Managerial accounting canadian edition 1st edition braun test bank

A Service company B Merchandising company C Manufacturing company _____ Generally has no inventory _____ Has three types of inventory _____ Inventory consists of freight-in and the cost

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Managerial Accounting, Canadian Edition (Braun)

Chapter 2 Building Blocks of Managerial Accounting

AACSB: Reflective Thinking

AICPA Business: Critical Thinking

AICPA Functional: Reporting

2) Merchandising companies include both wholesalers and retailers

Answer: TRUE

Diff: 1 Type: TF

LO: 2-1

EOC: S2-1

3) All companies have the same types of inventories

Answer: FALSE

Diff: 1 Type: TF

LO: 2-1

EOC: S2-2

4) Merchandising and manufacturing companies have finished goods inventory Answer: FALSE

Diff: 2 Type: TF

LO: 2-1

EOC: S2-2

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5) Which of the following are merchandising companies?

AACSB: Analytical Thinking

AICPA Functional: Decision Making

6) Raw materials, work in process and finished goods are the three types of inventory held by which of the following types of companies?

7) The balance sheet of a service company has:

A) little or no inventory

B) raw materials inventory

C) three categories of inventory

D) two categories of inventory

Answer: A

Diff: 1 Type: MC

LO: 2-1

EOC: S2-1

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8) H & R Block, an income tax preparation service, is what type of company?

9) Among other things, General Mills makes breakfast cereal Which type of company is General Mills? A) Manufacturer

10) Which type of company typically produces its own inventory?

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11) What type of company resells products it previously purchased ready-made from suppliers? A) Merchandiser

12) Before these materials are used to manufacture its cars, Honda classifies steel, glass, and plastic as: A) finished goods inventory

C) work in process inventory

13) Wal-Mart classifies its clothing held for sale as:

A) finished goods inventory

C) work in process inventory

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14) How would Honda classify its partially completed vehicles?

15) Which of the following types of company is the fastest growing in the Canada? A) Service

16) Which of the following is characteristic of a service company?

A) Service companies generally have no tangible products to sell

B) Service companies have a single category of inventory

C) Service companies make a product

D) Service companies transform raw materials into finished goods

Answer: A

Diff: 1 Type: MC

LO: 2-1

EOC: S2-1

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17) A lawn mowing business would be classified as a:

18) A law firm would be classified as a:

19) Intel Corporation makes computer chips Intel Corporation would be classified as a: A) manufacturing company

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20) has/have three types of inventory

21) In , inventory consists of freight-in and the cost of the product which is to be resold A) a service company

22) Which type of company has the highest percentage of labor costs?

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23) Which type(s) of companies prepare income statements and balance sheets?

24) Which of the following items would NOT be found in raw materials inventory for a furniture manufacturer? A) Wood

25) Which of the following costs could be found in work in process inventory for an ice cream manufacturer? A) Utilities for administrative offices

B) Assembly worker wages

C) Depreciation on sales office

D) Customer order forms

Answer: B

Diff: 1 Type: MC

LO: 2-1

EOC: S2-2

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26) Enter the letter of the type of company on the line in front of each statement Letters may be used more than once or not at all

A) Service company

B) Merchandising company

C) Manufacturing company

_ Generally has no inventory

_ Has three types of inventory

_ Inventory consists of freight-in and the cost of the product

_ Has the highest percentage of labor costs

_ Wal-Mart is this type of company

Answer:

A _ Generally has no inventory

C _ Has three types of inventory

B _ Inventory consists of freight-in and the cost of the product

A _ Has the highest percentage of labor costs

B _ Wal-Mart is this type of company

Diff: 1 Type: ES

LO: 2-1

EOC: S2-1

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27) On the line in front of each statement, enter the letter corresponding to the term that best fits that statement You may use a letter more than once and some letters may not be used at all

A Materials inventory E Work in process inventory

B Service companies F Manufacturing companies

C Merchandise inventory G Merchandising companies

D Finished goods inventory

_ Typically have a single category of inventory

_ Resell products they previously purchased ready-made from suppliers

_ Do not have inventory for resale

_ Produce its own inventory

_ Transform raw materials into new finished products

_ Ready to sell inventory of manufacturers

_ Partially completed items of manufacturers

Answer:

G Typically have a single category of inventory

G Resell products they previously purchased ready-made from suppliers

B Do not have inventory for resale

F Produce its own inventory

F Transform raw materials into new finished products

D Ready to sell inventory of manufacturers

E Partially completed items of manufacturers

Diff: 2 Type: ES

LO: 2-1

EOC: E2-1

28) Describe service, merchandising, and manufacturing companies

Answer: Service companies sell intangible services such as insurance, consulting and healthcare Salaries and wages often are the largest part of their costs They usually do not have inventory or cost of goods sold accounts, although some service companies will have a small amount of supplies inventory which is used for their own use and not for sale to customers Merchandising companies resell tangible products they buy from suppliers

Retailers and wholesalers are both types of merchandising companies Merchandisers have inventory

Manufacturing companies use labor, plant and equipment to convert raw materials into finished products which they sell to other companies They have three types of inventory-raw materials, work in process, and finished goods

Diff: 2 Type: ES

LO: 2-1

EOC: S2-1

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29) Explain the difference between raw materials inventory, work in process inventory, and finished goods inventory

Answer: Raw materials inventory includes all materials used to make a product including materials that become

a part of the product as well as other physical materials used in a plant such as machine lubricants and janitorial supplies Work in process inventory includes goods that are partway through the manufacturing process but not yet complete Finished goods inventory includes completed goods that have not yet been sold

Diff: 1 Type: ES

LO: 2-1

EOC: S2-1

30) Describe a company that has some elements of all three types of companies It is part service company, part manufacturer, and part merchandiser

Answer: Many restaurants fall into this category They are a service company since they serve hungry customers They are a manufacturer since they convert raw ingredients into finished meals and they are a merchandiser since they sell ready-to-serve bottles of beer and wine

Diff: 2 Type: ES

LO: 2-1

EOC: S2-1

31) Why do service firms not have inventory costs pertaining to items to be sold? What type of costs do they have?

Answer: Service firms do not have inventory costs because services cannot be produced today and stored up to sell later They do not have inventory They only have period costs that are expensed

Diff: 2 Type: ES

LO: 2-1

EOC: S2-1

32) A company which is in the business of providing intangible services is what type of company?

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33) A company which is in the business of reselling tangible products purchased from suppliers to final users is what type of company?

34) A company which is in the business of reselling tangible products purchased from supplier to businesses which resell the product is what type of company?

2) The activities in the value chain must take place in a specific order

Answer: FALSE

Diff: 1 Type: TF

LO: 2-2

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3) The value chain helps companies control costs of products only

Answer: FALSE

Diff: 1 Type: TF

LO: 2-2

EOC: S2-4

4) Research and development is needed to improve products and to design new products Answer: TRUE

Diff: 1 Type: TF

LO: 2-2

EOC: S2-4

5) Receipt of materials is part of the firm's value chain

Answer: TRUE

Diff: 1 Type: TF

LO: 2-2

EOC: S2-4

6) A company's distribution system is an important part of the value chain

Answer: TRUE

Diff: 1 Type: TF

LO: 2-2

EOC: S2-4

7) Which of the following is NOT part of a company's value chain?

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8) All of the following activities are included in the value chain EXCEPT for: A) customer service

9) Which of the following would NOT be a cost object?

A) Built-to-order web sales

B) Costs in the legal department

C) Sales of a particular model in the southeast

D) All of these could serve as cost objects

Answer: D

Diff: 2 Type: MC

LO: 2-2

EOC: S2-5

10) The value chain is used by:

A) only manufacturing and merchandising businesses

B) only service and manufacturing businesses

C) only service and merchandising businesses

D) service, manufacturing and merchandising businesses

Answer: D

Diff: 2 Type: MC

LO: 2-2

EOC: S2-4

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11) Collectively, all costs such as design, customer service, etc are part of: A) downstream activities

12) The promotion of products and services is known as:

13) Which cost does NOT relate to part of the value chain for a toy company? A) Administrative costs

B) Cost of advertising the new products

C) Cost of shipping to retailers

D) Salaries of game designers

Answer: A

Diff: 2 Type: MC

LO: 2-2

EOC: S2-4

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14) Depreciation on a factory would be classified as which part of the value chain?

15) A technical support hotline for customers would be considered which part of the value chain? A) Customer service

16) Advertising expenses would be considered which part of the value chain?

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17) The costs associated with reengineering machinery and its location within the factory to increase efficiency would be considered which part of the value chain?

18) A company decision as to where to locate a new store would be considered:

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19) Farm Fresh Dairy provided the following expense information for May: Assembly-line workers' wages $72,000

Reconfiguring the assembly line 155,000

Depreciation on factory equipment 81,000

Salaries of research scientists 84,000

Customer toll-free order line 4,000

What is the total cost of research and development?

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What is the total cost for the production category of the value chain? A) $538,000

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What is the total cost for the design category of the value chain?

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What is the total cost for the distribution category of the value chain? A) $19,000

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What is the total cost for the marketing category of the value chain?

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What is the total cost for the customer service category of the value chain? A) $80,000

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25) Sunnybrook Orange Groves processes a variety of fresh juices The company has the following expenses for July:

Depreciation expense on bottling machines $63,000

Cost of maintaining website used for customer orders $4,000

Freshness seals/caps for juice bottles $3,000

Cost of refrigerated trucks used to deliver juice $17,000

What is the total cost for the research and development category of the value chain?

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What is the total cost for the production category of the value chain?

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What is the total cost for the design category of the value chain?

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What is the total cost for the distribution category of the value chain?

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What is the total cost for the marketing category of the value chain?

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What is the total cost for the customer service category of the value chain?

31) Delivery expenses are charged to which of the following areas?

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32) A product support hot line would be considered:

33) Place the value chain elements in the correct order by numbering them from 1 to 6 _ Design

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34) Place the letter for the appropriate value chain activity on the line in front of each item Letters may be used more than once or not at all Assume a manufacturer

A Research and development D Marketing

C Production or purchases F Customer service

_ Depreciation expense on equipment in factory

_ Delivery expense

_ Toll free line for customer orders

_ Customer support hot line

_ Assembly line workers' wages

Answer:

C Depreciation expense on equipment in factory

E Delivery expense

D Toll free line for customer orders

F Customer support hot line

C Assembly line workers' wages

Diff: 2 Type: ES

LO: 2-2

EOC: S2-4

35) Name and briefly describe the activities that make up the value chain

Answer: The value chain consists of research and development, design, production or purchase, marketing, distribution, and customer service Research and development refers to researching and developing new or improved products or services and the processes for producing them Design involves the detailed engineering of products and services and the processes for producing them Production or purchases refers to the resources used

to produce a product or service or to purchase finished merchandise intended for resale Marketing is the

promotion and advertising of products or services Distribution is the delivery of products or services to

customers and customer service provides support for customers after the sale

Diff: 2 Type: ES

LO: 2-2

EOC: S2-3

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36) Classify each of the following business costs into one of the six value chain elements

A Cost of a commercial during a TV program

B Cost of shipping goods to customers

C Costs associated with repairing products under warranty

D Costs of developing a new product

E Cost of making a prototype of a new product

F Cost of labor for machine operator in factory

37) Place the letter for the appropriate value chain activity on the line in front of each item Letters may be used more than once or not at all Assume a manufacturer

_ Depreciation expense on store fixtures

_ Cost of repairing a product under warrantee

_ Cost of testing a new material for use in an existing product

_ Architects fee for designing a new factory building

_ Cost of a new robot to be used in the assembly plant

Answer:

E Depreciation expense on store fixtures

F Cost of repairing a product under warrantee

A Cost of testing a new material for use in an existing product

B Architects fee for designing a new factory building

C Cost of a new robot to be used in the assembly plant

Diff: 2 Type: ES

LO: 2-2

EOC: S2-4

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38) Place the letter for the appropriate value chain element on the line in front of each item Letters may be used more than once or not at all

_ Delivery of products and services

_ Detailed engineering plans for products

_ Payment to sponsor a racing team

_ Investigating a potential new process for producing a product

_ Repairing a customers purchase at no charge

Answer:

E Delivery of products and services

B Detailed engineering plans for products

D Payment to sponsor a racing team

A Investigating a potential new process for producing a product

F Repairing a customers purchase at no charge

Diff: 2 Type: ES

LO: 2-2

EOC: S2-3

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39) Assume the costs listed below are incurred by an independent electronics shop Place the letter for the appropriate value chain element on the line in front of each item Letters may be used more than once or not at all

_ Rearranging the store layout

_ Advertising on the local TV channel

_ Cost of having merchandise delivered to the store

Answer:

A Research on whether the store should expand their product line

C Purchases of merchandise

B Rearranging the store layout

D Advertising on the local TV channel

C Cost of having merchandise delivered to the store

Diff: 2 Type: ES

LO: 2-2

EOC: E2-17A

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40) Assume the costs listed below are incurred by an Telcra Manufacturing Place the letter for the appropriate value chain element on the line in front of each item Letters may be used more than once or not at all

Costs:

Salaries of sales persons

Depreciation on manufacturing equipment

Parts for monitors being manufactured

Delivery expense to customers

Rearrange the production process to accommodate new equipment

Customer support hot line

Answer:

D Salaries of sales persons

C Depreciation on manufacturing equipment

C Parts for monitors being manufactured

E Delivery expense to customers

B Rearrange the production process to accommodate new equipment

F Customer support hot line

Diff: 2 Type: ES

LO: 2-2

EOC: E2-17A

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41) Assume the costs listed below are incurred by an Telcra Manufacturing Place the letter for the appropriate value chain element on the line in front of each item Letters may be used more than once or not at all

Costs:

_ Salaries for the engineers who developed a new process

_ Toll free line for customer orders

_ Assembly line worker's wages

_ Cost of having raw materials delivered to the factory

_ Customer complaint department

Answer:

A Salaries for the engineers who developed a new process

F Toll free line for customer orders

C Assembly line worker's wages

D Cost of having raw materials delivered to the factory

F Customer complaint department

Diff: 2 Type: ES

LO: 2-2

EOC: E2-18A

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42) Assume the costs listed below are incurred by Done and Woody Bookkeeping Service Place the letter for the appropriate value chain element on the line in front of each item Letters may be used more than once or not at all

Costs:

_ Depreciation on computers used by accounting personnel

_ Consultant fees for redesign of the company's billing system

_ Sponsorship of a local youth ball team

_ Purolator charges for returning completed files to clients

_ Purchase of printer supplies

Answer:

C Depreciation on computers used by accounting personnel

B Consultant fees for redesign of the company's billing system

D Sponsorship of a local youth ball team

E Purolator charges for returning completed files to clients

C Purchase of printer supplies

Diff: 2 Type: ES

LO: 2-2

EOC: E2-18A

2) Costs can be either direct or indirect, depending upon the cost object

Answer: TRUE

Diff: 1 Type: TF

LO: 2-3

EOC: E2-20

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3) Indirect costs can be traced to specific units

Answer: FALSE

Diff: 1 Type: TF

LO: 2-3

EOC: E2-21

4) Indirect costs cannot be traced to the cost objects, so they are allocated

Answer: TRUE

Diff: 1 Type: TF

LO: 2-3

EOC: E2-21

5) Indirect costs incurred in manufacturing autos include all of the following EXCEPT:

A) cost of the engines

B) machinery depreciation in the factory

6) When determining the cost of a manufactured product, a factory janitor's wages would be classified as: A) a direct cost

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7) When determining the cost of a manufactured product, a salesperson's salary would be classified as:

8) When determining the cost of a manufactured product, the cost of lighting the factory would be classified as: A) a direct cost

9) All of the following would be considered a direct material for a mattress EXCEPT:

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10) Prime costs consist of:

A) direct labor and manufacturing overhead

B) direct materials and direct labor

C) direct materials and manufacturing overhead

D) direct materials, direct labor and manufacturing overhead Answer: B

Diff: 1 Type: MC

LO: 2-3

EOC: E2-20

11) Conversion costs consist of:

A) direct labor and manufacturing overhead

B) direct materials and direct labor

C) direct materials and manufacturing overhead

D) direct materials, direct labor and manufacturing overhead Answer: A

Diff: 1 Type: MC

LO: 2-3

EOC: E2-20

12) Which of the following is an example of direct labor?

A) Salary of a production manager

B) Salary of the vice-president of operations

C) Wages of assembly line personnel

D) Wages of factory security

Answer: C

Diff: 1 Type: MC

LO: 2-3

EOC: E2-21

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