Question 1

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

Accepted Answer

Continuous improvement is a management philosophy that emphasizes the need for organizations to continuously assess and improve their processes, products, and services to achieve higher levels of performance. It is based on the idea that there is always room for improvement and rejects the notion of "good enough." Therefore, option E is the correct answer. The other options are incorrect.

Question 2

A classification of costs that determines whether a cost is expensed to the income statement or capitalized to inventory is:
A) Direct versus indirect.
B) Fixed versus variable.
C) Service versus manufacturing.
D) Financial versus managerial.
E) Product versus period.

Accepted Answer

The classification of costs into product versus period determines whether they are expensed immediately to the income statement (period costs) or capitalized to inventory and expensed when the inventory is sold (product costs). Direct versus indirect costs refer to how the cost is incurred, not whether it is capitalized or expensed. Fixed versus variable costs refer to how the cost behaves with changes in activity levels. Service versus manufacturing costs refers to the type of business operation. Financial versus managerial costs refer to the purpose of the cost (i.e. financial reporting or internal management decisions).

Question 3

Jenny, an employee of Toucan Company, used company assets for her own personal gain. This is an example of:
A) internal control.
B) embezzlement.
C) employment perks.
D) fraud.
E) ethics.

Accepted Answer

Jenny's actions constitute fraud, which involves the intentional deception or misrepresentation of facts for personal gain.

Question 4

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

Accepted Answer

Direct costs are costs that can be traced to a single cost object, such as a specific product, department, or project. Examples of direct costs include direct materials, direct labor, and direct expenses. These costs vary with the level of activity and can be easily allocated to a specific cost object.

Question 5

Costs that flow directly to the income statement as expenses are called:
A) Period costs.
B) Capitalized costs.
C) General costs.
D) Balance sheet costs.
E) Product costs.

Accepted Answer

Period costs are expenses that flow directly to the income statement in the period in which they are incurred. This includes expenses such as salaries, rent, and utilities that are not directly related to the production of inventory. Capitalized costs are costs that are recorded as an asset on the balance sheet and then expensed over time as the asset is used. General costs and balance sheet costs are not commonly used terms in accounting. Product costs include both direct and indirect costs associated with the production of inventory and are initially recorded as an asset on the balance sheet before being expensed as Cost of Goods Sold when the inventory is sold.

Question 6

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

Accepted Answer

The employee should contact the next level of management who is not involved in the ethical conflict to escalate the issue and seek a resolution. Resigning from the company or reporting to the state board of accountancy are options that should not be taken without exhausting all internal avenues first. Making the president aware of the conflict is also not necessarily the best course of action, as it could create unnecessary conflict without providing a solution. Contacting the IMA may be a last resort, but trying to resolve the issue internally should be the first step.

Question 7

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

Accepted Answer

Just-in-time manufacturing (JIT) is a system aimed at reducing waste and increasing efficiency by receiving and providing units of materials and products only as they are needed, minimizing inventory costs and improving response times to customer demand. JIT is often associated with lean manufacturing and a focus on continuous improvement. The other options listed are management approaches that may complement JIT, but they do not specifically involve the same principles of JIT.

Question 8

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

Accepted Answer

A fixed cost does not change with changes in the volume of activity within the relevant range. This means that the cost remains constant regardless of how many units are produced or sold. This makes it an important consideration for cost-volume-profit analysis and short-term decision making.

Question 9

A management concept that seeks to uncover and eliminate waste in all aspects of business activities is called:
A) Just-in-time.
B) Theory of constraints.
C) Continuous operations.
D) Lean business model.
E) Customer orientation.

Accepted Answer

The management concept that seeks to uncover and eliminate waste in all aspects of business activities is called the lean business model. This approach focuses on maximizing value while minimizing waste, which can improve efficiency and profitability. Other options, such as just-in-time, theory of constraints, continuous operations, and customer orientation, may also be important in business management, but they do not specifically target waste reduction as their primary goal.

Question 10

Marshall Corporation incurred costs for materials and labor needed to manufacture its products. These costs are an example of:
A) Period costs.
B) Capitalized costs.
C) Balance sheet costs.
D) Product costs.
E) General costs.

Accepted Answer

The costs incurred for materials and labor needed to manufacture products are referred to as product costs. Product costs are costs that are directly associated with the production of goods or services and are recorded as inventory until the products are sold.

Question 11

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

Accepted Answer

Customer orientation is a management concept that focuses on understanding and meeting the changing wants and needs of customers. It leads to flexible product designs and production processes that can adapt to these changing needs. Just-in-time, total quality management, continuous improvement, and theory of constraints are all related management concepts, but they do not specifically focus on customer wants and needs as the driving force for flexibility and adaptation.

Question 12

A National Quality Award that encourages an emphasis on quality was established by:
A) The Malcolm Baldrige Foundation.
B) The United Nations.
C) The SEC.
D) The U.S. Chamber of Commerce.
E) The U.S. Congress.

Accepted Answer

The Malcolm Baldrige National Quality Award was established by the U.S. Congress in 1987 to promote quality awareness and recognize U.S. companies that have implemented successful quality management systems.

Question 13

Costs that are capitalized as inventory when they are incurred are called:
A) Fixed costs.
B) General costs.
C) Administrative costs.
D) Period costs.
E) Product costs.

Accepted Answer

Costs that are capitalized as inventory when they are incurred are known as product costs. These costs are associated with the production of goods, and are considered an asset until the products are sold, at which point the costs are recognized as an expense in the cost of goods sold. Fixed costs, general costs, administrative costs, and period costs are types of expenses that are recognized immediately in the period they are incurred, and are not capitalized as inventory.

Question 14

Classifying costs by behavior with changes in volume of activity involves:
A) Identifying fixed cost and variable cost.
B) Identifying both quantitative and qualitative cost factors.
C) Identifying cost of goods sold and operating costs.
D) Identifying costs in a physical manner.
E) Identifying costs as financial or managerial.

Accepted Answer

Classifying costs by behavior with changes in volume of activity involves identifying costs as either fixed or variable. Fixed costs remain constant regardless of changes in volume of activity, while variable costs change in direct proportion to changes in volume of activity.

Question 15

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

Accepted Answer

Continuous improvement is the attitude of constantly seeking ways to improve company operations, including customer service, product quality, product features, the production process, and employee interactions. This approach involves constantly reviewing and evaluating processes and making modifications where necessary to improve efficiency and effectiveness.

Question 16

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?

$$\begin{array} { l l } 
\text { Total Variable Cost } &  { \text { Total Fixed Cost } } \
\text { A)Remains constant } & \text { Remains constant } \
\text { B)Increases } & \text { Decreases } \
\text { C)Decreases } & \text { Remains constant } \
\text { D)Remains constant } & \text { Decreases } \
\text { E)Remains constant } & \text { Increases }
\end{array}$$

Accepted Answer

The answer of Last year, Flash Company sold 15,000 units...

Question 17

Period costs for a manufacturing company would flow directly to:
A) The balance sheet as inventory.
B) The income statement as an expense.
C) Factory overhead.
D) The current schedule of cost of goods manufactured.
E) Cost of goods sold on the income statement.

Accepted Answer

Period costs for a manufacturing company are expensed on the income statement as they are not directly related to the production process. Examples of period costs include marketing and administrative expenses.

Question 18

The model whose goal is to eliminate waste while satisfying the customer and providing a positive return to the company is:
A) Managerial accounting model.
B) Lean business model.
C) Just-in-time manufacturing model.
D) Corporate social responsibility model.
E) Continuous improvement model.

Accepted Answer

The Lean business model is specifically designed to eliminate waste while ensuring that customers are satisfied and the company makes a positive return. It involves streamlining processes, continuously improving operations, and maximizing efficiency in order to reduce costs and increase profitability. The other models listed may have some similar goals, but they are not as focused on waste reduction and operational efficiency as the Lean business model.

Question 19

Goals of a Total Quality Management process include all of the following except:
A) Continuous improvement.
B) Better inventory control.
C) Fewer product defects.
D) Reduced waste.
E) Consistent production levels.

Accepted Answer

Total Quality Management focuses on improving quality and efficiency, not necessarily maintaining consistent production levels.

Question 20

For product costs associated with a particular product to be reported on the income statement:
A) The product must be sold.
B) The company must expect to sell the product during the next twelve months.
C) The product must be transferred to Finished Goods Inventory.
D) The product may be in any of the manufacturer's inventory accounts.
E) The product must still be in Work in Process Inventory.

Accepted Answer

Product costs are only reported on the income statement when the product is sold. Costs incurred during the manufacturing process are recorded as inventory costs until the product is sold.

Quiz 18: Managerial Accounting Concepts and Principles

Continuous improvement:

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

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

A direct cost is a cost that is:

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

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:

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 fixed cost:

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

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

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 National Quality Award that encourages an emphasis on quality was established by:

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

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

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:

Period costs for a manufacturing company would flow directly to:

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

Goals of a Total Quality Management process include all of the following except:

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