Test bank for introduction to management accounting 15th edition

Test Bank for Introduction to Management Accounting 15th
Edition

According to the Financial Executives Institute, a function of the treasurer is
________.

1. A) reporting and interpreting
2. B) short-term financing
3. C) protection of assets
4. D) government reporting


The ________ is mainly concerned with the company's operating matters
whereas the ________ is mainly concerned with the company's financial
matters.

1. A) treasurer; controller
2. B) controller; treasurer
3. C) managerial accountant; financial accountant
4. D) chief executive officer; chief financial officer
Which credential is associated with independent auditors?

1. A) CMA
2. B) CPA
3. C) CFP
4. D) IMA
The largest U.S. association of professional accountants whose major interest
is management accounting is the ________.

1. A) American Institute of Certified Public Accountants
2. B) American Institute of Certified Management Accountants

3. C) Institute of Management Accountants
4. D) American Institute of Management Accountants
Which of the following is a major factor causing changes in management
accounting today?

1. A) decreased global competition


2. B) advances in technology
3. C) shift to manufacturing-based economy
4. D) expansion of the value chain
Which is NOT a service organization?

1. A) Rainbow Dry Cleaners
2. B) Law Firm of Cannon and Dunfy
3. C) Shoreeast Real Estate Company
4. D) Irwin Publishing Company
All service organizations are similar in that ________.

1. A) there is very little labor
2. B) output is difficult to measure
3. C) major inputs and outputs can be stored
4. D) they are capital intensive
Dell Inc. buys electronic components for laptop computers from Intel using
the Internet. This is an example of a(n) ________.

1. A) A2B transaction
2. B) B2B transaction
3. C) B2C transaction
4. D) C2B transaction

Which statement is FALSE concerning Enterprise Resource Planning (ERP)
systems?

1. A) Well known ERP system providers are SAP, Microsoft Dynamics and JD
Edwards.
2. B) Accountants are involved with ERP systems.
3. C) ERP systems only support a few functional areas of a company.
4. D) ERP systems are having a major effect on accounting systems.
Which of the following is NOT a new direction in business process
management?

1. A) JIT philosophy
2. B) XBRL
3. C) Six Sigma
4. D) TQM
Which company has NOT engaged in accounting fraud in the past ten
years?

1. A) Enron
2. B) Tyco
3. C) Adelphia
4. D) Smucker Quality Beverages Inc.
What do Certified Management Accountants and Certified Public Accountants
have in common?

1. A) Both groups are licensed to practice by state licensing agencies.

2. B) Both groups follow codes of conduct.
3. C) Both groups prepare information for stockholders and creditors.
4. D) Both groups rely heavily on other fields such as economics and behavioral
science for analytical tools.
Here is a statement from the Statement of Ethical Professional Practice
drafted by the Institute of Management Accountants: "Each member has a
responsibility to perform professional duties in accordance with relevant
laws, regulations and technical standards." This statement comes from the
________ standard.

1. A) credibility
2. B) confidentiality
3. C) competence
4. D) professional responsibility
According to the Statement of Ethical Professional Practice drafted by the
IMA, the standard of integrity states that each member has a responsibility to
________.

1. A) communicate information fairly and objectively
2. B) mitigate actual conflicts of interest
3. C) recognize and communicate professional limitations or other constraints
that would preclude responsible judgment or successful performance of an
activity
4. D) disclose delays or deficiencies in information
This is a statement from the IMA's Statement of Ethical Professional Practice:
"Each member has a responsibility to communicate information fairly and
objectively." This is an example of the ________ standard.

1. A) competence

2. B) confidentiality
3. C) integrity
4. D) credibility
According to the IMA's Statement of Ethical Professional Practice, the
standard of credibility includes ________.

1. A) continually developing the accountant`s knowledge and skills
2. B) mitigating actual conflicts of interest
3. C) disclosing all relevant information that could reasonably be expected to
influence an intended user`s understanding of the reports
4. D) refrain from engaging in any conduct that would prejudice carrying out
duties ethically
You are the management accountant in Company XYZ. Your close friend, Ted,
is a shareholder in Company XYZ. Ted asks you for information about
Company XYZ that is typically available only to executive officers in Company
XYZ. Sharing this information with Ted violates the IMA's ethical standard of
________.

1. A) competence
2. B) confidentiality
3. C) integrity
4. D) objectivity
You are the management accountant in Company ZZ. A supplier to Company
ZZ offers to let stay rent-free at the supplier's condominium in Florida for
your upcoming vacation. Accepting the supplier's offer violates the IMA's
ethical standard of ________.

1. A) competence

2. B) confidentiality
3. C) credibility
4. D) integrity
The IMA's ethical standard of confidentiality does NOT require each member
to ________.

1. A) keep information confidential except when disclosure is authorized or
legally required
2. B) inform all relevant parties regarding appropriate use of confidential
information
3. C) refrain from using confidential information for unethical or illegal
advantage
4. D) provide confidential decision support information and recommendations
that are accurate, clear, concise and timely
The IMA's ethical standard for integrity includes all of the following EXCEPT
________.

1. A) each member has a responsibility to mitigate actual conflicts of interest
2. B) each member has a responsibility to refrain from engaging in any conduct
that would prejudice carrying out duties ethically
3. C) each member has a responsibility to abstain from engaging in or
supporting any activity that would discredit the profession
4. D) each member has a responsibility to monitor subordinates` activities to
ensure compliance with the ethical standard
According to the IMA's Statement of Ethical Professional Practice, the
standard of credibility requires ________.

1. A) mitigating actual conflicts of interest

2. B) maintaining an appropriate level of professional expertise by continually
developing knowledge and skills
3. C) communicating information fairly and objectively
4. D) performing professional duties in accordance with relevant laws,
regulations and technical standards
The Institute of Management Accountants has adopted a set of standards for
ethical conduct which includes ________.

1. A) competence, integrity, confidentiality and objectivity
2. B) competence, confidentiality, credibility and objectivity
3. C) competence, confidentiality, credibility and integrity
4. D) competence, integrity, morality and confidentiality
You are a management accountant in a large company. You have observed
unethical behavior by your immediate supervisor. In accordance with the
guidelines offered by the IMA, which of the following courses of action should
NOT be taken?

1. A) Follow the organization`s established policies on the resolution of ethical
conflict.
2. B) Discuss the issue with your immediate supervisor.
3. C) Consult your own attorney.
4. D) Initiate a confidential discussion with an IMA Ethics Counselor.


Scott is a management accountant in a large company. Scott observed
unethical behavior by a coworker who is also a management accountant. The
coworker is a relative of the company's president and he always receives
preferential treatment. Scott observed the coworker putting office supplies
and small pieces of electronic equipment in his briefcase. According to the

IMA, what course of action should Scott take?

1. A) He should report the observation to the police. The coworker is stealing
from the company.
2. B) He should report the observation to his immediate supervisor.
3. C) He should report the observation to the Securities and Exchange
Commission.
4. D) He should do nothing.
According to the Financial Executive, which of the following situations create
pressures for unethical behavior?

1. A) emphasis on long-term results
2. B) upward trends in the economy
3. C) ignoring small lapses in ethical behavior
4. D) rising stock prices
John is a management accountant at DAP Inc. John has reason to believe that
his immediate supervisor (the controller), the chief financial officer and the
company president are engaged in accounting fraud that involves overstating
assets and understating liabilities. According to the guidelines offered by the
IMA, what should John do?

1. A) Report the suspected wrongdoings to the local police.
2. B) Discuss the suspected wrongdoings with his immediate supervisor.
3. C) Discuss the suspected wrongdoings with the company president.


4. D) Report the suspected wrongdoings to the audit committee or the board of
directors.
Scorekeeping allows managers to evaluate organizational performance.

1. True
2. False
Generally Accepted Accounting Principles play an important role in
management accounting.

1. True
2. False
Behavioral considerations are of primary importance in financial
accounting.

1. True
2. False
Financial accounting reports are usually prepared for a period of one year or
less.

1. True
2. False
Most scorecard and attention-directing information is produced on a
nonroutine basis.

1. True
2. False


Reports prepared by managerial accountants have a past orientation.

1. True
2. False
A manager using information to decide whether to add or drop a product is an
example of problem solving.

1. True
2. False
The same information may serve the attention-directing function and the
problem-solving function.

1. True
2. False
The same information may serve the attention-directing function and the
problem-solving function.

The cost-benefit balance is the primary consideration in choosing among
accounting systems and methods.

1. True
2. False
The behavioral implications of an accounting system refers to the system's
effects on the firm's customers.

1. True


2. False
Additional costly information should be acquired when the expected benefit
of an improved decision exceeds the cost of the information.

1. True
2. False
Feedback is usually not critical to the cycle of planning and control.

1. True
2. False
Variances are deviations from planned results.

1. True
2. False
Management by exception is the practice of ignoring areas that deviate from
the plan.

1. True
2. False
A budget is a qualitative expression of a plan of action.

1. True
2. False


Product life cycles may range from a few months to many years.

1. True
2. False
The product life cycle for a refrigerator is usually a few months.

1. True
2. False
The value chain refers to the various stages through which a product
passes.

1. True
2. False

The only function in the value chain where accountants are of any importance
is the production function.

1. True
2. False
Accountants support only some of the value-chain functions.

1. True
2. False


Line managers are directly involved with making and selling the
organization's products or services.

1. True
2. False
Staff managers give advice to line managers and have authority over line
managers.

1. True
2. False
The maintenance department provides line support to the welding
department in a factory.

1. True
2. False
Specialization by individuals in organizations is being replaced by decisionmaking by cross-functional teams.

1. True
2. False

One of a controller's responsibilities is risk management.

1. True
2. False


One of a treasurer's responsibilities is tax administration.

1. True
2. False
The controller is primarily concerned with a company's financial matters and
the treasurer is concerned with a company's operating matters.

1. True
2. False
In English-speaking countries outside the United States, management
accountants are called chartered accountants.

1. True
2. False
In English-speaking countries outside the United States, management
accountants are called chartered accountants.

designation refers to independent auditors.

1. True
2. False
The majority of accountants work for government entities and nonprofit
firms.

1. True


2. False
Management accountants are exposed to only a few functional areas in an
organization.

1. True
2. False
The service sector accounts for approximately 40 percent of the employment
in the United States at the present time.

1. True
2. False
The essence of the just-in-time philosophy is to eliminate waste.

1. True
2. False
Companies that have a fully installed computer-integrated manufacturing
system are usually labor intensive.

1. True
2. False
XBRL is an integrated information system that supports all functional areas of
a business.

1. True
2. False

In the IMA's Statement of Ethical Professional Practice, integrity is one of the
standards explained.

1. True
2. False
Over 80 percent of companies in the United States have a code of
conduct.

1. True
2. False
According to the Financial Executive, an emphasis on long-term results by top
executives in a company creates pressures for unethical behavior.

1. True
2. False
________ is the field that produces information for managers within an
organization.

1. A) Financial accounting
2. B) Management accounting
3. C) Financial auditing
4. D) External auditing
The primary users of management accounting information are ________.

1. A) bankers


2. B) governmental regulatory bodies
3. C) managers in organizations
4. D) managerial accountants

________ is the field of accounting that develops information for external
parties such as stockholders, suppliers, banks and governmental regulatory
bodies.

1. A) Auditing
2. B) Internal auditing
3. C) Management accounting
4. D) Financial accounting
What statement about management accounting is FALSE?

1. A) Management accounting is the process of identifying, measuring,
accumulating, analyzing, preparing, interpreting and communicating
information.
2. B) Management accounting helps managers fulfill organizational objectives.
3. C) Management accounting is used by managerial accountants to make
strategic and operational decisions.
4. D) Management accounting produces information for managers in an
organization.
When comparing management accounting and financial accounting, which of
the following statements is FALSE?

1. A) Management accounting has a future orientation whereas financial
accounting has a past orientation.
2. B) Management accounting prepares detailed reports whereas financial
accounting prepares summary reports.


3. C) Management accountants are constrained by the principles of reporting
promulgated by the Institute of Management Accountants whereas financial
accountants are constrained by Generally Accepted Accounting Principles.

4. D) Behavioral considerations are of primary importance in management
accounting, but not in financial accounting.
________ information involves routine reports that compare actual results to
predicted results.

1. A) Budgets
2. B) Attention directing
3. C) Scorekeeping
4. D) Problem solving
________ information helps managers focus on operating problems,
imperfections, inefficiencies and opportunities.

1. A) Scorekeeping
2. B) Attention directing
3. C) Problem solving
4. D) Performance
Problem solving information would NOT be used in this situation.

1. A) decision to make or buy parts for a manufactured product
2. B) decision to replace equipment
3. C) decision to add or drop a division
4. D) evaluating the operating performance of a segment in the current year


Which of the following activities would NOT be called scorekeeping?

1. A) estimating the cost of moving the corporate headquarters to another city
2. B) preparing a schedule of depreciation expense for trucks for the current
year
3. C) preparing a schedule of sales for the current year

4. D) preparing a schedule of plant assets at the end of the current year
Investigating the reasons for the variances on a department's performance
report is an example of ________.

1. A) scorekeeping
2. B) attention directing
3. C) problem solving
4. D) auditing
________ is the classification, accumulation, and reporting of data that help
users understand and evaluate organizational performance.

1. A) Scorekeeping
2. B) Attention directing
3. C) Problem solving
4. D) Cost accounting
Generally Accepted Accounting Principles are most closely connected to
________.

1. A) management accounting


2. B) financial accounting
3. C) internal auditing
4. D) management accounting
What type of information is used in making nonroutine decisions, such as the
decision to replace a traditional assembly line with fully automated
robots?

1. A) scorekeeping information
2. B) attention directing information

3. C) problem solving information
4. D) auditing information
Which of the following is NOT a government regulation that influences
accounting systems?

1. A) Sarbanes-Oxley Act
2. B) Foreign Corrupt Practices Act
3. C) tax rules promulgated by the Internal Revenue Service
4. D) International Financial Reporting Standards
A(n) ________ is a review to determine whether the policies and procedures
specified by top management have been implemented.

1. A) management audit
2. B) internal audit
3. C) internal control
4. D) internal accounting control


The Foreign Corrupt Practices Act requires ________.

1. A) companies to accept bribes from officials in foreign countries
2. B) all publicly held companies to follow the act only if they conduct business
outside the United States
3. C) companies to maintain their accounting records in reasonable detail and
accuracy
4. D) companies to prepare a separate report on their system of internal control
Which of the following items should be considered by managers when
designing accounting systems?

1. A) cost-benefit balances

2. B) behavioral implications
3. C) cost-benefit balances and behavioral implications
4. D) none of the above
________ is (are) the primary consideration in choosing among accounting
systems and methods.

1. A) Simplicity
2. B) Behavioral implications
3. C) The cost-benefit balance
4. D) Simplicity and behavioral implications
________ is (are) the accounting system's effect on the behavior and the
decisions of managers.

1. A) Simplicity


2. B) Behavioral implications
3. C) The cost-benefit balance
4. D) The code of ethics
A budget ________.

1. A) is a quantitative expression of a plan of action
2. B) provides feedback by comparing actual results with planned results
3. C) includes deviations from planned results
4. D) ignores areas that are presumed to be running smoothly
Performance reports ________.

1. A) are quantitative expressions of plans for action
2. B) provide feedback by comparing actual results with planned results
3. C) ignore areas that are presumed to be running smoothly

4. D) provide information to enable managers to select a value chain function to
emphasize
Variances ________.

1. A) are quantitative expressions of plans of action
2. B) ignore areas that are problem areas
3. C) are deviations from a plan
4. D) ignore areas that are presumed to be running smoothly


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

1. A) frees managers from needless concern over operations that adhere to
plans
2. B) allows managers to ignore aspects of the business outside their area of
expertise
3. C) allows managers to ignore day-to-day operations
4. D) allows managers to ignore problem situations
Management-by-exception means that managers should ________.

1. A) concentrate on areas that deviate from the plan
2. B) in the absence of other evidence, presume that areas that conform with
plans are running smoothly
3. C) A and B
4. D) none of the above
The Hola Company held a Christmas party. The company expected attendance
of 100 people and prepared the following budget: Hotel room rental $500
Food 500 Entertainment 800 Decorations 400 Total Costs $2,200 One hundred
people attended the party. The following costs were incurred: Hotel room

rental $575 Food 640 Entertainment 750 Decorations 350 Total Costs $2,315
What is the variance for total costs?

1. A) $115 Unfavorable
2. B) $115 Favorable
3. C) $25 Favorable
4. D) $140 Unfavorable


The Hola Company held a Christmas party. The company expected attendance
of 100 people and prepared the following budget:Hotel room rental $600 Food
500 Entertainment 800 Decorations 300 Total Costs $2,200 One hundred
people attended the party. The costs incurred were:Hotel room rental $575
Food 640 Entertainment 750 Decorations 350 Total Costs $2,315 What is the
primary reason for the variance in total costs?

1. A) Hotel room rent cost more than expected.
2. B) Food cost more than expected.
3. C) Entertainment cost more than expected.
4. D) Decorations cost more than expected.
Key Bank held a party. Key Bank expected attendance of 100 people and
prepared the following budget: Hotel room rental $600 Food 400
Entertainment 800 Decorations 300 Total Costs $2,100 One hundred people
attended the party. The following costs were incurred: Hotel room rental $575
Food 640 Entertainment 750 Decorations 350 Total Costs $2,315 What is the
variance for the cost of food?

1. A) $215 Unfavorable
2. B) $240 Favorable
3. C) $215 Favorable

4. D) $240 Unfavorable
The Flintstone Company held a party. The company expected attendance of
100 people and prepared the following budget: Hotel room rental $600 Food
500 Entertainment 800 Decorations 300 Total Costs $2,200 One hundred
people attended the party. The costs incurred were: Hotel room rental $575
Food 640 Entertainment 750 Decorations 250 Total Costs $2,215 Which of the
following costs deserve further examination assuming Flintstone Company
uses the management-by-exception rule?

1. A) hotel room rental
2. B) food