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Exam 10: An Introduction to Management Accounting

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Question 21

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What is the effect on the balance sheet of making cash sales of inventory to customers on profit?

A) Assets and equity increase.
B) Assets and equity decrease.
C) Assets decrease and equity increases.
D) Assets increase and equity decreases.

E) A) and B)
F) None of the above

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Question 22

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As a Certified Management Accountant, Grace is bound by the standards of ethical conduct issued by the Institute of Management Accountants. If she accepts an expensive gift from a vendor trying to win a contract with her firm, which of the following standards will she violate?

A) Integrity
B) Confidentiality
C) Competence
D) Objectivity

E) A) and B)
F) A) and C)

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Question 23

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As a Certified Management Accountant, Steven is bound by the Institute of Management Accountant's Standards of Ethical Conduct. Describe the actions Steven should take when faced with an ethical dilemma at work.

Anton believes his company's overhead costs are driven (affected) by the number of machine hours because the production process is heavily automated. During the period, the company produced 3,000 units of Product A requiring a total of 100 machine hours and 2,000 units of Product B requiring a total of 25 machine hours. What allocation rate should be used if the company incurs overhead costs of $10,000?

Product costs flow from the balance sheet to the income statement.

Cash paid to production workers should be recorded as Wages Expense in the income statement for the period incurred.

The benefits of a just-in-time system would include all of the following except:

According to the Sarbanes-Oxley Act, a company's audit committee is responsible for its system of internal controls.

A just-in-time system can lower inventory holding costs and increase customer satisfaction.

The time spent moving a product from one processing department to the next processing department is an example of a value-added activity.

Managerial accounting is designed to satisfy needs of external users including creditors, investors, and governmental agencies.

Which of the following transactions would cause net income for the period to decrease?

Distinguishing between product and period costs is sometimes guided by the value-added principle.

Jarvis Company provided the following information regarding its first year of operations: $\begin{array}{lr}\text { Administrative salaries } & \$ 60,000 \\\text { Depreciation on factory equipment } & 16,000 \\\text { Indirect materials } & 4,000 \\\text { Marketing costs } & 40,000 \\\hline \text { Salaries for factory supervisors } & 28,000\\\hline \text { Wages for production workers } & 80,000 \\\text { Raw materials used } & 100,000 \\\text { Research and development } & 32,000 \\\text { Rent on factory building } & 18,000 \\\text { Sales revenues } & 432,000 \\\hline \text { Sales salaries and other selling costs } & 56,000\\\\\hline \text { Beginning inventory } & 0 \text { units } \\\hline \text { Number of units produced } & 20,000 \\\hline \text { Number of units sold } & 18,000 \\\end{array}$ Required: Determine the following amounts: (a) Total overhead costs. (b) Total product costs. (c) Product cost per unit. (d) Total cost of ending finished goods inventory. (e) Total cost of goods sold.

Which of the following is not a provision of the Sarbanes-Oxley Act of 2002?

Unlike direct material and direct labor costs, overhead costs must be allocated to products.

Cruz Tools produces scissors in a two-stage production process. The following production times are provided: $\begin{array}{|l|r|} \hline\text { a) Casting and shaping process } & 16 \text { minutes } \\\hline\text { b) Inspection time in casting } & 8 \text { minutes } \\\hline \text { c) Move time to finishing } & 15 \text { minutes } \\\hline \text { d) Waiting for the finishing operation } & 22 \text { minutes } \\\hline \text { e) Finishing process } & 14 \text { minutes } \\\hline \text { f) Inspection time in finishing } & 5 \text { minutes }\\\hline\end{array}$ Required: 1) Identify the non-value-added activities. 2) What percentage of the total time to complete is actually value-added time? 3) How could this production operation be improved?

Period costs are initially recorded in asset accounts and are later expensed in the period when the related units are sold.

Choose the answer that is not a distinguishing characteristic of financial accounting information.

Assuming a company's inventory increased during the period, which of the following misclassifications may increase net income?