131 test bank for managerial accounting tools for business decision making 3rd

131 Test Bank for Managerial Accounting Tools for
Business Decision Making 3rd
True - False Questions
Reports prepared in managerial accounting are general-purpose
reports, whereas reports prepared in financial accounting
are usually special-purpose reports.
1.

True

2.

False

As a result of the Sarbanes-Oxley Act of 2002, managerial
accounting reports must now comply with accounting
principles accepted by the accounting profession.
1.

True

2.

False

Determining the unit cost of manufacturing a product is an
output of managerial accounting.
1.

True

2.

False

The CEO is directly responsible for the company’s complement
of accounting and financial goals.
1.

True

2.

False

A value chain refers to all the activities associated with providing
a product or service.
1.

True

2.

False

The theory of constraints is used to measure performance.
1.

True

2.

False


Firms that use large amounts of direct labour to produce their
products are apt to use lean manufacturing.
1.

True

2.

False

Lean manufacturing is in contrast to traditional mass-production
operations.
1.

True

2.

False

Decision-making is an integral part of the planning, directing and
motivating functions, but not of the controlling function.
1.

True

2.

False

Top managers must certify that a company maintains an
adequate system of internal controls.
1.

True

2.

False

The value chain is affected by technology through business-tobusiness on the Internet.
1.

True

2.

False

Whereas management accountants used to be responsible for
strategic cost management, their modern-day
responsibilities are more focused on collecting and
reporting costs to management.
1.

True

2.

False

The term “line position” is interchangeable with “staff position.”
1.

True


2.

False

The CFO has overall responsibility for managing the business.
1.

True

2.

False

Managerial accounting reports are special-purpose and issued
as frequently as needed.
1.

True

2.

False

A primary outcome of managerial accounting is the
determination of costs for manufactured items and
services.
1.

True

2.

False

Given the decision to employ straight-line amortization or a
usage-based amortization method, the management
accountant’s need to report the most relevant economic
information to external users will determine which method
is used.
1.

True

2.

False

Activity-based costing is a method of allocating overhead costs
to products.

1.

True

2.

False

Organization charts are common in companies but not relevant
to managerial accounting.
1.

True

2.

False


The balanced scorecard approach attempts to maintain as little
inventory on hand as possible.
1.

True

2.

False

The focus of a TQM system is to reduce defects in finished

products.
1.

True

2.

False

Managerial accounting internal reports are prepared less
frequently than are classified financial statements.
1.

True

2.

False

Employees with staff positions serve other employees, while
those with line positions work directly in line with the
company’s revenue generating goals.
1.

True

2.

False

Managerial accounting information generally pertains to an entity
as a whole and is very detailed.
1.

True

2.

False

Management accounting is a sub-discipline within accounting
focusing solely on the provision of economic and financial
information for external users.
1.

True

2.

False


The verification process for managerial accounting requires an
independent audit by Chartered Accountants.
1.

True

2.

False

Fundamentally, managerial accounting applies best to the
manufacturing context.
1.

True

2.

False

An organization chart in a manufacturing company replaces the
chart of accounts.
1.

True

2.

False

Detailed reports scrutinized by managerial accountants include
those focused on business sub-units.
1.

True

2.

False

Companies rely upon management accountants to collect nonfinancial information in order to assess how well the
companies’ resources are being used.
1.

True

2.

False

Management accounting and financial accounting, while in the
same field, are mutually exclusive disciplines.
1.

True

2.

False

Management accounting is a discipline with a rather narrow
scope for career advancement.
1.

True


2.

False

The controller, treasurer and internal audit staff are direct reports
of the CFO.
1.

True

2.

False

Directing is the process of determining whether planned goals
are being met.
1.

True

2.

False

Lean manufacturing is being used less often by manufacturing
firms.
1.

True

2.

False

The content of managerial accountants’ reports is very detailed
and includes non-financial data relevant to business
decision-making.
1.

True

2.

False

The management function of planning is mainly concerned with
setting goals and objectives for the entity.
1.

True

2.

False

Generally Accepted Accounting Principles (GAAP) form the
backbone of managerial accounting conventions, and local
and/or regional standards and professional judgement
allow for variations among practitioners.
1.

True

2.

False


Managers’ activities and responsibilities can be classified into
three broad functions: cost accounting, budgeting, and
internal control.
1.

True

2.

False

Managerial accounting applies only to manufacturing
companies.
1.

True

2.

False


Multiple Choice Questions - Page 1

The major reporting standard for management accounting is
1.

a. the Standards of Ethical Conduct for Practitioners of Management Accounting and
Financial Management.

2.

b. the Sarbanes-Oxley Act of 2002.

3.

c. relevance to decisions.

4.

d. generally accepted accounting principles.

A company must inform readers of its annual report of:
1.

a. All changes in financial accounting policies.

2.

b. Results of any overseas activities.

3.

c. All changes in internal accounting information.

4.

b. Changes to management’s bonus system.

What broad functions do the management of an organization
perform?
1.

a. Directing, manufacturing, and controlling

2.

b. Planning, directing, and controlling

3.

c. Planning, directing, and selling

4.

d. Planning, manufacturing and controlling

The organization chart of a company shows:
1.

a. the interrelationships of activities within a company.

2.

b. the delegation of authority within a company.

3.

c. the delegation of responsibility within a company.

4.

d. all of the above.

Which of the following uses managerial accounting?
1.

a. Manufacturing and service entities, but not merchandising

2.

b. Profit-oriented businesses only

3.

c. Service, manufacturing, and merchandising entities

4.

d. Only manufacturing entities


In establishing a good internal reporting system, a company
should:

1.

a. Ensure that these reports agree to generally accepted accounting principles.

2.

b. Have the Board of Directors agree to the information provided.

3.

c. Establish clearly understood standards of performance.

4.

d. All of the above are valid reasons.

Which of the following statements about internal reports is true?
1.

a. Most internal reports are summarized rather than detailed.

2.

b. Internal reports focus on general purpose needs of users.

3.

c. The content of internal reports extends beyond the double-entry accounting system.

4.

d. Internal reports are often very general.

Which function is achieved when a manager is determining
whether planned goals are being met?
1.

a. Controlling

2.

b. Motivating

3.

c. Planning

4.

d. Directing

How often should management receive or prepare reports on its
external business process activities?
1.

a. As they correspond to external financial reporting

2.

b. Never more than monthly

3.

c. According to the company’s business cycle

4.

d. As often as is necessary

Managerial accounting information is generally prepared for
1.

a. stockholders.

2.

b. managers.

3.

c. regulatory agencies.

4.

d. investors.


Which one of the following describes internal reports?
1.

a. They are often audited by CAs.

2.

b. They must be prepared according to GAAP.

3.

c. They are aggregated.

4.

d. They are detailed.

How often are internal managerial reports communicated?
1.

a. As frequently as needed

2.

b. Annually

3.

c. During every audit by the company’s CA

4.

d. Monthly

How could management information assist in motivating its
employees?
1.

a. Keeping track of quality improvements

2.

b. Showing the company’s percent of market share

3.

c. Showing statistics on plant safety

4.

d. All areas would benefit from providing internal management information

Which one of the following is true concerning the managerial
function of controlling?
1.

a. It includes performance evaluation by management.

2.

b. It is concerned mainly with operating a manufacturing segment.

3.

c. It is performed only by the controller of a company.

4.

d. It includes hiring and training employees.

Which term describes managerial accounting reports?
1.

a. GAAP reports

2.

b. Special-purpose

3.

c. General-purpose

4.

d. Regulatory reports


Which of the following is not part of managerial accounting?
1.

a. Determining whether planned goals are being met

2.

b. Reporting financial information to the shareholders

3.

c. Calculating product costs

4.

d. Controlling costs

Managerial accounting
1.

a. is concerned with costing products.

2.

b. is governed by generally accepted accounting principles.

3.

c. pertains to the entity as a whole and is highly aggregated.

4.

d. places emphasis on special-purpose information.

Which description identifies financial statements that are

prepared for external users?
1.

a. External reports

2.

b. Special-purpose

3.

c. User-specific

4.

d. General-purpose

Managerial accounting information
1.

a. pertains to the entity as a whole and is highly aggregated.

2.

b. must be prepared according to generally accepted accounting principles.

3.

c. pertains to subunits of the entity and may be very detailed.

4.

d. is prepared only once a year.

Managerial accounting is also called
1.

a. inside reporting.

2.

b. cost accounting.

3.

c. management accounting.

4.

d. strategic management.

Which of the following is not an internal user?
1.

a. Corporate officers


2.

b. Staff employees

3.

c. Stockholders

4.

d. Department manager

Which one of the following involves coordinating a company’s
activities to produce a smooth-running operation?
1.

a. Auditing

2.

b. Controlling

3.

c. Planning

4.

d. Directing

Which management function is a manager performing when
objectives are being established?
1.

a. Regulating

2.

b. Planning

3.

c. Motivating

4.

d. Directing

Which one of the following does the planning function involve?
1.

a. Analyzing financial statements

2.

b. Setting goals and objectives for an entity

3.

c. Hiring the right people for a particular job

4.

d. Coordinating the accounting information system

Which one of the following tasks would not be performed by a
management accountant?
1.

a. Being concerned with the impact of cost and volume on profits

2.

b. Strategic cost management

3.

c. Assisting in budget planning

4.

d. Preparing reports primarily for external users

How often should management receive or prepare reports on its
internal process activities?
1.

a. On a fixed time basis


2.

b. As often as is necessary

3.

c. Never more than monthly

4.

d. Weekly

What activities and responsibilities are not associated with
management’s functions?
1.

a. Planning

2.

b. Accountability

3.

c. Controlling

4.

d. Directing

Which of the following reports would management find useful in
decision making?
1.

a. Monthly reports on activities to the Board of Directors

2.

b. Quarterly reporting to the Toronto Stock Exchange

3.

c. Specific purpose statements on services delivered

4.

d. Audited financial information in the annual report to shareholders

Which of the following represents two management functions?
1.

a. Regulating and directing

2.

b. Controlling and directing

3.

c. Controlling and auditing

4.

d. Auditing and planning

91 Free Test Bank for Managerial Accounting Tools for
Business Decision Making 3rd Canadian Edition by
Weygandt Multiple Choice Questions - Page 2
The Ontario Securities Commission introduced regulations
governing the composition and duties of audit committees,
as well as their members’ behaviour. The new rules:
1.

a. are as robust as parallel rules required by the U.S. Sarbanes-Oxley Act.

2.

b. were adopted by all provincial and territorial securities regulators, except for British
Columbia’s.


3.

c. were introduced in conjunction with the Canadian Securities Administrators.

4.

d. all of the above.

Directing includes
1.

a. providing a framework for management to have criteria to terminate employees when

needed.

2.

b. running a department under quality control standards universally accepted.

3.

c. coordinating a company’s diverse activities and human resources to produce a
smooth-running operation.

4.

d. developing a performance ranking system to give certain high performers good raises.

A company acting ethically must adapt its external reports to any
changes required:
1.

a. Instantly.

2.

b. As it is appropriate for its business cycle.

3.

c. As stipulated by the CICA.

4.

d. If they are considered pertinent to its business activities.

Which of the following is not required to become a CMA?
1.

a. Completion of a university degree

2.

b. Candidates must pass an entrance exam into the CMA program

3.

c. Completion of a two-year strategic leadership program concurrently with gaining
industry experience

4.

d. Completion of a national exit exam.

Which one of the following managerial accounting approaches
attempts to allocate manufacturing overhead in a more
meaningful fashion?
1.

a. Theory of constraints

2.

b. Just-in-time inventory

3.

c. Activity-based costing

4.

d. Total-quality management


Which is the best definition of fraud?
1.

a. Unknowingly misrepresenting the facts

2.

b. Using business supplies for personal use

3.

c. The intentional misstatement of facts

4.

d. Misappropriating funds for personal financial gain

Which of the following is true?
1.

a. Dissatisfied employees cite a decline in ethical behaviour is a result of a change in
corporate culture.

2.

b. Unethical corporate behaviour occurs only in the United States because of its
capitalistic environment.

3.

c. Unethical behaviour rarely causes a decline in investor confidence.

4.

d. Unethical actions are reasonable in an environment wherein unreasonable budgets
and targets have been set.

Some companies implement systems to reduce defects in
finished products with the goal of achieving zero defects.
What are these systems called?
1.

a. Activity-based costing systems

2.

b. Enterprise resource planning systems

3.

c. Value chain systems

4.

d. Total quality management systems

How have many companies significantly lowered inventory levels
and costs?
1.

a. They use activity-based costing.

2.

b. They utilize an enterprise resource planning system.

3.

c. They have a just-in-time method.

4.

d. They focus on a total quality management system.

A company acting ethically must adapt its internal reports to any
changes required:
1.

a. Instantly.

2.

b. As it is appropriate for its business cycle.

3.

c. As stipulated by the CICA.

4.

d. If they are considered pertinent to its business activities.

One of the advantages of a just in time inventory system is that it
reduces inventory quantities. Why is this considered to be
a benefit?
1.

a. Carrying inventory incurs storage costs, hence reducing inventory quantities reduces
costs.

2.

b. Carrying large inventory raises the risk that customers will want an item that you do
not have.

3.

c. Carrying large inventory reduces the risk that customers will want an item that you do

not have.

4.

d. None of the above.

What is one primary benefit of an enterprise resource planning
(ERP) system?
1.

a. It reduces inventory levels.

2.

b. It permits companies to be more streamlined in production.

3.

c. It replaces research and development in a company.

4.

d. It requires an increased emphasis on product quality.

How do most companies manage their value chain?
1.

a. By using activity-based costing

2.

b. By creating enterprise resource planning systems

3.

c. Using an action plan

4.

d. Using total quality management systems

Though their areas of specialization overlap, which of the three
bodies of professionally designated accountants would be
best to engage for implementation of an activity-based
costing inventory system?
1.

a. Chartered Accountant

2.

b. Certified General Accountant


3.

c. Certified Public Accountant

4.

d. Certified Management Accountant

In Canada the three different professional accounting
designations are
1.

a. CPA, CA, CMA

2.

b. CMA, CGA, CPA

3.

c. CA, CMA, CGA

4.

d. MA, CPA, CA

In Canada, which of the following professional accounting
organizations play an important role in promoting high
standards of ethics in the accounting profession?
1.

a. The Society of Management Accountants of Canada

2.

b. The Canadian Institute of Chartered Accountants

3.

c. The Certified General Accountants Association of Canada

4.

d. All of the above

Choose the correct statement.
1.

a. CGA stands for Certified Generic Accountant.

2.

b. CMA stands for Certified Managing Accountant.

3.

c. CA stands for Chartered Accountant.

4.

d. CPA stands for Certified Professional Accountant.

What is “balanced” in the balanced scorecard approach?
1.

a. The number of products produced

2.

b. The emphasis on financial and non-financial performance measurements

3.

c. The amount of costs allocated to products

4.

d. The number of defects found on each product

What term describes all activities associated with providing a
product or service?
1.

a. The manufacturing chain

2.

b. The product chain


3.

c. The supply chain

4.

d. The value chain

In order to obtain more accurate product costs, how do many
companies allocate overhead?
1.

a. They use activity-based costing.

2.

b. They use enterprise resource planning systems.

3.

c. They use just-in-time methods.

4.

d. They use total quality management systems.

For what purpose is the theory of constraints used?
1.

a. To reduce product defects

2.

b. To balance performance measurement

3.

c. To identify and manage constraints that bottle-neck operations

4.

d. To reduce inventory levels

The production manager at ABC Inc. is responsible for
formulating the budget for his department. He will be
evaluated on his ability to control costs. After considerable
thought, he arrives at his best estimate of costs, and then
adds a further 10% to the projections. Chances are he has
inflated the cost projections because
1.

a. that is the way it has always been done.

2.

b. conservative accounting practise requires that he not under report expenses.

3.

c. by overestimating expenses, it will make it easier for him to come in under budget and
receive a favourable evaluation.

4.

d. none of the above.

Many companies now manufacture products that are untouched
by human hands. What do they use to achieve this?
1.

a. Activity-based costing

2.

b. Computer-integrated manufacturing

3.

c. Enterprise resource planning systems

4.

d. Total quality management systems


Which one of the following is not a main component of the value
chain sequence?
1.

a. ERP

2.

b. Sales and marketing

3.

c. Production

4.

d. Customer relations

Which statement is correct?
1.

a. All three of Canada’s professional accounting designations require completion of a
university degree in accounting.

2.

b. All three of Canada’s professional accounting designations require completion of
some post-secondary education.

3.

c. The educational requirements of the three professional accounting designations focus
on broadly-based accounting and financial management concepts.

4.

d. Each of the three professional accounting bodies publishes its own magazine to
promote the interests of its membership.

Which of the following statements is true?
1.

a. In recent decades, the Canadian economy in general has shifted towards an
emphasis on providing services rather than goods. This trend has reduced the importance
of managerial accounting.

2.

b. In recent decades, the Canadian economy in general has shifted towards an
emphasis on providing goods rather than services. This trend has reduced the importance
of managerial accounting.

3.

c. In recent decades, the Canadian economy in general has shifted towards an
emphasis on providing services rather than goods. This trend has NOT reduced the
importance of managerial accounting.

4.

d. In recent decades, the Canadian economy in general has shifted towards an
emphasis on providing goods rather than services. This trend has NOT reduced the
importance of managerial accounting.


Choose the incorrect answer.
1.

a. While generally not encouraged, lapses in ethical behaviour are irrelevant to a
company’s operating income.

2.

b. Proper incentives need to be implemented to foster an ethical business environment.

3.

c. Manufacturing companies need to establish effective and realistic production goals for
their processes.

4.

d. As a result of the Sarbanes-Oxley Act, companies now pay more attention to the
composition of the board of directors.

Which of the following is true?
1.

a. Managerial accountants are the employees who are principally responsible for ethical
behaviour.

2.

b. Investment losses have been precipitated by lax ethical standards.

3.

c. Corporate fraud was found to have decreased between the years 1998 and 2003.

4.

d. Expense account abuse has been cited as one of the rarest forms of unethical
employee behaviour.

91 Free Test Bank for Managerial Accounting Tools for
Business Decision Making 3rd Canadian Edition by
Weygandt Multiple Choice Questions - Page 3
Bottlenecks are:
1.

a. The point at which the finished product leaves the factory.

2.

b. Constraints that limit the company’s potential profitability.

3.

c. The point at which a company’s plan is put into action.

4.

d. Are factors that consume a great deal of managers’ attention, but have little impact on
the company as a whole.

Management accountants have a responsibility to:
1.

a) solve any conflicts of interest

2.

b) avoid conflicts of interest

3.

c) hire a good mediator to solve conflicting issues

4.

d) be the expert in resolving complex issues


Budgetary slack refers to?
1.

a) Non motivated employees.

2.

b) Revising a business plan.

3.

c) Implementing an attainable budget

4.

d) Underestimating a divisions performance

A bank uses financial accounting data to determine __________.

1.

a) whether to buy or sell shares of company stock

2.

b) whether to lend money to a firm and at what terms

3.

c) what dividends to pay out

4.

d) the amount of taxes due

Managers’ activities and responsibilities can be classified into
what three broad functions?
1.

a) Identify available options.

2.

b) Planning, directing and controlling

3.

c) Measure costs and benefits.

4.

d) Make a final decision.

Which of the following is not a confidentiality requirement as
stated by the IMA Standards of Ethical Conduct for
Members?
1.

a) Refrain from disclosing confidential information acquired in the course of their work
except when authorized, unless legally obligated to do so.

2.

b) Refrain from engaging in any activity that would prejudice their ability to carry out their
duties ethically.

3.

c) Refrain from using or appearing to use confidential information acquired in the course
of their work for unethical or illegal advantage either personally or through third parties.

4.

d) Inform subordinates as appropriate regarding the confidentiality of information
acquired in the course of their work and monitor their activities to assure the maintenance
of that confidentiality.


A company’s Chief Financial Officer (CEO) reports to

__________.
1.

a) the company’s Board of Directors

2.

b) the company’s Chief Operating Officer

3.

c) the company’s internal auditors

4.

d) the CEO of the company

Which component of a company’s value chain would benefit
most from internal management information?
1.

a. Complaints from its customers over services offered

2.

b. Bonuses paid to managers of the company

3.

c. The company’s efforts to develop new services

4.

d. All such components would benefit from internal management information

The organizational goal of management at Zhung Inc. is to
maximize profits. The goal of individual employees is to
maximize their paycheques. One way in which
management can try to align these goals would be to
__________.
1.

a) increase employee pay, after all this should make employees more efficient

2.

b) eliminate stringent policies and procedures, thus giving employees more freedom in
their work

3.

c) increase employee incentives for exceptional work

4.

d) decrease the amount of supervision of the employees, as this can be distracting to
employees

Management accountants have a responsibility to:
1.

a) refrain from disclosing confidential information

2.

b) provide information to only company employees

3.

c) prepare financial statements

4.

d) prepare financial statements fairly


Which of the following is a characteristic of financial
accounting?
1.

a) Periodicity of reporting is often generated on an as-needed basis.

2.

b) Focus is on estimates on future performance.

3.

c) It is governed by Generally Accepted Accounting Principles (GAAP).

4.

d) Information relevance is valued most.

What is value chain management best defined as?
1.

a. A large chain that keeps the machines from falling on the production floor

2.

b. Management decisions that affect how quickly the production run occurs

3.

c. The incremental value of costs associated with hiring a new production floor leader

4.

d. All activities associated with providing a product or service

Which of the following is a characteristic of financial
accounting?
1.

a) Periodicity of reporting is often generated on an as-needed basis.

2.

b) Focus is on estimates on future performance.

3.

c) Reports are general purpose and intended for external users.

4.

d) Information relevance is valued most.

Management accountants have a responsibility to:
1.

a) communicate information fairly and objectively

2.

b) hire good accountants to work with the company

3.

c) disclose all information fairly

4.

d) inform only the Chief Executive Officers for all managerial events

Step two in the lean thinking model:
1.

a. Deals with push and pull factors.

2.

b. is the central element in understanding how a company can evaluate what is valueadded and what is waste.

3.

c Is always the most time consuming.

4.

d. Can be excluded if step one is done correctly.


Which one of the following characteristics would likely be
associated with a Just-In-Time inventory method?
1.

a. Ending inventory of work in process that would allow several production runs

2.

b. A backlog of inventory orders not yet shipped

3.

c. Minimal finished goods inventory on hand

4.

d. An understanding with customers that they may come to the showroom and select
from inventory on hand

Which of the following methods do companies use to influence
employees to achieve organizational goals?
1.

a) Incentive schemes and performance measurement.

2.

b) Policies and Procedures.

3.

c) Controlling

4.

d) All of the above.

Which one of the following is an example of activity-based
costing?
1.

a. Monitoring the salaries of managers that do untimely quality control checks

2.

b. Keeping close track of shrinkage associated with thefts off the showroom floor

3.

c. Insuring that management is closely working with the local union on keeping labour
costs in line

4.

d. Allocating the set up cost associated with getting a machine ready for a production run

The Sarbanes-Oxley Act of 2002 requires that __________.
1.

a) executives of publicly-traded companies take responsibility for the accuracy of
financial reports

2.

b) publicly-traded companies release financial statements on a quarterly basis

3.

c) publicly-traded companies notify stockholders if there is any turnover in executive
positions

4.

d) publicly-traded companies provide a dividend to stockholders at least every other year

Decision-making is the outcome of?

1.

a) Identifying critical steps.


2.

b) Exercise of good judgement in planning, directing and controlling.

3.

c) Measuring costs and benefits.

4.

d) Make a final decision.

Step one in the lean thinking model requires:
1.

a. Target costing, that is determining the acceptable cost the customer is willing to pay.

2.

b. An assessment of the potential value that can be added to the firm by adopting the
lean manufacturing concept.

3.

c. Identifying processes that do not add value to the manufacturing process.

4.

d. Identifying push factors that can be converted to pull factors.

What is ERP?
1.

a. Efficient resource procurement

2.

b. Earnings reporting policies

3.

c. Enterprise resource planning

4.

d. Effective resource procurement

A company’s Chief Executive Officer (CEO) reports to
__________.
1.

a) the company’s Board of Directors

2.

b) the company’s Chief Operating Officer

3.

c) the company’s internal auditors

4.

d) nobody; the CEO is the head of the company

Managerial accounting has become more important in service
industries due to:
1.

a. The decline of the manufacturing sector has freed up many accountants.

2.

b. Service delivery is extremely complex and requires proper monitoring.

3.

c. The economy has become more service-oriented recently.

4.

d. The increase in complexity in computer systems requires accounting specialists.

The five steps in the lean thinking model, in order are:
1.

a. 1) Define value, 2) Identify the pull factors, 3) Identify the value stream, 4) make the
value stream flow, 5) revise until perfection is achieved.