Deck 1: Managerial Accounting Concepts and Principles

Question 1

Managerial accounting provides financial and nonfinancial information to an organization's managers and other internal decision makers.

Answer 1

True

Question 2

Enterprise risk management (ERM) includes the systems and process companies use to maximize the effect of risk.

Answer 2

False

Question 3

The concept of total quality management focuses on continuous improvement.

Answer 3

True

Question 4

Control is the process of setting goals and determining ways to achieve them.

Question 5

Both financial and managerial accounting report monetary information; managerial accounting also reports considerable nonmonetary information.

Question 6

Feedback provided by the control function allows managers to revise their plans.

Question 7

Managerial accounting is an activity that helps managers determine costs of products and services, plan future activities, and compare actual to planned results.

Question 8

Costs are important to managers because they impact both the financial position and profitability of a business.

Question 9

Just-in-time manufacturing is a system that acquires inventory and produces product only when needed for an order.

Question 10

Managerial accounting reports and information are used by external users and financial accounting by internal users.

Question 11

The management concept of customer orientation motivates a company to spend large amounts on advertising to convince customers to buy the company's standard products.

Question 12

Control is the process of monitoring planning decisions and evaluating an organization's activities and employees.

Question 13

The main goal of the lean business model is the elimination of waste while satisfying the customer and providing a positive return to the company.

Question 14

Both financial and managerial accounting rely on accepted principles that are enforced through an extensive set of rules and guidelines.

Question 15

One of the usual differences between financial and managerial accounting is the timeliness of the information reported.

Question 16

Planning is the process of setting goals and making plans to achieve them.

Question 17

When the attitude of continuous improvement exists throughout an organization, every manager and employee is challenged to continuously experiment with new and improved business practices.

Question 18

Both financial and managerial accounting affect user's decisions and actions.

Question 19

The focus of managerial accounting information is on the organization as a whole.

Question 20

Managerial accounting information can be forwarded to the managers of a company quickly since external auditors do not have to review it, and estimates and projections are acceptable.

Question 21

Straight-line depreciation, rent, and manager salaries are examples of variable costs.

Question 22

Variable costs per unit change in proportion to changes in the volume of activity.

Question 23

Indirect costs cannot be easily and cost-beneficially traced to a single cost object.

Question 24

Period costs can refer to expenditures necessary to finish products during the time period.

Question 25

The management concept of customer orientation encourages a company to set up its production system to produce large quantities of the same product for all customers.

Question 26

An employee overstates his reimbursable expenses in one period in order to receive needed additional cash. Since he intends to reduce his expenses the next period by the current overstatement, this act is not considered fraudulent.

Question 27

Cost concepts such as variable, fixed, mixed, direct, and indirect apply only to manufacturers and not to service companies.

Question 28

Product costs can refer to expenditures necessary to finish products and to the administrative support during the time period.

Question 29

The balanced scorecard aids in continuous improvement by augmenting financial measures with information on the drivers or indicators of future financial performance.

Question 30

Under a just-in-time manufacturing system, large quantities of inventory are accumulated throughout the factory to be certain that components are available each time that they are needed.

Question 31

Direct costs are incurred for the benefit of more than one cost object.

Question 32

Costs may be classified by many different cost classifications.

Question 33

Period costs are incurred by purchasing merchandise or manufacturing finished goods.

Question 34

The Institute of Management Accountants (IMA) Statement of Ethical Professional Practice requires that management accountants be competent and act with integrity.

Question 35

Adopting a lean business model should have no effect on cost in a modern manufacturing environment.

Question 36

Total variable costs change in proportion to changes in the volume of activity.

Question 37

Direct materials are not easily traced to a product.

Question 38

The sales commission incurred based on units of product sold during the month is an example of a product cost.

Question 39

Product costs are capitalized as inventory on the balance sheet and period costs are expensed on the income statement.

Question 40

Total quality management and just-in-time manufacturing focus on quality improvement as well as on time customer deliveries.

Question 41

The series of activities that add value to a company's products or services is called a value chain.

Question 42

Four factors come together in production activity: beginning work in process inventory, raw materials, direct labor, and factory overhead.

Question 43

The main difference between the cost of goods sold of a manufacturer and a merchandiser is that the merchandiser includes cost of goods manufactured rather than cost of goods purchased.

Question 44

Beginning finished goods inventory plus cost of goods manufactured equals cost of goods available for sale.

Question 45

Newly completed units are combined with beginning finished goods inventory to make up total ending work in process inventory.

Question 46

Product costs can be classified as one of three types: direct materials, direct labor, or overhead.

Question 47

A lean business model aims to eliminate waste while satisfying the customer and providing a positive return to the company.

Question 48

Raw materials that become part of a product and are identified with specific units or batches of a product are called direct materials.

Question 49

Manufacturers usually have three inventories: raw materials, work in process, and finished goods.

Question 50

The cost of partially completed products is included in the balance of the Work in Process Inventory account.

Question 51

The Work in Process Inventory account is found only in the ledgers of merchandising companies.

Question 52

Product costs are expenditures necessary and integral to finished products.

Question 53

Beginning finished goods inventory plus cost of goods manufactured minus ending finished goods inventory equals cost of goods sold.

Question 54

The Work in Process Inventory account is found only in the ledgers of manufacturing companies.

Question 55

Selling and administrative expenses are normally period costs.

Question 56

The main difference between the cost of goods sold of a manufacturer and a merchandiser is that the manufacturer includes cost of goods manufactured rather than cost of goods purchased.

Question 57

To be certified under ISO 9000 standards, companies must use a quality control system and document that it achieves the desired quality level.

Question 58

Beginning finished goods inventory plus cost of goods manufactured equals cost of goods sold.

Question 59

Raw materials inventory should not include indirect materials.

Question 60

Raw materials purchased plus beginning raw materials inventory equals the ending balance of raw materials inventory.

Question 61

Managerial accounting is different from financial accounting in that:

A) Managerial accounting is more focused on the organization as a whole and financial accounting is more focused on subdivisions of the organization.
B) Managerial accounting never includes nonmonetary information.
C) Managerial accounting includes many projections and estimates whereas financial accounting has a minimum of predictions.
D) Managerial accounting is used extensively by investors, whereas financial accounting is used only by creditors.
E) Managerial accounting is mainly used to set stock prices.

Question 62

Prime costs consist of direct materials and direct labor.

Question 63

Flexibility of practice when applied to managerial accounting means that:

A) The information must be presented in electronic format so that it is easily changed.
B) Managers must be willing to accept the information as the accountants present it to them, rather than in the format they ask for.
C) The managerial accountants need to be on call twenty-four hours a day.
D) Managerial accounting system differ across companies depending on the nature of the business and the arrangement of its internal operations.
E) Managers must be flexible with information provided in varying forms and using inconsistent measures.

Question 64

Which of the following items is not a management concept that was created to improve companies' performances?

A) Just-in-time manufacturing.
B) GAAP constraints and guidelines.
C) Total quality management.
D) Continuous improvement.
E) Customer orientation.

Question 65

The raw materials inventory turnover is raw materials purchased divided by the average raw materials inventory.

Question 66

Direct labor refers to the cost of the workers whose efforts are directly related to specific units of product.

Question 67

The schedule of cost of goods manufactured is also known as a manufacturing statement.

Question 68

Prime costs consist of direct labor and factory overhead.

Question 69

A manufacturer's cost of goods manufactured is the sum of direct materials, direct labor, and factory overhead costs incurred in producing products.

Question 70

Which of the following items does not represent a difference between financial and managerial accounting?

A) Users of the information.
B) Flexibility of reporting.
C) Timeliness of information.
D) Focus of the information.
E) Managerial accounting does not use the financial information from the financial accounting system.

Question 71

Although direct labor and raw materials costs are treated as manufacturing costs and therefore make up part of the finished goods inventory cost, factory overhead is charged to expense as it is incurred because it is a period cost.

Question 72

Total quality management (TQM) focuses on quality improvement and applies this standard to all aspects of business activities.

Question 73

The schedule of cost of goods manufactured must be prepared monthly as it is a required general-purpose financial statement.

Question 74

Indirect materials are accounted for as factory overhead because they are not clearly identified with specific product units.

Question 75

Just-in-time manufacturing (JIT) is a system that acquires inventory and produces only when needed.

Question 76

Total quality management (TQM) is a system that acquires inventory and produces only when needed.

Question 77

Indirect labor refers to the cost of the workers whose efforts are directly related to specific units of product.

Question 78

Factory overhead includes selling and administrative expenses because they are indirect costs of a product.

Question 79

Just-in-time manufacturing (JIT) focuses on quality improvement and applies this standard to all aspects of business activities.

Question 80

Managerial accounting information:

A) Is used mainly by external users.
B) Involves gathering information about costs for planning and control decisions.
C) Is generally the only accounting information available to managers.
D) Can be used for control purposes but not for planning purposes.
E) Has little to do with controlling costs.