MULTIPLE CHOICE QUESTIONS OF

(MANAGEMENT ACCOUNTING)

1.

Managerial accounting information is generally prepared for a) b) c) d) Shareholders Creditors Managers Regulatory agencies

C is correct. Management accounting basics Management accounting focuses mainly on the preparation of reports for the internal users of financial information, i.e. managers are all levels of the entity. 2. Managerial accounting information a) b) c) d) Relates to the entity as a whole and is highly aggregated Relates to sub-units of the entity and may be very detailed Is prepared only once a year is constrained by the requirements of generally accepted accounting principles

B is correct. Management accounting basics Management accounting pertains to subunits of the entity and may be very detailed. 3. Which of the following is not an internal user of management information? a) b) c) d) Creditor Department manager Controller Treasurer

A is correct. Management accounting basics Creditors are external to the entity. 4. Managerial accounting does not encompass a) b) c) d) Calculating product cost Calculating earnings per share Determining cost behavior Profit planning

B is correct. Management accounting basics Calculating earnings per share is a function for external users of financial information.

Contributed By: Prof. Ashish Bhalla

5.

Management accounting is applicable to a) b) c) d) Service entities Manufacturing entities Not-for-profit entities All of these

D is correct. Management accounting basics Management accounting applies to any business entity. 6. Financial statements for external users can be described as a) b) c) d) User-specific General-purpose Special-purpose Management reports

B is correct. Management accounting basics Financial statements prepared for external users are general purpose financial reports. 7. Management accounting reports can be described as a) b) c) d) General-purpose Macro-reports Special-purpose Classified financial statements

C is correct. Management accounting basics Management accounting reports provides special purpose information for a particular user for a specific reason. 8. The reporting standard for external financial reports is a) b) c) d) Industry-specific Company-specific Generally accepted accounting principles Department-specific

C is correct. Management accounting basics The reporting standard for external financial reports is generally accepted accounting principles.

Contributed By: Prof. Ashish Bhalla

9.

Internal reports are generally a) b) c) d) Aggregated Detailed Regulated Unreliable

B is correct. Management accounting basics Internal reports are generally very detailed. 10. Planning is a function that involves a) b) c) d) Hiring the right people for a particular job Coordinating the accounting information system Setting goals and objectives for an entity Analyzing financial statements

C is correct. Management accounting basics Planning requires management to look ahead and to establish objectives. 11. Which of the following is not a management function? a) b) c) d) Demotivating Planning Controlling Directing

A is correct. Management accounting basics Management are concerned with directing and motivating, not demotivating. 12. A manager who is establishing objectives is performing which management function? a) b) c) d) Motivating Directing Planning Constraining

C is correct. Management accounting basics Planning involves looking ahead and establishing objectives.

Contributed By: Prof. Ashish Bhalla

13. The document of an organization that depicts authority relationships within the company is the a) b) c) d) Chart of accounts Ledger Organization chart Constitution

C is correct. Management accounting basics An organizational chart depicts authority relationships within a company. 14. Both direct materials and indirect materials are classified as a) b) c) d) Raw materials Manufacturing overhead Merchandise inventory Non-Current assets

A is correct. Management cost concepts Both direct and indirect materials are included in raw materials. 15. The work of factory employees that can be physically associated with converting raw material into finished goods is classified as a) b) c) d) Manufacturing overhead Indirect materials Indirect labour Direct labour

D is correct. Management cost concepts The work of factory employees that can be physically and economically traced to converting raw materials into finished goods is considered direct labour. 16. Which one of the following would not be classified as manufacturing overhead? a) b) c) d) Indirect labour Direct materials Insurance on factory building Indirect materials

B is correct. Management cost concepts Direct materials are classified as direct materials, not manufacturing overhead.

Contributed By: Prof. Ashish Bhalla

17. In manufacturing a product, prime costs are a) b) c) d) Raw materials and manufacturing overhead Indirect materials and manufacturing overhead Indirect labour and manufacturing overhead Direct materials and direct labour

D is correct. Management cost concepts Direct materials and direct labour are often referred to as prime costs because of their direct association with the manufacturing of the finished product. 18. A manufacturing process requires small amounts of glue. The glue used in the process is classified as a) A prime cost b) An indirect material c) A direct material d) Miscellaneous expense B is correct. Management cost concepts The glue would be classified as an indirect material as the physical association with the finished product is too small in terms of cost. 19. The wages of a maintenance worker in a manufacturing plant would be classified as a) b) c) d) A prime cost Direct labour Indirect labour Compliance costs

C is correct. Management cost concepts These wages would be classified as indirect labour. 20. Which of the following is not a manufacturing cost category? a) b) c) d) Cost of goods sold Direct materials Direct labour Manufacturing overhead

A is correct. Management cost concepts The three manufacturing categories are direct materials, direct labour and manufacturing overhead.

Contributed By: Prof. Ashish Bhalla

21. Lubricants, used irregularly in a production process, are classified as a) b) c) d) Miscellaneous expense Direct materials Indirect materials Immaterial items

C is correct. Management cost concepts Lubricants used in a production process are classified as overhead because they do not physically become part of the finished product.

22. Which of the following is not another name for the term manufacturing overhead? a) b) c) d) Factory overhead Pervasive costs Burden Indirect manufacturing costs

B is correct. Management cost concepts Terms such as factory overhead, indirect manufacturing costs and burden as sometimes used instead of manufacturing overhead. 23. Because of automation, which component of product cost is declining? a) b) c) d) Direct labour Direct materials Manufacturing overhead Advertising

A is correct. Management cost concepts Automation often replaces direct labour in the product cost. 24. The product cost that is most difficult to associate with a product is a) b) c) d) Direct materials Direct labour Manufacturing overhead Raw materials

C is correct. Management cost concepts Manufacturing overhead is most difficult to associate with a product because the costs are indirectly associated with the manufacture of the finished product.

Contributed By: Prof. Ashish Bhalla

25. Which one of the following costs would not be included in inventory? a) b) c) d) Period costs Prime costs Conversion costs Indirect labour costs

A is correct. Management cost concepts Period costs are costs that are identified with a specific time period rather than with a saleable product and therefore do not become part of inventory. 26. Sales commissions are classified as a) b) c) d) Prime costs Period costs Product costs Indirect labour

B is correct. Management cost concepts Sales commissions are included in selling expenses and therefore are classified as a period cost. 27. Product costs consist of a) b) c) d) Conversion costs and unexpired expenses Prime costs and manufacturing overhead Selling and administrative expenses Period costs

B is correct. Management cost concepts Product costs include direct materials, direct labour (collectively known as prime costs) and manufacturing overhead.. 28. Product costs are also called a) b) c) d) Direct cost Prime cost Inventoriable cost Capitalisable cost

C is correct. Manufacturing costs in financial statements Product costs are also called inventoriable costs because they will eventually become part of finished goods inventory.

Contributed By: Prof. Ashish Bhalla