Ch 16 & 17

The principal difference between managerial accounting and financial accounting is that managerial accounting information is:

• Prepared by managers.

• Intended primarily for use by decision makers inside the business organization.

• Prepared in accordance with a set of accounting principles developed by the Institute of Certified Managerial Accountants

• Oriented toward measuring solvency rather than profitability.

Manufacturing costs do not include:

• Direct labor applicable to production within the period

• Selling expenses related to goods manufactured during the period

• Direct materials used during the period

• Manufacturing overhead charged to work in process during the period

Manufacturing overhead is best described as

• All manufacturing costs other than direct materials and direct labor

• All period costs associated with manufacturing operations

• Indirect materials and indirect labor

• All operating expenses other than selling expenses and general and administrative expenses

When a manufacturing company purchases raw materials or component parts to be used in manufacturing finished goods, these costs are initially debited to:

• Expense accounts

• Raw Materials Inventory

• Finished Goods Inventory

• Manufacturing Overhead

The cost of the employee who computes total manufacturing costs would be considered as

• Direct Labor

• Indirect Labor

• Manufacturing Overhead

• Period Costs

A product cost is deducted from revenue in the period in which:

• The related finished goods are sold.

• The expenditure is made.

• The production of the product begins

• The production process is completed

An activity base is said to be a "driver" of overhead costs when the activity base:

• Is independent of the amount of overhead cost incurred

• Results in an overhead application rate greater than 100%.

• Is a causal factor in the amount of overhead cost incurred

• Is the largest of the various types of expenditures classified as manufacturing overhead.

An activity-based costing system would probably not be appropriate if:

• A company produces more than one product line

• A company produces only one product

• A company is highly automated

• A company has more than one production facility

Under-applied overhead at the end of a month

• Results when actual overhead costs are less than amounts applied to work in process

• Indicates a poorly designed cost accounting system

• Is represented by a debit balance remaining in the Manufacturing Overhead account

• Is represented by a credit balance remaining in the Work in Process Inventory account

The employee time card for John Winter indicates that he spent last week performing routine maintenance on factory machinery. Payments made to Winter for last week's work should be

• Debited to Work in Process Inventory

• Credited to the Direct Labor account

• Debited to the Direct Labor account

• Debited to the Manufacturing Overhead account