Deck 1: What Is Managerial Accounting

Question 1

For a custom home builder,lumber should be categorized as direct materials.

Answer 1

True

Question 2

It is important to include small inexpensive items (such as glue or nails)related to production as direct materials,in order to calculate accurate product cost data.

Answer 2

False

Question 3

The term "product costs" refers exclusively to the direct labor used in the production process.

Answer 3

False

Question 4

The Securities and Exchange Commission (SEC)does not require a company to disclose whether it has adopted a code of ethics.

Question 5

Managerial accounting can only use financial performance measures.

Question 6

An internal auditor typically reports to the CFO and is responsible for confirming that the company has controls to ensure accurate financial data.

Question 7

The control function is implemented to assess an organization's plan and may lead to recommendations for the future.

Question 8

An example of selling costs would be salaries for marketing personnel.

Question 9

Enterprise Resource Planning (ERP)systems are only used by large publicly held organizations.

Question 10

Product costs are always expensed in the period when they are incurred.

Question 11

Regardless of size,all companies have a chief financial officer (CFO)and a treasurer.

Question 12

Managerial accounting information must follow U.S.Generally Accepted Accounting Principles (GAAP).

Question 13

The three categories of manufacturing costs include direct materials,manufacturing overhead,and selling costs.

Question 14

Enterprise Resource Planning (ERP)systems should be implemented by all organizations since ERP systems are inexpensive and lead to better decisions.

Question 15

There is one standard form of budget used by all companies.

Question 16

The Institute of Management Accountants (IMA)provides formal guidance to help in choosing ethically acceptable courses of action.

Question 17

The treasurer is typically in charge of all finance and accounting functions within an organization.

Question 18

Managerial accounting focuses on providing historical financial information to outside users including shareholders and creditors.

Question 19

Before purchasing an Enterprise Resource Planning (ERP)system,companies must confirm that the benefits of an ERP system will outweigh the costs of implementation.

Question 20

Financial accounting focuses on external users,while managerial accounting focuses on internal users.

Question 21

Which of the following would be most likely to use managerial accounting information?

A)Bondholder.
B)Production manager.
C)Vendor.
D)Stockholder.
E)None of the above.

Question 22

General and administrative costs would include factory utilities.

Question 23

The term "factory burden" is synonymous with manufacturing overhead.

Question 24

All of the following are examples of managerial accounting information except:

A)budget versus actual reports.
B)monthly income statement for each store.
C)monthly analysis of product profitability.
D)annual balance sheet prepared in accordance with U.S.GAAP.
E)None of the above.

Question 25

A managerial accountant is most likely to prepare all of the following reports except:

A)a weekly report on the percent of products returned by customers.
B)a budgeted income statement for next quarter.
C)a balance sheet in accordance with U.S.GAAP.
D)a report showing the percentage of on-time deliveries.
E)None of the above.

Question 26

All of the following are steps outlined by the Institute of Management Accountants (IMA)for resolving ethical conflicts except:

A)consulting an objective advisor such as an attorney.
B)following the policies of the organization for resolving ethical conflicts.
C)presenting the matter to the audit committee,if a satisfactory resolution is not reached by all higher levels of management.
D)bringing the matter to the attention of local news agencies.
E)None of the above.

Question 27

Period costs are not related to the production of goods.

Question 28

Most income statements for both merchandising companies and manufacturing companies include the account called Cost of Goods Sold.

Question 29

When comparing the characteristics of financial and managerial accounting,which of the following is a focus of managerial accounting?

A)Making future projections for geographic segments of a company.
B)Focusing on users outside the organization including stockholders and creditors.
C)Using performance measures that are exclusively financial in nature.
D)Presenting overall company information in accordance with U.S.GAAP.
E)None of the above.

Question 30

Nonmanufacturing costs include direct labor and indirect labor.

Question 31

Period costs are also called manufacturing costs.

Question 32

All of the following are examples of nonfinancial measures that could be used by a restaurant,except:

A)average time to serve customers (from order taking to food on the table).
B)percentage of favorable customer surveys.
C)number of food orders returned to the kitchen each day.
D)percent change in sales from the previous month.
E)None of the above.

Question 33

The cost of completed goods transferred out of Work in Process Inventory to Finished Goods is called Cost of Goods Manufactured.

Question 34

Insurance costs for a production facility are best classified as selling costs.

Question 35

Which of the following would be a financial measure of performance?

A)Quarterly cash flows.
B)Product defect rate.
C)Customer satisfaction survey results.
D)Percent of on-time deliveries.
E)None of the above.

Question 36

Direct labor and direct materials are typically easily traceable to a product.

Question 37

Nonmanufacturing costs consist of selling costs and indirect materials costs.

Question 38

Manufacturing overhead consists of all costs related to the production process other than direct materials and direct labor.

Question 39

When a manufacturing company sells its products,Finished Goods is debited and Cost of Goods Sold is credited.

Question 40

Distinguishing between period and product costs can be done quickly and easily.

Question 41

All organizations must have:

A)a tax accountant.
B)a treasurer.
C)vice president of marketing.
D)an internal auditor.
E)None of the above.

Question 42

Which of the following is typically performed by a financial accountant?

A)Preparing an income statement for one segment of a company.
B)Preparing a balance sheet for the annual report in accordance with U.S.GAAP.
C)Preparing the budgeted income statement for the upcoming quarter.
D)Preparing a report on the percentage of defective product returned by customers.
E)None of the above.

Question 43

Which of the following is classified as a selling expense?

A)Depreciation of computers used by the accounting staff.
B)Shipping charges for products delivered to customers.
C)Salary of the chief executive officer.
D)Factory equipment depreciation
E)None of the above.

Question 44

All of the following are included in the overarching principles of the IMA's Ethical Professional Practice except:

A)Objectivity.
B)Fairness.
C)Honesty.
D)Professionalism.
E)None of the above.

Question 45

All of the following would be best classified as manufacturing overhead except:

A)depreciation for production building.
B)salaries for production supervisors.
C)cost of direct labor related to production.
D)cost of indirect materials.
E)None of the above.

Question 46

An analysis comparing actual labor hours used for a project to budgeted labor hours would most likely be performed by the:

A)financial accountant.
B)managerial accountant.
C)tax accountant.
D)chief executive officer.
E)None of the above.

Question 47

Which of the following is classified as a general and administrative expense?

A)Salaries of sales personnel.
B)Utility costs for the production facility.
C)Salaries of production supervisors.
D)Salaries of Human Resource Department personnel.
E)None of the above.

Question 48

All of the following are typically performed by a treasurer except:

A)preparing cost estimates for potential product lines.
B)obtaining sources of financing for an organization.
C)projecting cash flow needs.
D)managing cash and short-term investments.
E)None of the above.

Question 49

Direct labor costs related to production are:

A)period costs.
B)expensed in the period in which they are incurred.
C)included in manufacturing overhead.
D)expensed when the products are sold.
E)None of the above.

Question 50

All of the following statements regarding ERP systems are true except:

A)They are relatively inexpensive.
B)They provide real-time information.
C)They can be used by both manufacturing and service companies.
D)They do not guarantee increased profits.
E)None of the above.

Question 51

Which of the following is not one of the four key standards of ethical conduct for Institute of Management Accountants (IMA)members?

A)Subjectivity.
B)Competence.
C)Confidentiality.
D)Integrity.
E)None of the above.

Question 52

If you compare financial statements prepared in accordance with U.S.GAAP to a managerial accounting report,the managerial accounting report is more likely to:

A)provide financial information for the company as a whole.
B)focus on users of financial information outside the company.
C)provide financial information related to the last accounting period.
D)provide financial information at the product level.
E)None of the above.

Question 53

Which of the following statements about computerized accounting systems is false?

A)Even small accounting packages like QuickBooks have features used for managerial accounting purposes.
B)The size of an organization and the information needs of an organization are important in determining which accounting software is appropriate.
C)Enterprise Resource Planning (ERP)systems are appropriate for all companies.
D)Accounting systems are typically used for internal and external reporting purposes.
E)None of the above.

Question 54

According to the IMA Statement of Ethical Professional Practice,competence means that each member has a responsibility for all the following except:

A)refrain from using confidential information for unethical or illegal advantage.
B)maintaining an appropriate level of professional expertise.
C)recognizing and communicating professional limitations.
D)performing professional duties in accordance with relevant laws,regulations and technical standards.
E)None of the above.

Question 55

The managerial accountant typically reports to the:

A)controller.
B)chief executive officer.
C)financial accountant.
D)tax accountant.
E)None of the above.

Question 56

According to the IMA Statement of Ethical Professional Practice,credibility means that each member has a responsibility for all the following except:

A)communicating information fairly and subjectively.
B)keeping information confidential except when disclosure is legally required.
C)disclosing delays or deficiencies in information in conformance with policy or laws.
D)disclosing all relevant information that might influence user understanding.
E)None of the above.

Question 57

The term "public company" refers to:

A)a company whose shares of stock are publicly traded.
B)a company with a treasurer and tax accountant.
C)a company whose shares of stock are privately traded.
D)a company with a small number of shareholders.
E)None of the above.

Question 58

All of the following are things you can do when faced with any ethical dilemma as a managerial accountant except:

A)discuss the issue with your immediate supervisor except when you think the supervisor may be involved.
B)initiate a confidential discussion with an IMA Ethics Counselor to clarify relevant ethical issues.
C)always contact the board of directors first.
D)contact your attorney about your legal obligations and rights.
E)None of the above.

Question 59

All of the following statements about Enterprise Resource Planning systems (ERP)are true except:

A)ERP systems are designed to record and share information across functional areas such as accounting and marketing.
B)ERP systems are designed to record and share information across geographical areas such as a sales office in China and headquarters in New York.
C)ERP system information is updated in weekly in batches.
D)ERP system information can be organized in different formats to meet the needs of internal and external users.
E)None of the above.

Question 60

Which of the following positions typically reports directly to the chief financial officer (CFO)?

A)The chief executive officer.
B)The tax accountant.
C)The treasurer.
D)The financial accountant.
E)None of the above.

Question 61

All of the following are included in Balance Sheet accounts containing product costs except:

A)Work in Process Inventory.
B)Cost of Goods Sold.
C)Raw Materials.
D)Cost of Goods Manufactured.
E)None of the above.

Question 62

Which of the following costs would not be included in manufacturing overhead?

A)Depreciation of factory building.
B)Direct labor.
C)Indirect labor.
D)Indirect materials.
E)None of the above.

Question 63

When direct materials are placed into production,their costs are transferred to:

A)Cost of Goods Sold.
B)Cost of Goods Manufactured.
C)Finished Goods Inventory.
D)Work in Process Inventory.
E)None of the above.

Question 64

The inventory cost flow equation is:

A)Beginning balance + Transfers in - Ending balance = Transfers out
B)Beginning balance + Transfers in + Ending balance = Transfers out
C)Beginning balance - Transfers in - Ending balance = Transfers out
D)Beginning balance - Transfers in + Ending balance = Transfers out
E)None of the above.

Question 65

Use the information below to calculate the missing amounts (shown by letters)in the Schedule of Cost of Goods Manufactured and the Schedule of Cost of Goods Sold.
$\begin{array}{c}\text {Newcastle Manufacturing Company }\\\text {Schedule of Cost of Goods Manufactured }\\\text {Month Ended January 31}\\\begin{array}{llr} \text { WIP Inventory, beginning balance } &&\$102,000\\ \text { Current period manufacturing costs } &\\ \text { Direct materials } &118,000\\ \text { Direct labor } & \text { A }\\ \text { Manufacturing overhead} &54,000\\ \text { Total current period manufacturing costs} && \text { B }\\ \text { Total cost of work in process} &&\$236,000\\ \text { WIP Inventory, ending balance } && \text { C }\\ \text { Cost of Goods Manufactured } &&\$232,000\\\end{array}\end{array}$

$\begin{array}{c} \text { Newcastle Manufacturing Company }\\ \text { Schedule of Cost of Goods Sold}\\ \text { Month Ended January 31}\\\begin{array}{llr} \text { Finished Goods Inventory, beginning balance } & \text {\$D } \\ \text { Cost of Goods Manufactured } & \text { E} \\ \text { Cost of Goods Available for Sale } &\$460,000\\ \text { Finished Goods Inventory, ending balance } & \text {F } \\ \text { Cost of Goods Sold } &\$259,300\\\end{array}\end{array}$

Question 67

In a wooden boat factory,which of the following would most likely be classified as indirect labor?

A)Salaries for the factory supervisors.
B)Salaries for sanding operators.
C)Salaries for production machine operators.
D)Salaries for staining and painting personnel.
E)None of the above.

Question 68

Which of the following is a product cost?

A)Supplies used in the Marketing Department.
B)Commissions paid to sales personnel.
C)Maintenance of manufacturing equipment.
D)Clerical support salaries in the Human Resource Department.
E)None of the above.

Question 69

In an airplane factory,which of the following would most likely be classified as a direct material?

A)Sandpaper.
B)Jet engines.
C)Inexpensive fasteners.
D)Cleaning supplies.
E)None of the above.

Question 70

You are the new managerial accountant for a company that awards its managers with a year-end bonus based on exceeding the target operating profit presented in the yearly budget proposal.The controller tells you that she believes the company will likely have operating profit of $120 million for the year,but asks you to prepare a proposal with projected operating profit of $100 million.She notes that "after all,it is only an estimate,and it would be a shame if the managers missed their bonus again this year after all their hard work." You realize that the only way to project operating profit of $100 million is to make unrealistically low sales estimates and unrealistically high cost estimates.
Using the IMA's Statement of Ethical Professional Practice,what guidelines are violated and how should you handle this situation?

Question 71

Costs of completed but unsold products would be found in which account?

A)Raw Materials Inventory.
B)Work in Process Inventory
C)Finished Goods Inventory.
D)Cost of Goods Sold.
E)None of the above.

Question 72

Assume you are the managerial accountant for a publicly held corporation.Your supervisor is the controller,and he directs you to ignore a significant amount of obsolete inventory for a report you are preparing for the CFO.Your supervisor indicates that the inventory issue will just "mess up our projections because adjusting the inventory value downward will result in lower profits for the quarter.If it's obsolete now,it will be obsolete next quarter,and we have much more flexibility built into the budget next quarter."
Using the IMA's Statement of Ethical Professional Practice,what guidelines are violated and how should you handle this situation?

Question 73

The three categories of product costs include all of the following except:

A)Manufacturing overhead.
B)Direct materials.
C)Indirect labor.
D)Direct labor.
E)None of the above.

Question 74

Which of the following is a period cost?

A)Indirect materials used in production.
B)Raw materials purchased from a supplier.
C)Supplies used by accounting personnel.
D)Maintenance costs for manufacturing equipment.
E)None of the above.

Question 75

Sampson Company had a Cost of Goods Sold of $730,000 and Cost of Goods Manufactured of $940,000 for the year ended December 31,2016.If the January 1,2016 balance in the Finished Goods Inventory account was $180,000,what was the December 31,2016,balance in Finished Goods Inventory?

A)$1,850,000
B)$1,120,000
C)$520,000
D)$390,000
E)None of the above.

Question 76

Use the information below to calculate the missing amounts (shown by letters)in the Schedule of Raw Materials Placed in Production and the Schedule of Cost of Goods Manufactured.
$\begin{array}{c} \text { Cycle Manufacturing Company}\\ \text { Schedule of Raw Materials Placed in Production }\\ \text { Month Ended January 31}\\\begin{array}{ll} \text { Raw Materials Inventory, beginning balance } & \text { A } \\ \text { Current period raw materials purchases } & 20,000 \\ \text { Raw materials available for production } & \overline{\$ 60,000} \\ \text { Raw Materials Inventory, ending balance } & \text { B } \\ \text { Raw materials placed in production } & \overline{\$ 50,000} \\ \text { Indirect materials included in manufacturing overhead } & 4,000 \\\text { Direct materials placed in production } &\$C \\\end{array}\end{array}$
$\begin{array}{c} \text { Cycle Manufacturing Company}\\ \text { Schedule of Cost of Goods Manufactured }\\ \text { Month Ended January 31}\\\begin{array}{llr} \text { WIP Inventory, beginning balance} &&\$90,000\\ \text { Current period manufacturing costs: } &\\ \text { Direct materials } & \text { }D \\ \text {Direct labor } & \text { E} \\ \text { Manufacturing overhead} &64,000\\ \text { Total current period manufacturing costs } &326,000\\ \text {Total cost of work in process } & \text { \$ F } \\ \text { WIP Inventory, ending balance } &78,000\\ \text {Cost of Goods Manufactured } &\$ G\\\end{array}\end{array}$