Deck 18: Managerial Accounting Concepts and Principles

Question 1

Managerial accounting provides financial and nonfinancial information to an organization's managers and other internal decision makers.

Answer 1

True

Question 2

Both financial and managerial accounting rely on accepted principles that are enforced through an extensive set of rules and guidelines.

Answer 2

False

Question 3

The focus of managerial accounting information is on the organization as a whole.

Answer 3

False

Question 4

One of the usual differences between financial and managerial accounting is the timeliness of the information reported.

Question 5

The concept of total quality management focuses on continuous improvement.

Question 6

Under a just-in-time manufacturing system,large quantities of inventory are accumulated throughout the factory to be certain that components are available each time that they are needed.

Question 7

The management concept of customer orientation motivates a company to spend large amounts on advertising to convince customers to buy the company's standard products.

Question 8

Both financial and managerial accounting report monetary information;managerial accounting also reports considerable nonmonetary information.

Question 9

Adopting a lean business model should have no effect on cost in a modern manufacturing environment.

Question 10

The balanced scorecard aids in continuous improvement by augmenting financial measures with information on the drivers or indicators of future financial performance.

Question 11

When the attitude of continuous improvement exists throughout an organization,every manager and employee is challenged to continuously experiment with new and improved business practices.

Question 12

Managerial accounting information can be forwarded to the managers of a company quickly since external auditors do not have to review it,and estimates and projections are acceptable.

Question 13

Both financial and managerial accounting affect user's decisions and actions.

Question 14

Managerial accounting reports and information are used by external users and financial accounting by internal users.

Question 15

Control is the process of setting goals and determining ways to achieve them.

Question 16

Managerial accounting is an activity that helps managers determine costs of products and services,plan future activities,and compare actual to planned results.

Question 17

Total quality management and just-in-time manufacturing focus on quality improvement as well as on time customer deliveries.

Question 18

The management concept of customer orientation encourages a company to set up its production system to produce large quantities of the same product for all customers.

Question 19

The main goal of the lean business model is the elimination of waste while satisfying the customer and providing a positive return to the company.

Question 20

Just-in-time manufacturing is a system that acquires inventory and produces product only when needed for an order.

Question 21

The Institute of Management Accountants (IMA)Statement of Ethical Professional Practice requires that management accountants be competent and act with integrity.

Question 22

An employee overstates his reimbursable expenses in one period in order to receive needed additional cash.Since he intends to reduce his expenses the next period by the current overstatement,this act is not considered fraudulent.

Question 23

Product costs are expenditures necessary and integral to finished products.

Question 24

Direct materials are not usually easily traced to a product.

Question 25

Raw materials inventory should not include indirect materials.

Question 26

Product costs can refer to expenditures necessary to finish products and to the administrative support during the time period.

Question 27

Product costs can be classified as one of three types: direct materials,direct labor,or overhead.

Question 28

Direct costs are incurred for the benefit of more than one cost object.

Question 29

Product costs are capitalized as inventory on the balance sheet and period costs are expenses on the income statement.

Question 30

Costs may be classified by many different cost classifications.

Question 31

Straight line depreciation,rent and manager salaries are examples of variable costs.

Question 32

Period costs are incurred by purchasing merchandise or manufacturing finished goods.

Question 33

The main difference between the cost of goods sold of a manufacturer and a merchandiser is that the merchandiser includes cost of goods manufactured rather than cost of goods purchased.

Question 34

Selling and administrative expenses are normally period costs.

Question 35

The sales commission incurred based on units of product sold during the month is an example of a product cost.

Question 36

A variable cost changes in proportion to changes in the volume in activity.

Question 37

Manufacturers usually have three inventories: raw materials,work in process,and finished goods.

Question 38

Cost concepts such as variable,fixed,mixed,direct and indirect apply only to manufacturers and not to service companies.

Question 39

The cost of partially completed products is included in the balance of the Work in Process Inventory account.

Question 40

Raw materials that become part of a product and are identified with specific units or batches of a product are called direct materials.

Question 41

The schedule of cost of goods manufactured is also known as a manufacturing statement.

Question 42

Factory overhead includes selling and administrative expenses because they are indirect costs of a product.

Question 43

Indirect materials are accounted for as factory overhead because they are not clearly identified with specific product units.

Question 44

Managerial accounting information:

A)Is used mainly by external users.
B)Involves gathering information about costs for planning and control decisions.
C)Is generally the only accounting information available to managers.
D)Can be used for control purposes but not for planning purposes.
E)Has little to do with controlling costs.

Question 45

The series of activities that add value to a company's products or services is called a value chain.

Question 46

Prime costs consist of direct labor and factory overhead.

Question 47

Flexibility of practice when applied to managerial accounting means that

A)The information must be presented in electronic format so that it is easily changed.
B)Managers must be willing to accept the information as the accountants present it to them,rather than in the format they ask for.
C)The managerial accountants need to be on call twenty-four hours a day.
D)Managerial accounting system differ across companies depending on the nature of the business and the arrangement of its internal operations.
E)Managers must be flexible with information provided in varying forms and using inconsistent measures.

Question 48

Which of the following items is not a management concept that was created to improve companies' performances?

A)Just-in-time manufacturing.
B)GAAP constraints and guidelines.
C)Total quality management.
D)Continuous improvement.
E)Customer orientation.

Question 49

Indirect labor refers to the cost of the workers whose efforts are directly related to specific units of product.

Question 50

Which of the following items does not represent a difference between financial and managerial accounting?

A)Users of the information.
B)Flexibility of reporting.
C)Timeliness of information.
D)Focus of the information.
E)Managerial accounting does not use the financial information from the financial accounting system.

Question 51

Raw materials purchased plus beginning raw materials inventory equals the ending balance of raw materials inventory.

Question 52

Four factors come together in production activity: beginning work in process inventory,raw materials,direct labor,and factory overhead.

Question 53

Although direct labor and raw materials costs are treated as manufacturing costs and therefore make up part of the finished goods inventory cost,factory overhead is charged to expense as it is incurred because it is a period cost.

Question 54

A manufacturer's cost of goods manufactured is the sum of direct materials,direct labor,and factory overhead costs incurred in producing products.

Question 55

The Malcolm Baldrige National Quality Award that encourages an emphasis on quality was established by

A)The United Nations.
B)The U.S.Chamber of Commerce.
C)The Malcolm Baldrige Foundation.
D)The U.S.Congress.
E)The SEC.

Question 56

The raw materials inventory turnover is raw materials purchased divided by the average raw materials inventory.

Question 57

Managerial accounting is different from financial accounting in that:

A)Managerial accounting is more focused on the organization as a whole and financial accounting is more focused on subdivisions of the organization.
B)Managerial accounting never includes nonmonetary information.
C)Managerial accounting includes many projections and estimates whereas financial accounting has a minimum of predictions.
D)Managerial accounting is used extensively by investors,whereas financial accounting is used only by creditors.
E)Managerial accounting is mainly used to set stock prices.

Question 58

The Work in Process Inventory account is found only in the ledgers of merchandising companies.

Question 59

The schedule of cost of goods manufactured must be prepared monthly as it is a required general-purpose financial statement.

Question 60

Newly completed units are combined with beginning finished goods inventory to make up total ending work in process inventory.

Question 61

Marshall Corporation incurred costs for materials and labor needed to manufacture its products.These costs are an example of:

A)Period costs.
B)Product costs.
C)General costs.
D)Balance sheet costs.
E)Capitalized costs.

Question 62

Last year,Flash Company sold 15,000 units of its only product.If sales decreased by 17% in the current year,how will total variable cost and total fixed cost be affected?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 63

A management concept based on an understanding of the changing wants and needs of customers,and which leads to flexible product designs and production processes,is called:

A)Continuous improvement.
B)Customer orientation.
C)Just-in-time.
D)Theory of constraints.
E)Total quality management.

Question 64

Continuous improvement:

A)Encourages employees to maintain established business practices.
B)Strives to preserve acceptable levels of performance.
C)Rejects the notion of "good enough."
D)Is not applicable to most businesses.
E)Is possible only in service businesses.

Question 65

A direct cost is a cost that is:

A)Identifiable as controllable.
B)Traceable to the company as a whole.
C)Does not change with the volume of activity.
D)Traceable to a single cost object.
E)Traceable to multiple cost objects.

Question 66

Costs that are capitalized as inventory when they are incurred are called:

A)Period costs.
B)Product costs.
C)General costs.
D)Administrative costs.
E)Fixed costs.

Question 67

For product costs associated with a particular product to be reported on the income statement:

A)The product must be transferred to Finished Goods Inventory.
B)The product must still be in Work in Process Inventory.
C)The product must be sold.
D)The product may be in any of the manufacturer's inventory accounts.
E)The company must expect to sell the product during the next twelve months.

Question 68

Last year,Wesson Company sold 10,000 units of its only product.If sales increase by 12% in the current year,how will unit variable cost and unit fixed cost be affected?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 69

Costs that flow directly to the income statement as expenses are called:

A)Period costs.
B)Product costs.
C)General costs.
D)Balance sheet costs.
E)Capitalized costs.

Question 70

A fixed cost:

A)Requires the future outlay of cash and is relevant for future decision making.
B)Does not change with changes in the volume of activity within the relevant range.
C)Is directly traceable to a cost object.
D)Changes with changes in the volume of activity within the relevant range.
E)Is irrelevant for cost-volume-profit and short-term decision making.

Question 71

Classifying costs by behavior with changes in volume of activity involves:

A)Identifying fixed cost and variable cost.
B)Identifying cost of goods sold and operating costs.
C)Identifying costs as financial or managerial.
D)Identifying costs in a physical manner.
E)Identifying both quantitative and qualitative cost factors.

Question 72

A management concept that seeks to uncover and eliminate waste in all aspects of business activities is called:

A)Continuous operations.
B)Customer orientation.
C)Just-in-time.
D)Theory of constraints.
E)Total quality management.

Question 73

The model whose goal is to eliminate waste while satisfying the customer and providing a positive return to the company is:

A)Just in time manufacturing model.
B)Managerial accounting model.
C)Corporate social responsibility model.
D)Continuous improvement model.
E)Lean business model.

Question 74

A classification of costs that determines whether a cost is expensed to the income statement or capitalized to inventory is:

A)Fixed versus variable.
B)Direct versus indirect.
C)Financial versus managerial.
D)Service versus manufacturing.
E)Product versus period.

Question 75

Period costs for a manufacturing company would flow directly to:

A)The income statement as an expense.
B)Factory overhead.
C)The balance sheet as inventory.
D)Cost of goods sold on the income statement.
E)The current schedule of cost of goods manufactured.

Question 76

An employee is dissatisfied with the resolution of an ethical conflict with his supervisor at his place of employment.According to the Institute of Management Accountants,the employee's next step should be to

A)contact the IMA.
B)contact the next level of management who is not involved in the ethical conflict.
C)make the president of the company aware of the ethical conflict.
D)report the incident to the State Board of Accountancy.
E)resign from the company.

Question 77

Last year,Gordon Company sold 20,000 units of its only product.If sales increase by 20% in the current year,how will unit variable cost and total fixed cost be affected?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 78

An attitude of constantly seeking ways to improve company operations,including customer service,product quality,product features,the production process,and employee interactions,is called:

A)Continuous improvement.
B)Customer orientation.
C)Just-in-time.
D)Theory of constraints.
E)Total quality measurement.

Question 79

Jenny,an employee of Toucan Company,used company assets for her own personal gain.This is an example of

A)embezzlement.
B)fraud.
C)internal control.
D)ethics.
E)employment perks.

Question 80

An approach to managing inventories and production operations such that units of materials and products are obtained and provided only as they are needed is called:

A)Continuous improvement.
B)Customer orientation.
C)Just-in-time manufacturing.
D)Theory of constraints.
E)Total quality management.