Question 1

A management concept that applies quality improvement to all aspects of business activities is called:
A) Continuous operations.
B) Customer orientation.
C) Just-in-time.
D) Theory of constraints.
E) Total quality management.

Accepted Answer

Total quality management (TQM) is a management concept that emphasizes a continuous, organization-wide effort to improve the quality of all business activities. TQM involves all employees in the organization, from top management to front-line workers, and focuses on customer satisfaction, continuous improvement, and waste reduction. TQM is a holistic approach that encompasses all aspects of the organization, from product design and development to production, sales, and customer support.

Question 2

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

Accepted Answer

The answer of Benny, an employee of Parrott Company, used...

Question 3

Continuous improvement:
A) Is a measure of profits.
B) Is a measure of costs.
C) Rejects the notion of "good enough."
D) Is not applicable to most businesses.
E) Is possible only in service businesses.

Accepted Answer

Continuous improvement is the ongoing effort to improve products, services, or processes. It strives to make improvements continuously and does not settle for what is considered "good enough." The other choices are not applicable or incorrect.

Question 4

An opportunity cost is:
A) An uncontrollable cost.
B) A cost of potential benefit lost.
C) A change in the cost of a component.
D) A direct cost.
E) A sunk cost.

Accepted Answer

An opportunity cost is the potential benefit that is foregone when choosing one alternative over another. It is not an uncontrollable cost or a change in the cost of a component. It is also not a direct cost or a sunk cost, as it represents the value of the next best alternative that was not chosen.

Question 5

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

Accepted Answer

Period costs are costs that are expensed on the current income statement and are not included in the cost of goods sold. These include expenses such as advertising, salaries, and rent.

Question 6

Last year, Smith Company sold 10,000 units of its only product. If sales increase by 15% in the current year, how will unit variable cost and unit fixed cost be affected? 
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Accepted Answer

The answer of Last year, Smith Company sold 10,000 units...

Question 7

The model whose goal is to eliminate waste while satisfying the customer and providing a positive return to the company is:
A) Total quality management.
B) Managerial accounting.
C) Customer orientation.
D) Continuous improvement.
E) Lean business model.

Accepted Answer

The Lean business model focuses on eliminating waste while providing value to customers and generating profits for the company. It emphasizes continuous improvement and efficiency in all aspects of the business, from production to management. Total quality management and customer orientation are also important concepts in Lean, but they do not encompass the entire model. Managerial accounting is a tool used in many different business models, but it is not a model itself.

Question 8

A classification of costs that is useful for assigning responsibility to and evaluating managers is:
A) Classification by traceability.
B) Classification by behavior.
C) Classification by relevance.
D) Classification by function.
E) Classification by controllability.

Accepted Answer

A classification of costs by controllability is useful for assigning responsibility to and evaluating managers because it focuses on the costs that are under the control of a particular manager, rather than costs that are outside of their control. This allows for a more accurate evaluation of managerial performance and responsibility.

Question 9

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

Accepted Answer

Just-in-time manufacturing is an approach to managing inventories and production operations that emphasizes producing only what is needed, when it is needed, and in the quantity needed. This enables companies to reduce waste and improve efficiency, as they are not producing excess inventory that may go unused or become obsolete. It also promotes better coordination and communication among suppliers, as they must provide materials and components in a timely and accurate manner.

Question 10

A primary difference between variable costs and fixed costs is:
A) Variable costs per unit change in varying increments while fixed costs per unit change in equal increments over the relevant range of activity.
B) Variable costs per unit fluctuate and fixed costs per unit remain constant over the relevant range of activity.
C) Variable costs per unit are fixed and fixed costs per unit are variable over the relevant range of activity.
D) Variable costs per unit change in equal increments while total fixed costs change in proportion to the level of activity over the company's relevant range.
E) Total variable costs are fixed and fixed costs per unit never change over the relevant range of activity.

Accepted Answer

The answer of A primary difference between variable costs and...

Question 11

A management concept that encourages all managers and employees to be in tune with the wants and needs of customers, and which leads to flexible product designs and production processes, is called:
A) Continuous improvement.
B) Customer orientation.
C) Just-in-time.
D) Theory of constraints.
E) Total quality management.

Accepted Answer

Customer orientation is a management concept that prioritizes understanding and meeting the needs and wants of customers. This often leads to higher customer satisfaction, flexible product designs, and more efficient production processes. Continuous improvement, just-in-time, theory of constraints, and total quality management are also important management concepts, but don't necessarily prioritize the customer experience above all else.

Question 12

A mixed cost:
A) Requires the future outlay of cash and is relevant for future decision making.
B) Does not change with changes in the volume of activity within the relevant range.
C) Is directly traceable to a cost object.
D) Contains a combination of fixed costs and variable costs.
E) Has already been incurred and cannot be avoided so it is irrelevant for decision making.

Accepted Answer

A mixed cost contains both fixed and variable components. It changes with changes in the volume of activity within the relevant range. It is relevant for future decision making and requires future outlay of cash. It may or may not be directly traceable to a cost object. It is different from a sunk cost, which is already incurred and cannot be avoided, and hence, irrelevant for decision making.

Question 13

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

Accepted Answer

Continuous improvement is defined as the approach of constantly seeking ways to improve company operations. This includes not only improving the end product or service, but also the production process and employee interactions. This approach helps to ensure that the company is always striving to provide the best possible products and services to customers, which can lead to increased customer loyalty and profitability.

Question 14

Period costs for a manufacturing company would flow directly to:
A) The current income statement.
B) Factory overhead.
C) The current balance sheet.
D) Job cost sheet.
E) The current manufacturing statement.

Accepted Answer

Period costs are not directly related to the production of goods, so they are expensed in the current income statement as incurred.

Question 15

An employee is dissatisfied with the resolution of an ethical conflict at his place of employment. According to the Institute of Management Accountants, the employee's next step should be to
A) contact the IMA.
B) contact the next level of management who is not involved in the ethical conflict.
C) make the president of the company aware of the ethical conflict.
D) report the incident to the State Board of Accountancy.
E) resign from the company.

Accepted Answer

Contacting the next level of management who is not involved in the ethical conflict is recommended by the IMA as the first step in addressing ethical conflicts. This allows for a review of the situation by a higher authority who can consider all factors and suggest a remedy. Contacting external parties or resigning should be a last resort after all internal options have been exhausted.

Question 16

Costs that are first assigned to inventory are called:
A) Period costs.
B) Product costs.
C) General costs.
D) Administrative costs.
E) Fixed costs.

Accepted Answer

Costs that are first assigned to inventory are called product costs. These costs include direct materials, direct labor, and manufacturing overhead. They are assigned to inventory because the goods are not yet sold and are still considered assets of the company. Once the goods are sold, these costs are then expensed through Cost of Goods Sold.

Question 17

Classifying costs by behavior involves:
A) Identifying fixed cost and variable cost.
B) Identifying cost of goods sold and operating costs.
C) Identifying all costs.
D) Identifying costs in a physical manner.
E) Identifying both quantitative and qualitative cost factors.

Accepted Answer

Classifying costs by behavior involves identifying costs as either fixed or variable costs. This distinction is important in understanding how costs will change in response to changes in production or sales levels. Option B is incorrect because it refers to another method of cost classification. Option C is too broad and vague. Option D doesn't make sense as a method of cost classification. Option E mentions quantitative and qualitative factors, which are not necessarily related to cost behavior.

Question 18

A direct cost is a cost that is:
A) Identifiable as controllable.
B) Variable with respect to the volume of activity.
C) Fixed with respect to the volume of activity.
D) Traceable to a cost object.
E) Sunk with respect to a cost object.

Accepted Answer

A direct cost is traceable or assignable to a particular cost object such as a product, department or a project. Examples include direct materials, direct labor and direct expenses. This means that the cost can be measured and allocated to specific goods, services or departments. Therefore, option D, tracing the cost to a cost object is the best choice.

Question 19

A fixed cost:
A) Requires the future outlay of cash and is relevant for future decision making.
B) Does not change with changes in the volume of activity within the relevant range.
C) Is directly traceable to a cost object.
D) Changes with changes in the volume of activity within the relevant range.
E) Has already been incurred and cannot be avoided so it is irrelevant for decision making.

Accepted Answer

Fixed costs do not change with changes in the volume of activity within the relevant range.

Question 20

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

Accepted Answer

Product costs are not expensed on the income statement until the product is sold. Therefore, the product must be sold for its costs to be expensed.

Quiz 18: Managerial Accounting Concepts and Principles

A management concept that applies quality improvement to all aspects of business activities is called:

Benny, an employee of Parrott Company, used company assets for his own personal gain. This is an example of

Continuous improvement:

An opportunity cost is:

Costs that flow directly to the current income statement are called:

Last year, Smith Company sold 10,000 units of its only product. If sales increase by 15% in the current year, how will unit variable cost and unit fixed cost be affected?

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

A classification of costs that is useful for assigning responsibility to and evaluating managers is:

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 primary difference between variable costs and fixed costs is:

A management concept that encourages all managers and employees to be in tune with the wants and needs of customers, and which leads to flexible product designs and production processes, is called:

A mixed cost:

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:

An employee is dissatisfied with the resolution of an ethical conflict at his place of employment. According to the Institute of Management Accountants, the employee's next step should be to

Costs that are first assigned to inventory are called:

Classifying costs by behavior involves:

A direct cost is a cost that is:

A fixed cost:

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