissions.4.
Mark Hansen is employed by Eastern Products, Inc., and works on the company’s assembly line. Mark’s basic wage rate is $20 per hour. The company’s union contract states that employees are to be
Wollongong Group Ltd, of New South Wales, Australia, acquired its factory building about 10 years ago. For several years the company has rented out a small annex attached to the rear of the building.
Various costs associated with the operation of factories are given below:1. Electricity used in operating machines.2. Rent on a factory building.3. Cloth used to drapery production.4. Production
In response to intensive foreign competition, the management of Florex Company has attempted over the past year to improve the quality of its products. A statistical process control system has been
Various cost and sales data for Meriwell Company for the just completed year appear in the worksheet below:Finished goods inventory, beginning $20,000Finished goods inventory,
You have just been hired by Ogden Company to fill a new position that was created in response to rapid growth in sales. It is you responsibility to coordinate shipments of finished goods from the
Staci Valek began dabbling in pottery several years ago as a hobby. Her work is quite creative, and it has been so popular with friends and others that she has decided to quit het job is $3,800 per
Mercury, Inc., produces pagers at its plant in Texas. In recent years, the company’s market share has been eroded by stiff competition from overseas. Price and product quality are the two key areas
The Dorilane Company specializes in producing a set of wood patio furniture consisting of a table and four chairs. The set enjoys great popularity, and the company has ample orders to keep production
Madison Seniors Care Center is a non-profit organization that provides a variety of health services to the elderly. The center is organized into a number of departments, one of which is the
Swift Company was organized on March 1 of the current year. After five months of start-up losses, management had expected to earn a profit during August. Management was disappointed, however, when
M. K. Gallant is president of Kranbrack Corporation, a company whose stock is traded on a national exchange. In a meeting with investment analysts at the beginning of the year, Gallant had predicted
Selected account balances for the year ended December 31 are provided below for Superior Company: Selling and administrative salaries?????????? $110,000 Insurance, factory???????????????..??? ? ?
Supply the missing data in the following cases. Each case is independent of the others.
Visic Corporation, a manufacturing company, produces a single product. The following information has been taken from the companys production, sales, and cost records for the just completed
I was sure that when our battery hit the market it would be an instant success, said Roger Strong, founder and president of Solar Technology, Inc., but just look at the gusher of red ink for the
Hector P. Wastrel, a careless employee, left some combustible materials near an open flame in Salter Company’s plant. The resulting explosion and fire destroyed the entire plant and administrative
What is the basic difference in orientation between financial and managerial accounting?
Bristow University is a large private school located in the Midwest. The university is headed by a president who has five vice presidents reporting to him. These vice presidents are responsible for,
Mary Karston was hired by a popular fast-food restaurant as an order-taker and cashier. Shortly after taking the job, she was shocked to overhear an employee bragging to a friend about shortchanging
Describe the three major activities of a manager.
What are the four steps in the planning and control cycle?
Distinguish between line and staff positions in an organization.
Special Alloys Corporation manufactures a variety of specialized metal products for industrial use. Most of the revenues are generated by large contracts with companies that have government defense
Consumers and attorney generals in more than 40 states accused a prominent nationwide chain of auto repair shops of misleading customers and selling them unnecessary parts and services, from brake
The situation described below was adapted from a case published by the institute of Management Accountants Committee on Ethics.WIW is a publicly owned corporation that makes various control devices
A number of terms that relate to organization, the work of management, and the role of managerial accounting are listed below:Budgets
Why aren’t actual overhead costs traced to jobs just as direct materials and direct labor costs are traced to jobs?
Why would job-order costing be used instead of process costing?
What is the purpose of the job cost sheet in a job-order costing system?
Why is a predetermined overhead rate, and how is it computed?
Explain how a sales order, a production order, a materials requisition form, and a labor time ticket are involved in producing and costing products?
Explain why some production costs most be assigned to products through an allocation process?
Why do companies uses predetermined overhead rates rather than actual manufacturing overhead costs to apply overhead to jobs?
What factors should be considered in selecting a base to be used in computing the predetermined overhead rate?
If a company fully allocates all of its overhead costs to jobs, does this guarantee that a profit will be earned for the period?
What account is credited when overhead cost is applied to work in process? Would you expect the amount applied for a period to equal the actual overhead costs of the period? Why or why not?
What is underapplied overhead? Over applied overhead? What disposition is made of these amounts at the end of the period?
Provide two reasons why overhead might be under applied in a given year?
What adjustment is made for under applied overhead on the schedule of cost of goods sold? What adjustment is made for over applied overhead?
What is a plant wide overhead rate? Why are multiple overhead rates, rather than a plant wide overhear rate, used in some companies?
What happens to overhead rates based on direct labor when automated equipment replaces direct labor?
Process Costing and Job-Order CostingWhich method of determining product costs, job-order costing or process costing, would be more appropriate in each of the following situations’?a. An Elmer’s
Cycle Gear Corporation has incurred the following costs on job number W456, an order for 20 special sprockets to be delivered at the end of next month.Direct materials:On April 10,Requisition number
Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year it estimated that its total manufacturing overhead would be S 134,000
Lamed Corporation recorded the following transactions for the just completed month.a. $80,000 in raw materials were purchased on account.b. $71,000 in raw materials were requisitioned for use in
Luthan Company uses a predetermined overhead rate of $23.40 per direct labor-hour. This predetermined rate was based on 11,000 estimated direct labor-hours and $257,400 of estimated total
Primare Corporation has provided the following data concerning last month's manufacturing operations. Required: 1. Prepare a schedule of cost of goods manufactured for the month. 2. Prepare a
Jurvin Enterprises recorded the following transactions for the just completed month. The company had no beginning inventories.a. $94,000 in raw materials were purchased for cash.b. $89,000 in raw
Osborn Manufacturing uses a predetermined overhead rate of $18.20 per direct labor-hour. This predetermined rate was based on 12,000 estimated direct labor-hours and $218,400 of estimated total
Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $5,000 for direct materials,
Estimated cost and operating data for three companies for the upcoming year follow: Predetermined overhead rates are computed using the following allocation bases in the three
The following information is taken from the accounts of Latta Company. The entries in the T-accounts are summaries of the transactions that affected those accounts during the year. The overhead
Harwood Company uses a job-order costing system. Overhead costs are applied to jobs on the basis of machine-hours. At the beginning of the year, management estimated that the company would incur
A company assigns overhead cost to completed jobs on the basis of 125% of direct labor cost. The job cost sheet for Job 313 shows that $10,000 in direct materials has been used on the job and that
The Polaris Company uses a job-order costing system. The following data relate to October, the first month of the company’s fiscal year.a. Raw materials purchased on account, $210,000.b. Raw
Architectural Consultants began operations on January 2. The following activity was recorded in the company’s Work in Process account for the first month of operations:Leeds Architectural
Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the
The following cost data relate to the manufacturing activities of Chang Company during the just completed year: The company uses a predetermined overhead rate to apply overhead cost to production.
Kingsport Containers, Ltd, of the Bahamas experiences wide variation in demand for the 200-liter steel drums it fabricates. The leakproof, rustproof steel drums have a variety of uses from storing
Vista Landscaping uses a job-order costing system to track the costs of its landscaping projects. The company provides garden design and installation services for its clients. The table below
White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Cutting Department bases its
Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company?s balance sheet accounts as of January 1, the beginning of its fiscal year, are given on the following
Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. A popular pastime among older Chinese men is to take their pet birds on daily
Almeda Products, Inc., uses a job-order costing system. The company’s inventory balances on April 1, the start of its fiscal year, were as follows:During the year, the following transactions were

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