Management Accounting Exam Questions And Answers Verified 100% Correct

Management Accounting Exam Questions And Answers Verified 100% Correct Product vs period costs (or Manufacturing vs non-manufacturing costs) - ANSWER -Product: - Relates to converting materials to products using labour and equipment. - Classified as: Direct Materials, Direct Labor, and Manufacturing Overhead Period: - Other costs related to the non-manufacturing sides eg. Fixed Selling and Administrative Expenses, Variable Selling and Administrative Expenses, Fixed Manufacturing Overhead Direct materials - ANSWER -Type of product cost. Materials that become an integral part of a finished product and whose costs can be conveniently traced to it. Direct labour - ANSWER -Type of product cost; Those factory labour costs that can be traced easily to individual units of product. Manufacturing overheard - ANSWER -All other product costs excluding direct labour and materials. Includes indirect labour, and includes other indirect product costs. eg. depreciation, maintenance labour, supervision, power, plant property taxes, etc Prime vs conversion costs - ANSWER -Only applies to manufacturing costs. Prime: Direct materials Conversion: The cost of converting the materials (Overhead costs) Direct labour is included in both categories? Income statement: Manufacturing companies - ANSWER - Manufacturing companies will often have three inventory accounts in the balance sheet: - Raw material inventory - Work in process inventory (where extra costs are accumulated) - Finished goods inventory Cost of goods manufactured is the cost of finishing products, before they are sold. These costs are then transferred to COGS when the product is sold, which goes on the income statement and is finally expensed. Other costs (period costs) are labelled as operating expenses. Cost of goods manufactured - ANSWER -represents the total product cost of goods completed during the period and transferred to finished goods inventory. Direct materials + Direct labour + manufacturing overhead costs + Beginning WIP inventory - Ending WIP inventory = COGM Cost of direct materials used in production (direct materials) - ANSWER -Beginning materials + Materials purchased - Ending materials = Direct materials What does it mean to expense a cost - ANSWER -Expensing a cost indicates it is included on the income statement and subtracted from revenue to determine profit. Income statement: Service organisation - ANSWER -Direct materials, labour and overhead come together to make cost of services, and all other costs are operating expenses Value chain - ANSWER -the series of internal departments that carry out value-creating activities to design, produce, market, and distribute goods and services, and includes customer service Upstream vs downstream costs - ANSWER -Upstream costs occur before production and downstream after Cost behaviour - ANSWER -the way in which a cost reacts or responds to changes in the level of activity Cost driver - ANSWER -A factor, such as machine-hours, beds occupied, cars manufactured, that measures the output of the activity that leads to cost changes. Relevant range - ANSWER -The range of activity over which a particular cost behaviour pattern is assumed to be valid Step cost - ANSWER -Cost that increases with volume in steps; also called semifixed cost (eg. material purchased in bulk)