TEST BANK FOR
Managerial Accounting Tools for Business Decision Making
10thEdition by Jerry J. Weygandt, Paul D. Kimmel, Jill E.
Mitchell
CHAPTER 1 f
MANAGERIAL ACCOUNTING f
CHAPTER LEARNING OBJECTIVES f f
1. Identify the features of managerial accounting and the functions of management. The
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primary users of managerial accounting reports, issued as frequently as needed, are internal
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users, who are officers, department heads, managers, and supervisors in the company. The
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purpose of these reports is to provide special-purpose information for a particular user for a
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specific decision. The content of managerial accounting reports pertains to subunits of the
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business. It may be very detailed, and may extend beyond the accrual accounting system. The
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reporting standard is relevance to the decision being made. No independent audits are
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required in managerial accounting.
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The functions of management are planning, directing, and controlling. Planning requires
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management to look ahead and to establish objectives. Directing involves coordinating the
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diverse activities and human resources of a company to produce a smooth-running operation.
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Controlling is the process of keeping the activities on track.
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2. Describe the classes of manufacturing costs and the differences between product and
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period costs. Manufacturing costs are typically classified as either (1) direct materials, (2)
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direct labor, or (3) manufacturing overhead. Raw materials that can be physically and directly
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associated with the finished product during the manufacturing process are called direct
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materials. The work of factory employees that can be physically and directly associated with
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converting raw materials into finished goods is considered direct labor. Manufacturing
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overhead consists of costs that are indirectly associated with the manufacture of the finished
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product. Manufacturing costs are typically incurred at the manufacturing facility.
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Product costs are costs that are a necessary and integral part of producing the finished product.
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Product costs are also called inventoriable costs. These costs do not become expenses until
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the company sells the finished goods inventory.
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Period costs are costs that are identified with a specific time period rather than with a salable
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product. These costs relate to nonmanufacturing costs and therefore are not inventoriable
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costs. They are expensed as incurred.
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3. Demonstrate how to compute cost of goods manufactured and prepare financial f f f f f f f f f f
statements for a manufacturer. Companies add the cost of the beginning work in process
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inventory to the total manufacturing costs for the current year to arrive at the total cost of work
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in process for the year. They then subtract the ending work in process inventory from the total
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cost of work in process to arrive at the cost of goods manufactured.
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The difference between a merchandising and a manufacturing balance sheet is in the current
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assets section. The current assets section of a manufacturing company's balance
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fsheet
,12-2 Test Bank for Managerial Accounting, Tenth
Edition
presents three inventory accounts: finished goods inventory, work in process inventory, and
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raw materials inventory.
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The difference between a merchandising and a manufacturing income statement is in the cost
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of goods sold section. A manufacturing cost of goods sold section shows beginning and ending
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finished goods inventories and the cost of goods manufactured.
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4 Discuss trends in managerial accounting. Managerial accounting has experienced many
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changes in recent years, including a shift toward service companies as well as emphasis on
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ethical behavior. Improved practices include a focus on managing the value chain through
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techniques such as just-in-time inventory, total quality management, activity-based costing, and
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theory of constraints. The balanced scorecard is now used by many companies in order to
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attain a more comprehensive view of the company's operations, and companies are now
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evaluating their performance with regard to their corporate social responsibility. Finally, data
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analytics and data visualizations are important tools that help businesses identify problems and
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opportunities, and then make informed decisions
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TRUE-FALSE STATEMENTS f
1. Reports prepared in financial accounting are general-purpose reports while reports
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prepared in managerial accounting are usually special-purpose reports.
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Ans: fT, fLO: f1, fBloom: fC, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: fNone, fAICPA fFC: fReporting, fAICPA fPC: fCommunication, fIMA: fReporting
2. Managerial accounting information generally pertains to an entity as a whole and is highly
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aggregated.
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Ans: fF, fLO: f1, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: fNone, fAICPA fFC: fReporting, fAICPA fPC: fCommunication, fIMA: fReporting
3. All forms of business organizations need managerial accounting information.
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Ans: fT, fLO: f1, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: fNone, fAICPA fFC: fReporting, fAICPA fPC: fCommunication, fIMA: fReporting
4. Determining the unit cost of manufacturing a product is an output of financial accounting. f f f f f f f f f f f f f
Ans: f F, f LO: f 1, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation, f AICPA
f PC: fNone, f IMA: fFSA
5. Managerial accounting internal reports are prepared more frequently than financial f f f f f f f f f
statements that are distributed externally.
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Ans: fT, fLO: f1, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: fNone, fAICPA fFC: fReporting, fAICPA fPC: fCommunication, fIMA: fReporting
6. The management function of organizing and directing is mainly concerned with settinggoals
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and objectives for the entity.
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Ans: fF, f LO: f1, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: f Process f and fResource fManagement fPerspectives, fAICPA f FC: fNone,
fAICPA fPC: fLeadership, fIMA: fDecision fAnalysis
7. The controller of a company is responsible for all of the accounting and finance issues a
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company faces.
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Ans: fF, fLO: f1, fBloom: fK, fDifficulty: fEasy, fMin: f1, fAACSB: fEthics, fAICPA fBB: f None, fAICPA fFC: fReporting, fAICPA fPC: fNone, fIMA: fReporting
8. Controlling is the process of determining whether planned goals are being met.
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Ans: fT, f LO: f1, fBloom: fK, fDifficulty: fEasy, f Min: f 1, fAACSB: fNone, fAICPA fBB: f Process f and fResource f Management fPerspectives, fAICPA f FC: fNone,
fAICPA fPC: fLeadership, fIMA: f Internal f Controls
9. Decision-making is an integral part of the planning, directing, and controlling functions. f f f f f f f f f f f
Ans: f T, f LO: f 1, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f Strategic f Perspective, f AICPA f FC: f None, f AICPA f PC:
f Leadership, f IMA: fDecision fAnalysis
, Planning for Capital Investments 12-3
10. Direct materials costs and indirect materials costs are both included in manufacturing
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overhead.
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Ans: f F, f LO: f 2, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation,
f AICPA f PC: fNone, f IMA: fCost f Management
11. Manufacturing costs that cannot be classified as direct materials or direct labor are
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classified as manufacturing overhead.
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Ans: f T, f LO: f 2, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation,
f AICPA f PC: fNone, f IMA: fCost f Management
12. The balance in the raw materials inventory account is equal to total direct materials minus
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total indirect materials.
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Ans: f F, f LO: f 2, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation,
f AICPA f PC: fNone, f IMA: fCost f Management
13. Raw materials that can be conveniently and directly associated with a finished product are
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called materials overhead.
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Ans: f F, f LO: f 2, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation,
f AICPA f PC: fNone, f IMA: fCost f Management
14. The total cost of a finished product does not generally include equal amounts of materials,
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labor, and overhead costs.
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Ans: f T, f LO: f 2, f Bloom: f C, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation,
f AICPA f PC: fNone, f IMA: fCost f Management
15. Both direct labor cost and indirect labor cost are product costs.
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Ans: f T, f LO: f 2, f Bloom: f C, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation,
f AICPA f PC: fNone, f IMA: fCost f Management
16. Period costs include selling and administrative expenses.
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Ans: f T, f LO: f 2, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation,
f AICPA f PC: fNone, f IMA: fCost f Management
17. Indirect materials and indirect labor are both inventoriable costs.
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Ans: f T, f LO: f 2, f Bloom: f C, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation,
f AICPA f PC: fNone, f IMA: fCost f Management
18. Direct materials and direct labor are the only product costs.
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Ans: f F, f LO: f 2, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation,
f AICPA f PC: fNone, f IMA: fCost f Management
19. Total period costs are deducted from total cost of work in process to calculate cost
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ofgoods manufactured.
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Ans: f F, f LO: f 3, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation,
f AICPA f PC: fNone, f IMA: fCost f Management
20. Period costs are not inventoriable costs.
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Ans: fT, fLO: f2, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: f None, fAICPA fFC: fReporting, fAICPA fPC: fNone, fIMA: fReporting
21. Ending finished goods inventory appears on both the balance sheet and the
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fincomestatement of a manufacturing company.f f f f f
Ans: fT, fLO: f3, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: f None, fAICPA fFC: fReporting, fAICPA fPC: fNone, fIMA: fReporting
22. The beginning work in process inventory appears on both the balance sheet and the cost
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of goods manufactured schedule of a manufacturing company.
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Ans: fF, fLO: f3, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: fNone, fAICPA fFC: fReporting, fAICPA fPC: fNone, fIMA: fReporting
, 12-4 Test Bank for Managerial Accounting, Tenth
Edition
23. In calculating gross profit for a manufacturing company, the cost of goods manufactured is
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deducted from net sales.
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Ans: fF, fLO: f3, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: fNone, fAICPA fFC: fReporting, fAICPA fPC: fNone, fIMA: fReporting
24. Finished goods inventory does not appear on a cost of goods manufactured schedule.
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Ans: fT, fLO: f3, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: f None, fAICPA fFC: fReporting, fAICPA fPC: fNone, fIMA: fReporting
25. If ending work in process inventory is greater than beginning work in process
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finventory,then cost of goods manufactured will be less than total manufacturing costs for the
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period.
f
Ans: fT, fLO: f3, fBloom: fC, fDifficulty: f Moderate, f Min: f 1, fAACSB: fNone, fAICPA fBB: f None, fAICPA fFC: f Measurement fAnalysis f and fInterpretation, f AICPA fPC:
fNone, f IMA: fCost f Management
26. The finished goods inventory account for a manufacturing company is equivalent to the
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inventory account for a merchandising company.
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Ans: fT, fLO: f3, fBloom: fC, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: fNone, fAICPA fFC: fReporting, fAICPA fPC: fNone, fIMA: fReporting
27. Raw materials inventory shows the cost of completed goods available for sale to
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customers.
f
Ans: fF, fLO: f3, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: fNone, fAICPA fFC: fReporting, fAICPA fPC: fNone, fIMA: fReporting
28. The balanced scorecard approach attempts to maintain minimal inventories on hand.
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Ans: f F, f LO: f 4, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation, f AICPA
f PC: fNone, f IMA: fPerformance fMeasurement
29. The supply chain is all the activities associated with providing a product or service.
f f f f f f f f f f f f f
Ans: f F, f LO: f 4, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation, f AICPA
f PC: fNone, f IMA: fPerformance fMeasurement
30. Many companies have significantly lowered inventory levels and costs using just-in-
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timeinventory methods.
f f
Ans: f T, f LO: f 4, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation, f AICPA
f PC: fNone, f IMA: fCost f Management
31. Managerial accounting is primarily concerned with managers and external users.
f f f f f f f f f
Ans: fF, fLO: f1, fBloom: fK, f Difficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: fNone, fAICPA fFC: fReporting, fAICPA fPC: fNone, fIMA: fBusiness fEconomics
32. Planning involves coordinating the diverse activities and human resources of a companyto
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produce a smoothly running operation.
f f f f f
Ans: fF, f LO: f1, fBloom: fK, fDifficulty: fEasy, f Min: f1, fAACSB: fNone, fAICPA fBB: f Process f and fResource fManagement fPerspectives, fAICPA fFC: fNone,
fAICPA fPC: fNonet, f IMA: fCost f Management
33. When the physical association of raw materials with the finished product is too difficult to
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trace, these costs are usually classified as indirect materials.
f f f f f f f f f
Ans: f T, f LO: f 2, f Bloom: f C, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation, f AICPA
f PC: fNone, f IMA: fCost f Management
34. Product costs are also called inventoriable costs.
f f f f f f
Ans: f T, f LO: f 2, f Bloom: f K, f Difficulty: f Easy, f Min: f 1, f AACSB: f None, f AICPA f BB: f None, f AICPA f FC: f Measurement f Analysis f and f Interpretation, f AICPA
f PC: fNone, f IMA: fCost f Management
35. Direct materials become a cost of goods manufactured when these items are acquired,
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not when the items are used.
f f f f f
Ans: fF, fLO: f3, fBloom: fK, fDifficulty: f Moderate, f Min: f 1, fAACSB: fNone, f AICPA fBB: f None, fAICPA fFC: f Measurement fAnalysis f and fInterpretation, fAICPA
fPC: fNone, f IMA: fCost f Management
