Question 1

Which of the following best represents a characteristic of managerial accounting?

Accepted Answer

While financial accounting is characterized by its objectivity,reliability,consistency,and historical nature,managerial accounting is more concerned with relevance and timeliness.Managerial accounting uses more estimates and fewer facts than financial accounting.

Question 2

A systematic problem-solving philosophy that encourages front line workers to achieve zero defects is known as:

Accepted Answer

To promote effective and efficient operations,many companies practice total quality management (TQM).TQM is a two-dimensional management philosophy using (1)a systematic problem-solving philosophy that encourages frontline workers to achieve zero defects and (2)an organizational commitment to achieving customer satisfaction.

Question 3

As a Certified Management Accountant,Grace is bound by the standards of ethical conduct issued by the Institute of Management Accountants.If she accepts an expensive gift from a vendor trying to win a contract with her firm,which of the following standards will she violate?

Accepted Answer

The Integrity standard of the IMA Statement of Ethical Professional Practice states that each member has a responsibility to mitigate actual conflicts of interest and avoid apparent conflicts of interest and also to refrain from engaging in any conduct that would prejudice carrying out duties ethically.

Question 4

As a Certified Management Accountant,Suzanne is bound by the standards of ethical conduct issued by the Institute of Management Accountants.During the course of business,Suzanne learned that her company has decided to discontinue a major product line.If she mentions this fact to her brother,who is a stockbroker,Suzanne could be in violation of the:

Accepted Answer

The Confidentiality standard of the IMA Statement of Ethical Professional Practice states that each member has a responsibility to keep information confidential except when disclosure is authorized or legally required and also to refrain from using confidential information for unethical or illegal advantage.

Question 5

Steuben Company produces dog houses.During the current year,Steuben Company incurred the following costs: $\begin{array}{c}
\begin{array}{|l|}
\hline \text { Rent on manufacturing facility}\
\hline \text { Office manager's salary}\
\hline \text { Wages of factory machine operators } \
\hline\text { Depreciation on manufacturing equipment } \
\hline \text { Insurance and taxes on selling and administrative offices }  \ 
\hline\text { Direct materials purchased and used }\ 
\hline
\end{array}
\begin{array}{r|}
\hline\$ 250,000 \
\hline150,000 \
\hline110,000 \
\hline50,000 \
\hline30,000 \
\hline170,000\
\hline
\end{array}
\end{array}$
 Based on the above information,the amount of period costs shown on Steuben's income statement is:

Accepted Answer

The answer of Steuben Company produces dog houses.During the current...

Question 6

Which of the following is not a provision of the Sarbanes-Oxley Act of 2002?

Accepted Answer

This provision is not a part of the Sarbanes-Oxley Act of 2002. However, the act does require companies to establish and maintain internal controls, report on their effectiveness, and have their external auditors attest to the accuracy of their internal controls report. The CEO and CFO are also jointly responsible for the establishment and enforcement of internal controls.

Question 7

Levenworth Company incurs unnecessary costs each period because of the excess quantities of inventory maintained to meet unexpected customer demand.The costs of inventory financing,storage,supervision,and obsolescence could most likely be reduced by which of the following practices?

Accepted Answer

Inventory holding costs include,but are not limited to,financing,warehouse space,supervision,theft,damage,and obsolescence.Many businesses have been able to reduce their inventory holding costs by making products available just in time (JIT)for customer consumption.

Question 8

Steuben Company produces dog houses.During the current year,Steuben Company incurred the following costs: $\begin{array}{c}
\begin{array}{|l|}
\hline \text { Rent on manufacturing facility}\
\hline \text { Office manager's salary}\
\hline \text { Wages of factory machine operators } \
\hline\text { Depreciation on manufacturing equipment } \
\hline \text { Insurance and taxes on selling and administrative offices }  \ 
\hline\text { Direct materials purchased and used }\ 
\hline
\end{array}
\begin{array}{r|}
\hline\$ 250,000 \
\hline150,000 \
\hline110,000 \
\hline50,000 \
\hline30,000 \
\hline170,000\
\hline
\end{array}
\end{array}$
 Wages paid to factory machine operators in producing the dog houses should be categorized as:

Accepted Answer

The wages paid to factory machine operators are direct labor costs incurred in producing the dog houses, making them a part of the product cost. Product costs are the costs that are incurred in the manufacturing process and are considered as an inventory asset until the product is sold. Therefore, the wages paid to factory machine operators should be categorized as a product cost and recorded in the inventory account.

Question 9

Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?

Accepted Answer

The four Standards of Ethical Conduct for Management Accountants are Credibility, Confidentiality, Integrity, and Objectivity. Independence is not included as one of the four Standards.

Question 10

During her first year with the company,Ann mistakenly accumulated some of the company's period costs in ending inventory.Which of the following indicates how this error affects the company's financial statements assuming number of units produced exceeded number of units sold during the period?

Accepted Answer

Classifying administrative salaries as a product cost (rather than a period cost)means that these costs are first accumulated in the Inventory account and then expensed when the goods are sold.Given that inventory increased during the period,some of the administrative salaries have passed through the Inventory account into the Cost of Goods Sold account with the rest remaining in the Inventory account.As a result,net income would be overstated because the understated expense would exceed the overstatement of cost of goods sold.

Question 11

Certified Management Accountants (CMA)must complete a specified number of continuing professional education credits each reporting period.Which of the four standards of ethical conduct issued by the Institute of Management Accountants likely motivated this requirement?

Accepted Answer

The Competence standard of the IMA Statement of Ethical Professional Practice states that each member has a responsibility to maintain an appropriate level of professional expertise by continually developing knowledge and skills.That standard may be met,in part,by completing continuing professional education classes.

Question 12

Which of following practices is not considered an effective means of reengineering business systems?

Accepted Answer

A key ingredient of successful reengineering is benchmarking.Benchmarking involves identifying the best practices used by world-class competitors.Best practices employed by world-class companies include total quality management (TQM),activity-based management (ABM),and value-added assessment.Comprehensive value chain analysis can lead to identifying and eliminating (rather than increasing)nonvalue-added activities

Question 13

Which of the following statements concerning manufacturing costs is incorrect?

Accepted Answer

Depreciation on manufacturing equipment is considered a product cost, not a period cost, because it is directly associated with the production process. Product costs are capitalized as part of inventory on the balance sheet and expensed as cost of goods sold when the inventory is sold.

Question 14

Which of the following is not an element that is typically present when fraud occurs?

Accepted Answer

The auditing profession has determined that the following three elements are typically present when fraud occurs: (1)the availability of an opportunity, (2),the existence of some form of pressure leading to an incentive,and (3)the capacity to rationalize.Separating the duties necessary to complete a task and assigning the separated duties to two or more employees reduces the opportunity for either employee to defraud the company.

Question 15

The benefits of a just-in-time system would include all of the following except:

Accepted Answer

A just-in-time system aims to reduce inventory holding costs by only producing or ordering goods as they are needed. This would not lead to an increase in warehousing costs. However, it may require a more frequent delivery schedule, which could lead to increased transportation costs. Additionally, a just-in-time system could improve customer satisfaction by ensuring prompt delivery of goods, and may not necessarily result in a decrease in the number of suppliers.

Question 16

The Sarbanes Oxley Act of 2002:

Accepted Answer

The Sarbanes Oxley Act of 2002 requires management to establish a whistleblower policy to encourage employees to report any fraudulent activities or accounting improprieties without fear of retaliation. This policy helps to promote ethical behavior within the organization and ensures that any potential issues are addressed in a timely manner.

Question 17

Steuben Company produces dog houses.During the current year,Steuben Company incurred the following costs: $\begin{array}{c}
\begin{array}{|l|}
\hline \text { Rent on manufacturing facility}\
\hline \text { Office manager's salary}\
\hline \text { Wages of factory machine operators } \
\hline\text { Depreciation on manufacturing equipment } \
\hline \text { Insurance and taxes on selling and administrative offices }  \ 
\hline\text { Direct materials purchased and used }\ 
\hline
\end{array}
\begin{array}{r|}
\hline\$ 250,000 \
\hline150,000 \
\hline110,000 \
\hline50,000 \
\hline30,000 \
\hline170,000\
\hline
\end{array}
\end{array}$
 Based on the above information,which of the following would not be treated as a product cost:

Accepted Answer

Office manager's salary is an administrative expense, not a product cost.

Question 18

If a company misclassifies a general,selling and administrative cost as a product cost in a period when production exceeds sales:

Accepted Answer

Classifying administrative salaries as a product cost (rather than a period cost)means that these costs are first accumulated in the Inventory account and then expensed when the goods are sold.Production exceeded sales;as such,inventory increased during the period and some of the administrative salaries have passed through the Inventory account into the Cost of Goods Sold account with the rest remaining in the Inventory account.As a result,the gross margin will be understated.In addition,net income would be overstated because the understated expense would exceed the overstatement of cost of goods sold.

Question 19

As a Certified Management Accountant,Derek is bound by the standards of ethical conduct issued by the Institute of Management Accountants.According to the standards,Derek has a responsibility to:

Accepted Answer

The Confidentiality standard of the IMA Statement of Ethical Professional Practice states that each member has a responsibility to inform all relevant parties regarding appropriate use of confidential information and also to monitor subordinates' activities to ensure compliance.

Question 20

Which of the following is not a reason management might be tempted to classify costs as product costs rather than expensing them during periods in which production exceeds sales?

Accepted Answer

Since income tax expense is calculated as a designated percentage of taxable income,managers seek to minimize taxes by reporting the minimum amount of taxable income.In other words,because taxes will be lower,managers prefer to classify costs as expenses rather than assets (rather than classify costs as product costs rather than expensing them as stated here).

Quiz 1: Management Accounting and Corporate Governance