Deck 18: Managerial Accounting Concepts and Principles

Question 1

The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead cost.

Answer 1

True

Question 2

Managerial accounting information includes both historical and estimated data.

Answer 2

True

Question 3

Control is the process of monitoring operating results and comparing actual results with the expected results.

Answer 3

True

Question 4

The controller's staff consists of management accountants responsible for systems and procedures, general accounting, budgets, taxes, and cost accounting.

Question 5

A staff department has no direct authority over a line department.

Question 6

In most business organizations, the chief accountant is called the controller.

Question 7

Since there are few rules to restrict how an organization chooses to arrange its own internal data for decision making, managerial accounting provides ample opportunity for creativity and change.

Question 8

The cost of materials entering directly into the manufacturing process is classified as factory overhead cost.

Question 9

A staff department or unit is one that provides services, assistance, and advice to the departments with line or other staff responsibilities.

Question 10

Managerial accounting provides useful information to managers on product costs.

Question 11

Managerial accounting reports must be useful to the user of the information.

Question 12

A diagram of the operating structure of an organization is called an organization chart.

Question 13

Planning is the process of developing the company's objectives or goals and translating these objectives into courses of action.

Question 14

In most business organizations, the chief accountant is called the treasurer.

Question 15

Accounting is an information system that provides essential data about the economic activities of an entity to various users to aid them in making informed judgments and decisions.

Question 16

The vice presidents of production and sales and the controller hold line positions in most large organizations.

Question 17

Managerial accounting reports are prepared according to generally accepted accounting principles.

Question 18

The payment of dividends is an example of a cost.

Question 19

Planning is the process of monitoring operating results and comparing actual results with the expected results.

Question 20

A cost can be a payment of cash for the purpose of generating revenues.

Question 21

For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.

Question 22

Indirect labor would be included in factory overhead.

Question 23

Direct labor costs are included in the conversion costs of a product.

Question 24

Factory overhead is an example of a product cost.

Question 25

If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as direct materials cost.

Question 26

The costs of materials and labor that do not enter directly into the finished product are classified as cost of goods sold.

Question 27

If the cost of materials is not a significant portion of the total product cost, the materials may be classified as part of factory overhead cost.

Question 28

The costs of materials and labor that do not enter directly into the finished product are classified as factory overhead.

Question 29

Direct costs can be specifically traced to a cost object.

Question 30

Cost of oil used to lubricate factory machinery and equipment is an example of a direct materials cost.

Question 31

Factory overhead cost is sometimes referred to as factory burden.

Question 32

Nonmanufacturing costs are classified into two categories: selling and administrative.

Question 33

The cost of wages paid to employees directly involved in converting materials to finished product is classified as direct labor cost.

Question 34

For a construction contractor, the wages of carpenters would be classified as factory overhead cost.

Question 35

Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are classified as factory overhead cost.

Question 36

Indirect costs can be specifically identified to a cost object.

Question 37

Depreciation on factory plant and equipment is an example of factory overhead cost.

Question 38

Conversion cost is the combination of direct materials cost and factory overhead cost.

Question 39

A cost object indicates how costs are related or identified.

Question 40

Conversion cost is the combination of direct labor cost and factory overhead cost.

Question 41

Prime costs are the combination of direct materials and direct labor costs.

Question 42

Managers use managerial information to evaluate performance of a company's operation.

Question 43

Period costs can be found in the balance sheet or in the income statement.

Question 44

A performance report that identifies the amount of employee downtime is a financial accounting report.

Question 45

Goods that are partway through the manufacturing process, but not yet complete, are referred to as materials inventory.

Question 46

Prime costs are the combination of direct labor costs and factory overhead costs.

Question 47

Operating expenses are product costs and are expensed when the product is sold.

Question 48

Controlling deals with choosing goals and deciding how to achieve them.

Question 49

Product costs are also referred to as inventoriable costs.

Question 50

Product costs are not expensed until the product is sold.

Question 51

A report analyzing the dollar savings of purchasing new equipment to speed up the production process is a managerial accounting report.

Question 52

Manufacturers use labor, plant, and equipment to convert direct materials into finished products.

Question 53

Conversion costs are the combination of direct labor, direct material and factory overhead costs.

Question 54

Period costs include direct materials and direct labor.

Question 55

A report analyzing how many products need to be sold to cover operating costs is not typically a managerial accounting report.

Question 56

On the balance sheet for a manufacturing business, the cost of direct materials, direct labor, and factory overhead are categorized as either materials inventory, work in process inventory, or finished goods inventory.

Question 57

Managerial information is for external as well as internal stakeholders.

Question 58

The plant manager's salary in a manufacturing business would be considered an indirect cost.

Question 59

Only the value of the inventory that is sold will appear in the income statement.

Question 60

The statement of cost of goods manufactured is an extension of the income statement for a manufacturing company.

Question 61

Which of the following is most associated with managerial accounting?

A) Must follow GAAP
B) May rely on estimates and forecasts
C) Is prepared for users outside the organization.
D) Always reports on the entire entity

Question 62

In order to be useful to managers, management accounting reports should possess all of the following characteristics EXCEPT:

A) provide objective measures of past operations and subjective estimates about future decisions
B) be prepared in accordance with generally accepted accounting principles
C) be provided at any time management needs information
D) be prepared to report information for any unit of the business to support decision making

Question 63

Product costs include direct labor and advertising expense.

Question 64

Factory overhead includes all manufacturing costs except direct materials and direct labor.

Question 65

Who are the individuals charged with the responsibility for directing the day-to-day operations of a business?

A) Investors
B) Managers
C) Shareholders
D) Customers

Question 66

Labor costs that are directly traceable to the product are part of factory overhead.

Question 67

Which of the following are basic phases of the management process?

A) Supervising and directing
B) Decision making and supervising
C) Organizing and directing
D) Planning and controlling

Question 68

Managerial accounting uses only past data in reports to aid management in the decision making process.

Question 69

Managerial accounting

A) is prepared according to GAAP.
B) is prepared according to management needs.
C) is prepared periodically only.
D) is related to the entire business entity only.

Question 70

In most business organizations, the chief management accountant is called the:

A) chief accounting officer
B) controller
C) chairman of the board
D) chief executive officer

Question 71

Which of the following statements is false?

A) There is no overlap between financial and managerial accounting.
B) Managerial accounting sometimes relies on past information.
C) Managerial accounting does not need to conform to GAAP
D) Financial accounting must conform to GAAP.

Question 72

Indirect labor and indirect materials would be part of factory overhead.

Question 73

Prime costs consists of direct materials, indirect materials, and direct labor.

Question 74

Which of the following is most associated with financial accounting?

A) Can have both objective and subjective information
B) Can be prepared periodically, or as needed
C) Prepared in accordance with GAAP
D) Can be prepared for the entity or segment

Question 75

Period costs are operating costs that are expensed in the period in which the goods are sold.

Question 76

What is the primary criterion for the preparation of managerial accounting reports?

A) Relevance of the reports
B) Meet the manager needs
C) Timing of the reports
D) Cost of the reports

Question 77

Prime costs consist of factory overhead and direct labor.

Question 78

The controller's staff often consists of several management accountants. All of the following would most likely be on the controller's staff EXCEPT:

A) general accountants
B) budgets and budget analysts
C) investments and shareholder relations managers
D) cost accountants

Question 79

All of the following employees hold line positions in Anthea Electric EXCEPT:

A) vice president of production
B) vice president of finance
C) manager of the Valhalla Plant
D) vice president of sales

Question 80

Conversion costs consist of product costs and period costs.