113 test bank for managerial accounting 2nd edition

113 Test Bank for Managerial Accounting 2nd Edition
True-False Questions
An indirect cost can be readily traced to a cost object while a direct cost is
traced only to manufacturing costs.
1.

True

2.

False

Fixed costs stay the same, in total, as activity level changes.
1.

True

2.

False

Fixed costs stay the same, on a per-unit basis, as activity level changes.
1.

True

2.

False

Prime costs include direct materials, direct labor, and manufacturing

overhead.
1.

True

2.

False

Managers of small, private corporations use managerial accounting
information whereas managers of large, public corporations use financial
accounting information.
1.

True

2.

False


All manufacturing costs are inventoriable costs.
1.

True

2.

False

Conversion costs are the costs to convert direct materials into the finished
product.
1.

True

2.

False

The planning function is the arranging of the necessary resources to carry out
the plan.
1.

True

2.

False

The control function is comparing actual with budgeted results and taking
corrective action when needed.
1.

True

2.

False

Opportunity cost is the cost of not doing something.
1.

True

2.

False

A cost that will occur in the future and differs between various alternatives
under consideration is a relevant cost.
1.

True


2.

False

Although there are numerous ways to categorize costs, each individual cost
will only be classified in one particular way.
1.

True

2.

False

The Sarbanes-Oxley Act of 2002 focuses on three factors that affect the
accounting reporting environment: ethics, fraud, and managers.
1.

True

2.

False

Managerial accounting information includes such items as budgets,
performance evaluations,and cost reports.
1.

True

2.

False

Variable costs are always direct costs.
1.

True

2.

False

Costs can be sorted or categorized in a number of ways including relevant or

irrelevant costs.
1.

True

2.

False


Out-of-pocket costs involve an actual outlay of cash.
1.

True

2.

False

Whether a cost is treated as direct or indirect depends on whether tracing the
cost is either possible or feasible.
1.

True

2.

False

Financial accounting information is reported for the company as a whole.

1.

True

2.

False

The Sarbanes-Oxley Act of 2002 places full responsibility on the board of
directors for the accuracy of the reporting system.
1.

True

2.

False

Financial accounting information is generally used exclusively by internal
parties such as managers.
1.

True

2.

False

The directing/leading function provides motivation to achieve results.
1.

True

2.

False


Investors, creditors and regulators are the primary users of managerial
accounting information.
1.

True

2.

False

A manufacturing firm reports only manufacturing costs.
1.

True

2.

False

Properly applied, ethics provide a clear right or wrong answer to the business
situations facing accountants and managers.
1.

True

2.

False

Financial accounting information is prepared according to generally accepted
accounting principles.
1.

True

2.

False

All manufacturing costs are treated as product costs.
1.

True

2.

False


Since hospitals, universities, and charitable organizations do not exist strictly
to earn profit for shareholders, managerial accounting information is not vital
to their operations.

1.

True

2.

False

Mutiple Choice Questions- Page 1
Which of the following is not a characteristic of managerial accounting?
1.

A. Information is used by internal parties.

2.

B. Information is subjective, relevant, future-oriented.

3.

C. Reports are prepared as needed.

4.

D. Reports are prepared according to GAAP.

Which of the following is not a characteristic of financial accounting?
1.

A. Financial reports are prepared according to GAAP.

2.

B. Information is used by external parties.

3.

C. Information is subjective, relevant and future-oriented.

4.

D. Reports are prepared periodically.

Which of the following functions of management involves taking actions to
implement the plan?
1.

A. Planning

2.

B. Organizing


3.

C. Directing/leading

4.

D. Control

Which of the following functions of management involves taking corrective
action if needed?
1.

A. Planning

2.

B. Organizing

3.

C. Directing/leading

4.

D. Control

Which of the following describes the Organizing function of management?
1.

A. Setting short and long-term objectives

2.

B. Comparing actual to budgeted results and taking corrective action if needed

3.

C. Taking actions to implement the plan

4.

D. Arranging the necessary resources to carry out the plan

Which of the following is not a characteristic of financial accounting?
1.

A. Financial reports are prepared according to GAAP.

2.

B. Information is used primarily by internal parties.

3.

C. Information is objective, reliable and historical.

4.

D. Reports are prepared periodically.

Accounting is primarily intended to facilitate
1.

A. starting a business.

2.

B. decision making.

3.

C. ethics investigations.

4.

D. cost tracing.

What is the primary goal of accounting?
1.

A. To set long-term goals and objectives.

2.

B. To arrange for the necessary resources to achieve a plan.

3.

C. To provide information for decision making.

4.

D. To motivate others to work towards a plan's success.

Which of the following types of reports is more characteristic of managerial

accounting than financial accounting?
1.

A. An internal report used by management.

2.

B. An external report used by investors.

3.

C. A report prepared according to GAAP.

4.

D. A report prepared periodically (monthly, quarterly, annually).

Which of the following describes the Planning function of management?
1.

A. Setting short and long-term objectives

2.

B. Comparing actual to budgeted results and taking corrective action

3.

C. Taking actions to implement the plan

4.

D. Arranging the necessary resources to carry out the plan


Which of the following types of organizations sells goods to the general
public?
1.

A. Service companies

2.

B. Manufacturing firms

3.

C. Merchandising companies

4.

D. Retailers

Which of the following describes the Control function of management?
1.

A. Setting short and long-term objectives

2.

B. Comparing actual to budgeted results and taking corrective action

3.

C. Taking actions to implement the plan

4.

D. Arranging the necessary resources to carry out the plan

Which of the following describes one of the Directing/Leading functions of
management?
1.

A. Setting short and long-term objectives

2.

B. Comparing actual to budgeted results and taking corrective action

3.

C. Taking actions to implement the plan

4.

D. Arranging the necessary resources to carry out the plan

Which of the following functions of management involves comparing actual
results with budgeted results?

1.

A. Planning

2.

B. Organizing


3.

C. Directing/leading

4.

D. Control

Which of the following is not a characteristic of managerial accounting?
1.

A. Information is used by internal parties.

2.

B. Information is subjective, relevant, future-oriented.

3.

C. Reports are prepared as needed.

4.

D. Information is reported for the company as a whole.

Which of the following functions of management involves providing
motivation to achieve results?
1.

A. Planning

2.

B. Organizing

3.

C. Directing/leading

4.

D. Control

Which of the following does the term "ethics" not refer to?
1.

A. The standards of conduct for judging fair from unfair

2.

B. The standards of conduct for judging right from wrong

3.

C. The standards of conduct for judging opportunity from incentives

4.

D. The standards of conduct for judging honest from dishonest


Which of the following functions of management involves setting short and
long-term objectives and the tactics to achieve them?
1.

A. Planning

2.

B. Organizing

3.

C. Directing/leading

4.

D. Control

Which of the following is not a characteristic of managerial accounting?
1.

A. Information is used by external parties.

2.

B. Information is subjective, relevant, future-oriented.

3.

C. Reports are prepared as needed.

4.

D. Information is reported at the decision making level.

Which of the following types of organizations purchases raw materials from
suppliers and uses them to create a finished product?
1.

A. Manufacturing firms

2.

B. Merchandising companies

3.

C. Service companies

4.

D. Retailers

Which of the following is not one of the factors affecting the accounting
reporting environment focused on by the Sarbanes-Oxley Act?
1.

A. Line of business

2.

B. Opportunity


3.

C. Character

4.

D. Incentives

Which of the following functions of management involves providing feedback
for future plans?
1.

A. Planning

2.

B. Organizing

3.

C. Directing/leading

4.

D. Control

Which of the following is not a characteristic of financial accounting?
1.

A. Information is reported at the decision making level.

2.

B. Information is used by external parties.

3.

C. Information is objective, reliable and historical.

4.

D. Reports are prepared periodically.

Which of the following functions of management involves arranging the
necessary resources to carry out the plan?
1.

A. Planning

2.

B. Organizing

3.

C. Directing/leading

4.

D. Control


Hair salons and law firms are which of the following type of organization?
1.

A. Retailers

2.

B. Service companies

3.

C. Manufacturing firms

4.

D. Merchandising companies

Which of the following is the correct sequencing of the managerial process?
1.

A. Planning - Organizing - Control - Directing/Leading

2.

B. Planning - Directing/Leading - Organizing - Control

3.

C. Planning - Organizing - Directing/Leading - Control

4.

D. Organizing - Directing/Leading - Planning - Control

85 Free Test Bank for Managerial Accounting 2nd Edition
by WhitecottonMutiple Choice Questions- Page 2
A cost is $50,000 when 25,000 units are produced, and $50,000 when 50,000
units are produced.This is an example of a(n)
1.

A. fixed cost.

2.

B. direct cost.

3.

C. variable cost.

4.

D. indirect cost.

Indirect costs are
1.

A. costs that are not worth the effort to trace to a specific cost object.


2.

B. costs that change, in total, in direct proportion to changes in activity levels.

3.

C. always irrelevant.

4.

D. costs that remain constant no matter the activity level.

A direct cost is one which
1.

A. involves an actual outlay of cash for a specific cost object.

2.

B. can be traced to a specific cost object.

3.

C. cannot be traced to a specific cost object.

4.

D. is not worth the effort of tracing to a specific cost object.

A cost is $50,000 when 25,000 units are produced, and $100,000 when 50,000
units are produced. This is an example of a(n)
1.

A. fixed cost.

2.

B. direct cost.

3.

C. variable cost.

4.

D. indirect cost.

Which of the following statements concerning costs is incorrect?
1.

A. Costs are treated differently depending on how the information will be used.

2.

B. Out-of-pocket costs include the costs associated with not taking a particular course
of action.

3.

C. Any single cost can be classified in more than one way.

4.

D. Costs can be categorized on the basis of relevant or irrelevant costs.


A cost object is
1.

A. an item for which managers are trying to determine the cost.

2.

B. an item to which managers must directly trace costs.

3.

C. an item to which it is not worth the effort of tracing costs.

4.

D. an item for sale by a business.

Which of the following is not one of the categories used to sort costs in
managerial accounting?
1.

A. Relevant or irrelevant

2.

B. Variable or fixed

3.

C. Out-of-pocket or opportunity

4.

D. Direct or indirect

Variable costs are
1.

A. costs that are not worth the effort to trace to a specific cost object.

2.

B. costs that change, in total, in direct proportion to changes in activity levels.

3.

C. always irrelevant.

4.

D. costs that remain constant no matter the activity level.

What determines the difference between a variable and a fixed cost?
1.

A. Whether the total cost changes when activity levels change.

2.

B. Whether the total cost is relevant to a particular decision.

3.

C. Whether the total cost can be traced to a specific cost object.


4.

D. Whether the total cost is related to manufacturing or nonmanufacturing activities.

The cost of not doing something is a(n)
1.

A. out-of-pocket cost.

2.

B. opportunity cost.

3.

C. direct cost.

4.

D. cost object.

An out-of-pocket cost involves which of the following?
1.

A. Choosing to do one thing instead of another.

2.

B. Tracing the cost directly to a cost object.

3.

C. An actual outlay of cash.

4.

D. Determining how the cost changes with a change in activity level.

Which of the following is a requirement under the Sarbanes-Oxley Act?
1.

A. Financial statements must be audited by a Big Four accounting firm.

2.

B. Management must issue a report that indicates whether the financial statements are
free of error.

3.

C. Management must conduct a review of the company's internal control system.

4.

D. Background checks must be performed on all employees.

Costs that are not worth the effort to trace to a specific cost object are
1.

A. opportunity costs.

2.

B. direct costs.


3.

C. indirect costs.

4.

D. irrelevant costs.

Which of the following is not a provision of the Sarbanes-Oxley Act?
1.

A. Executives can avoid penalties for fraud by declaring personal bankruptcy.

2.

B. Stiffer penalties for fraud in terms of monetary fines and jail time.

3.

C. Public companies must adopt a code of ethics for senior financial officers.

4.

D. Management must issue a report that indicates whether internal controls are
effective at preventing errors and fraud.

Fixed costs are
1.

A. costs that are not worth the effort to trace to a specific cost object.

2.

B. costs that change, in total, in direct proportion to changes in activity levels.

3.

C. always irrelevant.

4.

D. costs that remain constant, in total, no matter the activity level.

Which of the following changes introduced by the Sarbanes-Oxley Act is
intended to counteract incentives for fraud?
1.

A. Stronger oversight by directors

2.

B. Code of ethics

3.

C. Stiffer fines and prison terms

4.

D. Anonymous tip lines


Which of the following cannot be an out-of-pocket cost?
1.

A. A direct cost.

2.

B. An opportunity cost.

3.

C. A variable cost.

4.

D. A period cost.

The Sarbanes-Oxley Act places responsibility for the accuracy of the
reporting system on
1.

A. Accounting managers.

2.

B. Marketing managers.

3.

C. Top executives.

4.

D. All managers.

Variable costs are
1.

A. costs that stay the same, in total, regardless of activity level.

2.

B. costs that vary inversely, per unit, with the number of units produced.

3.

C. costs that vary inversely, in total, with the number of units produced.

4.

D. costs that change, in total, in direct proportion to changes in activity levels.

Costs that can be traced to a specific cost object are
1.

A. opportunity costs.

2.

B. direct costs.

3.

C. indirect costs.


4.

D. irrelevant costs.

Which of the following is a direct cost of manufacturing a table made of wood
and glass, for a firm that manufactures furniture?
1.

A. The cost of the wood in the table.

2.

B. The cost of rent on the factory where the table is manufactured.

3.

C. The salary of the supervisor who oversees all production for the firm.

4.

D. Depreciation on the tools used to manufacture the table.

Which of the following is an example of a variable cost for a manufacturing
firm?
1.

A. The cost of rent on the factory.

2.

B. The cost of factory supervision.

3.

C. The cost of raw materials.

4.

D. The cost of depreciation on equipment.

What determines the difference between a direct and an indirect cost?
1.

A. Whether it changes when activity levels change.

2.

B. Whether it is relevant to a particular decision.

3.

C. Whether it can be traced to a specific cost object.

4.

D. Whether it is related to manufacturing or nonmanufacturing activities.

An actual outlay of cash is a(n)
1.

A. out-of-pocket cost.


2.

B. opportunity cost.

3.

C. direct cost.

4.

D. cost object.

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?

1.

A. Cash paid for gas to run the lawnmower.

2.

B. The time spent mowing the lawns.

3.

C. The wages he could have earned working at the grocery store.

4.

D. Depreciation on the lawnmower.

Which of the following changes introduced by the Sarbanes-Oxley Act is not
one intended to encourage good character?
1.

A. Anonymous tip lines

2.

B. Whistle-blower protection

3.

C. Code of ethics

4.

D. Stiffer fines and prison terms

Which of the following changes introduced by the Sarbanes-Oxley Act is not
one intended to reduce opportunities for error and fraud?
1.

A. Internal control report from management

2.

B. Code of ethics

3.

C. Stronger oversight by directors


4.

D. Internal control audit by external auditors

An opportunity cost is
1.

A. the foregone benefit of the path not taken.

2.

B. an actual outlay of cash.

3.

C. the initial investment required to pursue an opportunity.

4.

D. a cost that cannot be traced to a specific cost object.

Which of the following is an indirect cost of manufacturing a table made of
wood and glass, for a firm that manufactures furniture?
1.

A. The cost of the wood in the table.

2.

B. The cost of the labor used to assemble the table.

3.

C. The cost of the glass in the table.

4.

D. The cost of rent on the factory where the table is manufactured.

Which of the following is not true about how the Sarbanes-Oxley Act
emphasizes the importance of the character of managers and employees?

1.

A. It requires that ethics be embedded in the organizational culture.

2.

B. It requires that audit committees establish anonymous tip lines.

3.

C. It provides protection for whistle-blowers.

4.

D. It requires that public companies adopt a code of ethics for senior financial officers.

Which of the following is not true about how the Sarbanes-Oxley Act
counteracts incentives for committing fraud?
1.

A. It provides for stiffer monetary penalties.


2.

B. It increases the maximum jail sentence for fraudulent reporting.

3.

C. It removes legal protection from whistleblowers.

4.

D. It provides that violators must repay any money obtained via fraud plus pay fines.

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 out-of-pocket
cost of mowing lawns?
1.

A. The use of his father's truck to get to job sites.

2.

B. The wages he could have earned working at the grocery store.

3.

C. The time spent mowing the lawns.

4.

D. Cash paid for gas to run the lawnmower.

85 Free Test Bank for Managerial Accounting 2nd Edition
by WhitecottonMutiple Choice Questions- Page 3
When are period costs counted as inventory?
1.

A. Before products are sold.

2.

B. After products are sold.

3.

C. After products are completed, but before they are sold.

4.

D. Never.

Product costs are
1.

A. expensed on the income statement when incurred.

2.

B. treated as an asset and depreciated.


3.

C. inventoried until the units are sold.

4.

D. considered current liabilities until paid.

Which of the following is true about product and period costs?
1.

A. Product costs are usually manufacturing costs, and period costs are usually
nonmanufacturing costs.

2.

B. Product costs are usually nonmanufacturing costs, and period costs are usually
manufacturing costs.

3.

C. Both product and period costs are usually manufacturing costs.

4.

D. Both product and period costs are usually nonmanufacturing costs.

Product costs are sometimes called
1.

A. relevant costs.

2.

B. sunk costs.

3.

C. differential costs.

4.

D. inventoriable costs.

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).
1.

A. opportunity cost.

2.

B. indirect cost.

3.

C. sunk cost.


4.

D. overhead cost.

For a cost to be relevant, it must meet which of the following criteria?
1.

A. It must not differ between the decision alternatives and it must be incurred in the
future rather than in the past.

2.

B. It must differ between the decision alternatives and it must be incurred in the future
rather than in the past.

3.

C. It must not differ between the decision alternatives and it must have occurred in the
past rather than in the future.

4.

D. It must differ between the decision alternatives and it must have occurred in the past
rather than in the future.

Prime costs are the same as
1.

A. Manufacturing costs minus non-manufacturing costs.

2.

B. Manufacturing costs minus manufacturing overhead.

3.

C. Manufacturing costs minus fixed costs.

4.

D. Manufacturing costs minus direct materials.

A cost that has already been incurred is called a(n) _______________ cost.
1.

A. indirect

2.

B. sunk

3.

C. relevant

4.

D. opportunity


Manufacturing costs are generally classified into which of the following
categories?
1.

A. relevant costs and irrelevant costs

2.

B. direct materials, direct labor, and manufacturing overhead

3.

C. prime costs and conversion costs

4.

D. conversion costs, marketing costs, and administrative costs

For a cost to be relevant, it must
1.

A. differ between decision alternatives.

2.

B. have already been incurred.

3.

C. not influence a decision.

4.

D. not be a differential cost.

For a cost to be relevant, it must be

1.

A. a differential cost and a sunk cost.

2.

B. a differential cost, but not a sunk cost.

3.

C. a sunk cost, but not a differential cost.

4.

D. neither a differential cost nor a sunk cost.

Nonmanufacturing costs are generally classified into what two groups?
1.

A. Conversion costs and prime costs.

2.

B. Direct materials and direct labor.

3.

C. Marketing costs and administrative costs.