Deck 1: Introduction to Managerial Accounting

Question 1

Financial accounting information is reported for the company as a whole

Answer 1

True

Question 2

Which of the following is not a characteristic of financial accounting?

A) Financial reports are prepared according to GAAP.
B) Information is used by external parties.
C) Information is subjective, relevant and future-oriented.
D) Reports are prepared periodically.

Answer 2

C

Question 3

Whether a cost is treated as direct or indirect depends on whether tracing the cost is both possible and feasible

Answer 3

True

Question 4

The Sarbanes-Oxley Act of 2002 focuses on three factors that affect the accounting reporting environment: ethics, fraud, and managers

Question 5

Managers must direct, lead and motivate during the implementation function

Question 6

Financial accounting information is generally used exclusively by internal parties such as managers

Question 7

Of the following groups, which is the primary user of managerial accounting information?

A) Investors
B) Creditors
C) Regulators
D) Managers

Question 8

Managerial accounting, as compared to financial accounting, is primarily intended to facilitate:

A) an understanding of GAAP.
B) making decisions with timely, relevant information.
C) conducting ethics investigations under SOX.
D) reporting results to shareholders.

Question 9

A sustainable business is one with the ability to meet the needs of today without sacrificing the ability of future generations to meet their own needs

Question 10

An opportunity cost is the cost of not doing something

Question 11

A cost that will occur in the future and differs between various alternatives under consideration is a relevant cost

Question 12

Managers of small, private corporations use managerial accounting information whereas managers of large, public corporations use financial accounting information

Question 13

The Sarbanes-Oxley Act of 2002 places full responsibility on the board of directors for the accuracy of the reporting system

Question 14

All manufacturing costs are treated as product costs

Question 15

What is the primary goal of accounting?

A) To set long-term goals and objectives.
B) To arrange for the necessary resources to achieve a plan.
C) To provide information for decision making.
D) To motivate others to work towards a plan's success.

Question 16

Managerial accounting information includes all of the following except:

A) Budgets.
B) Performance evaluations, for example budget-to-actual reports.
C) Cost reports.
D) Financial statements prepared in accordance with generally accepted accounting principles.

Question 17

All manufacturing costs are inventoriable costs

Question 18

Fixed costs stay the same, on a per-unit basis, as activity level changes

Question 19

Prime costs include direct materials, direct labor, and manufacturing overhead

Question 20

Variable costs are always direct costs

Question 21

The control function is:

A) Comparing actual with budgeted results and taking corrective action when needed.
B) Arranging of the necessary resources to carry out the plan.
C) The directing, leading, and motivating of those necessary to carry out the plan.
D) Drafting the goals and strategies to achieve long-term results.

Question 22

Which of the following types of organizations sells goods to the general public?

A) Service companies
B) Manufacturing firms
C) Merchandising companies
D) Retailers

Question 23

Which of the following functions of management involves setting short and long-term objectives and the tactics to achieve them?

A) Planning
B) Implementing
C) Reviewing
D) Control

Question 24

Which of the following functions of management involves taking corrective action if needed?

A) Planning
B) Implementing
C) Reviewing
D) Control

Question 25

Which of the following is the correct sequencing of the functions within the managerial cycle?

A) Plan - Control - Implement
B) Review - Plan - Implement
C) Plan - Implement - Control
D) Review - Control - Plan

Question 26

Which of the following functions of management involves providing feedback for future plans?

A) Planning
B) Implementing
C) Reviewing
D) Control

Question 27

Which of the following is not a characteristic of managerial accounting?

A) Information is used by external parties.
B) Information is subjective, relevant, future-oriented.
C) Reports are prepared as needed.
D) Information is reported at the decision making level.

Question 28

Which of the following is not a characteristic of managerial accounting?

A) Information is used by internal parties.
B) Information is subjective, relevant, future-oriented.
C) Reports are prepared as needed.
D) Reports are prepared according to GAAP.

Question 29

Hair salons and law firms are examples of which of the following type of organization?

A) Retailers
B) Service companies
C) Manufacturing firms
D) Merchandising companies

Question 30

Which of the following functions of management involves comparing actual results with budgeted results?

A) Planning
B) Implementing
C) Reviewing
D) Control

Question 31

During the last fiscal year, XYZ organization implemented managerial accounting to allocate program costs to its soup kitchen. The kitchen's manager is reviewing actual results from the prior month to compare the outcomes with the organization's objectives. Which function of the Plan-Implement-Control cycle is she conducting?

A) Plan
B) Implement
C) Control
D) Strategize

Question 32

Which of the following is not a characteristic of financial accounting?

A) Information is reported at the decision making level.
B) Information is used by external parties.
C) Information is objective, reliable and historical.
D) Reports are prepared periodically.

Question 33

Which of the following functions of management involves providing motivation to achieve results?

A) Planning
B) Implementing
C) Reviewing
D) Control

Question 34

Which of the following is not a characteristic of managerial accounting?

A) Information is used by internal parties.
B) Information is subjective, relevant, future-oriented.
C) Reports are prepared as needed.
D) Information is reported for the company as a whole.

Question 35

Which of the following types of organizations purchases raw materials from suppliers and uses them to create a finished product?

A) Manufacturing firms
B) Merchandising companies
C) Service companies
D) Retailers

Question 36

Which of the following describes the Planning function within the management cycle?

A) Setting short and long-term objectives
B) Comparing actual to budgeted results and taking corrective action
C) Taking actions to implement the plan
D) Arranging the necessary resources to carry out the plan

Question 37

Which of the following statements is true about the use of managerial accounting information in nonprofit organizations?

A) Universities do not exist strictly to earn profit for shareholders, so managerial accounting information is not vital to their operations.
B) Unlike other nonprofits, hospitals (which exist with a focus on financial results in addition to health metrics) make use of managerial accounting.
C) Because managers of nonprofit organizations need timely and relevant information to make decisions, managerial accounting is vital to these organizations.
D) Because nonprofit organizations - hospitals, educational institutions, charities - do not exist with a profit motive, they do not use managerial accounting principles.

Question 38

Which of the following is not a characteristic of financial accounting?

A) Financial reports are prepared according to GAAP.
B) Information is used primarily by internal parties.
C) Information is objective, reliable and historical.
D) Reports are prepared periodically.

Question 39

Which of the following types of reports is more characteristic of managerial accounting than financial accounting?

A) An internal report used by management
B) An external report used by investors
C) A report prepared according to GAAP
D) A report prepared periodically (monthly, quarterly, annually)

Question 40

Which of the following functions of management involves arranging the necessary resources to carry out the plan?

A) Planning
B) Implementing
C) Reviewing
D) Control

Question 41

Which of the following changes introduced by the Sarbanes-Oxley Act is intended to counteract incentives for fraud?

A) Stronger oversight by directors
B) Code of ethics
C) Stiffer fines and prison terms
D) Anonymous tip lines

Question 42

"Ethics" refers to all of the following except:

A) The standards of conduct for judging fair from unfair.
B) The standards of conduct for judging right from wrong.
C) The standards of conduct for judging opportunity from incentives.
D) The standards of conduct for judging honest from dishonest.

Question 43

Which of the following is a requirement under the Sarbanes-Oxley Act?

A) Financial statements must be audited by a Big Four accounting firm.
B) Management must issue a report that indicates whether the financial statements are free of error.
C) Management must conduct a review of the company's internal control system.
D) Background checks must be performed on all employees.

Question 44

Which of the following does not describe the Implementing function within the management cycle?

A) Leading, directing, and motivating others to achieve the plan's goals
B) Arranging the necessary resources to carry out the plan
C) Taking actions to implement the plan
D) Setting short- and long-term objectives

Question 45

Which of the following statements concerning costs is incorrect?

A) Costs are treated differently depending on how the information will be used.
B) Out-of-pocket costs include the costs associated with not taking a particular course of action.
C) Any single cost can be classified in more than one way.
D) Costs can be categorized on the basis of relevant or irrelevant costs.

Question 46

Many organizations are building sustainable business practices into their strategies, including by issuing:

A) Corporate social responsibility reports.
B) Reports on internal controls.
C) Profit and loss statements that reflect people and planet costs.
D) Reports from the board of directors on sustainability.

Question 47

An actual outlay of cash is a(n):

A) out-of-pocket cost.
B) opportunity cost.
C) direct cost.
D) cost object.

Question 48

Which of the following statements is correct about the triple bottom line?

A) The triple bottom line measures a company's social impact, without regard for profit.
B) The triple bottom line captures three factors: People, Profit, and Planet.
C) The triple bottom line has replaced net income as the most crucial measure of a company's success.
D) The triple bottom line reports profit at the expense of social factors.

Question 49

Which of the following is not a provision of the Sarbanes-Oxley Act?

A) Executives can avoid penalties for fraud by declaring personal bankruptcy.
B) Stiffer penalties for fraud in terms of monetary fines and jail time decrease the incentive to commit fraud.
C) Public companies must adopt a code of ethics for senior financial officers.
D) Management must issue a report that indicates whether internal controls are effective at preventing errors and frauD.
Executives cannot avoid monetary penalties by declaring personal bankruptcy.

Question 50

Which of the following is not true about how the Sarbanes-Oxley Act emphasizes the importance of the character of managers and employees?

A) It requires that ethics be embedded in the organizational culture.
B) It requires that audit committees establish anonymous tip lines.
C) It provides protection for whistle-blowers.
D) It requires that public companies adopt a code of ethics for senior financial officers.

Question 51

The cost of not doing something is a(n):

A) out-of-pocket cost.
B) opportunity cost.
C) direct cost.
D) cost object.

Question 52

An out-of-pocket costs is:

A) an actual outlay of cash.
B) the cost of not doing something.
C) a deferred cost.
D) a budgeted estimate.

Question 53

Which of the following is not one of the categories used to sort costs in managerial accounting?

A) Relevant or irrelevant
B) Variable or fixed
C) Out-of-pocket or opportunity
D) Direct or indirect

Question 54

Which of the following changes introduced by the Sarbanes-Oxley Act is not one intended to encourage good character?

A) Anonymous tip lines
B) Whistle-blower protection
C) Code of ethics
D) Stiffer fines and prison terms

Question 55

The requirement of the Sarbanes-Oxley Act that requires management to issue a report on internal controls places responsibility for the accuracy of the reporting system on:

A) accounting managers.
B) marketing managers.
C) production managers.
D) all managers.

Question 56

Which of the following is not one of the factors affecting the accounting reporting environment focused on by the Sarbanes-Oxley Act?

A) Industry
B) Opportunity
C) Character
D) Incentives

Question 57

Which of the following statements is correct about sustainability accounting?

A) Sustainability accounting has been in existence since 1592.
B) Sustainability accounting tracks a company's "green" score.
C) Sustainability accounting aims to provide managers a broad set of information to meet the needs of multiple stakeholders.
D) Sustainability accounting is a subset of GAAP applied only to socially responsible companies.

Question 58

Which of the following changes introduced by the Sarbanes-Oxley Act is not one intended to reduce opportunities for error and fraud?

A) Internal control report from management
B) Code of ethics
C) Stronger oversight by directors
D) Internal control audit by external auditors

Question 59

Which of the following describes the Control function within the management cycle?

A) Setting short and long-term objectives
B) Comparing actual to budgeted results and taking corrective action
C) Taking actions to implement the plan
D) Arranging the necessary resources to carry out the plan

Question 60

Which of the following is not true about how the Sarbanes-Oxley Act counteracts incentives for committing fraud?

A) It provides for stiffer monetary penalties.
B) It increases the maximum jail sentence for fraudulent reporting.
C) It removes legal protection from whistleblowers.
D) It provides that violators must repay any money obtained via fraud and pay fines.

Question 61

A cost is $50,000 when 25,000 units are produced, and $50,000 when 50,000 units are produced. This is an example of a(n):

A) fixed cost.
B) direct cost.
C) variable cost.
D) indirect cost.

Question 62

Which of the following cannot be an out-of-pocket cost?

A) A direct cost.
B) An opportunity cost.
C) A variable cost.
D) A period cost.

Question 63

Costs that can be traced to a specific cost object are:

A) opportunity costs.
B) direct costs.
C) indirect costs.
D) irrelevant costs.

Question 64

Costs that are not worth the effort to trace to a specific cost object are:

A) opportunity costs.
B) direct costs.
C) indirect costs.
D) irrelevant costs.

Question 65

Fixed costs are:

A) costs that are not worth the effort to trace to a specific cost object.
B) costs that change, in total, in direct proportion to changes in activity levels.
C) always irrelevant.
D) costs that remain constant, in total, no matter the activity level.

Question 66

What determines the difference between a variable and a fixed cost?

A) Whether the total cost changes when activity levels change.
B) Whether the total cost is relevant to a particular decision.
C) Whether the total cost can be traced to a specific cost object.
D) Whether the total cost is related to manufacturing or nonmanufacturing activities.

Question 67

A cost is $50,000 when 25,000 units are produced, and $100,000 when 50,000 units are produced. This is an example of a(n):

A) fixed cost.
B) direct cost.
C) variable cost.
D) indirect cost.

Question 68

To earn summer money, Joe could mow lawns in his neighborhood, or he could work at a local grocery store. Which of the following is an opportunity cost of mowing lawns?

A) Cash paid for gas to run the lawnmower.
B) The time spent mowing the lawns.
C) The wages he could have earned working at the grocery store.
D) Depreciation on the lawnmower.

Question 69

To earn summer money, Joe could mow lawns in his neighborhood, or he could work at a local grocery store. Which of the following is an out-of-pocket cost of mowing lawns?

A) The use of his father's truck to get to job sites.
B) The wages he could have earned working at the grocery store.
C) The time spent mowing the lawns.
D) Cash paid for gas to run the lawnmower.

Question 70

A cost object is:

A) an item for which managers are trying to determine the cost.
B) an item to which managers must directly trace costs.
C) an item to which it is not worth the effort of tracing costs.
D) an item for sale by a business.

Question 71

An opportunity cost is:

A) the foregone benefit of the path not taken.
B) an actual outlay of cash.
C) the initial investment required to pursue an opportunity.
D) a cost that cannot be traced to a specific cost object.

Question 72

What determines the difference between a direct and an indirect cost?

A) Whether it changes when activity levels change.
B) Whether it is relevant to a particular decision.
C) Whether it can be traced to a specific cost object.
D) Whether it is related to manufacturing or nonmanufacturing activities.

Question 73

Variable costs are:

A) costs that are not worth the effort to trace to a specific cost object.
B) costs that change, in total, in direct proportion to changes in activity levels.
C) always irrelevant.
D) costs that remain constant no matter the activity level.

Question 74

Which of the following is an indirect cost of manufacturing a table made of wood and glass for a firm that manufactures furniture?

A) The cost of the wood in the table.
B) The cost of the labor used to assemble the table.
C) The cost of the glass in the table.
D) The cost of rent on the factory where the table is manufactureD.
Costs that cannot be traced to a specific cost object, or that are not worth the effort of tracing, are indirect costs, such as the cost of rent on the factory.

Question 75

An out-of-pocket cost involves which of the following?

A) Choosing to do one thing instead of another.
B) Tracing the cost directly to a cost object.
C) An actual outlay of cash.
D) Determining how the cost changes with a change in activity level.

Question 76

Which of the following is a direct cost of manufacturing a table made of wood and glass, for a firm that manufactures furniture?

A) The cost of the wood in the table.
B) The cost of rent on the factory where the table is manufactured.
C) The salary of the supervisor who oversees all production for the firm.
D) Depreciation on the tools used to manufacture the table.

Question 77

A direct cost is one that:

A) involves an actual outlay of cash for a specific cost object.
B) can be traced to a specific cost object.
C) cannot be traced to a specific cost object.
D) is not worth the effort of tracing to a specific cost object.

Question 78

Indirect costs are:

A) costs that are not worth the effort to trace to a specific cost object.
B) costs that change, in total, in direct proportion to changes in activity levels.
C) always irrelevant.
D) costs that remain constant no matter the activity level.

Question 79

Which of the following is an example of a variable cost for a manufacturing firm?

A) The cost of rent on the factory.
B) The cost of factory supervision.
C) The cost of raw materials.
D) The cost of depreciation on equipment.

Question 80

Which of the following statements is correct?

A) A direct cost can be readily traced to a cost object while an indirect cost is traced only to manufacturing costs.
B) An indirect cost can be readily traced to a cost object while a direct cost is traced only to manufacturing costs.
C) A direct cost can be traced to a specific cost object, while an indirect cost cannot.
D) An indirect cost can be traced to a specific cost object, while a direct cost cannot.