Deck 1: Introduction to Managerial Accounting

Question 1

The control function is comparing actual with budgeted results and taking corrective action when needed.This is the definition of the control function.

Answer 1

True

Question 2

Managers of small,private corporations use managerial accounting information whereas managers of large,public corporations use financial accounting information.Managerial accounting information is used by managers in all types of organizations: large and small,public and private,profit and nonprofit.

Answer 2

False

Question 3

Financial accounting information is prepared according to generally accepted accounting principles.External financial statements are required to be prepared according to GAAP.

Answer 3

True

Question 4

Opportunity cost is the cost of not doing something.An opportunity cost is the foregone benefit of the path not taken - the cost of not doing something.

Question 5

Variable costs are always direct costs.Variable costs change,in total,in direct proportion to changes in activity levels.They are not always direct costs,which can be traced to a specific cost object.

Question 6

Financial accounting information is generally used exclusively by internal parties such as managers.Financial accounting information is used by external parties;managerial accounting information is used by internal business owners and manager.

Question 7

The planning function is the arranging of the necessary resources to carry out the plan.Planning involves setting long-term goals and objectives,along with the short-term tactics necessary to achieve them.

Question 8

Financial accounting information is reported for the company as a whole.Financial accounting information is provided at the company-wide level.

Question 9

Managerial accounting information includes such items as budgets,performance evaluations,and cost reports.Managerial accounting is used by internal business owners and managers,who need internal information such as budgets,performance evaluations,and cost reports.

Question 10

An indirect cost can be readily traced to a cost object while a direct cost is traced only to manufacturing costs.An indirect cost cannot be readily traced to a cost object.A direct cost can be traced to a specific cost object.It does not necessarily involve manufacturing costs.

Question 11

Costs can be sorted or categorized in a number of ways including relevant or irrelevant costs.One of the ways that costs can be sorted or categorized is by whether they are relevant or irrelevant.

Question 12

The Sarbanes-Oxley Act of 2002 focuses on three factors that affect the accounting reporting environment: ethics,fraud,and managers.The Sarbanes-Oxley Act of 2002 focuses on three factors that affect the accounting reporting environment: opportunity,incentives,and character.

Question 13

Although there are numerous ways to categorize costs,each individual cost will only be classified in one particular way.A single cost can be classified in more than one way,depending on how the information will be used.

Question 14

The Sarbanes-Oxley Act of 2002 places full responsibility on the board of directors for the accuracy of the reporting system.SOX places more responsibility on all managers (not just accountants)for the accuracy of the reporting system.SOX also places additional responsibilities on the boards of directors and external auditors to reduce the opportunity for errors and fraud.

Question 15

Since hospitals,universities,and charitable organizations do not exist strictly to earn profit for shareholders,managerial accounting information is not vital to their operations.Managerial accounting information is vital to nonprofit organizations,including hospitals,universities,and charitable organizations.Although these organizations do not exist strictly to earn profit for shareholders,their managers still need managerial accounting information to prepare budgets,manage resources,and make strategic and operational decisions.

Question 16

Out-of-pocket costs involve an actual outlay of cash.Out-of-pocket costs are those paid for items purchased,and involve an actual outlay of cash.

Question 17

Whether a cost is treated as direct or indirect depends on whether tracing the cost is either possible or feasible.Direct costs can be traced directly to a specific cost object,while indirect costs cannot be traced to a specific cost object or are not worth the effort of tracing.

Question 18

Investors,creditors and regulators are the primary users of managerial accounting information.Managerial accounting information is used by internal business owners and managers.

Question 19

The directing/leading function provides motivation to achieve results.Directing/leading involves putting the plan into action,and motivating others to work toward the plan's success.

Question 20

Properly applied,ethics provide a clear right or wrong answer to the business situations facing accountants and managers.Ethics refers to the standards of conduct for judging right from wrong,honest from dishonest,and fair from unfair.

Question 21

A manufacturing firm reports only manufacturing costs.A manufacturing firm reports both manufacturing and nonmanufacturing costs.

Question 22

Which of the following types of organizations sells goods to the general public?

A)Service companies
B)Manufacturing firms
C)Merchandising companies
D)Retailers

Question 23

Which of the following is not a characteristic of financial accounting?

A)Information is reported at the decision making level.
B)Information is used by external parties.
C)Information is objective,reliable and historical.
D)Reports are prepared periodically.

Question 24

Which of the following is not a characteristic of financial accounting?

A)Financial reports are prepared according to GAAP.
B)Information is used primarily by internal parties.
C)Information is objective,reliable and historical.
D)Reports are prepared periodically.

Question 25

All manufacturing costs are treated as product costs.GAAP requires that all manufacturing costs be treated as product costs,or costs that are assigned to the product as it is being manufactured.

Question 26

Which of the following is not a characteristic of managerial accounting?

A)Information is used by internal parties.
B)Information is subjective,relevant,future-oriented.
C)Reports are prepared as needed.
D)Information is reported for the company as a whole.

Question 27

A cost that will occur in the future and differs between various alternatives under consideration is a relevant cost.For a cost to be relevant,it must occur in the future and differ between the various alternatives the manager is considering.

Question 28

All manufacturing costs are inventoriable costs.Manufacturing costs are product costs that are assigned to the product as it is being manufactured.Product costs are also called inventoriable costs because they are counted as inventory until the product is finally sold.

Question 29

What is the primary goal of accounting?

A)To set long-term goals and objectives.
B)To arrange for the necessary resources to achieve a plan.
C)To provide information for decision making.
D)To motivate others to work towards a plan's success.

Question 30

Which of the following types of reports is more characteristic of managerial accounting than financial accounting?

A)An internal report used by management.
B)An external report used by investors.
C)A report prepared according to GAAP.
D)A report prepared periodically (monthly,quarterly,annually).

Question 31

Conversion costs are the costs to convert direct materials into the finished product.Direct labor and manufacturing overhead are referred to as conversion cost - that is,the total cost required to convert direct materials into the finished product.

Question 32

Which of the following is not a characteristic of managerial accounting?

A)Information is used by external parties.
B)Information is subjective,relevant,future-oriented.
C)Reports are prepared as needed.
D)Information is reported at the decision making level.

Question 33

Hair salons and law firms are which of the following type of organization?

A)Retailers
B)Service companies
C)Manufacturing firms
D)Merchandising companies

Question 34

Which of the following types of organizations purchases raw materials from suppliers and uses them to create a finished product?

A)Manufacturing firms
B)Merchandising companies
C)Service companies
D)Retailers

Question 35

Which of the following is not a characteristic of financial accounting?

A)Financial reports are prepared according to GAAP.
B)Information is used by external parties.
C)Information is subjective,relevant and future-oriented.
D)Reports are prepared periodically.

Question 36

Fixed costs stay the same,in total,as activity level changes.This is the definition of a fixed cost.

Question 37

Accounting is primarily intended to facilitate

A)starting a business.
B)decision making.
C)ethics investigations.
D)cost tracing.

Question 38

Prime costs include direct materials,direct labor,and manufacturing overhead.Taken together,direct materials and direct labor are referred to as prime cost.

Question 39

Fixed costs stay the same,on a per-unit basis,as activity level changes.Fixed costs stay the same,in total,as activity level changes.

Question 40

Which of the following is not a characteristic of managerial accounting?

A)Information is used by internal parties.
B)Information is subjective,relevant,future-oriented.
C)Reports are prepared as needed.
D)Reports are prepared according to GAAP.

Question 41

Which of the following changes introduced by the Sarbanes-Oxley Act is not one intended to reduce opportunities for error and fraud?

A)Internal control report from management
B)Code of ethics
C)Stronger oversight by directors
D)Internal control audit by external auditors

Question 42

Which of the following functions of management involves taking actions to implement the plan?

A)Planning
B)Organizing
C)Directing/leading
D)Control

Question 43

Which of the following describes the Planning function of management?

A)Setting short and long-term objectives
B)Comparing actual to budgeted results and taking corrective action
C)Taking actions to implement the plan
D)Arranging the necessary resources to carry out the plan

Question 44

Which of the following describes the Organizing function of management?

A)Setting short and long-term objectives
B)Comparing actual to budgeted results and taking corrective action if needed
C)Taking actions to implement the plan
D)Arranging the necessary resources to carry out the plan

Question 45

Which of the following is not one of the factors affecting the accounting reporting environment focused on by the Sarbanes-Oxley Act?

A)Line of business
B)Opportunity
C)Character
D)Incentives

Question 46

Which of the following functions of management involves setting short and long-term objectives and the tactics to achieve them?

A)Planning
B)Organizing
C)Directing/leading
D)Control

Question 47

The Sarbanes-Oxley Act places responsibility for the accuracy of the reporting system on

A)Accounting managers.
B)Marketing managers.
C)Top executives.
D)All managers.

Question 48

Which of the following changes introduced by the Sarbanes-Oxley Act is not one intended to encourage good character?

A)Anonymous tip lines
B)Whistle-blower protection
C)Code of ethics
D)Stiffer fines and prison terms

Question 49

Which of the following is a requirement under the Sarbanes-Oxley Act?

A)Financial statements must be audited by a Big Four accounting firm.
B)Management must issue a report that indicates whether the financial statements are free of error.
C)Management must conduct a review of the company's internal control system.
D)Background checks must be performed on all employees.

Question 50

Which of the following functions of management involves comparing actual results with budgeted results?

A)Planning
B)Organizing
C)Directing/leading
D)Control

Question 51

Which of the following is the correct sequencing of the managerial process?

A)Planning - Organizing - Control - Directing/Leading
B)Planning - Directing/Leading - Organizing - Control
C)Planning - Organizing - Directing/Leading - Control
D)Organizing - Directing/Leading - Planning - Control

Question 52

Which of the following describes one of the Directing/Leading functions of management?

A)Setting short and long-term objectives
B)Comparing actual to budgeted results and taking corrective action
C)Taking actions to implement the plan
D)Arranging the necessary resources to carry out the plan

Question 53

Which of the following describes the Control function of management?

A)Setting short and long-term objectives
B)Comparing actual to budgeted results and taking corrective action
C)Taking actions to implement the plan
D)Arranging the necessary resources to carry out the plan

Question 54

Which of the following does the term "ethics" not refer to?

A)The standards of conduct for judging fair from unfair
B)The standards of conduct for judging right from wrong
C)The standards of conduct for judging opportunity from incentives
D)The standards of conduct for judging honest from dishonest

Question 55

Which of the following functions of management involves providing feedback for future plans?

A)Planning
B)Organizing
C)Directing/leading
D)Control

Question 56

Which of the following functions of management involves taking corrective action if needed?

A)Planning
B)Organizing
C)Directing/leading
D)Control

Question 57

Which of the following is not true about how the Sarbanes-Oxley Act counteracts incentives for committing fraud?

A)It provides for stiffer monetary penalties.
B)It increases the maximum jail sentence for fraudulent reporting.
C)It removes legal protection from whistleblowers.
D)It provides that violators must repay any money obtained via fraud plus pay fines.

Question 58

Which of the following functions of management involves arranging the necessary resources to carry out the plan?

A)Planning
B)Organizing
C)Directing/leading
D)Control

Question 59

Which of the following functions of management involves providing motivation to achieve results?

A)Planning
B)Organizing
C)Directing/leading
D)Control

Question 60

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

A)Executives can avoid penalties for fraud by declaring personal bankruptcy.
B)Stiffer penalties for fraud in terms of monetary fines and jail time.
C)Public companies must adopt a code of ethics for senior financial officers.
D)Management must issue a report that indicates whether internal controls are effective at preventing errors and frauD.Executives cannot avoid monetary penalties by declaring personal bankruptcy.

Question 61

Costs that can be traced to a specific cost object are

A)opportunity costs.
B)direct costs.
C)indirect costs.
D)irrelevant costs.

Question 62

A direct cost is one which

A)involves an actual outlay of cash for a specific cost object.
B)can be traced to a specific cost object.
C)cannot be traced to a specific cost object.
D)is not worth the effort of tracing to a specific cost object.

Question 63

Which of the following statements concerning costs is incorrect?

A)Costs are treated differently depending on how the information will be used.
B)Out-of-pocket costs include the costs associated with not taking a particular course of action.
C)Any single cost can be classified in more than one way.
D)Costs can be categorized on the basis of relevant or irrelevant costs.

Question 64

Costs that are not worth the effort to trace to a specific cost object are

A)opportunity costs.
B)direct costs.
C)indirect costs.
D)irrelevant costs.

Question 65

Which of the following is a direct cost of manufacturing a table made of wood and glass,for a firm that manufactures furniture?

A)The cost of the wood in the table.
B)The cost of rent on the factory where the table is manufactured.
C)The salary of the supervisor who oversees all production for the firm.
D)Depreciation on the tools used to manufacture the table.

Question 66

Which of the following cannot be an out-of-pocket cost?

A)A direct cost.
B)An opportunity cost.
C)A variable cost.
D)A period cost.

Question 67

Variable costs are

A)costs that are not worth the effort to trace to a specific cost object.
B)costs that change,in total,in direct proportion to changes in activity levels.
C)always irrelevant.
D)costs that remain constant no matter the activity level.

Question 68

Which of the following is not one of the categories used to sort costs in managerial accounting?

A)Relevant or irrelevant
B)Variable or fixed
C)Out-of-pocket or opportunity
D)Direct or indirect

Question 69

An out-of-pocket cost involves which of the following?

A)Choosing to do one thing instead of another.
B)Tracing the cost directly to a cost object.
C)An actual outlay of cash.
D)Determining how the cost changes with a change in activity level.

Question 70

An actual outlay of cash is a(n)

A)out-of-pocket cost.
B)opportunity cost.
C)direct cost.
D)cost object.

Question 71

Which of the following is an indirect cost of manufacturing a table made of wood and glass,for a firm that manufactures furniture?

A)The cost of the wood in the table.
B)The cost of the labor used to assemble the table.
C)The cost of the glass in the table.
D)The cost of rent on the factory where the table is manufactureD.Costs that cannot be traced to a specific cost object,or that are not worth the effort of tracing,are indirect costs,such as the cost of rent on the factory.

Question 72

A cost object is

A)an item for which managers are trying to determine the cost.
B)an item to which managers must directly trace costs.
C)an item to which it is not worth the effort of tracing costs.
D)an item for sale by a business.

Question 73

The cost of not doing something is a(n)

A)out-of-pocket cost.
B)opportunity cost.
C)direct cost.
D)cost object.

Question 74

To earn summer money,Joe could mow lawns in his neighborhood,or he could work at a local grocery store.Which of the following is an opportunity cost of mowing lawns?

A)Cash paid for gas to run the lawnmower.
B)The time spent mowing the lawns.
C)The wages he could have earned working at the grocery store.
D)Depreciation on the lawnmower.

Question 75

Which of the following changes introduced by the Sarbanes-Oxley Act is intended to counteract incentives for fraud?

A)Stronger oversight by directors
B)Code of ethics
C)Stiffer fines and prison terms
D)Anonymous tip lines

Question 76

An opportunity cost is

A)the foregone benefit of the path not taken.
B)an actual outlay of cash.
C)the initial investment required to pursue an opportunity.
D)a cost that cannot be traced to a specific cost object.

Question 77

What determines the difference between a direct and an indirect cost?

A)Whether it changes when activity levels change.
B)Whether it is relevant to a particular decision.
C)Whether it can be traced to a specific cost object.
D)Whether it is related to manufacturing or nonmanufacturing activities.

Question 78

To earn summer money,Joe could mow lawns in his neighborhood,or he could work at a local grocery store.Which of the following is an out-of-pocket cost of mowing lawns?

A)The use of his father's truck to get to job sites.
B)The wages he could have earned working at the grocery store.
C)The time spent mowing the lawns.
D)Cash paid for gas to run the lawnmower.

Question 79

Indirect costs are

A)costs that are not worth the effort to trace to a specific cost object.
B)costs that change,in total,in direct proportion to changes in activity levels.
C)always irrelevant.
D)costs that remain constant no matter the activity level.

Question 80

Which of the following is not true about how the Sarbanes-Oxley Act emphasizes the importance of the character of managers and employees?

A)It requires that ethics be embedded in the organizational culture.
B)It requires that audit committees establish anonymous tip lines.
C)It provides protection for whistle-blowers.
D)It requires that public companies adopt a code of ethics for senior financial officers.