Deck 1: Managerial Accounting,the Business Organization,and Professional Ethics

Question 1

The primary users of management accounting information are ________.

A) bankers
B) governmental regulatory bodies
C) managers in organizations
D) managerial accountants

Answer 1

C

Question 2

Which credential is associated with management accountants?

A) CPA
B) CMA
C) CFP
D) IMA

Answer 2

B

Question 3

________ is the field of accounting that develops information for external parties such as stockholders,suppliers,banks and governmental regulatory bodies.

A) Auditing
B) Internal auditing
C) Management accounting
D) Financial accounting

Answer 3

D

Question 4

In some countries outside the United States,independent auditors are called chartered accountants.

Question 5

Financial accounting reports are usually prepared for a period of one year or less.

Question 6

Who provides assurance to external users about the reliability of a company's financial statements?

A) Certified Management Accountants and Certified Public Accountants
B) Chartered Management Accountants and Certified Management Accountants
C) Certified Public Accountants and Chartered Management Accountants
D) Certified Public Accountants and Chartered Accountants

Question 7

Which of the following statements about management accounting is FALSE?

A) Management accounting is the process of identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating information.
B) Management accounting helps managers fulfill organizational objectives.
C) Management accounting is used by managerial accountants to make strategic and operational decisions.
D) Management accounting produces information for managers in an organization.

Question 8

Problem solving information would NOT be used in which of the following situations?

A) decision to make or buy parts for a manufactured product
B) decision to replace equipment
C) decision to add or drop a division
D) evaluating the operating performance of a segment in the current year

Question 9

Financial reports prepared by financial accountants focus on ________.Financial reports prepared by management accountants focus on ________.

A) segments of the organization such as departments and divisions; segments of the organization such as departments and divisions
B) the organization as a whole; the organization as a whole
C) the organization as a whole; segments of the organization such as departments and divisions
D) segments of the organization such as departments and divisions; the organization as a whole

Question 10

Investigating the reasons for the variances on a department's performance report is an example of ________.

A) scorekeeping
B) attention directing
C) problem solving
D) auditing

Question 11

The largest U.S.association of professional accountants whose major interest is management accounting is the ________.

A) American Institute of Certified Public Accountants
B) American Institute of Certified Management Accountants
C) Institute of Management Accountants
D) American Institute of Management Accountants

Question 12

Behavioral considerations are of primary importance in financial accounting.

Question 13

________ is the classification,accumulation,and reporting of data that help users understand and evaluate organizational performance.

A) Scorekeeping
B) Attention directing
C) Problem solving
D) Cost accounting

Question 14

________ information helps managers focus on operating problems,imperfections,inefficiencies and opportunities.

A) Scorekeeping
B) Attention directing
C) Problem solving
D) Performance

Question 15

Reports prepared by managerial accountants have a past orientation.

Question 16

________ is the field that produces information used primarily by managers within an organization.

A) Financial accounting
B) Management accounting
C) Internal auditing
D) External auditing

Question 17

Generally Accepted Accounting Principles are most closely connected to ________.

A) management accounting
B) financial accounting
C) internal auditing
D) management auditing

Question 18

Generally Accepted Accounting Principles play an important role in management accounting.

Question 19

When comparing management accounting and financial accounting,which of the following statements is FALSE?

A) Management accounting has a future orientation whereas financial accounting has a past orientation.
B) Management accounting prepares detailed reports whereas financial accounting prepares summary reports.
C) Management accountants are constrained by the principles of reporting promulgated by the Institute of Management Accountants whereas financial accountants are constrained by Generally Accepted Accounting Principles.
D) Behavioral considerations are of primary importance in management accounting, but not in financial accounting.

Question 20

Which of the following organizations oversees the CMA Exam?

A) American Institute of Certified Public Accountants
B) Chartered Accountants Institute
C) Institute of Management Accountants
D) American Institute of Certified Management Accountants

Question 21

To evaluate managers' decisions and the productivity of organizational units,organizations use ________.

A) annual financial statements
B) quarterly financial statements
C) bimonthly financial statements
D) performance reports

Question 22

Companies produce most ________ and ________ information on a routine basis such as every day,every month or every quarter.

A) scorekeeping; problem-solving
B) scorekeeping; attention directing
C) problem-solving; attention directing
D) interim reports; problem-solving

Question 23

Starbucks generates many financial reports to evaluate the operating performance of each store at the end of each quarter.The financial reports are an example of ________.

A) scorekeeping
B) attention directing
C) problem-solving
D) management auditing

Question 24

How is accounting information prepared by management accountants used within an organization?

A) to help operating managers make decisions
B) to plan an organization's operations
C) to control an organization's operations
D) all of the above

Question 25

The Foreign Corrupt Practices Act requires ________.

A) companies to cease conducting business with companies in some foreign countries
B) companies to reject bribes from companies in foreign countries
C) companies to have an appropriate system of internal controls
D) companies to prepare a separate report on their accounting information system

Question 26

Performance reports compare actual results to ________.Performance reports also report ________.

A) budgeted results; bonuses awarded
B) objectives; variances
C) planned results; variances
D) projected results; stock options granted

Question 27

________ involves an analysis of alternative courses of action and the identification of the best course of action to follow.

A) Scorekeeping
B) Attention directing
C) Problem-solving
D) Internal auditing

Question 28

What are accounting systems?

A) The process used to streamline production processes
B) The process used to generate performance measures
C) Formal mechanisms for gathering, organizing and communicating information about an organization's activities
D) none of the above

Question 29

A company is considering whether to change the mix of products sold.They think it would be more profitable to emphasize the products with the highest profit per unit.What type of information is needed to answer this question?

A) scorekeeping
B) attention directing
C) problem-solving
D) internal auditing

Question 30

A company is setting the price on a special order of a manufactured product routinely made.What type of information is needed to set the price?

A) scorekeeping
B) attention directing
C) problem-solving
D) interim reports

Question 31

Southern Chicken is expanding the menu items offered in order to increase profitability.Management will evaluate the profitability of each new menu item after six months.Menu items that are profitable will be retained and the others will be discontinued.On the part of management,the evaluation and subsequent actions after six months is an example of ________.

A) management auditing
B) internal auditing
C) planning
D) control

Question 32

Planning refers to ________.

A) the implementation of organizational plans
B) the use of performance reports to evaluate the attainment of organizational objectives
C) setting organizational objectives and establishing the path to attain them
D) an analysis of alternative courses of action

Question 33

Taco Bell wants to increase profitability of stores in the Midwest by adding new menu items and increasing advertising.This is an experiment and the company is unsure if these actions will be fruitful.On the part of management,this is an example of ________.

A) control
B) scorekeeping
C) feedback
D) planning

Question 34

A company is unsure whether it is more cost efficient to make or buy a component used in a manufactured product that is mass produced.What type of information is needed to make this decision?

A) scorekeeping
B) attention directing
C) problem-solving
D) management auditing

Question 35

An unfavorable variance occurs on a performance report when ________.

A) the actual cost is less than the budgeted cost
B) the actual revenue is greater than the budgeted revenue
C) the actual profit is greater than the budgeted profit
D) the actual revenue is less than the budgeted revenue

Question 36

Most scorecard and attention-directing information is produced on a nonroutine basis.

Question 37

Starbucks experiments with adding ice cream sundaes to its menu at several stores in the state of Washington Financial reports are prepared showing revenues and costs for the new menu item.Based on the reports,management at the corporate office will then decide whether to permanently add or remove the new menu item.The financial reports are an example of ________ information.

A) scorekeeping
B) attention directing
C) problem-solving
D) management auditing

Question 38

A manager using information to decide whether to add or drop a product is an example of problem solving.

Question 39

A(n)________ is a review to determine whether the policies and procedures specified by top management have been implemented by lower managers.

A) management audit
B) internal audit
C) internal control
D) internal accounting control

Question 40

What type of information is used in making nonroutine decisions,such as the decision to replace a traditional assembly line with fully automated robots?

A) scorekeeping information
B) attention directing information
C) problem solving information
D) auditing information

Question 41

A favorable variance occurs on a performance report when ________.

A) the actual cost is greater than the budgeted cost
B) the actual revenue is less than the budgeted revenue
C) the actual profit is less than the budgeted profit
D) the actual profit is greater than the budgeted profit

Question 42

When designing an accounting information system for management,which governmental regulations are NOT important?

A) Sarbanes-Oxley Act
B) Foreign Corrupt Practices Act
C) Tax rules promulgated by Internal Revenue Service
D) Six Sigma Act

Question 43

The management accountant prepares the following performance report for a company's first year of operations:
$\begin{array}{llll}&\text { Budget }& \text { Actual } & \text { Variance }\\\text { Sales } & \$ 100,000 & \$ 110,000 & ? \\\text { Cost of Goods Sold } & 50,000 & 45,000 & ? \\\text { Selling Expenses } & 20,000 & 19,000 & ? \\\text { Administrative Expenses } & 10,000 & 11,000 & ? \\\text { Operating Income } & \$ 20,000 & \$ 35,000 & ?\end{array}$
Required:
Compute variances for each line item on the income statement. Also indicate if the variances are favorable or unfavorable.

Question 44

Which of the following items should be considered by managers when designing accounting systems?

A) cost-benefit balances
B) behavioral implications
C) cost-benefit balances and behavioral implications
D) none of the above

Question 45

USA Bank held a party.USA Bank expected attendance of 100 people and prepared the following budget:
$\begin{array}{ll}\text { Hotel room rental } & \$ 600 \\\text { Food } & 500 \\\text { Entertainment } & 800 \\\text { Decorations } & 300\\\text { Total Costs }&\$2,200\end{array}$
One hundred people attended the party.The following costs were incurred:
$\begin{array}{ll}\text { Hotel room rental } & \$ 575 \\\text { Food } & 640 \\\text { Entertainment } & 750 \\\text { Decorations } & 350 \\\text { Total Costs }&\$2,315\end{array}$
What is the variance for the cost of food?

A) $115 Unfavorable
B) $140 Favorable
C) $115 Favorable
D) $140 Unfavorable

Question 46

When designing an accounting information system,the cost to acquire additional information should be incurred ________.

A) at all times so the operating manager has more information to make decisions
B) when information overload does not occur
C) at all times because the benefit cannot be quantified
D) when the expected benefit of an improved decision exceeds the cost of the information

Question 47

Who is the primary user of performance reports used to plan and control operations?

A) management accountants
B) CPAs
C) operating managers
D) chartered accountants

Question 48

A budget is a qualitative expression of a plan of action.

Question 49

The Helium Company held a Christmas party.The company expected attendance of 100 people and prepared the following budget:
$\begin{array}{ll}\text { Hotel room rental } & \$ 500 \\\text { Food } & 500 \\\text { Entertainment } & 800 \\\text { Decorations } & 300\\\text { Total Costs }&\$2,100\end{array}$
One hundred people attended the party.The following costs were incurred:
$\begin{array}{ll}\text { Hotel room rental } & \$ 575 \\\text { Food } & 640 \\\text { Entertainment } & 750 \\\text { Decorations } & 350\\\text { Total Costs }&\$2,315\end{array}$
What is the variance for total costs?

A) $215 Unfavorable
B) $215 Favorable
C) $25 Favorable
D) $140 Unfavorable

Question 50

________ is (are)the accounting system's effect on the behavior and the decisions of managers.

A) Simplicity
B) Behavioral implications
C) The cost-benefit balance
D) The code of ethics

Question 51

A sorority held a party.The sorority prepared the following budget for 25 expected attendees:
$$\begin{array} { l l } \text { Room rental } & \$ 270 \\\text { Food } & 250 \\\text { Entertainment } & 150 \\\text { Decorations } & 75 \\\text { Total Costs } & \$ 745\end{array}$$
Twenty-five people attended the party.The costs incurred were:
$$\begin{array} { l l } \text { Room rental } & \$ 140 \\\text { Food } & 320 \\\text { Entertainment } & 125 \\\text { Decorations } & 75 \\\text { Total Costs } & \$ 660\end{array}$$
What is the variance for the room rental cost?

A) $85 Unfavorable
B) $85 Favorable
C) $130 Favorable
D) $130 Unfavorable

Question 52

A fraternity held a party.The fraternity prepared the following budget for 25 expected attendees:
$\begin{array}{ll}\text { Room rental }&\$150\\\text { Food } & 250 \\\text { Entertainment } & 150 \\\text { Decorations } & 75\\\text { Total Costs }&\$625\end{array}$
Twenty-five people attended the party.The following costs were incurred:
$$\begin{array} { l l } \text { Room rental } & \$ 240 \\\text { Food } & 320 \\\text { Entertainment } & 125 \\\text { Decorations } & 75 \\\text { Total Costs } & \$ 760\end{array}$$
What is the variance for total costs?

A) $90 Unfavorable
B) $135 Unfavorable
C) $135 Favorable
D) $70 Unfavorable

Question 53

A budget ________.

A) is a quantitative expression of a plan of action
B) provides feedback by comparing actual results with planned results
C) includes deviations from planned results
D) ignores areas that are presumed to be running smoothly

Question 54

Management-by-exception means that managers should ________.

A) concentrate on areas that deviate from the plan
B) in the absence of other evidence, presume that areas that conform with plans are running smoothly
C) A and B
D) none of the above

Question 55

Management by exception is the practice of ignoring areas that deviate from the plan.

Question 56

Variances are deviations from planned results.

Question 57

What types of variances should be investigated when looking at performance reports?

A) all variances
B) only favorable and unfavorable variances that are large in size
C) only unfavorable variances that are large in size
D) only favorable variances that are large in size

Question 58

________ is (are)the primary consideration in choosing among accounting systems.

A) Simplicity
B) Behavioral implications
C) The cost-benefit balance
D) Simplicity and behavioral implications

Question 59

The Hermanski Company held a Christmas party.The company expected attendance of 100 people and prepared the following budget:
$\begin{array}{ll}\text { Hotel room rental } & \$ 600 \\\text { Food } & 500 \\\text { Entertainment } & 800 \\\text { Decorations } & 300\\\text { Total Costs }&\$2,200\end{array}$
One hundred people attended the party.The costs incurred were:
$\begin{array}{ll}\text { Hotel room rental } & \$ 575 \\\text { Food } & 640 \\\text { Entertainment } & 750 \\\text { Decorations } & 350\\\text { Total Costs }&\$2,315\end{array}$
What is the primary reason for the variance in total costs?

A) Hotel room rent cost more than expected.
B) Food cost more than expected.
C) Entertainment cost more than expected.
D) Decorations cost less than expected.

Question 60

When developing a price for a new product,the price must cover ________.

A) costs in phase-out and product development cycles only
B) costs in mature market and introduction to market cycles only
C) costs in product development and phase-out cycles plus direct production costs
D) costs incurred in all stages of the product life cycle

Question 61

The various stages through which a product passes are called the ________.

A) value chain
B) product life cycle
C) performance plan
D) product performance plan

Question 62

The behavioral implications of an accounting system refer to the system's effects on the firm's customers.

Question 63

Advertising is an example of the ________ function of the value chain.

A) distribution
B) selling
C) marketing
D) promotion

Question 64

Marketing is the function of the value chain that involves ________.

A) the mechanism by which a company delivers products or services to the customer
B) the manner by which individuals or groups learn about the value and features of products or services
C) selling activities and delivery activities
D) selling activities and customer service

Question 65

The function of the value chain that provides support activities to the customer is called ________.

A) marketing
B) distribution
C) customer service
D) consumer relations

Question 66

The cost-benefit balance is the primary consideration in choosing among accounting systems.

Question 67

Additional costly information should be acquired when the expected benefit of an improved decision exceeds the cost of the information.

Question 68

When does a company earn the majority of revenue for a product that goes through the product life cycle?

A) phase-out of product and introduction to market stages
B) introduction to market and mature market stages
C) product development and mature market stages
D) mature market and phase-out of product stages

Question 69

Distribution is the function of the value chain that involves ________.

A) the mechanism by which a company delivers products or services to the customer
B) the manner by which individuals or groups learn about the value and features of products or services
C) the support activities provided to the customer
D) none of the above

Question 70

The ________ is mainly concerned with the company's operating matters whereas the ________ is mainly concerned with the company's financial matters.

A) treasurer; controller
B) controller; treasurer
C) managerial accountant; financial accountant
D) chief executive officer; chief financial officer

Question 71

The detailed design and engineering of products,services or processes is called the ________ function in the value chain.

A) research and development
B) design
C) engineering
D) production

Question 72

During the product development stage of the product life cycle,companies typically experience ________.

A) revenues and no costs
B) costs and no revenues
C) both costs and revenues
D) neither costs nor revenues

Question 73

Research and development is the function of a value chain that involves ________.

A) the detailed design and engineering of products, services or processes
B) the generation of ideas related to new products, services or processes
C) the generation of ideas related to new products only
D) the detailed design and engineering of new processes

Question 74

The product life cycle for an automobile is usually a few months.

Question 75

Which stage of the product life cycle has a stable sales level?

A) product development stage
B) introduction to market stage
C) mature market stage
D) phase-out of product stage

Question 76

A telephone hotline is established for customers to call with questions about a new electronic device.This is an example of the ________ function in the ________.

A) marketing; value chain
B) distribution; value chain
C) customer service; value chain
D) marketing; product life cycle

Question 77

An example of a staff department at a clothing manufacturer is the ________.

A) pressing department
B) cutting department
C) sewing department
D) maintenance department

Question 78

According to the Financial Executives Institute,a function of the controller is ________.

A) investments
B) short-term financing
C) provision of capital
D) reporting and interpreting

Question 79

According to the Financial Executives Institute,a function of the treasurer is ________.

A) reporting and interpreting
B) short-term financing
C) protection of assets
D) government reporting

Question 80

Product life cycles may range from a few months to many years.