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Exam 16: Introduction to Managerial Accounting

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Question 21

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Managerial accounting can be used to calculate costs for service and merchandising companies.

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Question 22

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Define indirect materials and give two examples of indirect materials for a manufacturing company.

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Indirect materials are used in making a ...

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Question 23

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Which of the following statements is true of the flow of product and period costs for a manufacturer?

Selected data for Lemon Grass,Inc.for the year are provided below: $\begin{array} { | l | r | } \hline \text { Factory Utilities } & \$ 1,000 \\\hline \text { Indirect Materials Used } & 34,000 \\\hline \text { Direct Materials Used } & 292,000 \\\hline \text { Property Taxes on Factory Building } & 5,900 \\\hline \text { Sales Commissions } & 85,000 \\\hline \text { Indirect Labor Incurred } & 22,000 \\\hline \text { Direct Labor Incurred } & 150,000 \\\hline \text { Depreciation on Factory Equipment } & 6,800 \\\hline\end{array}$ What is the total manufacturing overhead?

Best,Inc. ,a merchandiser,sells office supplies.The following information summarizes Best's operating activities during the year: $\begin{array} { | l | r | } \hline \text { Utilities Expense } & \$ 6,000 \\\hline \text { Rent for Store Expense } & 8,000 \\\hline \text { Sales Commissions Expense } & 4,500 \\\hline \text { Purchases of Merchandise } & 54,000 \\\hline \text { Merchandise Inventory on January 1 } & 30,000 \\\hline \text { Merchandise Inventory on December 31 } & 20,500 \\\hline \text { Sales Revenue } & 108,000 \\\hline\end{array}$ Required: Prepare an income statement for Best,Inc.for the year ended December 31,using the format below. $\begin{array} { | l | l | l | } \hline \text { Sales Revenue } & \quad\quad&\quad\quad \\\hline \text { Cost of Goods Sold: } & & \\\hline \text { Beginning Inventory } & & \\\hline \text { Purchases } & & \\\hline \text { Cost of Goods Available for Sale } & & \\\hline \text { Ending Inventory } & & \\\hline \text { Cost of Goods Sold } & & \\\hline \text { Gross Profit } & & \\\hline \text { Selling Expenses: } & & \\\hline \text { Sales Commissions Expense } & & \\\hline \text { Administrative Expenses: } & & \\\hline \text { Rent Expense } & & \\\hline \text { Utilities Expense } & & \\\hline \text { Total Operating Expenses } & & \\\hline \text { Operating Income } & & \\\hline\end{array}$

Which of the following would be considered a product cost for a manufacturing business?

Merchandising companies,like service companies,do not have a Cost of Goods Sold account.

Given the following information,determine the cost of goods manufactured. $\begin{array} { | l | r | } \hline \text { Direct Labor Incurred } & \$ 62,000 \\\hline \text { Manufacturing Overhead Incurred } & 177,000 \\\hline \text { Direct Materials Used } & 151,000 \\\hline \text { Finished Goods Inventory, Jan. 1 } & 197,000 \\\hline \text { Finished Goods Inventory, Dec. 31 } & 99,000 \\\hline \text { Work-in-Process Inventory, Jan. 1 } & 221,000 \\\hline \text { Work-in-Process Inventory, Dec. 31 } & 108,000 \\\hline\end{array}$

Product costs are expensed ________.

The following information relates to Webster,Inc.: $\begin{array} { | l | r | } \hline \text { Advertising Costs } & \$ 10,600 \\\hline \text { Administrative Salaries } & 17,600 \\\hline \text { Delivery Vehicle Depreciation } & 1,300 \\\hline \text { Factory Repair and Maintenance } & 200 \\\hline \text { Indirect Labor } & 10,500 \\\hline \text { Indirect Materials } & 10,000 \\\hline \text { Manufacturing Equipment Depreciation } & 1,000 \\\hline \text { Office Rent } & 51,000 \\\hline \text { President's Salary } & 2,500 \\\hline \text { Sales Revenue } & 530,000 \\\hline \text { Sales Salary } & 4,700 \\\hline\end{array}$ How much were Webster's period costs?

The three categories of period costs are direct materials,direct labor,and manufacturing overhead.

Which of the following will most likely be considered an indirect material cost for a bakery?

Which of the following describes a system in which suppliers deliver materials at the time they are needed and finished units are completed when customer orders need to be filled?

Star Health,Inc.is a fitness center in Oklahoma City.In October,the company earned $550,000 in revenues and incurred the following operating costs from 340 customers: $\begin{array} { | l | r | } \hline \text { Manager's salary } & \$ 50,000 \\\hline \text { Gym Rent } & 60,000 \\\hline \text { Depreciation Expense-Equipment } & 25,000 \\\hline \text { Office Supplies Expense } & 30,000 \\\hline \text { Utilities Expense } & 89,700 \\\hline \text { Trainer's Salary } & 25,000 \\\hline\end{array}$ Required: Prepare Star Health's income statement for the month of October.

Houston Corporation reports the following cost information for March: $\begin{array} { | l | r | } \hline \text { Cost of Goods Manufactured } & \$ 75,000 \\\hline \text { Manufacturing Overhead } & 18,700 \\\hline \text { Finished Goods Inventory, March 1 } & 4,000 \\\hline \text { Finished Goods Inventory, March 31 } & 4,000 \\\hline \text { Work-in-Process Inventory, March 1 } & 9,790 \\\hline \text { Work-in-Process Inventory, March 31 } & 1,280 \\\hline \text { Direct Labor } & 36,800 \\\hline\end{array}$ What is the amount of direct materials used by the company in March?

In which of the following ways is the management of a company accountable to its communities?

Which of the following is most likely a service company?

Unit product costs can be used to measure operating income and determine the cost of Finished Goods Inventory.

Define planning.List and briefly discuss a planning tool that managers can use.

Bloomington,Inc.is a merchandiser of stone ornaments.The company sold 7,000 units during the year.The company has provided the following information: $\begin{array} { | l | r | } \hline \text { Sales Revenue } & \$ 550,000 \\\hline \text { Purchases (excluding freight in) } & 304,000 \\\hline \text { Selling and Administrative Expenses } & 69,000 \\\hline \text { Freight In } & 15,000 \\\hline \text { Beginning Merchandise Inventory } & 43,000 \\\hline \text { Ending Merchandise Inventory } & 42,000 \\\hline\end{array}$ What is the cost of goods sold for the year?