Test bank for managerial accounting an introduction to concepts methods and uses 11th edition

Test Bank for Managerial Accounting An Introduction to
Concepts Methods and Uses 11th Edition

Which of the following is true of Managerial Accounting?

1. Complies with Securities and Exchange Commission rules and regulations.
2. Uses cost-benefit analysis to determine the amount of detail presented.
3. Prepares general-purpose reports for people outside an organization.
4. Presents summary historical data in compliance with generally accepted
accounting principles.


The best example of using managerial accounting information to help
organizations succeed includes which of the following?

1. implementing strategies.
2. processing travel vouchers.
3. tracking employee time and attendance.
4. reconciling petty cash balances.
Managerial accounting information is used by which of the following
managers?

1. marketing managers to help price products and assess their profitability.
2. production managers to manage quality and costs and to assure on-time
delivery.
3. general managers to measure employee performance and create incentives.
4. All of the answers are correct.
Considering the time dimension, how does managerial decision making
compare with external performance evaluation? Managerial Decision Making
External Performance

1. Past Past
2. Past Future
3. Future Past
4. Future Future
The question "How much information is enough?" for managerial purposes
should be answered on

1. a cost/benefit basis.
2. a cost, but not benefit, basis.


3. a benefit, but not cost, basis.
4. neither costs nor benefits, but some other criteria.
Accounting data used for managerial reports

1. must be the same data used for reporting to shareholders, but may be
different for tax purposes.
2. must be the same data used for tax purposes, but may be different data for
reporting to shareholders.
3. must be the same data used for both tax purposes and reporting to
shareholders.
4. may be different from data used for both tax purposes and reporting to
shareholders.
Who manages cost and managerial accounting in most organizations?

1. Controller
2. Treasurer
3. Board of directors
4. Chief executive officer
Who manages cash flows and raises cash for operations in most

organizations?

1. Controller
2. Treasurer
3. Board of directors
4. Chief executive officer


Who is the manager in charge of raising cash for operations and managing
cash and near-cash assets?

1. Chief financial officer.
2. Controller.
3. Treasurer.
4. Internal auditor.
Which of the following works in planning, decision making, designing
information systems, designing incentive systems, and helping managers
make operating decisions?

1. Controller
2. Treasurer
3. Board of directors
4. Chief executive officer
Who is the chief accounting officer that oversees providing information to
managers?

1. Chief financial officer.
2. Controller.
3. Treasurer.
4. Internal auditor.

What organization publishes a journal called Strategic Finance, numerous
policy statements, and research studies on accounting issues?

1. Institute of Management Accountants
2. Cost Accounting Standards Board


3. General Accounting Office
4. American Institute of Certified Public Accountants
The Sarbanes-Oxley Act of 2002 has increased the interaction between the
audit committee of the board of directors and the which of the following?

1. controller.
2. treasurer.
3. internal auditor.
4. production manager.
In 2002, Congress passed the Sarbanes-Oxley Act. Which of the following is
not a provision of that act?

1. The law empowered the American Institute of Certified Public Accountants
(AICPA) to oversee licensure of auditors.

2. The Chief Executive Officer (CEO) must sign the company’s financial
statements attesting to the inclusion of all material information.
3. The Public Company Accounting Oversight Board (PCAOB) was created.
4. The CEO and Chief Financial Officer (CFO) must indicate that they are
responsible for the company’s system of internal control.
What organization developed the “Standards of Ethical Conduct for
Management Accountants” mandating that management accountants have a
responsibility to maintain the highest levels of ethical conduct?

1. Institute of Management Accountants
2. Cost Accounting Standards Board
3. General Accounting Office
4. American Institute of Certified Public Accountants


Which of the following accurately describes the managerial accountants'
professional environment and ethical responsibilities?

1. Stockholders have an ethical responsibility to report accurately even when
their own compensation suffers.

2. Financial analysts have an ethical responsibility to report accurately even
when their own compensation suffers.
3. Managers have an ethical responsibility to report accurately even when their
own compensation suffers.
4. Managers do not have an ethical responsibility to report accurately even
when their own compensation suffers.
How is cost, as used in managerial accounting, distinguished from expense,
as used in financial accounting?

1. A cost is a sacrifice of resources and expenses are recorded in accounting
records, but not all costs appear in accounting records.

2. All expenses are costs, but not all costs are expenses in the period of
incurrence, even though they will become expenses in some later period.
3. Managerial accounting deals primarily with costs, not expenses, while
financial accounting primarily deals with expenses for financial reporting as
defined by generally accepted accounting principles.

4. All of the answers are correct.
In principle, a cost is

1. a sacrifice of resources.
2. something used up to produce revenues in a particular accounting period.
3. only comprised of direct material and direct labor.
4. something measured in conformity with generally accepted accounting
principles.


What is an opportunity cost?

1. The historical cost of goods or services used.
2. The foregone income from using an asset in its best alternative.
3. A sacrifice of resources.
4. A sacrifice of investment opportunities.
What is an opportunity cost?

1. The difference in total costs which results from selecting one choice instead
of another.

2. The profit forgone by selecting one choice instead of another.
3. A cost that may be saved by not adopting an alternative.
4. A cost that may be shifted to the future with little or no effect on current
operations.
Income forgone from not using an asset in its best economic alternative is an
example of which of the following type of cost?

1. outlay cost.
2. direct cost.

3. indirect cost.
4. opportunity cost.
Any item for which the manager wishes to measure cost is called a(n)

1. direct cost.
2. indirect cost.
3. cost object.


4. target cost.
What is the term that describes costs that relate directly to a cost
object?

1. direct cost.
2. indirect cost.
3. sunk cost.
4. target cost.
Costs that do not relate directly to a cost object are its

1. marginal cost.
2. indirect cost.
3. sunk cost.
4. target cost.
Costs that change in total as the level of activity changes are which of the
following?

1. direct costs.
2. indirect costs.
3. variable costs.
4. fixed costs.

Which of the following terms describes a cost that does not relate directly to
a cost object?

1. outlay cost.
2. direct cost.


3. indirect cost.
4. opportunity cost.
Which of the following is a cost that does not change in total as the level of
activity changes?

1. fixed cost.
2. direct cost.
3. indirect cost.
4. variable cost.
Which of the following statements is true concerning variable costs?

1. Variable costs are likely to respond to the amount of attention devoted to
them by a management.
2. Variable costs are associated with marketing, shipping, warehousing, and
billing activities.
3. Variable costs do not change in total for a given period but decrease on a per
unit basis.
4. Variable costs change in total with changes in production activity.
When the number of units manufactured increases, the most significant
change in average unit cost will be reflected as

1. an increase in the nonvariable component.
2. a decrease in the variable component.

3. a decrease in the nonvariable component.
4. an increase in the variable component.


The nursing station on the fourth floor of Columbia Hospital for Women is
responsible for the care of patients who have just given birth. The costs of
drugs administered by the nurses to patients would be classified as

1. direct costs.
2. indirect costs.
3. overhead costs.
4. period costs.
The costs of staffing and operating the accounting department at Columbia
Hospital for Women would be considered by the Department of Surgery to be
which of the following?

1. direct costs.
2. indirect costs.
3. incremental costs.
4. controllable costs.
Which of the following is true of Managerial Accounting?

1. Complies with Securities and Exchange Commission rules and regulations.
2. Uses cost-benefit analysis to determine the amount of detail presented.
3. Prepares general-purpose reports for people outside an organization.
4. Presents summary historical data in compliance with generally accepted
accounting principles.
The best example of using managerial accounting information to help
organizations succeed includes which of the following?

1. implementing strategies.
2. processing travel vouchers.


3. tracking employee time and attendance.
4. reconciling petty cash balances.
Managerial accounting information is used by which of the following
managers?

1. marketing managers to help price products and assess their profitability.
2. production managers to manage quality and costs and to assure on-time
delivery.
3. general managers to measure employee performance and create incentives.
4. All of the answers are correct.
Considering the time dimension, how does managerial decision making
compare with external performance evaluation? Managerial Decision Making
External Performance

1. Past Past
2. Past Future
3. Future Past
4. Future Future
The question "How much information is enough?" for managerial purposes
should be answered on

1. a cost/benefit basis.
2. a cost, but not benefit, basis.
3. a benefit, but not cost, basis.
4. neither costs nor benefits, but some other criteria.

Accounting data used for managerial reports

1. must be the same data used for reporting to shareholders, but may be
different for tax purposes.
2. must be the same data used for tax purposes, but may be different data for
reporting to shareholders.
3. must be the same data used for both tax purposes and reporting to
shareholders.
4. may be different from data used for both tax purposes and reporting to
shareholders.
Who manages cost and managerial accounting in most organizations?

1. Controller
2. Treasurer
3. Board of directors
4. Chief executive officer
Who manages cash flows and raises cash for operations in most
organizations?

1. Controller
2. Treasurer
3. Board of directors
4. Chief executive officer
Who is the manager in charge of raising cash for operations and managing
cash and near-cash assets?

1. Chief financial officer.
2. Controller.

3. Treasurer.
4. Internal auditor.
Which of the following works in planning, decision making, designing
information systems, designing incentive systems, and helping managers
make operating decisions?

1. Controller
2. Treasurer
3. Board of directors
4. Chief executive officer
Who is the chief accounting officer that oversees providing information to
managers?

1. Chief financial officer.
2. Controller.
3. Treasurer.
4. Internal auditor.
What organization publishes a journal called Strategic Finance, numerous
policy statements, and research studies on accounting issues?

1. Institute of Management Accountants
2. Cost Accounting Standards Board
3. General Accounting Office
4. American Institute of Certified Public Accountants


The Sarbanes-Oxley Act of 2002 has increased the interaction between the
audit committee of the board of directors and the which of the following?

1. controller.
2. treasurer.
3. internal auditor.
4. production manager.
In 2002, Congress passed the Sarbanes-Oxley Act. Which of the following is
not a provision of that act?

1. The law empowered the American Institute of Certified Public Accountants
(AICPA) to oversee licensure of auditors.

2. The Chief Executive Officer (CEO) must sign the company’s financial
statements attesting to the inclusion of all material information.
3. The Public Company Accounting Oversight Board (PCAOB) was created.
4. The CEO and Chief Financial Officer (CFO) must indicate that they are
responsible for the company’s system of internal control.
What organization developed the “Standards of Ethical Conduct for
Management Accountants” mandating that management accountants have a
responsibility to maintain the highest levels of ethical conduct?

1. Institute of Management Accountants
2. Cost Accounting Standards Board
3. General Accounting Office
4. American Institute of Certified Public Accountants


Which of the following accurately describes the managerial accountants'
professional environment and ethical responsibilities?

1. Stockholders have an ethical responsibility to report accurately even when
their own compensation suffers.

2. Financial analysts have an ethical responsibility to report accurately even
when their own compensation suffers.
3. Managers have an ethical responsibility to report accurately even when their
own compensation suffers.
4. Managers do not have an ethical responsibility to report accurately even
when their own compensation suffers.
How is cost, as used in managerial accounting, distinguished from expense,
as used in financial accounting?

1. A cost is a sacrifice of resources and expenses are recorded in accounting
records, but not all costs appear in accounting records.

2. All expenses are costs, but not all costs are expenses in the period of
incurrence, even though they will become expenses in some later period.
3. Managerial accounting deals primarily with costs, not expenses, while
financial accounting primarily deals with expenses for financial reporting as
defined by generally accepted accounting principles.
4. All of the answers are correct.
In principle, a cost is

1. a sacrifice of resources.
2. something used up to produce revenues in a particular accounting period.
3. only comprised of direct material and direct labor.
4. something measured in conformity with generally accepted accounting
principles.


What is an opportunity cost?

1. The historical cost of goods or services used.
2. The foregone income from using an asset in its best alternative.
3. A sacrifice of resources.
4. A sacrifice of investment opportunities.
What is an opportunity cost?

1. The difference in total costs which results from selecting one choice instead
of another.

2. The profit forgone by selecting one choice instead of another.
3. A cost that may be saved by not adopting an alternative.
4. A cost that may be shifted to the future with little or no effect on current
operations.
Income forgone from not using an asset in its best economic alternative is an
example of which of the following type of cost?

1. outlay cost.
2. direct cost.
3. indirect cost.
4. opportunity cost.
Any item for which the manager wishes to measure cost is called a(n)

1. direct cost.
2. indirect cost.
3. cost object.


4. target cost.
What is the term that describes costs that relate directly to a cost
object?

1. direct cost.
2. indirect cost.
3. sunk cost.
4. target cost.
Costs that do not relate directly to a cost object are its

1. marginal cost.
2. indirect cost.
3. sunk cost.
4. target cost.
Costs that change in total as the level of activity changes are which of the
following?

1. direct costs.
2. indirect costs.
3. variable costs.
4. fixed costs.
Which of the following terms describes a cost that does not relate directly to
a cost object?

1. outlay cost.
2. direct cost.


3. indirect cost.
4. opportunity cost.
Which of the following is a cost that does not change in total as the level of
activity changes?

1. fixed cost.
2. direct cost.
3. indirect cost.
4. variable cost.
Which of the following statements is true concerning variable costs?

1. Variable costs are likely to respond to the amount of attention devoted to
them by a management.
2. Variable costs are associated with marketing, shipping, warehousing, and
billing activities.
3. Variable costs do not change in total for a given period but decrease on a per
unit basis.
4. Variable costs change in total with changes in production activity.
When the number of units manufactured increases, the most significant
change in average unit cost will be reflected as

1. an increase in the nonvariable component.
2. a decrease in the variable component.
3. a decrease in the nonvariable component.
4. an increase in the variable component.


The nursing station on the fourth floor of Columbia Hospital for Women is
responsible for the care of patients who have just given birth. The costs of
drugs administered by the nurses to patients would be classified as

1. direct costs.
2. indirect costs.
3. overhead costs.
4. period costs.

The costs of staffing and operating the accounting department at Columbia
Hospital for Women would be considered by the Department of Surgery to be
which of the following?

1. direct costs.
2. indirect costs.
3. incremental costs.
4. controllable costs.
Which of the following statements is true concerning total variable costs?

1. Total variable costs do not vary in total within the relevant range.
2. Total variable costs vary in total in proportion to the activity level.
3. Total variable costs vary in total in an inverse relationship with production.
4. Total variable costs vary in total, but not in proportion to changes in the
activity level.
Fixed costs expressed on a per unit basis

1. will react directly with changes in activity.
2. will react inversely with changes in activity.


3. are not affected by activity.
4. should be ignored in making decisions since they cannot change over the
long run.
Data for Cost A and Cost B are as follows: Which of the following best
describes the behavior of Costs A and B?

1. Cost A is fixed, Cost B is variable.
2. Cost A is variable, Cost B is fixed.
3. Both Cost A and Cost B are variable.

4. Both Cost A and Cost B are fixed.
A cost that changes in total as the level of activity changes is known as which
of the following?

1. fixed cost.
2. direct cost.
3. indirect cost.
4. variable cost.
External financial statements

1. promote internal management planning and decision making.
2. do not show variable and fixed costs.
3. are not in accordance with generally accepted accounting principles.
4. show direct and indirect costs.
The income statement presentation that helps managers plan and make
decisions shows the distinction between

1. sunk and opportunity costs.


2. variable and fixed costs.
3. controllable and non-controllable costs.
4. discretionary and outlay costs.
Which of the following concepts is least useful for managing costs more
effectively?

1. Activity-based management.
2. Value-added and non-value-added activities.
3. The value chain.
4. Generally accepted accounting principles.

Benefit(s) of the income statements for managerial use include(s)

1. demonstrating which costs are variable and which are fixed.
2. breaking down revenues and costs in a number of ways to meet managers’
needs.
3. breaking down revenues and expenses in a number of ways to meet
managers’ needs.
4. demonstrating which costs are variable and which are fixed, and breaking
down revenues and costs in a number of ways to meet managers’ needs.
What appears at the bottom of income statements prepared for managerial
use to distinguish it from net income used in external reporting?

1. Other comprehensive income
2. Operating profit
3. Gross margin
4. Net profit (or loss)


What is the study of the need for activities and whether they are operating
efficiently called?

1. direct and indirect cost management.
2. variable and fixed cost management.
3. activity-based management.
4. total quality management.
Which of the following describes an activity that increases the product’s
service to the customer?

1. direct activity.
2. variable activity.

3. value-added activity.
4. non-value-added activity.
Which of the following is an activity that when eliminated reduces cost
without reducing the product’s service to the customer?

1. direct activity.
2. indirect activity.
3. value-added activity.
4. non-value-added activity.
The linked set of activities that increases the usefulness (or value) of the
products or services of an organization is the

1. direct chain.
2. indirect chain.
3. value chain.


4. variable chain.
Which of the following reflects the correct order in a value-chain?

1. Research & Development, Design, Production
2. Distribution, Customer Service, Marketing
3. Design, Research & Development, Production
4. Distribution, Marketing, Research & Development
In managerial accounting, what is the cost of capital?

1. the amount a firm could earn on its assets by putting them to their best
alternative use.

2. not included in the financial accounting statements.

3. the weighted average of the costs of the firm’s sources of funds taking into
account both debt and equity sources of capital.
4. All of the answers are correct.
In managerial accounting, what is the term used to describe the amount a
firm could earn on its assets by putting them to their best alternative
use?

1. cost of capital.
2. sunk cost.
3. marginal cost.
4. future cost.
In managerial accounting, what can help the manager decide where to direct
the organization’s resources?

1. Capital resource allocation models


2. Quantum resource analysis
3. Balanced scorecard
4. Strategic cost analysis
Which statement is true concerning integrated information systems?

1. Integrated information systems measure a company`s products, services,
and activities against other more efficient and effective divisions or
businesses.
2. Integrated information systems tie together various databases and
applications.
3. Integrated information systems focus on increasing quality as perceived and
defined by the customer.
4. Integrated information systems emphasize strengthening the weakest link (or

constraint) of the company to improve operations.
Which statement is true concerning integrated information systems?

1. Integrated information systems are not technically feasible.
2. Integrated information systems violate generally accepted accounting
principles.
3. Integrated information systems are not commercially available.
4. Integrated information systems tie together managerial accounting, financial
reporting, customer databases, supply chain management and other data
bases.
Integrated information processing systems that tie together managerial
accounting, financial reporting, customer databases, supply chain
management and other data bases are

1. not technically feasible.
2. required by the Internal Revenue Service regulations.
3. not in accordance with generally accepted accounting principles.


4. now commercially available.
What does the term “just-in-time” refer to?

1. factories built just in time to meet production needs.
2. machinery placed in service just in time to begin production.
3. materials received from suppliers just in time for production needs.
4. All of the answers are correct.
The benefits of a just-in-time system usually include which of the
following?

1. elimination of non-value-added activities.

2. increase in inventory levels, thus guarding against stock-outs.
3. increased time spent valuating inventories.
4. decrease in the number of deliveries required to maintain production.
What production methodology strives to eliminate inventory and increase
efficiency and quality?

1. Total quality management.
2. Theory of constraints.
3. Benchmarking.
4. Just-in-time.
Which of the following best describes the term “benchmarking?”

1. producing a particular product at the lowest possible cost.
2. designing the highest quality product in a given market.
3. developing the best selling product