Deck 18: Managerial Accounting Concepts and Principles

Question 1

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

Answer 1

False

Question 2

Planning is the process of setting goals and making plans to achieve them.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

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 6

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

Question 7

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

Question 8

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 9

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

Question 10

Feedback provided by the control function allows managers to revise their plans.

Question 11

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

Question 12

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

Question 13

The concept of total quality management focuses on continuous improvement.

Question 14

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

Question 15

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 16

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 17

Enterprise risk management (ERM) includes the systems and process companies use to maximize the effect of risk.

Question 18

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

Question 19

Control is the process of monitoring planning decisions and evaluating an organization's activities and employees.

Question 20

Costs are important to managers because they impact both the financial position and profitability of a business.

Question 21

Variable costs per unit change in proportion to changes in the volume of activity.

Question 22

Direct materials are not easily traced to a product.

Question 23

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

Question 24

Period costs can refer to expenditures necessary to finish products during the time period.

Question 25

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

Question 26

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

Question 27

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

Question 28

Costs may be classified by many different cost classifications.

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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 34

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 35

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

Question 36

Total variable costs change in proportion to changes in the volume of activity.

Question 37

Indirect costs cannot be easily and cost-beneficially traced to a single cost object.

Question 38

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

Question 39

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

Question 40

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 41

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

Question 42

Beginning finished goods inventory plus cost of goods manufactured equals cost of goods sold.

Question 43

Product costs are expenditures necessary and integral to finished products.

Question 44

To be certified under ISO 9000 standards, companies must use a quality control system and document that it achieves the desired quality level.

Question 45

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

Question 46

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

Question 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

Beginning finished goods inventory plus cost of goods manufactured equals cost of goods available for sale.

Question 54

Selling and administrative expenses are normally period costs.

Question 55

A lean business model aims to eliminate waste while satisfying the customer and providing a positive return to the company.

Question 56

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

Question 57

Beginning finished goods inventory plus cost of goods manufactured minus ending finished goods inventory equals cost of goods sold.

Question 58

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

Question 59

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 60

Raw materials inventory should not include indirect materials.

Question 61

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

Question 62

Total quality management (TQM) focuses on quality improvement and applies this standard to all aspects of business activities.

Question 63

Total quality management (TQM) is a system that acquires inventory and produces only when needed.

Question 64

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

Question 65

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

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

Question 66

Just-in-time manufacturing (JIT) is a system that acquires inventory and produces only when needed.

Question 67

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 68

Managerial accounting information:

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

Question 69

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

Question 70

Just-in-time manufacturing (JIT) focuses on quality improvement and applies this standard to all aspects of business activities.

Question 71

Prime costs consist of direct materials and direct labor.

Question 72

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

Question 73

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

Question 74

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

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

Question 75

Flexibility of practice when applied to managerial accounting means that:

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

Question 76

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

Question 77

Prime costs consist of direct labor and factory overhead.

Question 78

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

Question 79

Managerial accounting is different from financial accounting in that:

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

Question 80

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