Deck 16: Introduction to Managerial Accounting

Question 1

Management accounting reporting by a public firm is required to follow the rules of GAAP and guidelines of the Securities Exchange Commission.

Answer 1

False

Question 2

Financial statements prepared for investors and creditors often include forward-looking information because they make decisions based on a company's future prospects.

Answer 2

False

Question 3

Comparing actual performance to previously budgeted amounts is part of the ________.

A)controlling function of managerial accounting
B)planning function of managerial accounting
C)reporting function of managerial accounting
D)organizing function of managerial accounting

Answer 3

A

Question 4

Managerial accounting includes the planning function.Which of the following items would be part of the planning function of a business's managerial accounting?

A)comparing actual performance to previously budgeted amounts
B)creating detailed budgets
C)implementing operational plans
D)evaluating results of operations

Question 5

How is the management of a company accountable to its employees?

A)The management must provide products that are safe and free of defects.
B)The management must provide a safe workplace.
C)The management must ensure that it earns a net positive return on its investments.
D)The management must ensure the business is environmentally responsible to its community.

Question 6

A budget is a managerial accounting tool used in the planning process.

Question 7

Management accounting information of a company is primarily used by ________.

A)its customers to understand the pricing of the product
B)its creditors to understand the credibility of the business
C)its employees to plan and control operations
D)its investors to make their investment decisions

Question 8

Which of the following statements is true of financial accounting?

A)It provides information to investors needed for their investment decisions.
B)It provides forward-looking information needed for managing and delegating operations.
C)It focuses on detailed reports for parts of the company rather than the whole company.
D)It focuses on planning and controlling day-to-day operations.

Question 9

Which of the following is an objective of management accounting?

A)to generate financial statements of a company for tax reporting
B)to provide information to business managers to assist them in controlling their business
C)to provide information to shareholders to assist them with their investment decisions
D)to ensure that the reports produced for internal and external business purposes are GAAP compliant

Question 10

Financial accounting prepares reports for internal purposes,whereas managerial accounting provides information to external stakeholders.

Question 11

Management's accountability to its suppliers and vendors is to ________.

A)provide products to customers that are safe and free of defects
B)obey laws and pay taxes timely
C)provide a return on shareholders' investment
D)make timely payments and comply with contract terms

Question 12

Management of a company is accountable to ________ for obeying laws and paying taxes.

A)the natural environment
B)its asset vendors
C)the securities exchange
D)the government

Question 13

The IMA Standards of Ethical Practice include confidentiality,competence,credibility,and integrity.

Question 14

In which of the following ways is the management of a company accountable to its communities?

A)making timely interest payments to creditors and dividend payments to investors
B)ensuring the company's environmental impact is not harmful to its area of operations
C)providing a capital return on the shareholders' investment
D)repaying principal and interest to the suppliers

Question 15

Which of the following statements is true of management accounting?

A)The external stakeholders of a company are the primary users of management accounting.
B)Management accounting information is used to help managers plan and control their operations.
C)An external audit by an independent CPA is required for management accounting information.
D)Management accounting information must comply with Generally Accepted Accounting Principles.

Question 16

Financial reporting is typically much more detailed than managerial accounting.

Question 17

Managerial accounting focuses on providing information for internal planning and control.

Question 18

The IMA standards of ethical practice require managerial accountants to maintain their professional competence.

Question 19

ERP systems can integrate all of a company's functions,departments,and data into a single system.

Question 20

The accountant for Myra Lido deliberately deferred cash payments for business expenses in order to record a higher operating cash flow for the company.As long as the amount was not material,this would not be considered unethical behavior.

Question 21

Which of the following is the primary focus of financial accounting?

A)providing information that managers need to make operational decisions
B)providing summarized information on operational results to investors and creditors
C)providing budgets for future periods
D)providing highly detailed information on product lines,regions,and divisions

Question 22

Which of the following is the primary objective of managerial accounting?

A)providing information that managers need to make operational decisions
B)providing historical data to investors and creditors
C)providing summarized results of operations
D)providing information to comply with laws and regulations of government bodies

Question 23

An enterprise resource planning system (ERP)________.

A)is a cost management system in which a company produces products just in time to satisfy needs
B)requires the implementation of total quality management
C)integrates all worldwide functions,departments and data of a company into a single system
D)cannot be implemented in service companies

Question 24

Which of the following describes a system in which suppliers deliver materials at the time they are needed and finished units are completed when customer orders need to be filled?

A)Supply chain management (SCM)
B)Just-in-time (JIT)management
C)Enterprise resource planning (ERP)
D)Total quality management (TQM)

Question 25

Product costs,such as direct materials,are expensed in the period they were paid.

Question 26

Selling and administrative expenses are subtracted from the cost of goods sold to obtain operating profit.

Question 27

What is total quality management (TQM)?

A)a philosophy of supplying customers with superior products and services
B)an exchange of information with suppliers and customers to create efficient and effective processes
C)a software system that integrates a company's functions,departments and data into a single system
D)a system which speeds the transformation of raw materials into finished products

Question 28

Merchandising companies,like service companies,do not have a Cost of Goods Sold account.

Question 29

Unlike merchandising companies,income statements of service companies include cost of goods sold as a line item.

Question 30

Which of the following is one of the key standards of ethical practice published by the Institute of Management Accountants (IMA)?

A)objectivity
B)environmental sensitivity
C)technicality
D)confidentiality

Question 31

Manufacturing businesses have inventory accounts,but merchandising businesses do not.

Question 32

Seria Inc.has received a bulk order from an overseas client.As a result,the reported earnings of this year is expected to be significantly higher than the estimates of financial analysts.Joshua,an accountant at Seria,tells this to one of his friends.Which of the IMA standards has Joshua violated?

A)objectivity
B)competence
C)confidentiality
D)technicality

Question 33

You did not understand what the term accrual meant and failed to accrue the interest due at the end of the year on the company's bonds.Which of the IMA standards appears to have been violated here?

A)integrity
B)confidentiality
C)competence
D)objectivity

Question 34

Which of the following is a philosophy designed to integrate all organizational areas in order to provide customers with superior products and services,while meeting organizational goals throughout the value chain?

A)Supply chain management (SCM)
B)Just-in-time (JIT)management
C)Enterprise resource planning (ERP)
D)Total quality management (TQM)

Question 35

________ is a philosophy of continuous improvement of products and processes.

A)Just-in-time (JIT)management
B)Enterprise resource planning (ERP)
C)Supply chain management (SCM)
D)Total quality management (TQM)

Question 36

The whole sequence of activities that add value to a company's products and services is called ________.

A)the value chain
B)the planning process
C)TQM production chain
D)enterprise resource planning

Question 37

Manufacturing businesses produce their own products,but merchandising businesses do not.

Question 38

If Royal Inc.purchases each unit of product X for $100 and can sell it in the market for $135; the selling price of the product for Royal would be $100.

Question 39

Which of the following is true of just-in-time (JIT)inventory management?

A)It results in more storage and insurance cost.
B)It is a system in which the company produces product only after receiving an order.
C)It promotes surplus inventory to prevent production shut-down in case of supply interruptions.
D)It requires a surplus inventory of finished goods to ensure timely,or just-in-time,delivery to customers.

Question 40

Which of the following correctly describes just-in-time (JIT)inventory management?

A)It is a production approach that maintains surplus goods at each stage of manufacture.
B)It is an inventory purchase approach that seeks purchase discounts on buying large quantities.
C)It is a cost management approach that focuses on maintaining lean inventory levels.
D)It is an inventory approach which stockpiles raw materials to protect against supply interruptions.

Question 41

Crystal Inc.is a merchandiser of stone ornaments.It sold 15,000 units in 2015.The company has provided the following information: How much is the gross profit for 2015?

A)$183,700
B)$304,300
C)$252,700
D)$257,000

Question 42

Which of the following is true of service companies?

A)All costs of service companies are product costs.
B)Service companies modify and resell products they buy from manufacturers.
C)Revenues of service companies are only recorded on cash receipt.
D)Service companies carry no inventories of products for sale.

Question 43

For external reporting purposes,GAAP requires companies to treat period costs as assets.

Question 44

Product costs are expensed ________.

A)when the products are consumed or sold
B)when the accounting period they are incurred in comes to an end
C)when the products are transferred to Work-in-Process Inventory account
D)when the market value of products goes above the recorded value

Question 45

Which of the following is true of finished goods inventory?

A)Finished Goods Inventory is an account used by a manufacturer and includes completed goods that have not yet been sold.
B)Finished Goods Inventory is an account used by a merchandiser and includes completed goods that have not yet been sold.
C)Finished Goods Inventory is an account used by service companies in lieu of raw materials inventory.
D)Finished Goods Inventory is an account used by a manufacturer in lieu of raw materials inventory.

Question 46

Goods that have been started in the manufacturing process but are not yet complete are included in the ________.

A)Finished Goods Inventory account
B)Work-in-Process Inventory account
C)Raw Materials Inventory account
D)Cost of Goods Sold account.

Question 47

A company that uses labor,equipment,supplies,and facilities to convert raw materials into finished products is a ________.

A)merchandising company
B)manufacturing company
C)service company
D)trading company

Question 48

The income statement of a service company will most likely include ________.

A)salary expense
B)factory overhead
C)cost of goods sold
D)direct materials

Question 49

Service companies include companies that provide health care,communication,banking,and other important benefits to society.

Question 50

Damsel Inc.is a large manufacturer of auto tires.Damsel has provided the following information: Calculate the amount of ending finished goods inventory reported in Damsel's balance sheet.

A)$10,500
B)$36,500
C)$4,000
D)$3,500

Question 51

The balance sheet of a ________ company will show Work-in-Process Inventory as a line item.

A)manufacturing
B)merchandising
C)service
D)trading

Question 52

One of the primary activities of Rex Inc.is to purchase hats from Viva Inc.in Texas and sell them to its customers in Washington for a profit.It is likely that Rex is a ________.

A)manufacturing company
B)hybrid company
C)service company
D)merchandising company

Question 53

Partial income statements of Company A and Company B are provided below: Which of the following statements is true?

A)Company A is a merchandising company.
B)Company B is a manufacturing company.
C)Company A is a manufacturing company.
D)Company A is a service company.

Question 54

Which of the following is most likely a service company?

A)a law firm
B)a car dealership
C)a grocery store
D)a patisserie

Question 55

For a manufacturing company,which of the following is a period cost?

A)direct materials
B)office rent
C)wages expense of factory workers
D)indirect materials

Question 56

Which of the following is true of product costs?

A)They are expensed in the period they are paid.
B)For external reporting,GAAP requires that they be expensed before the products are sold.
C)They are first recorded in an inventory account.
D)For merchandising companies,product costs do not include freight costs.

Question 57

Which of the following would appear as a line item on the income statements of both,a merchandiser and a manufacturer?

A)Direct labor
B)Cost of goods manufactured
C)Direct materials
D)Cost of goods sold

Question 58

The Work-in-Process Inventory account includes the ________./

A)goods that are ready to be sold
B)goods that are partially completed
C)goods that have been sold in the market
D)goods that are damaged during production

Question 59

Which of the following formulas represents cost of goods sold for a merchandising business?

A)Beginning Inventory - Ending Inventory = Cost of Goods Sold
B)Purchases and Freight In - Ending Inventory = Cost of Goods Sold
C)Ending Inventory + Purchases and Freight In - Beginning Inventory = Cost of Goods Sold
D)Beginning Inventory + Purchases and Freight In - Ending Inventory = Cost of Goods Sold

Question 60

The primary activity of manufacturing businesses is to purchase goods from a wholesaler and resell them.

Question 61

For a manufacturer,rent paid for an office building is an example of a period cost.

Question 62

Wages and benefits of factory managers are considered as product costs.

Question 63

Best Inc.,a merchandiser,sells office supplies.The following information summarizes Best's operating activities during 2015:
Required: Prepare an income statement for Best Inc.for the year ended December 31,2015,using the format below.

Question 64

Product costs,such as factory overhead,should be treated as an asset until the product is sold.

Question 65

The three categories of period costs are direct materials,direct labor,and manufacturing overhead.

Question 66

Wages and benefits of assembly line workers are included in manufacturing overhead.

Question 67

Direct costs and indirect costs can be easily traced directly to a cost object.

Question 68

Indirect materials costs such as lubes and cleaning fluids are product costs.

Question 69

Salary of a factory manager will be included in manufacturing overhead.

Question 70

Manufacturing overhead includes all manufacturing costs,such as direct labor and direct materials.

Question 71

Manufacturing overhead includes indirect manufacturing costs,such as insurance and depreciation on the factory building.

Question 72

Wages and benefits of assembly line workers are period costs.

Question 73

Wages of factory janitors is considered non-manufacturing overhead as these are not directly related to the manufacturing process.

Question 74

Excellent Inc.sells accounting textbooks.The following information summarizes Excellent's operating activities for 2015:
Required: Prepare Excellent Inc.income statement for the year ended December 31,2015.

Question 75

In a manufacturing company,the salary of sales staff is an example of period cost.

Question 76

All costs incurred in the manufacture of final products are product costs.

Question 77

Indirect materials costs are included in manufacturing overhead.

Question 78

The cost of direct materials cannot easily be traced to the manufactured product and therefore it is a component of manufacturing overhead.

Question 79

Simons Inc.sells plasticware.The following information summarizes Simons' operating activities for 2015:
Prepare an income statement for Simons Inc.,a merchandiser,for the year ended December 31,2015 using the format below:

Question 80

Amber Corporation has provided the following information of its operating activities for 2015:
Required: Prepare Amber's income statement for the year ended December 31,2015.Use the format provided below: