Deck 1: Managerial Accounting and the Business Organization

Question 1

All of the following are service organizations, except:

A) a manufacturer of sporting goods
B) a dry cleaners
C) a real estate brokerage
D) a public accounting firm

Answer 1

A

Question 2

Systems that use computer- aided design and computer- aided manufacturing, together with robots and computer- controlled machines, are called:

A) computer- integrated manufacturing systems
B) manufacturing- robotic systems
C) robotic- computer systems
D) just- in- time systems

Answer 2

A

Question 3

Which of the following statements is true?

A) Management accounting information is used by organization managers at various levels.
B) Management accounting information tends to be more detailed than financial accounting.
C) Management accounting plays a vital role in the achievement of a company's goals and objectives.
D) All of these answers are correct.

Answer 3

D

Question 4

The greatest impact of the Foreign Corrupt Practices Act on the accounting system is that it:

A) requires documentation of the adequacy of internal accounting controls
B) forbids bribery
C) specifies how to account for transactions with foreign countries
D) prohibits unethical practices by foreign investors

Question 5

According to the Standards of Ethical Conduct for Management Accountants, the standard of competence includes:

A) disclosing all relevant information
B) the ongoing development of the accountant's knowledge and skills
C) avoiding actual or apparent conflicts of interest
D) All of these answers are correct.

Question 6

The Gotcha Company held a Christmas party. The company expected attendance of 200 persons and prepared the following budget: $\begin{array}{ll}\text { Hotel room rental } & \$ 600 \\\text { Food } & 500 \\\text { Entertainment } & \$ 00 \\\text { Decorations } & 300 \\\text { Totals } & \$ 2,200 \\\end{array}$ After all bills for the party were paid, the total came to $2,315. Details are: $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. Two hundred persons attended the party. What is the main reason for the unfavorable total budget variance?

A) Hotel room rent is the main reason.
B) Entertainment is the main reason.
C) Food is the main reason.
D) Decorations are the main reason.

Question 7

is (are) the primary consideration in choosing among accounting systems and methods.

A) Behavioral implications
B) Simplicity
C) Computerization
D) The cost- benefit balance

Question 8

Below is a statement from the Standards of Ethical Conduct for Management Accountants. "Refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so."
It is an example of:

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

Question 9

At a clothing manufacturer, line authority is held by the head of which department?

A) The head of the receiving department holds line authority.
B) The head of the shipping department holds line authority.
C) The head of the assembly department holds line authority.
D) All of these answers are correct.

Question 10

Launching a new product line is an example of:

A) organization
B) decision making
C) controlling
D) planning

Question 11

The largest U.S. association of professional accountants whose major interest is management accounting is the:

A) American Institute of CPAs
B) Government Accounting Institute
C) Institute of Management Accountants
D) American Accounting Association

Question 12

Department performance reports can be used to help department heads determine:

A) how efficiently the department is operating
B) how effectively the department is operating
C) how effectively and efficiently the department is operating
D) who is primarily responsible for any deviations from plans

Question 13

According to the Standards of Ethical Conduct for Management Accountants, the standard of confidentiality includes:

A) disclosing all relevant information
B) avoiding actual or apparent conflicts of interest
C) the ongoing development of the accountant's knowledge and skills
D) All of these answers are correct.

Question 14

According to the Financial Executives Institute, one function of the treasurer is:

A) government reporting
B) reporting and interpreting financial information
C) tax administration
D) short- term financing

Question 15

One advantage of the management- by- exception approach is that it:

A) takes advantage of computerization
B) allows managers to ignore day- to- day concerns so they can focus on crises
C) frees managers from needless concern over operations that are running smoothly
D) allows managers to ignore aspects of the business outside their area of expertise

Question 16

Buying manufacturing or operating inputs electronically is a type of:

A) B2B transaction
B) C2B transaction
C) A2B transaction
D) B2C transaction

Question 17

According to the Standards of Ethical Conduct for Management Accountants, the standard of objectivity includes:

A) disclosing all relevant information
B) avoiding actual or apparent conflicts of interest
C) the ongoing development of the accountant's knowledge and skills
D) All of these answers are correct.

Question 18

Ethical accountants are important to society because:

A) the information produced is reliable
B) they pay their taxes
C) they will not go to prison and waste taxpayers' money
D) None of these answers is correct.

Question 19

is a formal mechanism for gathering, organizing, and communicating information about an organization's activities.

A) Scorekeeping
B) Management accounting
C) Attention directing
D) An accounting system

Question 20

is mainly concerned with the company's operating matters.

A) The controller
B) The chairman of the board
C) The treasurer
D) The CEO

Question 21

Which of the following is a designation associated with independent auditors?

A) The CPA is associated with independent auditors.
B) The CMA is associated with independent auditors.
C) The IMA is associated with independent auditors.
D) The CFM is associated with independent auditors.

Question 22

Your close friend is a shareholder of the company that employs you, a management accountant. The friend asks you for information that is typically available only to company management. Sharing this information with your friend violates the ethical standard of:

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

Question 23

The Findley Company held a Groundhog Day party. The company expected attendance of 200 persons and prepared the following budget: $\begin{array}{ll}\text { Hotel room rental } & \$ 600 \\\text { Food } & 500 \\\text { Entertainment } & 800 \\\text { Decorations } & \underline{300} \\\text { Totals } & \underline{\$ 2,200}\end{array}$ After all bills for the party were paid, the total came to $2,315. Details are: $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. Two hundred persons attended the party. Which of the following costs deserves further examination assuming the Findley Company uses the management- by- exception rule?

A) Entertainment deserves further examination.
B) Decorations deserve further examination.
C) Hotel room rent deserves further examination
D) Food deserves further examination.

Question 24

A company should be especially concerned that revenues are balanced with costs during which stage of the product life cycle?

A) Phase- out of product is the stage where a company should be especially concerned that revenues are balanced with costs.
B) Product development is the stage where a company should be especially concerned that revenues are balanced with costs.
C) Mature market is the stage where a company should be especially concerned that revenues are balanced with costs.
D) Introduction to market is the stage where a company should be especially concerned that revenues are balanced with costs.

Question 25

Variances:

A) ignore areas that are presumed to be running smoothly
B) provide feedback by comparing results with plans and by highlighting deviations from plans
C) are quantitative expressions of action plans
D) are deviations from a plan

Question 26

The Findlay Company held an Independence Day party. The company expected attendance of 200 persons and prepared the following budget: $\begin{array}{ll}\text { Hotel room rental } & \$ 600 \\\text { Food } & 400 \\\text { Entertainment } & \$ 00 \\\text { Decorations } & \$ 300 \\\text { Totals } & \$ 2,100\end{array}$ After all bills for the party were paid, the total came to $2,315. Details are: $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. Two hundred persons attended the party. What is the variance in food?

A) $240 unfavorable is the food variance.
B) $70 favorable is the food variance.
C) $25 favorable is the food variance.
D) $70 unfavorable is the food variance.

Question 27

Internal auditors should have as their primary responsibilities:

A) scorekeeping and attention directing
B) attention directing and problem solving
C) problem solving and scorekeeping
D) problem solving only

Question 28

The Alpha Beta Gamma Fraternity held a Christmas party. The fraternity expected attendance of 200 persons and prepared the following budget: $\begin{array}{ll}\text { Hotel room rental } & \$ 600 \\\text { Food } & 500 \\\text { Entertainment } & \$ 00 \\\text { Decorations } & \underline{300} \\\text { Totals } & \$ 2,200\end{array}$ After all bills for the party were paid, the total came to $2,315. Details are: $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. Two hundred persons attended the party. What is the variance in hotel room rental?

A) $140 unfavorable is the hotel room rental variance.
B) $70 favorable is the hotel room rental variance.
C) $70 unfavorable is the hotel room rental variance.
D) $25 favorable is the hotel room rental variance.

Question 29

Budgets:

A) are deviations from a plan
B) are quantitative expressions of action plans
C) ignore areas that are presumed to be running smoothly
D) provide feedback by comparing results with plans and by highlighting deviations from plans

Question 30

According to the Financial Executives Institute, one function of controllership is:

A) reporting and interpreting financial information
B) provision of capital
C) investments
D) short- term financing

Question 31

All of the following companies had significantly faulty accounting information in the past ten years except:

A) Enron
B) Xerox
C) Microsoft
D) Tyco

Question 32

Which of the following products have a product life cycle of a few months?

A) Electric stoves have a product life cycle of a few months.
B) Fashion clothing has a product life cycle of a few months.
C) Planes have a product life cycle of a few months.
D) Automobiles have a product life cycle of a few months.

Question 33

Production is the function of a value chain that includes:

A) the generation of, and experimentation with, ideas related to new products, services, or processes
B) the coordination and assembly of resources to produce a product or deliver a service
C) the detail and engineering of products
D) the manner by which individuals or groups learn about the value and features of products or services

Question 34

A management audit would be performed by all of the following except:

A) a hospital
B) a sneaker manufacturer
C) the General Accounting Office
D) All of these answers are correct.

Question 35

refers to accounting information developed for managers within an organization.

A) Internal auditing
B) Financial accounting
C) Managerial accounting
D) Tax accounting

Question 36

The Slamma Jamma Sorority held a party. The sorority prepared the following budget for 50 expected attendees: $\begin{array}{ll}\text { Room rental } & \$ 150 \\\text { Food } & 310 \\\text { Entertainment } & 150 \\\text { Decorations } & \underline{75} \\\text { Totals } & \$ 685\end{array}$ After all bills for the party were paid, the total came to $760. Details are: $240 for room rental; $320 for food; $145 for entertainment; and $75 for decorations. Fifty persons attended the party. Which of the following costs deserves further examination assuming the sorority uses the management- by- exception rule?

A) Room rent deserves further explanation.
B) Entertainment deserves further explanation.
C) Decorations deserve further explanation.
D) Food deserves further explanation.

Question 37

Product life cycles:

A) are the same for all products
B) have nothing to do with product profitability
C) must be considered to effectively plan for production
D) are computerized bicycles

Question 38

The various stages through which a product passes are called the:

A) market analysis
B) product life cycle
C) product initiative
D) production plan

Question 39

Management by exception:

A) focuses on areas that are presumed to be running smoothly
B) is the quantitative expression of action plans
C) is a summary report of plan results
D) provides feedback by comparing results with plans and by highlighting deviations from plans

Question 40

The Animal House Fraternity held a homecoming party. The fraternity prepared the following budget for 50 expected attendees: $\begin{array}{ll}\text { Room rental } & \$ 150 \\\text { Food } & 250 \\\text { Entertainment } & 150 \\\text { Decorations } & 75 \\\text { Totals } & \$ 625\end{array}$ After all bills for the party were paid, the total came to $660. Details are: $140 for room rental; $320 for food; $125 for entertainment; and $75 for decorations. Fifty persons attended the party. What is the total budget variance?

A) $10 favorable is the total budget variance.
B) $10 unfavorable is the total budget variance.
C) $35 unfavorable is the total budget variance.
D) $70 unfavorable is the total budget variance.

Question 41

Nonprofit service organizations are similar to profit- seeking service organizations in that:

A) output is usually easy to define
B) both use labor intensively
C) major inputs and outputs can be stored
D) All of these answers are correct.

Question 42

A company earns most product revenue during which stages of the product life cycle?

A) Most product revenue is earned during the mature market and product development stages.
B) Most product revenue is earned during the phase- out of product and mature market stages.
C) Most product revenue is earned during the introduction to market and mature market stages.
D) Most product revenue is earned during the product development and introduction to market stages.

Question 43

Below is a statement from the Standards of Ethical Conduct for Management Accountants. "Communicate information fairly and objectively." It is an example of:

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

Question 44

is a review to determine whether the policies and procedures specified by top management have been implemented.

A) GAAP
B) The Foreign Corrupt Practices Act
C) The Robinson- Patman Act
D) A management audit

Question 45

is (are) the accounting system's effect on the decision of managers.

A) Behavioral implications
B) Computerization
C) Simplicity
D) The cost- benefit balance

Question 46

Complexity in accounting systems:

A) can usually be justified on a cost- benefit basis
B) is desirable if it reflects the complexity of the underlying business
C) is necessary to manage the behavioral implications of the accounting system
D) frequently generates costs of gathering and interpreting data that often exceed prospective benefits

Question 47

Which scorecard function is associated with planning and control?

A) Problem solving is associated with planning and control.
B) Scorekeeping is associated with planning and control.
C) Attention directing is associated with planning and control.
D) None of these answers is correct.

Question 48

The just- in- time philosophy attempts to reduce costs by reducing:

A) the number of products manufactured
B) value- added activities
C) manufacturing time
D) All of these answers are correct.

Question 49

The Animal House Fraternity held a homecoming party. The fraternity prepared the following budget for 50 expected attendees: $\begin{array}{ll}\text { Room rental } & \$ 150 \\\text { Food } & \mathbf{2 5 0} \\\text { Entertainment } & \mathbf{1 5 0} \\\text { Decorations } & \underline{75} \\\text { Totals } & \underline{\underline{\$ 625}}\end{array}$ After all bills for the party were paid, the total came to $760. Details are: $140 for room rental; $320 for food; $125 for entertainment; and $175 for decorations. Fifty persons attended the party. What is the main reason for the unfavorable total budget variance?

A) Entertainment is the main reason.
B) Decorations are the main reason.
C) Room rent is the main reason.
D) Food is the main reason.

Question 50

is the field of accounting that develops information for external decision makers such as stockholders, suppliers, banks, and government regulatory agencies.

A) Auditing
B) Financial accounting
C) Tax accounting
D) Management accounting

Question 51

Which scorecard function is associated with making nonroutine decisions?

A) Problem solving is associated with making nonroutine decisions.
B) Attention directing is associated with making nonroutine decisions.
C) Scorekeeping is associated with making nonroutine decisions.
D) None of these answers is correct.

Question 52

Which of the following items should be considered in addition to simplicity by managers when designing accounting systems?

A) Cost- benefit balances and behavior implications should be considered.
B) Behavior implications should be considered.
C) Cost- benefit balances should be considered.
D) None of these answers is correct.

Question 53

Which scorecard function is associated with the accumulation of data?

A) Problem solving is associated with the accumulation of data.
B) Scorekeeping is associated with the accumulation of data.
C) Attention directing is associated with the accumulation of data.
D) None of these answers is correct.

Question 54

Product and service process design is the function of a value chain that includes:

A) the detail and engineering of products
B) the manner by which individuals or groups learn about the value and features of products or services
C) the coordination and assembly of resources to produce a product or deliver a service
D) the generation of, and experimentation with, ideas related to new products, services, or processes

Question 55

Which of the following statements is not true?

A) Management accounting information is used across the entire value chain of activities.
B) External accountants are expected to adhere to standards of ethical conduct.
C) Management accounting does not play a vital role in the achievement of a company's goals and objectives.
D) Management accounting information is used throughout the life cycle of products and services.

Question 56

The codes of conduct for integrity include all of the following except:

A) communicating information subjectively
B) avoiding actual or apparent conflicts of interest
C) refusing any gift that would influence the accountant's actions
D) recognizing and communicating professional limitations

Question 57

An accountant earns the designation of certified public accountant (CPA) by:

A) meeting an education requirement
B) passing an examination
C) meeting a qualifying experience requirement
D) All of these answers are correct.

Question 58

Which of the following is not a major factor causing changes in management accounting today?

A) Increased global competition is not a major factor.
B) E- commerce is not a major factor.
C) Increasing importance of the service sector of the economy is not a major factor.
D) Declining work ethic is not a major factor.

Question 59

An example of a staff department at a clothes manufacturer is the:

A) pressing department
B) cutting department
C) maintenance department
D) sales department

Question 60

Distribution is the function of a value chain that includes:

A) the support activities provided to the customer
B) the manner by which individuals or groups learn about the value and features of products or services
C) the mechanism by which products or services are delivered to the customer
D) All of these answers are correct.

Question 61

A supplier to your company offers to let you, a management accountant, use the supplier's condo in Cancun for your vacation. Accepting the supplier's offer violates the ethical standard of:

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

Question 62

The Gotcha Company held a Christmas party. The company expected attendance of 200 persons and prepared the following budget: $\begin{array}{ll}\text { Hotel room rental } & \$ 600 \\\text { Food } & 500 \\\text { Entertainment } & 800 \\\text { Decorations } & \underline{300} \\\text { Totals } & \$ 2,200\end{array}$ After all bills for the party were paid, the total came to $2,315. Details are: $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. Two hundred persons attended the party. What is the total budget variance?

A) $115 unfavorable is the total budget variance.
B) $140 unfavorable is the total budget variance.
C) $25 favorable is the total budget variance.
D) $115 favorable is the total budget variance.

Question 63

The acronym GAAP is most closely connected with:

A) management accounting
B) the IRS
C) both management accounting and financial accounting
D) financial accounting

Question 64

All of the following are reasons to study management accounting except:

A) to help a person become a chartered accountant in the United States
B) a person will become a better manager
C) there will be more career opportunities
D) None of these answers is correct.

Question 65

Customer service is the function of a value chain that includes:

A) the manner by which individuals or groups learn about the value and features of products or services
B) the support activities provided to the customer
C) the mechanism by which products or services are delivered to the customer
D) All of these answers are correct.

Question 66

The Delta Delta Delta Sorority held a homecoming party. The sorority prepared the following budget for 50 expected attendees: $\begin{array}{ll}\text { Room rental } & \$ 150 \\\text { Food } & \mathbf{2 5 0} \\\text { Entertainment } & \mathbf{1 5 0} \\\text { Decorations } & \underline{75} \\\text { Totals } & \underline{\underline{\$ 625}}\end{array}$ After all bills for the party were paid, the total came to $660. Details are: $140 for room rental; $320 for food; $125 for entertainment; and $75 for decorations. Fifty persons attended the party. What is the variance in food?

A) $10 favorable is the food variance.
B) $35 favorable is the food variance.
C) $30 unfavorable is the food variance.
D) $70 unfavorable is the food variance.

Question 67

The Delta Delta Delta Sorority held a homecoming party. The sorority prepared the following budget for 50 expected attendees: $\begin{array}{ll}\text { Room rental } & \$ 170 \\\text { Food } & 250 \\\text { Entertainment } & 150 \\\text { Decorations } & 75 \\\text { Totals } & \$ 645\end{array}$ After all bills for the party were paid, the total came to $660. Details are: $140 for room rental; $320 for food; $125 for entertainment; and $75 for decorations. Fifty persons attended the party. What is the variance in hotel room rental?

A) $30 unfavorable is the hotel room rental variance.
B) $30 favorable is the hotel room rental variance.
C) $35 favorable is the hotel room rental variance.
D) $70 unfavorable is the hotel room rental variance.

Question 68

Reviewing the output of the department is an example of:

A) controlling
B) planning
C) analyzing
D) budgeting

Question 69

Research and development is the function of a value chain that includes:

A) the generation of, and experimentation with, ideas related to new products, services, or processes
B) the manner by which individuals or groups learn about the value and features of products or services
C) the coordination and assembly of resources to produce a product or deliver a service
D) the detail and engineering of products

Question 70

Broad concepts or guidelines and detailed practices that together make up accepted accounting practice at a given time are referred to as:

A) accounting rules and regulations
B) GAAP
C) IRS regulations
D) accounting conventions

Question 71

A clerk records a transaction in the accounting system. This activity would be classified as:

A) attention directing
B) planning
C) scorekeeping
D) problem solving

Question 72

Organizing workers into departments and assigning activities to those departments is an example of:

A) controlling
B) analyzing
C) planning
D) budgeting

Question 73

Management accountants are similar to CPAs in that they:

A) are independent of the company for which they work
B) give opinions on financial statements
C) adhere to codes of conduct
D) are licensed by the state board of public accountancy

Question 74

Staff authority may be exerted:

A) upward and downward, but not laterally
B) downward, upward, and laterally
C) downward and laterally, but not upward
D) laterally and upward, but not downward

Question 75

Performance reports:

A) are quantitative expressions of action plans
B) ignore areas that are presumed to be running smoothly
C) provide feedback by comparing results with plans and by highlighting deviations from plans
D) are deviations from a plan

Question 76

The benefits of e- procurement are realized through:

A) reduced transaction time from request to delivery
B) reduced transaction cost and reduced transaction time from request to delivery
C) reduced transaction time from delivery to sale
D) reduced transaction cost

Question 77

The Institute of Management Accountants has adopted a set of standards of ethical conduct which includes codes of conduct regarding all of the following except:

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

Question 78

A company can best reduce the life cycle costs of product and services by managing the revenues and costs associated with which function of the value chain?

A) Customer service is the best function to reduce the life cycle costs of product and services.
B) Support is the best function to reduce the life cycle costs of product and services.
C) Production is the best function to reduce the life cycle costs of product and services.
D) Design is the best function to reduce the life cycle costs of product and services.

Question 79

All service organizations are similar in that:

A) they are capital intensive
B) major inputs and outputs can be stored
C) output is usually difficult to define
D) there is very little labor

Question 80

The primary users of management accounting information are:

A) bankers
B) governmental regulatory authorities
C) suppliers
D) internal decision makers