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Chapter 2
Building Blocks of Managerial Accounting
Quick Check Questions

Answers:

1. b 3. a 5. c 7. b 9. b
2. b 4. b 6. b 8. d 10. c

Short Exercises
(5 min.) S2-1

X-Treme is a merchandiser because it has a single inventory account.

Y-Not? is a service company because it has no inventory.

Zesto is a manufacturer because it has three kinds of inventory: raw materials inventory, work in process inventory, and finished goods inventory.
(10 min.) S2-2

a. Service companies generally have no inventory.
b. Bombardier is a manufacturing company.
c. Merchandisers’ inventory consists of the cost of merchandise and freight-in.
d. Manufacturing companies carry three types of inventories: raw materials inventory, work in process inventory, and finished goods inventory.
e. TD Insurance is a service company.
f. Two types of merchandising companies include retailers and wholesalers.
g. Direct materials are stored in raw materials inventory.
h. Zellers is a merchandising company.
i. Manufacturers sell from their stock of finished goods inventory.
j. Labour costs usually account for the highest percentage
of service companies’ costs.
k. Partially completed units are kept in the work in process inventory.
(5 min.) S2-3

a. Distribution
b. Design
c. Marketing
d. Research and Development (R&D)
e. Customer Service
f. Production or Purchases