Deck 1: Managerial Accounting Concepts and Principles

Question 1

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.

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

Marketing managers can use managerial accounting information to decide whether to advertise on social media.

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

The concept of total quality management focuses on quality improvement.

Question 11

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

Question 12

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 13

An important managerial accounting report is the budget, which predicts revenues and expenses.

Question 14

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

Question 15

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

Question 16

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

Question 17

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 18

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

Question 19

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

Question 20

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 21

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

Question 22

Direct materials are not easily traced to a product.

Question 23

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

Question 24

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

Question 25

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 26

Costs may be classified by many different cost classifications.

Question 27

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 28

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

Question 29

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 30

Direct costs can be traced to more than one cost object.

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

Period costs are incurred by manufacturing finished goods.

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

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

Question 42

The triple bottom line focuses on three measures: financial, social, and environmental.

Question 43

Raw materials inventory should not include indirect materials.

Question 44

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

Question 45

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

Question 46

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

Question 47

Selling and administrative expenses are normally period costs.

Question 48

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 49

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

Question 50

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

Question 51

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

Question 52

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 53

Product costs are expenditures necessary to manufacture finished products.

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

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

Question 60

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

Question 61

Which of the following items is not a management concept that was created to improve company performance?

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

Question 62

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

Question 63

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

Question 64

Prime costs consist of direct labor and factory overhead.

Question 65

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

Question 66

Factory overhead is charged to expense as it is incurred because it is a period cost.

Question 67

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

Question 68

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) Managerial accountants must be on call twenty-four hours a day.
D) Managerial accounting systems 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 69

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.

Question 70

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

Question 71

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

Question 72

Direct labor refers to employees who physically convert materials to finished product.

Question 73

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

Question 74

Total quality management (TQM) focuses on quality improvement to business activities.

Question 75

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

Question 76

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 77

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 78

Indirect labor refers to the cost of workers who assist or supervise manufacturing, but they are not clearly identified with specific product units.

Question 79

Prime costs consist of direct materials and direct labor.

Question 80

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