Quiz 1 - Chapter 1 Flashcards
What are Direct Materials?
Raw materials that are integral to the finished product and can be directly traced to it.
What are Indirect Materials?
Materials used in the production process that cannot be directly traced to a specific product (part of MOH).
What is Direct Labor?
Labor costs that can be directly traced to manufacturing a product.
What is Manufacturing Overhead (MOH)?
All indirect manufacturing costs, including indirect materials, indirect labor, and factory costs.
What are Product Costs?
Costs related to making a product (Direct Materials + Direct Labor + MOH).
What are Period Costs?
Non-manufacturing costs such as selling and administrative expenses that are expensed immediately.
What is Cost of Goods Manufactured (COGM)?
The total cost of making products during a period, including raw materials, labor, and overhead.
What is Cost of Goods Sold (COGS)?
The cost of inventory sold during a period, reported on the income statement.
What is Financial Accounting?
External reporting for investors, creditors, and regulators (follows GAAP).
What is Managerial Accounting?
Internal reporting for management to make decisions (not bound by GAAP).
What is the Sarbanes-Oxley Act (SOX)?
A law that increased corporate accountability, requiring CEO/CFO certifications and stronger audit oversight.
What are Product Costs?
Product Costs include Direct Materials, Direct Labor, and Manufacturing Overhead.
What are Period Costs?
Period Costs are expensed immediately and include selling and administrative expenses.
What are the three components of Manufacturing Overhead?
The three components of Manufacturing Overhead are Indirect Materials, Indirect Labor, and Factory Costs.
What is the Cost of Goods Manufactured (COGM) formula?
The COGM formula is: Beginning WIP Inventory + Total Manufacturing Costs - Ending WIP Inventory = COGM.
Which of the following is NOT a product cost?
c) Administrative Salaries
Which inventory accounts appear on a manufacturer’s balance sheet?
a) Raw Materials, Work in Process, Finished Goods
What is the primary difference between financial and managerial accounting?
c) Financial accounting reports to external users, while managerial accounting is for internal users.
What type of cost are factory janitor’s wages?
Manufacturing Overhead
What type of cost is steel used to build cars?
Direct Materials
What type of cost are wages of assembly line workers?
Direct Labor
What type of cost are the company’s advertising expenses?
Period Cost
What type of company has the inventory accounts: Raw Materials, Work in Process, Finished Goods?
Manufacturing Company
What type of company has the inventory account: One Inventory Account (Merchandise Inventory)?
Merchandising Company
