CMA

• The gross profit is the amount available to cover the fixed expenses and any amount that remains thereafter is the net income.

  TRUE
• Financial accounting reports are very detailed and pertain to sub-unit or department.

  FALSE
• Financial accounting reports are intended for internal users while management accounting reports are intended for external users.

  FALSE
• The contribution margin income statement is used as an internal planning and decision-making tool

  TRUE
• The cost of goods sold of a manufacturing company contains the variable costs only.

  FALSE
• Manufacturing cost includes direct materials, direct labor, factory overhead and factory supplies.

  TRUE
• Management accounting focus on financial information while managerial accounting focus on non-financial information

  FALSE
• Non-manufacturing costs are considered period cost because they are incurred periodically

  TRUE
• The gross profit in the traditional income statement is the same as the contribution margin in the contribution margin income statement.

  FALSE
• Salaries paid to all workers in the factory are classified as direct labor.

  FALSE
• Sales less variable and fixed manufacturing overhead is the contribution margin.

  FALSE
• Financial accounting provides the necessary information but it is managerial accounting that determines how the information will be used to address the issues at hand.

  TRUE
• The contribution margin is the revenue remaining after deducting the variable costs

  TRUE
• Management accounting encompasses three broad areas namely financial accounting, cost accounting and auditing.

  FALSE
• Materials used in the manufacture of goods that are not significantly identifiable in the finished products are classified as indirect materials even if they form part of the finished product.

  TRUE
• Financial accounting prepares the financial statements frequently as needed by the management.

  FALSE
• General and administrative expenses are those that pertain to the expenses of the sales department including commissions paid to the sales agents.

  FALSE
• Analyzing the cost behavior is necessary in predicting future costs.

  TRUE
• Organizing focuses on keeping the company’s activities as planned

  FALSE
• The revenue remaining after deducting the cost of goods sold from the sales is called

  Gross profit
• A job order cost system would be appropriate for a crude refining business

  FALSE
• Perpetual inventory controlling accounts and subsidiary ledgers are maintained for materials, work in process, and finished goods in job order costing systems.

  TRUE
• A job order cost accounting system provides for a separate record of the cost of each particular quantity of product that passes through the factory

  TRUE
• When the goods are sold, their costs are transferred from Work in Process to Finished Goods.

  FALSE
• Materials are transferred from the storeroom to the factory in response to materials requisitions.

  TRUE
• If factory overhead applied exceeds the actual costs, overhead is said to be underapplied.

  FALSE
• The inventory accounts generally maintained by a manufacturing firm are only finished goods and materials.

  FALSE
• The debit to Factory Overhead for the cost of indirect materials is obtained from the summary of the materials requisitions.

  TRUE
• A process cost accounting system provides product costs for each of the departments or processes within the factory.

  TRUE
• A process cost accounting system is best used by manufacturers product that are distinguishable from each other during a continuous production process.

  FALSE
• In a process cost accounting system, the balance of the Work in Process account at the end of the period is equal to the sum of the costs of all unfinished units in each of the departments

  TRUE
• In a process cost system, the cost of units transferred out of each processing department must be determined along with the cost of any partially completed units remaining in the department.

  TRUE
• The FIFO method is preferred to be used in process cost accounting system because the flow of cost is different from the flow of physical units and it gives the most appropriate cost of the finished goods.

  FALSE
• The equivalent units of production is used to determine the unit cost because it is the same as the physical number of units in the department that includes the beginning inventory and the units started in process.

  FALSE
• The total cost to be accounted for includes the cost of the beginning inventory and the cost added this month for all the manufacturing components including direct materials, direct labor and factory overhead.

  TRUE
• The source document for the data for debiting Work in Process for direct materials is a

  materials requisition
• In a process cost system, the journal entry to record the cost of units finished and transferred to the next department would include a

  credit to Work in Process - Previous Department
• In a process cost system, the entry to record the actual factory overhead incurred would include a

  debit to Factory Overhead
• In both the job order cost system and process cost system, when goods are sold the journal entry would include a


  debit to accounts receivable and credit to sales