Question

____ 1. Which of the following is a characteristic of financial, but not managerial, accounting:

A) Information includes economic and non-financial data as well as financial data.

B) Information is historically based and focuses on the organization as a whole.

C) Information is provided primarily to insiders such as managers.

D) Information is reported continuously with a present or future orientation.

____ 2. Per our day-one class discussion, managerial accounting information is often not available to the public.

The internal use of such information, though, is “constrained” by which of the following limitations?

A) Generally Accepted Accounting Principles (GAAP) regulation

B) The Value Added Principle

C) International Accounting Standards Board (IASB) regulation

D) Financial Accounting Standards Board (FASB) regulation

____ 3. How can accountants justify the calculating of an “average” cost per unit?

A) Determining the exact cost of a product is virtually impossible.

B) Some manufacturing-related costs cannot be cost-effectively “traced” to specific units of product.

C) Even when producing multiple units of the same product, normal variations occur in the amount of materials and labor used.

D) All of the above are justifications for computing average unit costs.

____ 4. Select the correct statement regarding costs of a manufacturing-related business:

A) Some costs are initially recorded as expenses while others are initially recorded as assets.

B) Manufacturing-related production (product) costs are initially recorded as expenses.

C) Non-manufacturing costs should be recorded as assets in the period in which they are incurred.

D) Cost of Goods Sold (i.e. inventory expense) is recorded when inventory is purchased.

____ 5. The accountant for Kirkpatrick, Kelly & Aubry, Inc. mistakenly classified $114,323 of period costsas product costs. The company did not sell all of its production during the year. After review of page 18/19 of the text, and the page 54 homework assign, which of the following correctly indicateshow this error affects the company's financial statements?

A) Reported Gross Margin (i.e. Gross Profit) is too high.

B) Reported expense (total of all product and period costs) on the inc stmt is too high.

C) Reported Cost of Goods sold is too high. D) All of the above would occur as a result of this error.

Answer 1

1)

Option Bi.e. Information is historically based and focuses on the organization as a whole, is a characteristic of financial accounting and not managerial accounting

The information created through financial accounting is entirely historical, financial statements contain data for a defined period of time. Managerial accounting looks at past performance and creates business forecasts, Business decisions should be informed by this type of accounting.

2)

Option B i.e The value added principle

Since managerial accounting is not regulated by any specific law and is for the internal use of management only.

3)

Option Di.e.All of the above are justifications for computing average unit costs.

4)

Option B i.e. Manufacturing-related production (product) costs are initially recorded as expenses.

5)

Reported Gross Margin (i.e. Gross Profit) is too high.

Since product cost forms part of Cost of goods sold therefore if it is reported as period cost than the Gross profit would be overstated