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Chapter 16: 10RQ (page 885)
Explain the difference between a direct cost and an indirect cost.
The direct cost is effectively traced but the indirect cost cannot be traced easily to a cost object.
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Comparing managerial accounting and financial accounting
For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):
c. Helps in planning and controlling operations
Understanding today’s business environment
Match the following terms to the appropriate statement. Some terms may be used more than once, and some terms may not be used at all.
E-commerce Just-in-time management (JIT)
Enterprise resource planning (ERP) Total quality management (TQM)
a. A management system that focuses on maintaining lean inventories while producing products as needed by the customer.
b. A philosophy designed to integrate all organizational areas in order to provide customers with superior products and services while meeting organizational objectives.
c. Integrates all of a company’s functions, departments, and data into a single system.
d. Adopted by firms to conduct business on the Internet
Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.
Company A Company B Company C
Cash \( 6 Wages Expense \) 12 Administrative Expenses $ 4
Net Sales Revenue 48 Equipment 32 Cash 25
Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75
Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8
Selling Expenses 4 Cash 34 Merchandise Inventory 12
Equipment 67 Rent Expense 12 Equipment 55
Work-in-Process Inventory 9 Accounts Receivable 19
Accounts Receivable 14 Cost of Goods Sold 25
Cost of Goods Manufactured 23
Administrative Expenses 7
Raw Materials Inventory 6
Identifying differences between service, merchandising, and manufacturing companies Using the data on the previous page, calculate operating income for each company.
Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA): 1. Helps creditors make lending decisions
What are product costs?
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