Question 1

An irrelevant cost:

Accepted Answer

A)  is also called a differential cost. 
B)  must differ between decision alternatives. 
C)  must be incurred in the future rather than in the past. 
D)  will not influence a decision.

Question 2

A fixed cost:

Accepted Answer

A)  goes up in total when activity increases. 
B)  goes up per unit when activity increases. 
C)  goes down in total when activity increases. 
D)  goes down per unit when activity increases.

Question 3

Of the following groups, which is the primary user of managerial accounting information?

Accepted Answer

A)  Investors 
B)  Creditors 
C)  Regulators 
D)  Managers

Question 4

Which of the following is not a characteristic of financial accounting?

Accepted Answer

A)  Information is reported at the decision making level. 
B)  Information is used by external parties. 
C)  Information is objective, reliable and historical. 
D)  Reports are prepared periodically.

Question 5

To earn summer money, Joe could mow lawns in his neighborhood, or he could work at a local grocery store. Which of the following is an opportunity cost of mowing lawns?

Accepted Answer

A)  Cash paid for gas to run the lawnmower. 
B)  The time spent mowing the lawns. 
C)  The wages he could have earned working at the grocery store. 
D)  Depreciation on the lawnmower.

Question 6

Prime costs are defined as:

Accepted Answer

A)  manufacturing costs plus non-manufacturing costs. 
B)  direct labor plus direct materials. 
C)  variable costs equal fixed costs. 
D)  manufacturing overhead plus direct labor.

Question 7

For each of the following independent cases, compute the missing values:

Accepted Answer

The answer of For each of the following independent cases,...

Question 8

Which of the following is true about product and period costs?

Accepted Answer

A)  Product costs are usually manufacturing costs, and period costs are usually nonmanufacturing costs. 
B)  Product costs are usually nonmanufacturing costs, and period costs are usually manufacturing costs. 
C)  Both product and period costs are usually manufacturing costs. 
D)  Both product and period costs are usually nonmanufacturing costs.

Question 9

Which of the following types of reports is more characteristic of managerial accounting than financial accounting?

Accepted Answer

A)  An internal report used by management 
B)  An external report used by investors 
C)  A report prepared according to GAAP 
D)  A report prepared periodically (monthly, quarterly, annually)

Question 10

An opportunity cost is:

Accepted Answer

A)  the foregone benefit of the path not taken. 
B)  an actual outlay of cash. 
C)  the initial investment required to pursue an opportunity. 
D)  a cost that cannot be traced to a specific cost object.

Question 11

Which of the following is not a manufacturing cost?

Accepted Answer

A)  Raw materials cost. 
B)  Marketing cost. 
C)  Direct labor cost. 
D)  Manufacturing overhead cost.

Question 12

What is the primary goal of accounting?

Accepted Answer

A)  To set long-term goals and objectives. 
B)  To arrange for the necessary resources to achieve a plan. 
C)  To provide information for decision making. 
D)  To motivate others to work towards a plan's success.

Question 13

Which of the following statements is correct about the triple bottom line?

Accepted Answer

A)  The triple bottom line measures a company's social impact, without regard for profit. 
B)  The triple bottom line captures three factors: People, Profit, and Planet. 
C)  The triple bottom line has replaced net income as the most crucial measure of a company's success. 
D)  The triple bottom line reports profit at the expense of social factors.

Question 14

Which of the following is not one of the categories used to sort costs in managerial accounting?

Accepted Answer

A)  Relevant or irrelevant 
B)  Variable or fixed 
C)  Out-of-pocket or opportunity 
D)  Direct or indirect

Question 15

Which of the following changes introduced by the Sarbanes-Oxley Act is intended to counteract incentives for fraud?

Accepted Answer

A)  Stronger oversight by directors 
B)  Code of ethics 
C)  Stiffer fines and prison terms 
D)  Anonymous tip lines

Question 16

What determines the difference between a product cost and a period cost?

Accepted Answer

A)  Whether the cost changes when activity levels change. 
B)  Whether the cost is relevant to a particular decision. 
C)  Whether the cost can be traced to a specific cost object. 
D)  When the cost will be matched against revenue on the income statement.

Question 17

Managers of small, private corporations use managerial accounting information whereas managers of large, public corporations use financial accounting information

Accepted Answer

A) True 
 B)False

Question 18

A direct cost is one that:

Accepted Answer

A)  involves an actual outlay of cash for a specific cost object. 
B)  can be traced to a specific cost object. 
C)  cannot be traced to a specific cost object. 
D)  is not worth the effort of tracing to a specific cost object.

Question 19

Which of the following is not true about how the Sarbanes-Oxley Act counteracts incentives for committing fraud?

Accepted Answer

A)  It provides for stiffer monetary penalties. 
B)  It increases the maximum jail sentence for fraudulent reporting. 
C)  It removes legal protection from whistleblowers. 
D)  It provides that violators must repay any money obtained via fraud and pay fines.

Question 20

You are to receive five gold coins from your great uncle as an incentive to study hard. The coins were originally purchased in 1982. Your great uncle will deliver the coins the week after finals (assuming your grades are "acceptable"). The amount your great uncle paid for the coins is a(n):

Accepted Answer

A)  opportunity cost. 
B)  indirect cost. 
C)  sunk cost. 
D)  overhead cost.

Exam 1: Introduction to Managerial Accounting