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
4. improvement gained through measuring one’s products against the best products.

The following reduces the need for in-house information technology people as well as

for transaction and system managers: 

1. Theory of constraints.
2. Web hosting.
3. Generally accepted accounting principles.
4. Stand-alone accounting systems.

The following provides the means for companies to outsource substantial portions of
their information systems and enables the company to focus on its core competencies

while taking advantage of the host's server and bandwidth capability. 

1. Value chain.
2. Web hosting.
3. Total Quality Management.
4. Zero-Base Budgeting.

What modern production methodology emphasizes strengthening the weakest link of

the company to improve operations to become more efficient and effective? 

1. Weakest link theory

2. Just-in-time
3. Total quality
4. Theory of constraints.

What management technique focuses on increasing quality as perceived and defined by

the customer? 

1. Theory of constraints.
2. Benchmarking.
3. Total quality management.
4. Web hosting.
What is the term that describes the decline in value of assets during the period using

either the sales value of assets or their replacement costs as the measure of value? 

1. economic inflation.
2. economic deflation.
3. economic appreciation.
4. economic depreciation.

What is the definition of economic depreciation according to managerial

accounting? 

1. the decline in value of assets during the period using the sales value of assets as the
measure of value, only.
2. the decline in value of assets during the period using the replacement costs as the
measure of value, only.
3. the decline in value of assets during the period using either the sales value of assets or
their replacement costs as the measure of value.
4. the decline in value of assets during the period using amortized acquisition cost as the
measure of value.