Question 1

Conversion costs consist of product costs and period costs.

Accepted Answer

Conversion costs only consist of product costs, which include direct labor and manufacturing overhead. Period costs, such as selling and administrative expenses, are not included in conversion costs.

Question 2

Prime costs consist of direct materials, indirect materials, and direct labor.

Accepted Answer

Prime costs consist of direct materials and direct labor, but not indirect materials. Indirect materials are part of manufacturing overhead, not prime costs.

Question 3

In order to be useful to managers, managerial accounting reports should possess all of the following characteristics except

Accepted Answer

Managerial accounting reports are not required to be prepared in accordance with generally accepted accounting principles, as their purpose is to provide internal decision-making support rather than external financial statement reporting. However, they should possess the other characteristics listed, including providing both objective measures of past operations and subjective estimates about future decisions, being available on-demand as needed, and being relevant to decision-making for any unit of the business.

Question 4

Which of the following statements is false?

Accepted Answer

There is overlap between financial and managerial accounting, as both types of accounting may involve analyzing financial data and making decisions based on that analysis.

Question 5

Which of the following is most associated with financial accounting?

Accepted Answer

Financial accounting is prepared in accordance with Generally Accepted Accounting Principles (GAAP), which are a set of accounting standards that must be followed to ensure consistency and accuracy in financial reporting.

Question 6

All of the following employees hold line positions except

Accepted Answer

Line positions are involved in day-to-day operations and directly contribute to the production of goods or services. Vice president of finance is not considered a line position as they are involved in financial management and not directly involved in production.

Question 7

What is the primary criterion for the preparation of managerial accounting reports?

Accepted Answer

Managerial accounting reports are primarily prepared based on the needs of the managers to ensure that they receive relevant, timely, and useful information for decision-making purposes.

Question 8

In most business organizations, the chief management accountant is called the

Accepted Answer

The chief management accountant is typically referred to as the controller in business organizations. They are responsible for the financial management and accounting functions within the company, including preparing financial reports, managing budgets, and ensuring compliance with accounting regulations. The other options listed (chief accounting officer, chairman of the board, and chief executive officer) are all separate and distinct positions within a company's management structure.

Question 9

Only the value of the inventory that is sold will appear on the income statement.

Accepted Answer

Both the cost of goods sold (which is the value of inventory that has been sold) and any adjustments for inventory losses, write-downs, or obsolescence will appear on the income statement, affecting the gross profit.

Question 10

Prime costs consist of factory overhead and direct labor.

Accepted Answer

Prime costs consist of direct materials and direct labor, not factory overhead. Factory overhead is part of the manufacturing overhead costs.

Question 11

On the balance sheet for a manufacturing business, the cost of direct materials, direct labor, and factory overhead are categorized as either materials inventory, work in process inventory, or finished goods inventory.

Accepted Answer

This is true as the three categories of costs (direct materials, direct labor, and factory overhead) are included in the inventory accounts on the balance sheet for a manufacturing business. Direct materials are included in the materials inventory, direct labor is included in the work in process inventory, and factory overhead is included in both the materials and work in process inventory, as well as the finished goods inventory.

Question 12

The controller's staff often consists of several management accountants. All of the following would most likely be on the controller's staff except

Accepted Answer

Investments and shareholder relations managers are typically part of a company's finance department, not the controller's staff. The other options are all accounting-related roles that would likely be on the controller's staff.

Question 13

Which of the following is most associated with managerial accounting?

Accepted Answer

Managerial accounting is concerned with providing information to internal users (such as managers) to help them make informed business decisions. These decisions often rely on estimates and forecasts, rather than solely historical data, and are not required to follow Generally Accepted Accounting Principles (GAAP). Managerial accounting reports are also generally not shared outside of the organization, and may focus on specific segments or departments of the entity rather than the entire entity.

Question 14

The statement of cost of goods manufactured is an extension of the income statement for a manufacturing company.

Accepted Answer

The cost of goods manufactured statement summarizes the total manufacturing costs incurred during the period and the changes in work-in-progress inventory to calculate the cost of goods completed and transferred to finished goods inventory. This information is then used in the income statement to calculate the cost of goods sold and ultimately, the gross profit. Therefore, the statement of cost of goods manufactured is an extension of the income statement for a manufacturing company.

Question 15

Indirect labor and indirect materials would be part of factory overhead.

Accepted Answer

Factory overhead includes all manufacturing costs that cannot be directly traced to a specific product, such as indirect labor and indirect materials.

Question 16

Managerial accounting reports are

Accepted Answer

Managerial accounting reports are prepared according to the needs of management rather than being bound by GAAP (Generally Accepted Accounting Principles). These reports are prepared as and when required by the management and are not limited to any specific period. Managerial accounting reports focus on specific departments or segments of the business and provide information regarding their performance, cost analysis, and budgeting. Therefore, Option B is the correct choice. Option A, C, and D are incorrect as they do not describe the characteristics of managerial accounting reports.

Question 17

The Sustainability Accounting Standards Board 
(SASB) standards are required, just as GAAP standards are required.

Accepted Answer

SASB standards are not currently required by law. However, some companies choose to voluntarily disclose their sustainability performance using SASB standards in order to satisfy the demands of investors and other stakeholders.

Question 18

Who are the individuals charged with the responsibility for directing the day-to-day operations of a business?

Accepted Answer

Managers are the individuals charged with the responsibility for directing the day-to-day operations of a business. Investors provide funding for a business but are not involved in daily operations. Shareholders own a portion of the company but do not typically have a role in day-to-day management. Customers are the individuals who purchase goods or services from a business and are not involved in management.

Question 19

An example of an eco-efficiency measure would be cost savings generated by recycling.

Accepted Answer

Recycling is an eco-efficiency measure because it reduces waste and raw material usage, which can lead to cost savings.

Question 20

Sustainability practice focuses on short-term solutions to sustain company profits.

Accepted Answer

Sustainability practice focuses on using long-term solutions to meet the needs of the present without compromising the ability of future generations to meet their own needs. It aims to balance social, environmental, and economic factors to ensure long-term sustainability. While sustainability may lead to short-term profits, the ultimate goal is to create a sustainable business model for the long-term.

Quiz 18: Introduction to Managerial Accounting