Question 1

Performance reports, like other managerial accounting reports, must follow GAAP.

Accepted Answer

Performance reports are not required to follow GAAP, as they are internal reports used for management decision making and do not need to adhere to external regulations or standards. However, if performance reports are used for external reporting purposes, then they must follow GAAP.

Question 2

Managerial accounting is directed at internal users of accounting information.

Accepted Answer

Managerial accounting is focused on serving the needs of managers and other internal users within an organization. It provides information that is used for planning, controlling, and decision-making purposes, and is not generally shared with external parties like investors or creditors.

Question 3

The goal of managerial accounting is to provide information for planning, controlling, and reporting information to shareholders.

Accepted Answer

Managerial accounting is primarily focused on providing information to internal management for the purposes of planning, controlling, and decision-making, not for reporting to shareholders.

Question 4

Financial accounting must follow generally accepted accounting principles, whereas managerial accounting stresses information that is useful to managers.
15 Managerial accounting may present more detailed information than financial accounting.

Accepted Answer

Managerial accounting is focused on providing detailed and specific information to managers to help them make informed decisions, while financial accounting is primarily concerned with external reporting and must adhere to generally accepted accounting principles. Therefore, it is more likely that managerial accounting will present more detailed information than financial accounting.

Question 5

Managerial accounting stresses that the information provided should be useful to decision makers such as creditors and shareholders.

Accepted Answer

Managerial accounting primarily focuses on providing information useful for internal decision makers such as managers, rather than external users like creditors and shareholders.

Question 6

Budgets show comparisons of current period performance to the planned performance.

Accepted Answer

The answer of Budgets show comparisons of current period performance...

Question 7

Equipment depreciation is generally a controllable cost for a factory department supervisor.

Accepted Answer

Equipment depreciation is a non-controllable cost, as it is determined by factors such as the useful life of the equipment and the method of depreciation chosen by the company's accounting department. The factory department supervisor does not have control over these factors.

Question 8

Performance reports are used for control purposes.

Accepted Answer

Performance reports are used to monitor and measure progress towards goals and objectives, and to identify areas where corrective action may be necessary. This helps managers to exercise control over their operations and take corrective action as needed to ensure that performance stays on track.

Question 9

A thorough understanding of managerial accounting is essential to be an effective manager.

Accepted Answer

Managerial accounting provides important information for decision making, budgeting, forecasting, and performance evaluation. Without a good understanding of managerial accounting, a manager may struggle to make informed decisions and effectively manage the financial aspects of a business.

Question 10

Financial accounting stresses accounting concepts and procedures that are relevant to preparing reports for internal users of accounting information.

Accepted Answer

Financial accounting primarily focuses on preparing reports for external users, such as investors, creditors, and government entities, rather than internal management. Management accounting is the branch of accounting that is relevant to preparing reports for internal users.

Question 11

A production cost budget provides details of planned production amounts and the cost of resources needed for production.

Accepted Answer

A production cost budget provides a breakdown of the costs involved in producing goods or services, including raw materials, labor, equipment, and overhead costs. It is a key tool for businesses to plan and manage their production processes and expenses.

Question 12

Fixed cost per unit remains the same even though there is a change in the number of units produced.

Accepted Answer

Fixed cost per unit decreases as the number of units produced increases because the total fixed costs are spread over more units.

Question 13

A favorable evaluation of an operation indicates that the manager of that operation is performing adequately.

Accepted Answer

A favorable evaluation does not necessarily mean that the manager is performing adequately. It could mean that external factors or luck played a role in the positive outcome of the operation. A more thorough evaluation should consider the manager's actions and decisions as well as the results of the operation.

Question 14

Budgets can be used to communicate a company's goals to employees.

Accepted Answer

Budgets can help employees understand the company's priorities and how their work contributes to achieving those goals. By aligning individual and departmental objectives with the overall budget, employees can work towards the same vision and contribute to the company's success.

Question 15

Decisions to reward or punish managers are part of the planning and control process.

Accepted Answer

Decisions to reward or punish managers are part of the control process, which involves monitoring actual performance against planned performance and taking corrective actions as necessary. These decisions can also be part of the planning process, as managers may need to set goals and objectives that align with the organization's overall performance expectations.

Question 16

Financial accounting is concerned with presenting results of past transactions, while managerial accounting places considerable emphasis on the future.

Accepted Answer

Financial accounting focuses on recording and reporting historical financial transactions and results, while managerial accounting provides information to help managers make decisions about the future by analyzing current and future financial and operational data.

Question 17

Variable costs in total increase or decrease in proportion with changes in the level of business activity.

Accepted Answer

Variable costs are directly related to the level of business activity, so as business activity increases, the total variable costs will also increase in proportion. Similarly, as business activity decreases, total variable costs will decrease in proportion.

Question 18

Management by exception requires managers to investigate every difference between actual and budgeted costs that causes profit to be less than budgeted.

Accepted Answer

Management by exception only requires managers to investigate significant variances, not every difference.

Question 19

Only amounts that can be expressed in dollars and cents can be used in preparing budgets.

Accepted Answer

Budgets can include both quantitative (e.g., dollars and cents) and qualitative elements (e.g., time, manpower, units of output), depending on the type of budget and the items being budgeted.

Question 20

Variable cost per unit remains constant when the number of units produced changes.

Accepted Answer

Variable cost per unit is calculated by dividing the total variable costs by the number of units produced. Since the total variable costs increase in proportion to the number of units produced, the variable cost per unit should not change.

Quiz 1: Managerial Accounting in the Information Age