Deck 1: Managerial Accounting in the Information Age

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

Managerial accounting is directed at internal users of accounting information.

Question 9

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

Question 10

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

Question 11

Performance reports are used for control purposes.

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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.

Question 21

Costs that increase due to a special order are not considered as incremental.

Question 22

Sunk costs are never a consideration in incremental analysis.

Question 23

The actions of a manager are influenced by the performance measures that are used to evaluate the manager.

Question 24

Walmart and Procter & Gamble are two companies that collaborate in the use of Supply Chain Management (SCM).

Question 25

Opportunity costs are the value of benefits forgone when one alternative is selected over another.

Question 26

Managerial accounting is a key provider of information that impacts the information age.

Question 27

Firm value is created when the value to the customer of receiving products and services exceeds the cost of these activities,

Question 28

Incremental analysis is the appropriate way to approach the solution to all business problems.

Question 29

A good single measure of performance for a sales force would be the ratio of sales to new customers to total sales.

Question 30

Managers that are able to recognize all ethical dilemmas have the most profitable businesses.

Question 31

Customer Relationship Management Systems (CRM) involve activities between companies and its suppliers in an effort to enhance production and delivery of goods to customers.

Question 32

A Customer Relationship Management System (CRM) might allow a customer to track his/her package as it is being shipped across the country.

Question 33

Enterprise resource planning systems (ERP) often support accounting, human resources, and e-commerce, in addition to production.

Question 34

Supply chain management systems (SCM) allow suppliers some access to a company's databases so goods can more profitably be delivered to a company's customers.

Question 35

Indirect costs are directly traceable to a product, activity, or department.

Question 36

Enterprise resource planning systems focus on managing a variety of customer interactions.

Question 37

One aspect of the value chain involves information flows between a company and its customers.

Question 38

Businesses sometimes share sales databases with suppliers so suppliers can respond more quickly.

Question 39

Incremental analysis involves calculating the difference in revenue and difference in costs between alternatives.

Question 40

Since a manager can influence noncontrollable costs, they should be considered when evaluating a manager's performance.

Question 41

The controller is responsible for preparing reports for planning and evaluating company activities.

Question 42

A good code of ethics eliminates potential unethical behavior.

Question 43

Performance reports often compare current performance with

A) a competing company's performance.
B) shareholders' expected level of performance.
C) industry standards.
D) performance in a prior period or budgeted performance.

Question 44

When using management by exception, a difference between actual costs and budgeted costs

A) should be investigated if the amount is large.
B) indicates that the planned cost was poorly estimated.
C) indicates that the manager is doing a poor job.
D) should be ignored if it increases profit.

Question 45

The Sarbanes-Oxley Act requires that companies provide relevant managerial accounting information to decision-makers.

Question 46

In most organizations, the controller is the top managerial accountant.

Question 47

Below is a performance report that compares budgeted and actual profit of Atlanta Enterprises for the month of June:
$\begin{array}{lrrr}&\text { Budget } & \text { Actual } & \text { Difference } \\\hline\text { Sales } & \$ 182,000 & \$ 180,000 & (\$ 2,000) \\\text { Less: } & & & \\\text { Cost of ingredients } & 145,000 & 141,000 & 4,000 \\\text { Salaries } & 24,000 & 23,000 & 1,000\\\text { Controllable profit }& \$ \overline{13,000} &\$ {16,000} &\$ {3,000}\end{array}$
In evaluating the department in terms of its changes in sales and expenses, what will be most important to investigate?

A) Sales
B) Cost of ingredients
C) Salaries
D) Debtors

Question 48

Wilson Company's managers investigate departures from the budget that appear to be significant. What principle is being followed?

A) Small amounts do not matter
B) Management by exception
C) Incremental analysis
D) You get what you measure

Question 49

The treasurer usually reports to the controller.

Question 50

The fundamental difference between managerial and financial accounting is that

A) all financial accounting information is audited by Certified Public Accountants whereas managerial accounting information is audited by the IMA.
B) managerial accounting is concerned principally with budgets, whereas financial accounting is concerned with a wider range of the organization's activities.
C) managerial accounting provides information for decision-makers within the organization, whereas financial accounting provides information for individuals and institutions external to the organization.
D) financial accounting information follows U.S. Generally Accepted Accounting Principles, whereas managerial accounting information generally follows rules set forth by the Institute of Management Accountants.

Question 51

Which one of the following is true as it relates to the management function of control?

A) It is achieved by evaluating the performance of managers.
B) It is achieved by evaluating the operations for which a manager is responsible.
C) It is necessary only when performance is less than expected.
D) It is achieved by evaluating the performance of managers and the operations for which they are responsible.

Question 52

Which one of the following is the last step in the planning and control process?

A) Implement a plan.
B) Construct a plan.
C) Make decisions based on the evaluation of the results.
D) Compare actual results to the planned results.

Question 53

Which of the following is not a reason that current period performance results may differ from the company's budget for that period?

A) The plan may not have been followed properly.
B) The plan may not have been well thought-out.
C) Changing circumstances may have made the plan out of date.
D) All of the above are reasons that actual results may differ from the company's plan.

Question 54

Which of the following is a difference between financial accounting and managerial accounting?

A) Managerial accounting is primarily concerned with reporting the past, while financial accounting is more concerned with future decisions that external users may need to make.
B) Managerial accounting uses monetary and nonmonetary information, whereas financial accounting reports monetary information.
C) Managerial accounting is primarily concerned with providing information for external users while financial accounting is concerned with internal users.
D) Financial accounting is rather detailed, while managerial accounting is more summarized.

Question 55

Managerial accounting stresses accounting concepts and procedures that are relevant to preparing reports for

A) investors and banks.
B) internal users of accounting information.
C) shareholders and creditors.
D) the Securities and Exchange Commission (SEC).

Question 56

The financial plans prepared by managerial accountants are referred to as

A) budgets.
B) financial statements.
C) treasurer's reports.
D) controller's opinions.

Question 57

The U.S. government has charged the Institute of Management Accountants with primary responsibility for developing ethics laws that businesses must follow.

Question 58

The treasurer has custody of cash and funds invested in marketable securities.

Question 59

Managerial accounting

A) is primarily directed at external users of accounting information.
B) is required by taxing authorities such as the IRS.
C) must follow GAAP.
D) focuses on future performance.

Question 60

The goal of managerial accounting is to provide information that managers need for

A) planning, control, and financial reporting.
B) control, evaluation, and financial reporting.
C) planning, control, and decision making.
D) preparing reports for external users.

Question 61

A sunk cost is a cost

A) expected to be incurred in the future which is not relevant to present decisions.
B) incurred in the current period which changes with changes in production activity.
C) incurred in the current period which remains constant even though activity changes.
D) incurred in the past that is not relevant for future decisions.

Question 62

On which of the following costs should a manager not be evaluated?

A) Noncontrollable costs
B) Opportunity costs
C) Fixed costs
D) Variable costs

Question 63

Which of the following is a direct cost in relation to the cost of teaching the managerial accounting course in a college?

A) The cost of the paper that is given as handouts in the class
B) The cost of the electricity to light the classroom
C) The cost of the registration system
D) The cost of the financial aid department of the college

Question 64

Opportunity costs are

A) considered to be fixed costs in the short-term.
B) another term for sunk costs.
C) costs that are controlled by most effective managers.
D) the value of benefits forgone when one decision alternative is selected over another.

Question 65

Which of the following statements regarding direct and indirect costs is true?

A) Direct costs are always variable and indirect costs are always fixed.
B) Sunk costs are always direct, and opportunity costs are always fixed.
C) The distinction between a direct and indirect cost depends on the product, activity, or department to which the cost pertains.
D) If a cost is indirect to a department within a plant, it will also be indirect for the plant as a whole.

Question 66

Which one of the following is most likely to make use of Ralston Enterprises' managerial accounting information?

A) The IRS
B) An individual contemplating an investment in Ralston Enterprises
C) A company that is one of Ralston's main suppliers
D) The production manager of Ralston's plant in Georgia

Question 67

Which of the following costs will change when the level of business activity changes?

A) Total fixed costs
B) Variable cost per unit
C) A company's total costs
D) Sunk cost

Question 68

Which of the following is most likely to be a fixed cost?

A) Cost of wheels for a lawn mower manufacturer
B) Rent on a factory building
C) Cost of labor for cashiers at a retail store
D) Supplies used by the housekeeping staff that cleans hotel rooms

Question 69

Variable cost per unit

A) increases when the number of units produced increases.
B) does not change when the number of units produced increases.
C) decreases when the number of units produced increases.
D) decreases when the number of units produced decreases.

Question 70

Kilwin's Candies produced and sold 600 boxes of chocolate covered popcorn last month and had total variable costs of $2,100 that reflected the costs of chocolate and popcorn (ingredients). Each box of popcorn sells for $12.00. If production and sales are expected to increase by 10% next month, which of the following statements is true?

A) Total variable costs are expected to be $1,785
B) Variable cost per unit is expected to be $3.50
C) The incremental cost per unit is costs expected to be $0.35
D) Unit variable costs are expected to be $2.10

Question 71

Costs incurred in the past that are not incremental to present decisions are

A) fixed costs.
B) sunk costs.
C) opportunity costs.
D) variable costs.

Question 72

Which of the following is likely to be a noncontrollable cost of a department supervisor?

A) Labor in the department
B) Materials used in the department
C) Insurance on the plant
D) Overtime premium pay earned by those working in the department

Question 73

Which of the following statements regarding fixed costs is true?

A) When production increases, fixed cost per unit increases.
B) When production decreases, total fixed costs decrease.
C) When production increases, fixed cost per unit decreases.
D) When production decreases, total fixed costs increase.

Question 74

A company has a cost that is $3.00 per unit at a volume of 9,000 units and $3.00 per unit at a volume of 11,000 units. What type of cost is this?

A) Fixed
B) Variable
C) Sunk
D) Noncontrollable

Question 75

A retailer purchased some trendy clothes that have gone out of style and must be marked down to 60% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation?

A) The current selling price
B) The original selling price
C) The original purchase price
D) The anticipated profit

Question 76

A cost which is directly traceable to a product, activity, or department is a(n)

A) fixed cost.
B) managerial cost.
C) opportunity cost.
D) direct cost.

Question 77

Sunk costs

A) can be incremental or not incremental, depending on the decision to be made.
B) include all incremental costs to management decisions.
C) are costs that cannot be directly traded to a product, activity, or department.
D) None of these answer choices are correct.

Question 78

Bagel Time produced and sold 2,500 bagels last month and incurred fixed costs totaling $8,000. If production and sales are expected to decrease by 10% next month, which of the following statements is true?

A) Total fixed costs will increase.
B) Total fixed costs will decrease.
C) Fixed cost per unit will increase.
D) Fixed cost per unit will decrease.

Question 79

Which of the following is a benefit given up when one decision alternative is selected over another?

A) Sunk cost
B) Controllable cost
C) Opportunity cost
D) Incremental cost

Question 80

You own a car and are trying to decide whether to trade it in and buy a new car. Which of the following costs is an opportunity cost in this situation?

A) The trip to Europe that you will not be able to take if you buy the car
B) The cost of the car you are trading in
C) The cost of toothpaste and soap that you need for the next few months
D) The cost of your meals for the last week