Deck 1: Fundamental Concepts

Question 1

Managerial accounting information is used by which of the following managers?

A)marketing managers to help price products and assess their profitability.
B)production managers to manage quality and costs and to assure on-time delivery.
C)general managers to measure employee performance and create incentives.
D)All of the answers are correct.

Answer 1

D

Question 2

The Sarbanes-Oxley Act of 2002 has increased the interaction between the audit committee of the board of directors and the which of the following?

A)controller.
B)treasurer.
C)internal auditor.
D)production manager.

Answer 2

C

Question 3

Which of the following works in planning,decision making,designing information systems,designing incentive systems,and helping managers make operating decisions?

A)Controller
B)Treasurer
C)Board of directors
D)Chief executive officer

Answer 3

A

Question 4

The best example of using managerial accounting information to help organizations succeed includes which of the following?

A)implementing strategies.
B)processing travel vouchers.
C)tracking employee time and attendance.
D)reconciling petty cash balances.

Question 5

Which of the following is true of Managerial Accounting?

A)Complies with Securities and Exchange Commission rules and regulations.
B)Uses cost-benefit analysis to determine the amount of detail presented.
C)Prepares general-purpose reports for people outside an organization.
D)Presents summary historical data in compliance with generally accepted accounting principles.

Question 6

What organization developed the "Standards of Ethical Conduct for Management Accountants" mandating that management accountants have a responsibility to maintain the highest levels of ethical conduct?

A)Institute of Management Accountants
B)Cost Accounting Standards Board
C)General Accounting Office
D)American Institute of Certified Public Accountants

Question 7

Who manages cost and managerial accounting in most organizations?

A)Controller
B)Treasurer
C)Board of directors
D)Chief executive officer

Question 8

What is an opportunity cost?

A)The difference in total costs which results from selecting one choice instead of another.
B)The profit forgone by selecting one choice instead of another.
C)A cost that may be saved by not adopting an alternative.
D)A cost that may be shifted to the future with little or no effect on current operations.

Question 9

Who is the chief accounting officer that oversees providing information to managers?

A)Chief financial officer.
B)Controller.
C)Treasurer.
D)Internal auditor.

Question 10

The question "How much information is enough?" for managerial purposes should be answered on

A)a cost/benefit basis.
B)a cost,but not benefit,basis.
C)a benefit,but not cost,basis.
D)neither costs nor benefits,but some other criteria.

Question 11

Considering the time dimension,how does managerial decision making compare with external performance evaluation?
Managerial Decision Making External Performance

A)Past Past
B)Past Future
C)Future Past
D)Future Future

Question 12

What is an opportunity cost?

A)The historical cost of goods or services used.
B)The foregone income from using an asset in its best alternative.
C)A sacrifice of resources.
D)A sacrifice of investment opportunities.

Question 13

In principle,a cost is

A)a sacrifice of resources.
B)something used up to produce revenues in a particular accounting period.
C)only comprised of direct material and direct labor.
D)something measured in conformity with generally accepted accounting principles.

Question 14

Who is the manager in charge of raising cash for operations and managing cash and near-cash assets?

A)Chief financial officer.
B)Controller.
C)Treasurer.
D)Internal auditor.

Question 15

What organization publishes a journal called Strategic Finance,numerous policy statements,and research studies on accounting issues?

A)Institute of Management Accountants
B)Cost Accounting Standards Board
C)General Accounting Office
D)American Institute of Certified Public Accountants

Question 16

Which of the following accurately describes the managerial accountants' professional environment and ethical responsibilities?

A)Stockholders have an ethical responsibility to report accurately even when their own compensation suffers.
B)Financial analysts have an ethical responsibility to report accurately even when their own compensation suffers.
C)Managers have an ethical responsibility to report accurately even when their own compensation suffers.
D)Managers do not have an ethical responsibility to report accurately even when their own compensation suffers.

Question 17

Who manages cash flows and raises cash for operations in most organizations?

A)Controller
B)Treasurer
C)Board of directors
D)Chief executive officer

Question 18

Accounting data used for managerial reports

A)must be the same data used for reporting to shareholders,but may be different for tax purposes.
B)must be the same data used for tax purposes,but may be different data for reporting to shareholders.
C)must be the same data used for both tax purposes and reporting to shareholders.
D)may be different from data used for both tax purposes and reporting to shareholders.

Question 19

In 2002,Congress passed the Sarbanes-Oxley Act.Which of the following is not a provision of that act?

A)The law empowered the American Institute of Certified Public Accountants (AICPA)to oversee licensure of auditors.
B)The Chief Executive Officer (CEO)must sign the company's financial statements attesting to the inclusion of all material information.
C)The Public Company Accounting Oversight Board (PCAOB)was created.
D)The CEO and Chief Financial Officer (CFO)must indicate that they are responsible for the company's system of internal control.

Question 20

How is cost,as used in managerial accounting,distinguished from expense,as used in financial accounting?

A)A cost is a sacrifice of resources and expenses are recorded in accounting records,but not all costs appear in accounting records.
B)All expenses are costs,but not all costs are expenses in the period of incurrence,even though they will become expenses in some later period.
C)Managerial accounting deals primarily with costs,not expenses,while financial accounting primarily deals with expenses for financial reporting as defined by generally accepted accounting principles.
D)All of the answers are correct.

Question 21

Data for Cost A and Cost B are as follows:

Which of the following best describes the behavior of Costs A and B?

A)Cost A is fixed,Cost B is variable.
B)Cost A is variable,Cost B is fixed.
C)Both Cost A and Cost B are variable.
D)Both Cost A and Cost B are fixed.

Question 22

Any item for which the manager wishes to measure cost is called a(n)

A)direct cost.
B)indirect cost.
C)cost object.
D)target cost.

Question 23

What is the term that describes costs that relate directly to a cost object?

A)direct cost.
B)indirect cost.
C)sunk cost.
D)target cost.

Question 24

Costs that donot relate directly to a cost object are its

A)marginal cost.
B)indirect cost.
C)sunk cost.
D)target cost.

Question 25

Which of the following statements is true concerning variable costs?

A)Variable costs are likely to respond to the amount of attention devoted to them by a management.
B)Variable costs are associated with marketing,shipping,warehousing,and billing activities.
C)Variable costs do not change in total for a given period but decrease on a per unit basis.
D)Variable costs change in total with changes in production activity.

Question 26

Costs that change in total as the level of activity changes are which of the following?

A)direct costs.
B)indirect costs.
C)variable costs.
D)fixed costs.

Question 27

What appears at the bottom of income statements prepared for managerial use to distinguish it from net income used in external reporting?

A)Other comprehensive income
B)Operating profit
C)Gross margin
D)Net profit (or loss)

Question 28

The nursing station on the fourth floor of Columbia Hospital for Women is responsible for the care of patients who have just given birth.The costs of drugs administered by the nurses to patients would be classified as

A)direct costs.
B)indirect costs.
C)overhead costs.
D)period costs.

Question 29

Benefit(s)of the income statements for managerial use include(s)

A)demonstrating which costs are variable and which are fixed.
B)breaking down revenues and costs in a number of ways to meet managers' needs.
C)breaking down revenues and expenses in a number of ways to meet managers' needs.
D)demonstrating which costs are variable and which are fixed,and breaking down revenues and costs in a number of ways to meet managers' needs.

Question 30

The income statement presentation that helps managers plan and make decisions shows the distinction between

A)sunk and opportunity costs.
B)variable and fixed costs.
C)controllable and non-controllable costs.
D)discretionary and outlay costs.

Question 31

External financial statements

A)promote internal management planning and decision making.
B)do not show variable and fixed costs.
C)are not in accordance with generally accepted accounting principles.
D)show direct and indirect costs.

Question 32

The costs of staffing and operating the accounting department at Columbia Hospital for Women would be considered by the Department of Surgery to be which of the following?

A)direct costs.
B)indirect costs.
C)incremental costs.
D)controllable costs.

Question 33

Which of the following concepts isleast useful for managing costs more effectively?

A)Activity-based management.
B)Value-added and non-value-added activities.
C)The value chain.
D)Generally accepted accounting principles.

Question 34

When the number of units manufactured increases,the most significant change in average unit cost will be reflected as

A)an increase in the nonvariable component.
B)a decrease in the variable component.
C)a decrease in the nonvariable component.
D)an increase in the variable component.

Question 35

A cost that changes in total as the level of activity changes is known as which of the following?

A)fixed cost.
B)direct cost.
C)indirect cost.
D)variable cost.

Question 36

Which of the following statements is true concerning total variable costs?

A)Total variable costs do not vary in total within the relevant range.
B)Total variable costs vary in total in proportion to the activity level.
C)Total variable costs vary in total in an inverse relationship with production.
D)Total variable costs vary in total,but not in proportion to changes in the activity level.

Question 37

Which of the following terms describes a cost that does not relate directly to a cost object?

A)outlay cost.
B)direct cost.
C)indirect cost.
D)opportunity cost.

Question 38

Which of the following is a cost that does not change in total as the level of activity changes?

A)fixed cost.
B)direct cost.
C)indirect cost.
D)variable cost.

Question 39

Income forgone from not using an asset in its best economic alternative is an example of which of the following type of cost?

A)outlay cost.
B)direct cost.
C)indirect cost.
D)opportunity cost.

Question 40

Fixed costs expressed on a per unit basis

A)will react directly with changes in activity.
B)will react inversely with changes in activity.
C)are not affected by activity.
D)should be ignored in making decisions since they cannot change over the long run.

Question 41

In managerial accounting,what is the term used to describe the amount a firm could earn on its assets by putting them to their best alternative use?

A)cost of capital.
B)sunk cost.
C)marginal cost.
D)future cost.

Question 42

In managerial accounting,what is the cost of capital?

A)the amount a firm could earn on its assets by putting them to their best alternative use.
B)not included in the financial accounting statements.
C)the weighted average of the costs of the firm's sources of funds taking into account both debt and equity sources of capital.
D)All of the answers are correct.

Question 43

The linked set of activities that increases the usefulness (or value)of the products or services of an organization is the

A)direct chain.
B)indirect chain.
C)value chain.
D)variable chain.

Question 44

The following provides the means for companies to outsource substantial portions of their information systems and enables the company to focus on its core competencies while taking advantage of the host's server and bandwidth capability.

A)Value chain.
B)Web hosting.
C)Total Quality Management.
D)Zero-Base Budgeting.

Question 45

Which statement is true concerning integrated information systems?

A)Integrated information systems measure a company's products,services,and activities against other more efficient and effective divisions or businesses.
B)Integrated information systems tie together various databases and applications.
C)Integrated information systems focus on increasing quality as perceived and defined by the customer.
D)Integrated information systems emphasize strengthening the weakest link (or constraint)of the company to improve operations.

Question 46

In managerial accounting,what can help the manager decide where to direct the organization's resources?

A)Capital resource allocation models
B)Quantum resource analysis
C)Balanced scorecard
D)Strategic cost analysis

Question 47

What production methodology strives to eliminate inventory and increase efficiency and quality?

A)Total quality management.
B)Theory of constraints.
C)Benchmarking.
D)Just-in-time.

Question 48

Integrated information processing systems that tie together managerial accounting,financial reporting,customer databases,supply chain management and other data bases are

A)not technically feasible.
B)required by the Internal Revenue Service regulations.
C)not in accordance with generally accepted accounting principles.
D)now commercially available.

Question 49

Which of the following best describes the term "benchmarking?"

A)producing a particular product at the lowest possible cost.
B)designing the highest quality product in a given market.
C)developing the best selling product
D)improvement gained through measuring one's products against the best products.

Question 50

Which statement is true concerning integrated information systems?

A)Integrated information systems are not technically feasible.
B)Integrated information systems violate generally accepted accounting principles.
C)Integrated information systems are not commercially available.
D)Integrated information systems tie together managerial accounting,financial reporting,customer databases,supply chain management and other data bases.

Question 51

What modern production methodology emphasizes strengthening the weakest link of the company to improve operations to become more efficient and effective?

A)Weakest link theory
B)Just-in-time
C)Total quality
D)Theory of constraints.

Question 52

What is the study of the need for activities and whether they are operating efficiently called?

A)direct and indirect cost management.
B)variable and fixed cost management.
C)activity-based management.
D)total quality management.

Question 53

Which of the following describes an activity that increases the product's service to the customer?

A)direct activity.
B)variable activity.
C)value-added activity.
D)non-value-added activity.

Question 54

The benefits of a just-in-time system usually include which of the following?

A)elimination of non-value-added activities.
B)increase in inventory levels,thus guarding against stock-outs.
C)increased time spent valuating inventories.
D)decrease in the number of deliveries required to maintain production.

Question 55

What is the term that describes the decline in value of assets during the period using either the sales value of assets or their replacement costs as the measure of value?

A)economic inflation.
B)economic deflation.
C)economic appreciation.
D)economic depreciation.

Question 56

What management technique focuses on increasing quality as perceived and defined by the customer?

A)Theory of constraints.
B)Benchmarking.
C)Total quality management.
D)Web hosting.

Question 57

Which of the following is an activity that when eliminated reduces cost without reducing the product's service to the customer?

A)direct activity.
B)indirect activity.
C)value-added activity.
D)non-value-added activity.

Question 58

The following reduces the need for in-house information technology people as well as for transaction and system managers:

A)Theory of constraints.
B)Web hosting.
C)Generally accepted accounting principles.
D)Stand-alone accounting systems.

Question 59

Which of the following reflects the correct order in a value-chain?

A)Research & Development,Design,Production
B)Distribution,Customer Service,Marketing
C)Design,Research & Development,Production
D)Distribution,Marketing,Research & Development

Question 60

What does the term "just-in-time" refer to?

A)factories built just in time to meet production needs.
B)machinery placed in service just in time to begin production.
C)materials received from suppliers just in time for production needs.
D)All of the answers are correct.

Question 61

Which of the following is an example of direct materials cost for an automobile manufacturer?

A)cost of wages of assembly workers
B)cost of oil or lubricants for the factory machinery
C)cost of the automobile windshield
D)salary of the production supervisor

Question 62

Which of the following activities performed by a manufacturer of bicycles best describes one that is not a value-added activity?

A)Transfer of direct materials to appropriate points on the assembly line.
B)Reworking of poor quality bicycles.
C)Inspection of direct materials upon receipt from suppliers.
D)Bar code tagging of direct materials to ensure that the right parts are used for production.

Question 63

What is the definition of economic depreciation according to managerial accounting?

A)the decline in value of assets during the period using the sales value of assets as the measure of value,only.
B)the decline in value of assets during the period using the replacement costs as the measure of value,only.
C)the decline in value of assets during the period using either the sales value of assets or their replacement costs as the measure of value.
D)the decline in value of assets during the period using amortized acquisition cost as the measure of value.

Question 64

Examples of value-added activities include all of the following except:

A)Assembly activities.
B)Machinery set-up activities.
C)The establishment of efficient distribution channels.
D)Product design.

Question 65

Which of the following are Canadian designations that are similar to the CPA designation in the United States?
I)CA
II)CMA
III)CGA
IV)CASB

A)I & II
B)I & III
C)III & IV
D)I & IV

Question 66

All of the following are ways in which IFRS may relate to managerial accounting except:

A)IFRS governs managerial accounting methods.
B)Managerial accountants usually do not use LIFO for internal reports,so managerial accounting reports are more likely to agree with IFRS than with U.S.GAAP,if the U.S.GAAP reports use LIFO.
C)If the current IFRS approach of capitalizing R & D costs as assets prevails in the United States,then we are likely to see development costs capitalized for managerial reports.
D)The accounting information that managers use in making decisions and evaluating performance need not comply with IFRS.

Question 67

All of the following are characteristics of the value chain except:

A)a linked set of activities
B)activities that are monitored by how they contribute to the final product's service,quality,and cost.
C)activities that increase the usefulness of products or services
D)includes activities that can be eliminated without reducing the product's service potential

Question 68

Which of the following best determines the amount of accounting information that is generated for managerial purposes and effective communication between accountants and users?

A)bandwidth capabilities
B)cost-benefit analysis
C)web hosting
D)just-in-time analysis

Question 69

All of the following correctly describe accounting information used for managerial purposes except:

A)Most managerial decisions require more detailed data than external financial reports provide.
B)Managers must use the same accounting data for their decision making,planning,and other managerial activities as they present in tax returns and financial statements.
C)"One size fits all" does not apply to accounting information used for managerial accounting purposes.
D)Many companies develop managerial accounting information systems independent of financial accounting information systems.

Question 70

Which of the following statements is false concerning lean production?

A)Lean production eliminates inventory between producing departments.
B)Lean production requires flexibility to change quickly from one product to another.
C)Lean production requires increased time valuating inventories.
D)Lean production emphasizes employee training and participation in decision making.

Question 71

What recent management innovation is the continuous process of measuring one's own products,services,and activities against the best levels of performance inside one's own organization or in other organizations?

A)Benchmarking
B)Total quality management
C)Theory of constraints
D)Strategic cost analysis

Question 72

Which of the following statements are more descriptive of managerial accounting than of financial accounting?

A)Emphasis is on historical data.
B)Information is more widely distributed.
C)Recognized standards for presentation.
D)Information is tailored to the needs of individual decision makers.

Question 73

What is part of a "lean production" philosophy that has been credited for the success of many Japanese companies and some large U.S.companies?

A)Just-in-time production
B)Mini-max inventory systems
C)Economic order quantities
D)Strategic cost analysis systems

Question 74

Ethical standards that comprise the Institute of Management Accountant's Code of Ethics do not include which of the following?

A)competence.
B)collegiality.
C)integrity.
D)objectivity.

Question 75

Which of the following would be a direct cost for a computer manufacturer?

A)cost of utilities in the factory
B)wages of the workers in the keyboard manufacturing department
C)wages of the workers in the repair department
D)factory supervision

Question 76

Lean production strives to do all of the following except:

A)flexibility in changing quickly from one product to another
B)make the quality and efficiency of production the highest priority
C)eliminate inventory between production departments
D)emphasize upper management control of decision making

Question 77

All of the following are true regarding integrated information systems except:

A)Accounting and other databases can be integrated with numerous applications such as managing the supply chain,making general ledger entries,and reporting to top management.
B)Integrated information systems imply that accountants no longer control a particular information domain.
C)Accountants are no longer the source of accounting information because managers and staff can directly access accounting information in integrated information systems.
D)Because accountants are no longer needed in an integrated information system environment,they typically do not serve on cross-functional teams.

Question 78

What recent management innovation views a business as a linked sequence of processes that transforms inputs into saleable outputs and is used to improve operations?

A)Just-in-time production
B)Total quality management
C)Theory of constraints
D)Strategic cost analysis systems

Question 79

What recent management innovation uses such performance measures as product reliability and service delivery,as well as traditional measures of profitability?

A)Just-in-time production
B)Total quality management
C)Economic order quantities
D)Strategic cost analysis systems

Question 80

The value chain component related to the suppliers and production does not include costs for:

A)Receipt of direct materials from suppliers.
B)Production set-up.
C)Direct production labor.
D)Salaries for sales personnel.