Garrison 13e Practice Exam Chapter 2
Print these pages. Answer each of the following questions, explaining your answers or showing
your work, as appropriate, and then compare your solutions to those provided at the end of the
practice exam.
1. For each of the following, indicate whether the description more closely relates to managerial
accounting or financial accounting:
Managerial
Accounting
Financial
Accounting
Focuses on external uses of information
Is typically bound by the requirements of
GAAP
Is generally more detailed information
produced frequently
Typically focuses on segments of the
organization
Often uses estimation in order to meet
needs for timeliness
Focuses on the historical performance of
the company
GAAP not mandatory
Oriented toward future decision making
Often mandatory information
Prepared primarily for internal users
2. For each of the following, indicate whether the cost would typically be variable or fixed.
Variable
Direct materials
Direct labor
Rent on building
Supervisor salaries
Sales commissions based on units sold
Fixed
3. For each of the following, indicate whether the cost would typically be considered direct or
indirect cost for the cost object given.
Direct
Indirect
The direct labor factory costs for the
manufacturing division.
The factory supervisors salary for the
product produced.
The factory supervisors salary for the
manufacturing division.
The manufacturing overhead costs for the
products produced.
The manufacturing overhead costs for the
manufacturing division.
4. The following data (in thousands of dollars) have been taken from the accounting records of
Hancock Corporation for the current year.
Sales
Selling expenses
Manufacturing overhead
Direct labor
Administrative expenses
Purchases of raw materials
Finished goods inventory, beginning
Finished goods inventory, ending
Raw materials inventory, beginning
Raw materials inventory, ending
Work in process inventory, beginning
Work in process inventory, ending
$1,980
280
460
400
300
240
240
320
80
140
140
100
Part (a) What was the cost of the raw materials used in production during the year (in
thousands of dollars)?
Part (b) What was the cost of goods manufactured (finished) for the year (in thousands of
dollars)?
Part (c) What was the cost of goods sold for the year (in thousands of dollars)?
Part (d) What was the net income for the year (in thousands of dollars)?
GNB 13e Practice Exam Solutions Chapter 2
1. Solution (Learning Objective 1):
Managerial
Accounting
Focuses on external uses of information
Is typically bound by the requirements of
GAAP
Is generally more detailed information
produced frequently
Typically focuses on segments of the
organization
Often uses estimation in order to meet
needs for timeliness
Focuses on the historical performance of
the company
GAAP not mandatory
Oriented toward future decision making
Often mandatory information
Prepared primarily for internal users
Financial
Accounting
X
X
X
X
X
X
X
X
X
X
2. Solution (Learning Objective 6):
Direct labor
Direct materials
Rent on building
Supervisor salaries
Sales commissions based on units sold
Variable
X
X
Fixed
X
X
3. Solution (Learning Objective 7):
The direct labor factory costs for the
manufacturing division.
The factory supervisors salary for the
product produced.
The factory supervisors salary for the
manufacturing division.
The manufacturing overhead costs for the
products produced.
The manufacturing overhead costs for the
manufacturing division.
Direct
X
Indirect
X
X
(See note below)
X
X
(See note below)
Note:Thesecostsaredirectbecausetheycanbetracedtothemanufacturingdivision,
whichisthecostobject.
4. Part(a)Solution(LearningObjective5):
The cost of the raw materials used in production during the year is determined as follows:
Raw materials inventory, beginning
Purchases of raw materials
Less raw materials inventory, ending
Raw materials used in production
$ 80
240
(140)
$180
Part(b)Solution(LearningObjective5):
The cost of goods manufactured (finished) during the year is determined as follows:
Raw materials used in production
Direct labor
Manufacturing overhead
Total manufacturing costs
Work in process inventory, beginning
Less: work in process inventory, ending
Cost of goods manufactured
$ 180
400
460
1,040
140
1,180
(100)
$1,080
Part(c)Solution(LearningObjective4):
The cost of goods sold for the year is determined as follows:
Finished goods inventory, beginning
Cost of goods manufactured
Less finished goods inventory, ending
Cost of goods sold
$ 240
1,080
(320)
$1,000
Part(d)Solution(LearningObjective4):
Thenetincomefortheyearisdeterminedasfollows:
Sales
Cost of goods sold
Gross profit
Operating expenses:
Administrative expenses
Selling expenses
Net income
$1,980
1,000
980
$300
280
(580)
$ 400
