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CHAPTER 1: An Overview: The Role, Historical Perspective and Direction of

Management Accounting
MULTIPLE CHOICES: THEORIES
1. That kind of accounting concerned with providing information to management in making
decisions about the operations of the business

a. Responsibility accounting c. Management accounting


b. Cost accounting d. Correct answer not given

2. Management accounting

a. Is governed by generally accepted accounting principles.


b. Draws from disciplines other than accounting.
c. Is geared primarily to the past rather than the future.
d. Places more emphasis on precision of data compared with financial accounting which
does not.

3. A type of managerial accounting which refers to the determination of the operating cost
regardless of cost behavior is

a. Differential accounting c. Responsibility accounting


b. Full cost accounting d. Profitability accounting

4. Which of the following characteristics does not relate to management accounting?

a. Accounting reports may include non-monetary information


b. It is subject to restrictions imposed by GAAP.
c. Reports are often based on estimates and are seldom useful for anything other than the
purpose for which they are prepared.
d. It provides data for internal users within the business organization.

5. Management accounting is an integral part of the management process. As such, it


provides essential information for the following objectives except

a. Maintaining the current level of resource utilization as well as internal and external
communication.
b. Measuring and evaluating performance.
c. Planning strategies and controlling current activities of the organization.
d. Enhancing objectivity in decision-making.

6. Statement 1: Managerial control and engineering control are synonymous.


Statement 2: Control from the viewpoint of management accounting is defined as the
process of setting maximum limits on financial expenditures.
a. b. c. d.
Statement 1 True False True False
Statement 2 True False False True
7. Which type of authority do management accountants generally exercise?

a. Functional b. Company c. Line d. Staff

8. Which of the following is not a characteristic of a “Staff” authority?

a. It gives support, advise, and service to line managers.


b. It is exercised laterally or upward.
c. It has the authority to command action or give orders to subordinates.
d. None of the above

9. In financial accounting, certain rules and regulations must be followed on how financial
statements must be presented to the reader. In managerial accounting, no such restrictions
generally apply because it is:

a. An entirely different field that need not observe the broad guidelines in financial
accounting.
b. Designed to provide management with non-financial information for decision-making.
c. Designed to provide accounting and other financial data to assist management in
making business decisions.
d. A discipline that does not require preparation of other financial statements.
e. All of the above.

10. Which of the following characteristics relate to Financial Accounting?

a. Reports are promptly prepared and submitted to preserve its usefulness.


b. Data may be both historical and estimates.
c. It must adhere to the generally accepted accounting principles.
d. It provides information needed by management in making decisions.

11. The following characteristics refer to Financial Accounting except

a. Provides information to external users


b. Emphasizes on objective data
c. Has no externally imposed standards
d. Generates general purpose financial statements

12. To distinguish between management accounting and financial accounting, the following
statements are correct, except:

a. Management accounting, in view of its various integrated recipients should have a


separate data recording and retrieval system from financial accounting.
b. Financial accounting is bound by GAAP, and management accounting need not be in
conformity with GAAP.
c. Financial accounting can be regarded as the process while management accounting can
be regarded as the product of the process.
d. Management accounting output must be released on time so as not to erode its usefulness;
Financial accounting output can still be useful even when delayed.

13. Which of the following is a Controller’s responsibility?

a. Tax planning and accounting c. In charge of credit and collection


b. Custodian of funds d. Arranging short-term financing

14. You were newly appointed as controller of CZX Corporation. Among the jobs your
department would do include the following:

a. Cash receipts, cash disbursements, general accounting, taxation, financial accounting


analysis, and internal auditing.
b. Financial reporting, strategic planning, managerial accounting, taxation, financial
statement analysis, and internal accounting.
c. Financial accounting, managerial accounting, cost accounting, inventory accounting,
payroll accounting, tax accounting and sales forecasting.
d. Tax accounting, managerial accounting, internal auditing, general accounting.

15. Controllership has attained special recognition in corporate management as business


expands in complexity and reach, and as the controller exerts influence for management to take
organization’s goals. Controllership and treasurership constitute corporate finance. These are
among the controller’s traditional functions:

1. Tax management. 5.
Reporting to government regulatory agencies.
2. Financial reporting and interpretation. 6. Risk management.
3. Credit management. 7.
Economic appraisal.
4. Sourcing and investing of funds. 8. Planning for
control.

a. All eight items. c. Items 1,2,3,4,5,7 and 8 only.


b. Items 1,2,5,7 and 8 only. d. Items 2,3,5,7 and 8 only.

16. The chief management accountant called “controller” traditionally performs these
functions except:

a. The establishment and implementation of the financial planning process.


b. Financial and management reporting and interpretation.
c. Protection of company resources and economic evaluation.
d. Preparation of proposals for product promotions.
17. As business increase in complexity, the function of controllership has attained top level
recognition in the corporate area. Many areas related to finance and accounting have been
identified with controllership. One area that becomes controversial when included under the
controller and viewed that such inclusion violates basic internal control is

a. Credit and collection.


b. Internal auditing.
c. Long-range financial planning.
d. Taxation and reporting to government agencies.

18. Which of the following is not usually a controller’s function?

a. Planning for control. c. Tax administration.


b. Protection of assets. d. Credit and collection.

19. Which of the following is not a Controller’s function?

a. In charge of planning and control


b. Protection of assets such as adequate insurance coverage. Etc.
c. Interpreting and reporting on effects of external factors on the business
d. Arranging short-term financing

20. Controllers are generally not concerned with

a. Reporting to government c. Protection of assets


b. Preparation of tax returns d. Investor relations

21. Which of the following is a Controller’s responsibility?

a. Tax planning and accounting c. In charge of credit and collection


b. Custodian of funds d. Arranging short-term financing

22. Which of the following is not a controllership function, as distinguished from a treasury
function?

a. Reporting and interpreting c. Protection of assets


b. Credit and collection d. Government reporting

23. The primary purpose of management advisory services is

a. To conduct special studies, preparation of recommendation, development plans and


programs, and provision of advise and assistance in their implementation.
b. To provide service or to fulfill some social need.
c. To improve the client’s use of its capabilities & resources to achieve the objectives of
the organization.
d. To earn the best rate of return on resources entrusted to its care with safety of investment
being taken into account and consistent with the firm’s social and legal responsibilities.

24. Which of the following statements is not true?

a. In the rendition of MAS, independence must be observed so as to maintain the essential


requisites of impartiality and objectivity.
b. All provisions of the code of professional ethics are applicable to the practice of MAS
except those rules related to the expression of an opinion on financial statements.
c. MAS serves only in the areas of accounting and finance.
d. Before accepting an engagement, a practitioner should notify the client of any
reservations he has regarding anticipated benefits.

25. Which of the following acts is not performed by an independent CPA engaged to install
an accounting system?

a. Formulation of the chart of accounts


b. Design of business and accounting forms
c. Supervision of application of system and procedures recommended
d. Preparation of an accounting manual.

26. The following characterize management advisory services except

a. Involve decision for the future.


b. Broader in scope and varied in nature.
c. Utilize more junior staff than senior members of the firm.
d. Relate to specific problems where expert help is required.

27. Which of the following is not a characteristic of management services?

a. A wider variety of assignments are encountered in MAS than in audit.


b. MAS engagements are recurring.
c. MAS pinpoint actions to be taken, the benefits of which will be received in the future.
d. In MAS engagements, the nature of work involved requires a lesser need for junior
assistance.

28. Which of the following is not a characteristic of Management Advisory Services?

a. MAS is broad in scope


b. MAS involves problem-solving affecting the future operations of the client
c. Beneficiary of service is management
d. MAS is repetitive as far as the same client is concerned
29. Which of the following types of management services is normally related to accounting
and finance?

a. Management audit.
b. Marketing forecasts.
c. Costs determination of alternatives in collective bargaining agreements.
d. Job evaluation and salary administration.

30. Which of the following types of management services is not directly related to
accounting and finance functions?

a. Cost analysis of major investment decision.


b. Long range planning.
c. Design, installation and review of budgetary system.
d. Valuation of capital stock of companies for purposes of merger or sales.

31. A certified public accountant’s scope of management services is broad and covers all of
the following except

a. Change management engagements. c. Audit engagements.


b. Computerization engagements. d. Re-engineering jobs.

32. Which of the following is not classifiable as a management advisory service by CPAs?

a. Systems design. c. Make or buy analysis.


b. Project feasibility study. d. Assistance in budgeting.

33. Which of the following is not classifiable as a management advisory service by CPAs?

a. Annual financial planning and budgeting. c. Information systems.


b. Public relations work. d.
Lease-or-buy analysis.

34. Management services of certified public accountant cover all of the following except
a. Project feasibility studies. c.
Organizational development and planning.
b. Systems design, development and implementation. d. Audit, tax and legal services.

35. Which of the following does not relate to management services by CPAs?

a. Design and/or installation of accounting systems. c. Cost analysis of major


investment decisions.
b. Financial analysis for project feasibility studies. d. None of the above.

36. Which of the following is not an area related to the performance of management services
by independent accounting firms?
a. Introducing new ideas, concepts and methods to management.
b. Improving existing policies, methods and procedures
c. Performing special studies, preparing recommendations, and formulating plans and
programs
d. Performing management functions and making decisions

37. A management advisory services engagement involves the following activities in what
order?

I. Post-engagement follow-up.
II. Implementing the recommendation.
III. Conducting the engagement.
IV. Negotiating the engagement.
V. Preparing for and starting the engagement.
VI. Evaluating the engagement.
VII. Preparing and presenting report and recommendations.

a. VII, VI, V, IV, III, II and I. c. IV, III, V, VI, II, VII, and I.
b. III, IV, V, VI, VII, I and II. d. IV, V, III, VII, II, VI, and I.

38. The following statements refer to competence of CPA’s in management advisory services
except

a. In concept it refers to the technical qualification of the practitioner and his ability to
supervise and evaluate the quality of work of his staff assigned to the engagement so as to be
responsible for the successful completion of the project.
b. It is acquired by education, self study, attendance to professional development courses,
actual experience in MS work and research.
c. It is the ability to identify client’s needs, use analytical approach and process, apply
technical knowledge, communicate recommendations and assist in implementation.
d. It must be retained in the rendition of MAS work and it can be impaired if the CPA
performs decision-making for the client or acts as employee of the client.

39. Which of the following statements is True?

a. Adequate training and experience in both the analytical approach and process in
the particular undertaking are requisites for the CPA to be involved in a management
service engagement.
b. A CPA with MBA and PhD degrees is automatically qualified to render management
services.
c. Competence as a standard in the rendition of management services by a CPA may be
equated to having excellent scholarly preparation to include the usual baccalaureate degree, an
MBA, and other post graduate studies.
d. A certified public accountant by virtue of having the necessary academic preparation and
by hurdling the licensure examinations required to have a CPA license can readily render
management services to the public.

40. These statements relate to MAS practice standards

1. A practitioner is to notify the client of any reservation he has regarding anticipated


benefits.
2. Throughout the engagement, there ought to be a systematic critical review of
accomplishments and work should be done within the framework of the code of ethics and other
professional standards.
3. During the engagement, should there be a significant change between cost and
anticipated benefits, the client should be informed.
4. Before the engagement, the practitioner must make arrangements with, and inform the
client on significant matters related to engagement, in writing.

Of these statements, which pertain to the practice standard on client benefit?

a. Statements 1 and 3 only. c. Statement 1 only.


b. All statements. d. Statement 1, 3 and 4 only.

41. Which of the following is not a qualification of a CPA in MAS practice?

a. Familiarity with the client’s financial accounting and internal control systems
b. Analytical experience in problem solving
c. Professional independence, objectivity and integrity
d. Auditor of the client

42. As a consultant, the CPA practitioner should

a. Exercise administrative control over the client’s staff to avoid unnecessary delays in
implementation.
b. Encourage dependence of client on the consultant’s staff so as to pinpoint clear
responsibility in implementing systems.
c. Not take responsibility for making decisions and policy judgments in MAS
engagements.
d. Conduct his engagement as if he is a member of the client’s organization.

43. The Revised Accountancy Law incorporates the Code of Professional Ethics for CPAs.
The provision of management advisory services is among the areas of public accounting. It is,
however, not exclusive to CPAs. Considering these premises, which of the following statements
is applicable?
a. Management advisory services as a field of practice is considered as an integral part
of public accounting thus, the Code of Professional Ethics for CPAs covers management
advisory services.
b. CPAs in the practice of audit and management consulting services may advertise and
charge contingent fees.
c. The practice of management advisory services should not be extended to existing audit
clients since this will adversely affect the CPA’s independence.
d. CPAs in the practice of management advisory services are not bound by the Board of
Accountancy but are bound by the said law in the practice of audit.

44. Which of the following statements is False?

a. CPAs provide management services to go around the ethical constraints as


mandated by the Accountancy Act.
b. Businesses hire management consultants to help define specific problems and develop
solutions.
c. Included in the practice of consulting is the provision of confidential service in which the
identity of the client is concealed.
d. CPAs performing management services may be considered to be in the practice of
management consulting.

45. Which of the following statements is not acceptable?

a. A CPA represents three major players in the industry in rationalizing the industry’s
incentive before the government public hearing.
b. A CPA shares with a new and substantial client information regarding another
client belonging to the same industry.
c. A CPA provides consulting services to an existing audit client.
d. A CPA offers and provides consulting services to two major competing client.

46. Mr. Rey Carlos, a CPA firm’s partner-in-charge of quality assurance and review is
arguing with Mr. Reuben Fortuna, the consulting partner regarding the question of independence
as Mr. Fortuna is presently rendering consulting services to T. Ang and Nga Co., an audit client
of the firm. Related to this issue of independence, all of the following statements are not valid
except

a. Independence is never sacrificed for as long as the auditor/consultant is correct in his


decisions for the client.
b. A CPA who renders both audit and consulting services to a client by virtue of his
competence/expertise and extensive knowledge of the client’s business is in the best position to
render decisions for the client and should do so.
c. The client is the ultimate decision maker and the auditor and/or consultant should
not make decisions for the client.
d. It is us up to professional judgment and discretion of the auditor/ consultant to render
decisions for the client for as long as his professional fees are commensurate to the benefit that
the client will derive from the engagement.
47. Which of the following acts is not performed by an independent CPA engaged to design
the accounting system?

a. Formulation of the chart of accounts.


b. Design of business and accounting forms.
c. Supervision of implementation of system and procedures recommended
d. Preparation of an accounting manual.

48. Which of the following will not impair the independence of a CPA in the rendition of
Management Services?

a. The CPA performs decision-making services for his client.


b. The CPA performs services wherein he is in effect, acting as an employee of the client.
c. The CPA loses his objectivity and acts in a manner as if he is advocating for the interest
of his client.
d. The CPA does not extend his services beyond the presentation of recommendations
or giving of advice.

49. A CPA should reject management advisory services engagement if

a. It would require him to make management decisions for an audit client.


b. The proposed engagement is not accounting related.
c. His recommendations are to be subjected to a review by the client.
d. He audits the financial statements of a subsidiary of the prospective client.

50. After preliminary audit arrangements have been made, an engagement confirmation letter
should be sent to the client. This letter usually should not include

a. An estimate of the time to be spent on the audit work by audit staff and management.
b. A reference to the auditor’s responsibility for the detection of errors and irregularities.
c. A statement that management advisory services would be available upon request.
d. A statement that management letter will be issued outlining comments and suggestions as
to any procedures requiring the client’s attention.
51. The controller of a company or other organization is
a. a staff manager.
b. an operating manager.
c. an accountant, not a manager.
d. a natural manager.
52. Which item is NOT an IMA Standard for Ethical Conduct?
a. Integrity.
b. Competence.
c. Loyalty.
d. Objectivity.
53. Which statement about the degree of detail in a report is true?
a. It depends on the level of the manager receiving the report.
b. It may depend on the frequency of the report.
c. It depends on the type of manager receiving the report.
d. All of the above.
54. Managerial accounting is similar to financial accounting in that
a. both are governed by generally accepted accounting principles.
b. both deal with economic events.
c. both concentrate on historical costs.
d. both classify reported information in the same way.
55. Managerial accounting differs from financial accounting in that it is
a. more concerned with the future.
b. more concerned with segments of a company.
c. less constrained by rules and regulations.
d. all of the above.
56. One of the ways managerial accounting differs from financial accounting
is that managerial accounting
a. is bound by generally accepted accounting principles.
b. classifies information in different ways.
c. does not use financial statements.
d. deals only with economic events.
57. Which activity is NOT normally performed by managerial accountants?
a. Assisting managers to interpret data in managerial accounting
reports.
b. Designing systems to provide information for internal and external
reports.
c. Gathering data from sources other than the accounting system.
d. Deciding the best level of inventory to be maintained.
58. Conventional and just-in-time manufacturers both
a. Maintain large inventories of their products.
b. Sell only to other manufacturing companies.
c. Desire to meet customers' deadlines.
d. Require about the same amount of space to operate.
59. Classifying costs by behavior is
a. associated primarily with financial accounting.
b. not relevant to a company that has only selling expenses.
c. common in reports prepared for external readers.
d. none of the above.
60. Which is NOT a common accounting classification of costs?
a. By the method of payment for the expenditure.
b. By the objective of expenditure.
c. By behavior.
d. By the function incurring the expenditure.

61. Which classification of costs is most relevant for income statements to


be used internally?
a. Behavior.
b. Function.
c. Method of payment.
d. Object.
62. The set of processes that transform raw materials into finished
products is known as a
a. differentiation strategy.
b. flexible manufacturing system.
c. lowest cost strategy.
d. value chain.
63. Income statements classifying costs by object show such items as
a. tax expense, wages expense, depreciation expense.
b. cost of goods sold, selling expenses, administrative expenses.
c. assets, liabilities, owners' equity.
d. all of the above.
64. The period that begins with the arrival of materials and ends with the
shipment of a completed good is the
a. cycle time.
b. manufacturing cell.
c. computer-integrated manufacturing.
d. performance period.
65. Which function is most directly related to management by objectives?
a. Planning.
b. Control.
c. Decision making.
d. Reporting.
66. Which consideration influences the frequency of an internal report?
a. The wishes of the managers receiving the report.
b. The frequency with which decisions are made that require the
information in the report.
c. The cost of preparing the report.
d. All of the above.
67. A just-in-time manufacturer is more likely than a conventional
manufacturer to
a. receive more frequent deliveries of materials.
b. spend less money on advertising.
c. need workers with fewer skills.
d. all of the above.
68. A conventional manufacturer is more likely than a just-in-time
manufacturer to
a. have a short production cycle.
b. produce goods in small batches.
c. hold large inventories to serve as buffers.
d. none of the above.
69. The professional certification most relevant for managerial accountants
is the
a. CMA.
b. CPA.
c. CSA.
d. MAS.
70. A firm that is competing using a _______________________ strategy is
ttempting to create a perception of uniqueness that will permit a
higher selling price.
a. value chain
b. lowest cost
c. lead time
d. differentiation
71. Planning and control are
a. different names for the same thing.
b. the basic functions of management.
c. described equally well by the terms "decision making" and
"performance evaluation."
d. exemplified by, respectively, financial statements and budgeting.
72. In contrast to a balance sheet, an income statement
a. is for a period of time, a balance sheet is at a point in time.
b. gives information about cash and a balance sheet does not.
c. is prepared after the statement of retained earnings.
d. has two columns, while a balance sheet has more than two.
73.0 One characteristic of the conventional manufacturing environment is
a. flexible manufacturing systems.
b. manufacturing cells.
c. a just-in-case philosophy.
d. a high degree of quality control.
74. A characteristic of the just-in-time manufacturing environment is
a. frequent deliveries of materials.
b. manufacturing cells.
c. little or no inventory of finished product.
d. all of the above.
75. Conventional and just-in-time manufacturers differ in that the
conventional manufacturer is likely to
a. be a new entrant into its industry.
b. need less storage space than its JIT competitors.
c. give less credibility to management accounting reports.
d. have a longer production cycle than its JIT competitors.

76. Which of the ff. is not a characteristic of MAS practice?


a. MAS practice is broad in scope while specific in approach
b. MAS practice involves problem-solving affecting the future operations of the client.
c. The beneficiary in MAS service is the government.
d. MAS practice is relatively young and had been tremendously evolving in the recent
times.
77. Which of the ff. contains the best statement on how an accounting firm should apply the
concept of competence in serving clients?
a. If the firm is not reasonably competent to undertake a particular engagement it should
employ a specialist on temporary basis
b. The firm should only accept only those engagements which it is qualified to undertake
and assign personnel qualified to give effective service in serving the particular problem.
c. The firm should occasionally accept engagements outside the scope of its regular
service and then collaborate with outside specialists on such engagements.
d. If the firm does not have men on their professional staffs that are reasonably competent
to solve the client’s problem, it should ask several of its men to equip themselves for the task by
study, consultation, or other means.

78. It involves the technical qualifications of the practitioner and the ability to supervise the
personnel assigned, to evaluate the quality of work performed and to accept responsibility to the
client for the successful completion of the engagement.
a. Competence per se
b. Competence in professional work
c. Competence in MAS
d. Competence in implementation and recommendation.

79. It refers to the ability of the practiotioner to maintain his role as an adviser or consultant
without making any attempt to make decisions for the management.
a. Objectivity
b. Competence
c. Independence in mental attitude
d. Due Care

80. How should a management consultant undertake to secure a consulting engagement when a
prospective client has inquired about the services he offers?
a. The consultant should call on the prospective client, listen to an explanation, and then
agree to do as the client wishes, provided the work lies on the field on the consultant’s
competence.
b. The consultant should present the value of his services as forcefully as he can because
the potential client will benefit from the use of his services.
c. The consultant should diagnose the existing problem by personal investigation,
help the client define it clearly, consider various methods of solutions, recommend the
approach that will best meet the requirements of the situation, and make sure that the
client understands what the purposes to do, how long will it take, how much will it cost,
and what probable benefits will result.
D. The consultant should recommend the technique or procedure which will solve the
client’s problem and should refer him to other clients who have used the same technique
successfully in the past.

81. In carrying out full scope engagements, the consultant should participate up to the
implementation stage, considering the ff., except:
a. The client understands the nature and implications of the recommended course of action.
b. The consultant has made a firm decision to proceed with the implementation of the
chosen course of action
c. Client-management accepts overall responsibility for the implementation of the chosen
course of action,
d. Sufficient expertise will be available in the client’s organization to fully comprehend the
significance of the changes being made during the implementation, when changes have been full
implemented, client personnel have the knowledge and ability to adequately maintain and
operate such systems as may be involved.

82. In the course of providing a particular type of service, a CPA is called upon by the client to
give informal advice on diverse questions, not necessarily related to the service being rendered.
The CPA’s opinion is sought in view of his knowledge of the particular client’s affairs and broad
exposure to other situations. Which of the ff. statements best expresses the CPA’s role under
these circumstances?
a. The CPA should inform the client that it would be improper for him to give any advice
until an extensive study has been performed.
b. The CPA tactfully reminds the client that advice sought is not covered by the terms of the
original agreement.
c. The CPA should withhold any advice that he has identified and considered the pertinent
facts and alternatives.
d. The CPA should respond as practicable at the moment and express the basis of his
response, that such is an informal advice, there is no presumption that an extensive study
has been performed to identify and consider pertinent facts and alternatives.

83. The CEO wants to know whether the purchasing function is properly meeting its charge to
“purchase right materials at the right time in the right quantities.” Which of the following types
of engagements addresses this request?
a. A financial engagement relating to the purchasing department
b. An operational engagement relating to the purchasing function
c. A compliance engagement relating to the purchasing function
d. A full scope engagement relating to the manufacturing operation.
84. Complaints from the public were received about processing automobile license applications
in the LTO. You were assigned by the legislative auditor to review this operation. Which of the
ff. should be your first audit step?
a. Send out questionnaires to recent license
b. Test the system by licensing a vehicle
c. Discuss the nature of complaints with the chief of license office.
d. Discuss the nature of complaints with the director of the LTO.

85. The most important factor in selecting an engagement team is to assign consultants:
a. With a combination of skills and experiences in various business and functional areas as
well as in different industries.
b. who are likely to employ different approaches to problem solving such as highly
imaginative thinking, or unusual skill in the interpretation and use of financial and statistical
data.
c. with prior experience in the client’s industry.
d. with the appropriate skills, experience and types of thinking to deal with the client’s
problem.

86. In performing MAS, a practitioner must act with integrity and objectivity and be independent
in mental attitude, this statement falls under:
a. Competence
b. Client Benefit
c. Due Care
d. Personal Characteristics

87. Which of the ff. is not a MAS Practice Standard?


a. Before undertaking a MAS engagement, a practitioner is to notify the client for any
reservations regarding anticipated benefits.
b. In performing MAS, , a practitioner must act integrity and objectivity and be independent
in mental attitude.
c. The MAS engagement is performed by a person, having adequate technical
knowledge and expertise in specific engagement.
d. MAS engagement is performed by a person, having competence in analytical approach
and processes.

88. The MAS Practice Standards include the ff. attributes of practice except:
a. competence, confidentiality, integrity
b. Personal characteristics, competence and due care
c. Client benefits, understanding with the client, and planning, supervision and control
d. Sufficient relevant data and communication of results.
89. All except one are advantages of a CPA over management consultants of other professions:
a. The CPA is a specialist in accounting and taxes.
b. The CPA is known to the client and enjoys his confidence
c. The CPA is already familiar with the client’s business
d. The CPA is a member of a profession wit recognized standing.

90. The CPA should not undertake a MAS engagement that includes a continued participation
through implementation, unless;
a. The CPA accepts overall responsibility for implementation of the chosen course of
action.
b. The CPA acquires overall knowledge of the client’s business that is equivalent to
that of possessed by management.
c. upon implementation, the client’s personnel will have the knowledge and ability to
adequately maintain and operate such systems involved.
d. upon implementation, a new study and evaluation of the system’s internal control.

91. People who make information-based decision go through a series of fundamental steps in
their decision making process.
I. Evaluate alternative IV. Gather appropriate information
II. Identify constraints V. Choose the most acceptable alternative
III. Set objectives VI. Identify alternative
a. IV, II, III ,VI, I, V
b. II, II, IV, VI,I, V
c. III, II, IV. VI, I, V
d. II, III, IV, VI, I, V
92. A CPA should reject a MAS engagement if:
a. It would require him to make management decision for an audit client.
b. The proposed management id not accounting related.
c. His recommendations are to be subjected by a review by the client.
d. He audits the financial statements of a subsidiary of the prospective client.

93. Which of the ff. is not a characteristic of MAS?


a. MAS is broad in concept
b. MAS involve problem solving affecting the future operations of the client.
c. Beneficiary of service is the management
d. MAS is repetitive as far as the same client is involved.

94. The ff. characterizes MAS, except:


a. involves decisions for the future.
b. broader in scope and varied in nature.
c. Utilize more junior staff than senior members of the firm.
d. Relate to specific problems where help of expert is required.

95. Which of the ff. is not a characteristic of MAS?


a. Design and/or installation of accounting system
b. Financial analysis for project feasibility study.
c. Cost analysis of major investment decision.
d. None of the above.

96. Which of the ff. is not a characteristic of MAS?


a. A wider variety of assignments are encountered in MAS than in audit.
b. MAS engagements are recurring.
c. MAS pinpoints actions to be taken, the benefits of which will be received the future
d. In MAS engagements, the nature of work involved requires a lesser need for junior
assistance.

97. Management services of CPA’s cover all of the ff. except:


a. Project feasibility studies
b. System development design and implementation
c. Organization development and planning
d. Audit, tax and legal services.

98. A CPA’s scope of management services is broad and covers all of the ff. except:
a. Change in management engagements,
b. Computerization engagements
c. Audit engagements
d. Re-engineering engagements

99. A MAS engagement generally involves the ff. activities in what order?
I. Post management follow-up VI. Evaluating the engagement
II. Implementing the recommendation VII. Preparing and representing the report
III. Determining standards of performance and recommendations.
IV. Negotiating the engagement
V. Preparing for and starting the
engagement
a. VII, VI, V, IV, II, II, I
b. II. IV, V, VI, VII, I, II
c. IV, III, V, VI, II, VII, I
d. IV, V, II, VII, II, VI, I
100. The activities in managements system’s control process can be grouped into four:
I. Measurement of actual performance
II. Deciding and implementing corrective action
III. Determining standards of performance.
IV. Comparing actual performance vs. standards and analyzing results.

a. IV, III, II, I


b. III, I, IV, II
c. I, III, IV, II
d. III, IV, I , II

101. As a consultant, a practitioner should:


a. Exercise administrative control over the client’s staff to avoid unnecessary delays in
implementation.
b. Encourage dependence of the client on the consultant’s staff so as to pinpoint clear
responsibility in implementing system.
c. Not take responsibility for making decisions and policy judgments in MAS
engagements.
d. Conduct his engagement as if he is a member of the client’s organization.

102. Which of the ff. is not an idea related to the performance of management services by
independent accounting firms?
a. Introducing new ideas, concepts and methods to the management
b. Improving existing policies, methods and procedures.
c. Performing special studies, preparing recommendations and formulating plans and
programs.
d. Performing management functions and making decisions.

103. Which of the ff. is not a qualification of a CPA in MAS practice?


a. Familiarity with the client’s financial accounting and internal control systems
b. Analytical experience in problem-solving
c. Professional independence, objectivity and integrity
d. Auditor of the client.

104. Which of the ff. statements is not true?


a. In rendition of MAS, independence must be observed so as to maintain the essential
requisite of impartiality and objectivity.
b. All provisions of the code of ethics are applicable in the practice of MAS except those
rules related to the expression of an opinion on financial statements.
c. MAS serve only in the areas of accounting and finance.
d. Before accepting an engagement, a practitioner should notify the client of a reservation
he has regarding anticipated benefits.

105. Identify the ff. statements as true of false.


S1. MAS principally involve the consultative services to management in his decision-making.
S2. MAS consultation, unlike MAS engagement, generally involves advice of information by a
CPA in which an analytical process is applied.
a. True, True
b. False, True
c. False, False
d. True, False

106. Indicate whether the ff. statements as true of false.


S1. A CPA firm’s primary purpose of performing MAS services is to enable the staff members to
acquire the necessary continuing education in all areas of business.
S2. In management audit, a team with a mix of members who are accountants and non-
accountants will produce a desirable combination of specialists and will offer a cross-fertilization
of ideas from different business fields.
S3. An area of MAS which is directly related to accounting and finance functions is project
feasibility study.
True False
a. S1 S2
b. S2 S1
c. S3 S2
d. S1 S3

107. The ff. statements refer to competence of CPA’s in MAS, except:


a. In concept, it refers to the technical qualification of the practitioner and his ability to
supervise and evaluate the quality of work of his staff assigned to his engagement to be
responsible for the successful completion of the project.
b. It is acquired by education, self-study, attendance to professional development courses,
actual experience in MS Work and research.
c. It is the ability to identify the client’s needs, use analytical approach and process, apply
technical knowledge, communicate recommendations and assist in implementation.
d. It must be retained in the rendition of MAS work and it can be impaired if the CPA
performs decision-making for the client or acts as an employee of the client.

108. Competence in MAS is acquired by


a. Education
b. Auditing and other experience
c. Actual performance of MAS
d. All of the above

109. Which of the ff. statements is true?


a. Adequate training and experience in both analytical approach and process in the
particular undertaking are requisites for the CPA to be involved in a MAS engagement.
b. A CPA with MBA and PhD degrees is automatically qualified to render management
services.
c. Competence as a standard in the rendition of management services by a CPA may be
equated to having scholarly preparation to include the usual baccalaureate degree, an MBA and
other post-graduate studies.
d. A CPA by virtue of having the necessary academic preparation and by hurdling the
licensure examination required to have a CPA license can readily render management services to
the public.

110. Which of the ff. will not impair the independence of a CPA in the rendition of management
services?
a. The CPA performs decision-making services for his client
b. The CPA performs wherein he is in effect acting as an employee of the client.
c. The CPA losses his objectivity and acts in a manner as if he is advocating for the interest
of his client.
d. The CPA does not extend his services beyond the presentation of recommendations
of giving advice.

111. These statements relate to MAS standards.


I. A practitioner is to notify the client of any reservation he has regarding the anticipated
benefits.
II. Throughout the engagement, there ought to be a systematic critical review of
accomplishments and work should be done within the framework of the Code of Ethics and other
professional standards.
III. During the engagement, there should be significant changes between the cost and anticipated
benefits, the client should be informed.
IV. Before the engagement, the practitioner must make an arrangement with, and inform the
client on significant matters related to the engagement in writing.

Of these statements, which pertains to the practice standard on client benefit?


a. Statement I and III
b. All statements
c. Statement I only
d. Statement I, III, and IV only.
112. Mr. Rey Carlos, a CPA firms’ partner-in-charge of quality assurance and review is arguing
with Mr. Fortuna, the consulting partner regarding the question on independence as Mr. Fortuna
is presently rendering consulting services to T. Ang and Nga Co., an audit client of the firm.
Related to this issue of independence, all of the ff. are not valid except:
a. Independence is never sacrificed for as long as the auditor/consultant is correct in his for
the client.
b. A CPA who renders both audit and consulting services to a client by virtue of his
competence/expertise and extensive knowledge of the client’s business is in the best position to
render decisions for the client and should do so.
c. The client is the ultimate decision-maker and the auditor /or consultant should not
make decisions for the client.
d. It is up to professional judgment and discretion of the auditor/consultant to render
decisions for the client as long as his professional fees are commensurate to the benefit that the
client will derive from the engagement.

113. After preliminary audit arrangements have been made, an engagement confirmation letter
should be sent to the client. The letter would usually not include
a. An estimate of the time to be spent on the audit work by audit staff and management.
b. A reference to the auditor’s responsibility for the detection of errors or irregularities.
c. A statement of MAS would be made available upon request.
d. A statement that management letter will be issued outlining comments and suggestions as
to any procedures requiring the client’s attention.

114. This consists of identifying alternatives, selecting from among alternatives the one that is
best for the organization, and specifying what actions will be taken to implement the chosen
alternative.
a. Controlling
b. Planning
c. Directing
d. Motivating

115. The accounting and other reports coming to management that are used in controlling the
organization are called
a. Feedback
b. Performance report
c. Budget
d. Financial Accounting
116. The delegation of decision-making authority throughout an organization by allowing
managers at various operating levels to make key decisions relating to their area of responsibility
is called
a. Planning
b. Directing
c. Control
d. Decentralization

117. A position on the organization chart that is directly related to achieving the basic objectives
of an organization is called
a. line position
b. staff position
c. chief financial officer
d. controller

118. It provides a service or assistance to other parts of the organization and does not directly
achieve the basic objectives of the organization
a. line position
b. staff position
c. chief financial officer
d. controller

119. A detailed report to management comparing budgeted data to actual data for a specific time
period is called
a. budget
b. planning report
c. performance report
d. controller’s report

120. A member of the top management team who is responsible for providing timely and
relevant data to support planning and control activities and for preparing financial statements for
external users.
a. chief financial officer
b. controller
c. Management accountant
d. Treasurer

121. Managerial counting places less emphasis on ____________ and more emphasis on
______________ than financial accounting
a. Planning; Nonmonetary data
b. Budgets; Estimated data
c. Precision; Nonmonetary data
d. Estimates; Actual data

122. The delegation of decision-making authority throughout an organization by providing


managers at various operating levels with the authority to make key decisions relating to their
area of responsibility.
a. Decentralization
b. Assignment
c. Monitoring
d. Control
123. Accounting and other reports that help managers monitor performance and focus on
problems and/or opportunities that might otherwise go unnoticed
a. Feedback
b. Performance report
c. Budget
d. Financial Accounting

124. The manager in charge of the accounting department in an organization


a. CFO
b. Treasurer
c. Controller
d. Vice President-Finance

125. The phase of accounting concerned with providing information to managers for use in
planning and controlling operations and in decision-making
a. Financial accounting
b. Managerial accounting
c. Cost accounting
d. Corporate accounting

126. An activity that consumes resources or takes time but does not add value for which
customers are willing to pay
a. Constraint
b. Non-value added activity
c. Non-constraint
d. Value-added activity
127. A visual diagram of a firm’s organizational structure that depicts formal lines of reporting,
communication, and responsibility between managers.
a. Performance report
b. Budget
c. Cycle diagram
d. Organization chart.

128. If a financial manager/management accountant has a problem in identifying unethical


behavior or resolving an ethical conflict, the first action(s) he should normally take is to
a. Consult the board of directors
b. Discuss the problem with immediate superior
c. Notify the appropriate law enforcement agency
d. Resign from the company

129. Jam is a financial manager who has discovered that her company is violating environmental
regulations. In her immediate superior is involved, her appropriate action is to
a. Do nothing
b. Consult the audit committee
c. Present the matter to the next higher managerial level
d. Confront her immediate superior

130. If a financial manager/management accountant discovers unethical conduct in his/her


organization and fails to act, (s)he will be in violation of which ethical standard(s)
a. “Actively or passively subverts the attainment of the organization’s legitimate and ethical
objectives.”
b. “Communicate unfavorable as well as favorable information”
c. “Condone the commission of such acts by others within their organizations.
d. : All of the above

131. Corporate Social Responsibility


a. Effectively enforced through the controls envisioned by classical economics.
b. Defined as the obligation to shareholders to earn a profit
c. More than the obligation to shareholders to earn a profit
d. Defined as the obligation to serve long term, organizational interests.

132. A common argument against corporate involvement in social responsible behavior is that
a. It encourages government intrusion in decision making
b. As a legal person, a corporation is accountable for this conduct
c. It creates goodwill.
d. In a competitive market, such behavior incurs costs that place the company at a
disadvantage.

133. The Code of Ethics for Management Accountants requires a financial manager to allow the
established policies of the organization when faced with an ethical conflict. If these policies do
not resolve the conflict, the financial accountant should:
a. Consult the BOD immediately
b. Discuss the problem with the immediate superior if he/she is involved in conflict.
c. Communicate the problem to authorities outside the organization
d. Contact the next higher managerial level if initial presentation to the immediate
superior does not resolve the conflict.

134. Financial managers are obliged to maintain the highest standards of ethical conduct.
Accordingly, the Code of Ethics for MAs explicitly requires that they,
a. Obtain sufficient competent evidence when expressing opinion
b. Not to condone violations of others.
c. Comply with GAAS
d. Adhere to GAAS

135. Integrity is an ethical requirement for all financial managers. One aspect of integrity
requires
a. Performance of professional duties in accordance with applicable laws.
b. Avoidance of conflict of interest.
c. Refrain from improper use of inside information
d. Maintenance of appropriate level of professional competence.

136. Under the express terms of the Code of Ethics for Management Accountants, a financial
manager may not
a. Advertise
b. Encroach on the practice of another financial manager
c. Disclose confidential information unless authorized or legally obliged.
d. Accept other employment while serving as a financial accountant.

137. A financial manager/management accountant discovers a problem that could mislead users
of the firm’s financial data and has informed his/her immediate superior (S)he should report the
circumstances to the audit committee and/or BOD only if
a. The immediate superior, who reports to the CEO, knows about the situation but refuses to
correct it.
b. The immediate superior assures the financial manager that the problem will be resolved
c. The immediate superior reports the situation to his superior
d. The immediate superior, the firm’s CEO, knows about the situation, but refuses to
correct it

138. In which situation is a financial manager permitted to communicate confidential


information to individuals outside the firm?
a. There is an ethical conflict and the board refuses to take action
b. Such communication is legally prescribed
c. The financial manager knowingly communicates the information indirectly through a
subordinate.
d. An officer at the financial manager/ management accountant’s bank has requested
information on a transaction that could influence the firm’s stock price.

139. The Code of Ethics for Management Accountants includes integrity standard, which
requires the financial manager to
a. Identify and make known anything that may hinder his judgment or prevent
satisfactory completion of duties.
b. Report any relevant information that could influence users of financial statements.
c. Disclose confidential information when authorized by firm or required under the law.
d. Refuse gifts from anyone.

140. The Code of Ethics for Management Accountants includes competence standard, which
requires the financial manager to
a. Report information, whether favorable or unfavorable
b. Develop his/her professional proficiency on continual basis.
c. Discuss ethical conflicts and possible courses of actions with an unbiased counselor.
d. Discuss with subordinates, their responsibilities regarding the disclosure of information
about the firm.

141. Dramatic improvements in communication have resulted in increasing global competition


which has required firms to
a. completely replace existing cost information systems
b. expand existing cost information systems
c. modify existing cost information systems to handle more data
d. modify existing cost information systems to handle less data
e. develop cost management systems to help firms be more competitive.

142. A series of steps are followed to carry out some task in the business is
a. Business process
b. Controlling
c. Decentralization
d. Directing and motivating

143. A system by which a company is directed and controlled is called


a. Corporate Governance
b. Feedback
c. Nonconstraint
d. Risk Management

144. Anything that prevents an organization or individual from getting more of what it wants
a. constraint
b. Non-value added activity
c. Value-added activity
d. Governance

145.It consist of business functions that adds value to a company’s products and services such as
research and development, product design, marketing, distribution and customer service.
a. Value-added activity
b. Value chain
c. Business process
d. Decentralization

146. The delegation of decision making authority throughout an organization by providing


managers with the authority to make decisions relating to their area of responsibility.
A. Directing and motivating
b. Decentralization
c. Planning and control cycle
d. Business process

147. the process used by the company to help identify the risks that it faces and to develop
responses to those risks that enable the company to be reasonably assured of meeting its goals.
a. Enterprise risk management
b. Feedback
c. Planning and control cycle
d. Strategy.

148. Accounting and other reports that help managers monitor performance and focus on
problems and opportunities that might otherwise go unnoticed.
a. Financial statements
b. Feedback
c. Budget
d. Segment reports

149. The phase of accounting concerned with providing information to stockholders, creditors
and others outside the organization.
a. Management accounting
b. Financial accounting
c. Tax accounting
d. Bookkeeping

150. Selecting a course of action and specifying how the action will be implemented
a. Planning
b. Controlling
c. Organizing
d. Directing

151. Any part of an organization that can be evaluated independently of other parts and which
the managers seek financial data
a. Segment
b. Investment center
c. Profit center
d. Cost center

152. Management Accounting is an integral part of the management process. As such, it provides
essential information for the following objectives except
a. Maintaining the current level of resources utilization as well as internal and external
communication.
b. Measuring are evaluating performances
c. Planning strategies and controlling activities of the organization
d. Enhancing objectivity in decision-making.

153. Management accounting


a. Is governed by GAAP
b. Draws from disciplines other than accounting
c. Is geared primarily to the past rather than the future.
d. Places more emphasis on precision of data compared with financial accounting which
does not place more emphasis on accuracy of information

***********************************************************************
154. Management accounting information is developed for all of the following constituents
EXCEPT:
a. workers
b. bondholders
c. managers
d. executives

155.Management accounting has the following characteristics EXCEPT:


a. current, future oriented.
b. not regulated by the government
c. disaggregate
d. auditable

156.Management accounting information serves all of the following functions EXCEPT:


a. assessing company credit risk
b. Customer costing.
c. Management control.
d. Operational control.

157.Front line workers/operators should see all of the following types of financial and
nonfinancial information EXCEPT:
a. Cost of resources used in their production or service process.
b. Financial statements of customers and suppliers.
c. Quality and yield of the production or service process.
d. Time required to perform their production or service process.

158.Senior executives of organizations should see all of the following types of financial and
nonfinancial information EXCEPT:
a. Market share among targeted customer and market segments.
b. Hourly quality and yield statistics for all manufacturing and service
processes.
c. Profit and cash flow statements of the enterprise.
d. Monthly customer satisfaction and retention statistics.

159.Management accounting includes all of the following types of financial and


nonfinancial information EXCEPT:
a. Product costs.
b. Debt owed to banks.
c. Customer profitability.
d. Quality information.

160.An organization’s value proposition includes


a. Price.
b. Quality.
c. Customer satisfaction.
d. All of the above.
161.Return on investment is
a. capital/net income.
b. net income/capital.
c. operating income/capital.
d. none of the above.

162.Important factors in controlling unethical or illegal behavior within an organization


include
a. examples set by top management.
b. codes of conduct.
c. boundary systems.
d. all of the above.

163.An organization develops an ethical code of conduct because


a. its Boards of Directors mandates it.
b. it desires to immediately fire those employees who do not believe in its ethical
standards.
c. it hopes to reduce ethical conflicts by avoiding ambiguity or misunderstandings.
d. it hopes to silence its critics.

*********************************************************************
164.The major users of accounting information are:

a. external parties for making decisions about the company


b. internal managers for planning and control purposes
c. internal managers for non routine decisions
d. all of the above

165.Good accounting information helps an organization by:

a. accumulating and classifying data.


b. determining who should be fired and when.
c. directing management's attention.
d. helping to solve problems.

166.Which of the following should be considered in the selection of an accounting system?

a. behavioral effects of the system on managers


b. costs of buying and operating the system
c. improved decision-making power resulting from the system
d. all of the above

167.The cost-benefit balance weighs _____ costs against _____ benefits:


a. actual; actual
b. actual; estimated
c. estimated; estimated
d. estimated; actual

168.Which of the following is NOT and example of a special report?


a. cash flow report
b. customer survey
c. competitor analysis
d. advertising impact analysis

169.The process of setting goals is called:


a. controlling
b. managing
c. planning
d. none of the above

170.The focus on customers occurs in which functions of the value chain:


a. research and development
b. production
c. marketing
d. distribution
e. all of the above

171.In the value-chain, accounting is in the _____ function:


a. research and development
b. design
c. support
d. customer service
e. Distribution

172.The functions of planning for control, evaluating and consulting, and governmental
reporting are typically assumed within organizations by:

a. the company treasurer


b. the company controller
c. the company vice-president of marketing
d. external auditors
173.The treasurer function includes:

a. tax administration
b. evaluating and consulting
c. investor relations
d. economic appraisal
174. Trends that are causing changes in management accounting today include:

a advances in technology
b. increased global competition
c. a shift from a manufacturing to a service-based economy
d. a., b.
e. a., b., c.

175.The most dominant influence on management accounting over the past decade is:

a. increased global competition


b. a shift from a manufacturing to a service-based economy
c. advances in technology
d. none of the above

176. Ethical obligations of management accountants are governed by the Standards of


Ethical Conduct for Management Accountants, which outlines responsibilities
regarding:

a. incompetence, full disclosure of all information, moral decay, and partisanship


b. assisting in maximizing profits regardless of the means necessary
c. competence, confidentiality, integrity, and objectivity
e. none of these

177.In the Standards of Ethical Conduct for Management Accountants, which of the
following is an example of Competence:

a. communicate unfavorable as well as favorable information


b. avoid actual or apparent conflicts of interest
c. refuse any gift that would appear to or actually influence behavior
d. perform professional duties in accordance with relevant laws

*************************************************************************
MULTIPLE CHOICE QUESTIONS

178. Which of the following statements about managerial accountants is false?


A. Managerial accountants more and more are considered "business partners."
B. Managerial accountants often are part of cross-functional teams.
C. An increasing number of organizations are segregating managerial accountants
in separate managerial-accounting departments.
D. In a number of companies, managerial accountants make significant business
decisions and resolve operating problems.
E. The role of managerial accountants has changed considerably over the past decade.

179. The day-to-day work of management teams will typically comprise all of the following
activities except:
A. decision making.
B. planning.
C. cost minimizing.
D. directing operational activities.
E. controlling.

180. Which of the following functions is best described as choosing among available
alternatives?
A. Decision making.
B. Planning.
C. Directing operational activities.
D. Controlling.
E. Budgeting.

181. Which of the following managerial functions involves a detailed financial and operational
description of anticipated operations?
A. Decision making.
B. Planning.
C. Directing operational activities.
D. Controlling.
E. Measuring.
182. Which of the following involves the coordination of daily business functions within an
organization?
A. Decision making.
B. Planning.
C. Directing operational activities.
D. Controlling.
E. Motivating.

183. Titan Company has set various goals, and management is now taking appropriate action
to ensure that the firm achieves these goals. One such action is to reduce outlays for
overhead, which have exceeded budgeted amounts. Which of the following functions
best describes this process?
A. Decision making.
B. Planning.
C. Coordinating.
D. Controlling.
E. Organizing.

184. Which of the following is not an objective of managerial accounting?


A. Providing information for decision making and planning.
B. Assisting in directing and controlling operations.
C. Maximizing profits and minimizing costs.
D. Measuring the performance of managers and subunits.
E. Motivating managers toward the organization's goals.

185. The role of managerial accounting information in assisting management is a(n):


A. financial-directing role.
B. attention-directing role.
C. planning and controlling role.
D. organizational role.
E. problem-solving role.

186. Employee empowerment involves encouraging and authorizing workers to take initiatives
to:
A. improve operations.
B. reduce costs.
C. improve product quality.
D. improve customer service.
E. all of the above.

187. The process of encouraging and authorizing workers to take appropriate initiatives to
improve the overall firm is commonly known as:
A. planning and control.
B. employee empowerment.
C. personnel aggressiveness.
D. decision making.
E. problem recognition and solution.

188. .Which of the following business models considers financial, customer, internal operating,
and other measures in the evaluation of performance?
A. Deterministic simulation.
B. Balanced scorecard.
C. Payoff matrix.
D. Decision tree.
E. Chart of operating performance (COP).

189. Which of the following perspectives is normally absent in a balanced scorecard?


A. Financial.
B. Customer.
C. Internal operations.
D. Learning and innovation/growth.
E. None of the above.

190. Managerial accounting:


A. focuses only on historical data.
B. is governed by GAAP.
C. focuses primarily on the needs of personnel within the organization.
D. provides information for parties external to the organization.
E. focuses on financial statements and other financial reports.

191. Managerial accounting:


A. is unregulated.
B. produces information that is useful only for manufacturing organizations.
C. is based exclusively on historical data.
D. is regulated by the Securities and Exchange Commission (SEC).
E. generally focuses on reporting information about the enterprise in its entirety rather
than by subunits.

192. Which of the following would likely be considered an internal user of accounting
information rather than an external user?
A. Stockholders.
B. Consumer groups.
C. Lenders.
D. Middle-level managers.
E. Government agencies.

193. All of the following entities would have a need for managerial accounting information
except:
A. Dell Computer.
B. The Los Angeles Dodgers baseball club.
C. Office Depot.
D. The Federal Bureau of Investigation (FBI).
E. None of the above responses is correct, as all of these entities would use
managerial accounting information.

194. Which of the following choices correctly depicts whether Bank of America, Microsoft,
and Florida State University would have a need for managerial accounting?
Bank Florida State
of Microsoft University
America
A. Yes Yes No
B. Yes No Yes
C. Yes Yes Yes
D. No Yes No
E. No Yes Yes
195. Financial accounting focuses primarily on reporting:
A. to parties outside of an organization.
B. to parties within an organization.
C. to an organization's board of directors.
D. to financial institutions.
E. for financial institutions.

196. Which of the following statements represents a similarity between financial and
managerial accounting?
A. Both are useful in providing information for external users.
B. Both are governed by GAAP.
C. Both draw upon data from an organization's accounting system.
D. Both rely heavily on published financial statements.
E. Both are solely concerned with historical transactions.
197. Which of the following employees at American Airlines would not be considered as
holding a line position?
A. Pilot.
B. Chief financial officer (CFO).
C. Flight attendant.
D. Ticket agent.
E. Baggage handler.

198. Which of the following employees would be considered as holding a line position?
A. The controller of Exxon Corporation.
B. The vice-president for government relations of Microsoft.
C. The manager of food and beverage services at Disney's Magic Kingdom.
D. A secretary employed by Hewlett-Packard.
E. None of the above.

199. Which of the following employees at Starbucks would likely be considered as holding a
staff position?
A. The company's chief operating officer (COO).
B. The manager of a store located in Kansas City, Missouri.
C. The company's lead, in-house attorney.
D. The company's chief financial officer (CFO).
E. Both the company's lead, in-house attorney and the chief financial officer.

200. The chief managerial and financial accountant of an organization is the:


A. chief executive officer (CEO).
B. treasurer.
C. vice-president of accounting.
D. internal auditor.
E. chief financial officer (CFO).

201. Which of the following typically does not relate to the role of a controller?
A. A controller supervises the accounting department.
B. A controller safeguards an organization's assets.
C. A controller oversees the preparation of reports required by governmental authorities.
D. A controller normally assumes a narrow role within the organization, often
preventing the individual's rise to top management ranks.
E. Choices "B" and "D" above.
202. A controller is normally involved with:
A. preparing financial statements.
B. managing investments.
C. raising capital.
D. safeguarding assets.
E. managing the firm's credit policy.

203. Which of the following is not a function of the treasurer?


A. Safeguarding assets.
B. Managing investments.
C. Preparing financial statements.
D. Being responsible for an entity's credit policy.
E. Raising capital.

204. Managerial accountants:


A. often work on cross-functional teams.
B. are located throughout an organization.
C. are found throughout an organization and work on cross-functional teams.
D. are found primarily at lower levels of the organizational hierarchy.
E. are found primarily at higher levels of the organizational hierarchy.

205. The two dimensions of managerial accounting are:


A. a decision-facilitating dimension and a decision-influencing dimension.
B. a decision-facilitating dimension and a financial-influencing dimension.
C. a decision-influencing dimension and a cost-minimizing dimension.
D. a cost-minimizing dimension and a profit-maximizing dimension.
E. a decision-influencing dimension and a profit-maximizing dimension.

206. Much of managerial accounting information is based on:


A. a cost-benefit theme.
B. profit maximization.
C. cost minimization.
D. the generation of external information.
E. effectiveness but not efficiency.
207. Which of the following is not normally considered to be an element of e-business?
A. E-budgeting.
B. Supply-chain management.
C. E-commerce.
D. Balanced scorecards.
E. Choices "B" and "D" above.

208. Managerial accounting has changed in recent years because of:


A. the growth of e-business.
B. increased global competition.
C. the emergence of new industries.
D. an increased focus on the customer.
E. all of the above factors.

209. Managerial accounting has changed in recent years because of:


A. a growing service economy in the United States.
B. the growing popularity of cross-functional teams.
C. computer-integrated manufacturing (CIM).
D. time-based competition.
E. all of the above factors.

210. Which of the following statement(s) about just-in-time (JIT) inventory management is
(are) true?

I. The emphasis of JIT is on "pull" manufacturing.


II. Raw materials are purchased just in time to be used in production.
III. JIT is an inventory technique that focuses on reduction of both inventory and
related inventory costs.

A. I only.
B. II only.
C. III only.
D. II and III.
E. I, II, and III.
211. Ohio Corporation recently implemented a just-in-time (JIT) production system along with
a series of continuous improvement programs. If the firm is now considering adopting a
total quality management (TQM) program, it would likely find that TQM:
A. is consistent with both JIT and continuous improvement.
B. is consistent with JIT but inconsistent with continuous improvement.
C. is consistent with continuous improvement but inconsistent with JIT.
D. is inconsistent with both JIT and continuous improvement.
E. is an antiquated management technique.

212. Cost management systems tend to focus on an organization's:


A. machines.
B. employees.
C. activities.
D. customers.
E. rules and regulations.

213. The value chain of a manufacturer would tend to include activities related to:
A. manufacturing.
B. research and development.
C. product design.
D. marketing.
E. all of the above.

214. Which of the following choices correctly depicts activities that would be included in a
manufacturer's value chain?
Research
and Marketing Distribution
Developme
nt
A. Yes Yes No
B. Yes No Yes
C. Yes Yes Yes
D. No Yes No
E. No Yes Yes

215.Which of the preceding activities would likely not be considered part of The Gap clothing
company’s value chain?
A. Designing a new product line.
B. Locating and then negotiating terms with a clothing manufacturer.
C. Marketing an existing product line.
D. Distributing goods from regional warehouses to local stores.
E. All of the above activities would be an element in the company’s value chain.
216. The activities performed by a manufacturing organization could be categorized as pre-
production (such as research and development and product design), production-related,
and post-production (such as marketing and customer service). Which activities should
the firm focus on if management understands the value chain concept and desires to meet
organizational goals?
A. Pre-production activities.
B. Production-related activities.
C. Post-production activities.
D. Pre-production, production-related, and post-production activities.
E. Pre-production and production-related activities.

217. In order for a company to achieve a sustainable competitive advantage, it must perform
value chain activities:
A. at the same quality level as competitors, at the same cost.
B. at the same quality level as competitors, but at a lower cost.
C. at a higher quality level than competitors, at a higher cost.
D. at a higher quality level than competitors, but at no greater cost.
E. at either the same quality level as competitors, but at a lower cost, or at a higher
quality level than competitors, but at no greater cost.

218. The process of managing the various activities in the value chain, along with the
associated costs, is commonly known as:
A. activity-based costing.
B. strategic cost management.
C. total quality management.
D. computer-integrated costing.
E. sound management practices (SMP).

219. A company has a bottleneck operation that slows production. Which of the following
tools or approaches could the firm use to determine the most cost-effective ways to
eliminate this problem?
A. Linear programming.
B. Theory of constraints.
C. Decision-tree diagrams.
D. Payoff matrices.
E. Strategic path analysis (SPA).
220. Which of the following can be linked to the relatively recent wave of corporate scandals?
A. Greedy corporate executives.
B. Managers who make over-reaching business deals.
C. Lack of oversight by companies' audit boards and boards of directors.
D. Shoddy work by external auditors.
E. All of the above.

221.Which of the following acts strives to improve corporate governance and the quality of
corporate accounting/reporting?
A. Robinson-Patman.
B. Taft-Hartley.
C. Sarbanes-Oxley.
D. Bush-Cheney.
E. Franks-Ashcroft.

222. Which of the following statements about the ethical climate of business is false?
A. Greedy corporate executives are, in part, to blame for the relatively recent rash of
corporate scandals.
B. Unethical business behavior can have a negative impact on our economy.
C. The Sarbanes-Oxley Act strives to improve the overall quality of corporate reporting.
D. The Robinson-Patman Act strives to improve the overall quality of corporate
reporting.
E. Corporate scandals have served as the accounting profession’s wake-up call to pay
increased attention to ethical issues in the conduct of business.

223.Which of the following is not an ethical standard of managerial accounting?


A. Competence.
B. Confidentiality.
C. Efficiency.
D. Integrity.
E. Credibility.

224. Which of the following is not an element of competency?


A. To develop appropriate knowledge about a particular subject.
B. To perform duties in accordance with relevant laws.
C. To perform duties in accordance with relevant technical standards.
D. To refrain from engaging in an activity that would discredit the accounting
profession.
E. To prepare clear reports after an analysis of relevant and reliable information.
225 .Assume that a managerial accountant regularly communicates with business associates to
avoid conflicts of interest and advises relevant parties of potential conflicts. In so doing,
the accountant will have applied the ethical standard of:
A. objectivity.
B. confidentiality.
C. integrity.
D. credibility.
E. unified behavior.
*****************************************************************************
226. I. Reports prepared in financial accounting are general-purpose reports, whereas reports
prepared in managerial accounting are usually special-purpose reports.
II. Managerial accounting information generally pertains to an entity as a whole and is
highly aggregated.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

227. I. Managerial accounting applies to all forms of business organizations.


II. Determining the unit cost of manufacturing a product is an output of financial
accounting.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

228. I. Managerial accounting internal reports are prepared more frequently than are classified
financial statements.
II. The management function of organizing and directing is mainly concerned with
setting goals and objectives for the entity.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

229. I. The Sarbanes-Oxley Act replaces generally accepted accounting principles in a


manufacturing company.
II. Controlling is the process of determining whether planned goals are being met.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
230. I. Decision-making is an integral part of the planning, directing, and controlling functions.
II. Both direct labor cost and indirect labor cost are product costs.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

231 I. Manufacturing costs that cannot be classified as direct materials or direct labor are
classified as manufacturing overhead.
II. Raw materials are equal to direct materials minus indirect materials.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
232. I. Raw materials that can be conveniently and directly associated with a finished product
are called materials overhead.
II. The total cost of a finished product does not generally contain equal amounts of
materials, labor, and overhead costs.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

233. I. Direct materials costs and indirect materials costs are manufacturing overhead.
II. Period costs include selling and administrative expenses.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
234. I. Indirect materials and indirect labor are both inventoriable costs.
II. Direct materials and direct labor are the only product costs.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
235. I. Total period costs are deducted from total cost of work in process to calculate cost of
goods manufactured.
II. . Period costs are not inventoriable costs.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

236. I. Ending finished goods inventory appears on both the balance sheet and the income
statement of a manufacturing company.
II. The beginning work in process inventory appears on both the balance sheet and the cost
of goods manufactured schedule of a manufacturing company.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

237. I. In calculating gross profit for a manufacturing company, the cost of goods
manufactured is deducted from net sales.
II. Finished goods inventory does not appear on a cost of goods manufactured schedule.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
238.I. If the ending work in process inventory is greater than the beginning work in process
inventory, then the cost of goods manufactured will be less than total manufacturing costs
for the period.
II. Finished goods inventory for a manufacturing company is equivalent to merchandise
inventory for a merchandising company.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
239. I. Raw materials inventory is not an asset until it is used to make a product.
II. Raw materials inventory shows the cost of completed goods available for sale to
customers.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
240. I. The supply chain is all the activities associated with providing a product or service.
II. Many companies have significantly lowered inventory levels and costs using just-in-time
inventory methods.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
241. I. The theory of constraints is used to measure performance.
II. The focus of a TQM system is to reduce defects in finished products.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
242.I. The balanced scorecard approach attempts to maintain as little inventory on hand as
possible.
II. In preparing closing entries for a manufacturing company, all revenue and
expense account balances are closed to a Manufacturing Summary account.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
243.I. To balance the Cost of Goods Manufactured columns of a worksheet for a manufacturing
company, an entry must be made in the income statement debit column.
II. Managerial accounting is primarily concerned with managers and external users.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
244. I. Planning involves coordinating the diverse activities and human resources of a company
to produce a smooth running operation.
II. When the physical association of raw materials with the finished product is too small to trace
in terms of cost, they are usually classified as indirect materials.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
245. I. Product costs are also called inventoriable costs.
II. Direct materials become a cost of the finished goods manufactured when they are
acquired, not when they are used.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

246.I. The sum of the direct materials costs, direct labor costs, and beginning work in process is
the total manufacturing costs for the year.
II. In a manufacturing company balance sheet, manufacturing inventories are reported in the
current assets section in the order of their expected use in production.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

247. I. Published financial statements show costs classified by behavior.


II. Generally accepted accounting principles govern financial accounting but not
managerial accounting.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

248. I. Economic events are the raw data for both financial and managerial accounting.
II. Internal financial statements must be prepared using generally accepted accounting principles.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

249. I. The form and content of reports can influence decisions made by managers.
II. Management-by-objectives and management-by-exception are two names for the same
general management principle.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
250. I. . "Pro forma" is the name given to an income statement that classifies costs by function.
II. . Some managerial accounting reports contain costs not incorporated in the basic accounting
system.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
251.I. . A professional examination exists to test the competence of financial accountants, but
not of managerial accountants.
II. Managerial accountants should, but have no obligation to, maintain their professional skills.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

252. In order to be useful to managers, management accounting reports should possess all of
the following characteristics EXCEPT:
a.provide objective measures of past operations and subjective estimates about future decisions
b.be prepared in accordance with generally accepted accounting principles
c.be provided at any time management needs information
d.be prepared to report information for any unit of the business to support decision making

253. What is the primary criterion for the preparation of managerial accounting reports?
a.Relevance of the reports
b.Meet the manager needs
c.Timing of the reports
d.Cost of the reports

254. Which of the following is most associated with managerial accounting?


a.Must follow GAAP
b.May rely on estimates and forecasts
c.Is prepared for users outside the organization.
d.Always reports on the entire entity

255. Which of the following is most associated with financial accounting?


a.Can have both objective and subjective information.
b.Can be prepared periodically, or as needed.
c.Prepared in accordance with GAAP
d.Can be prepared for the entity or segment.
256. Which of the following statements is false?
a.There is no overlap between financial and managerial accounting.
b.Managerial accounting sometimes relies on past information.
c.Managerial accounting does not need to conform to GAAP
d.Financial accounting must conform to GAAP.

257. In most business organizations, the chief management accountant is called the:
a.chief accounting officer
b.controller
c.chairman of the board
d.chief executive officer

258.All of the following employees hold line positions in Anthea Electric EXCEPT:
a.vice president of production
b.vice president of finance
c.manager of the Valhalla Plant
d.vice president of sales

259.. The controller's staff often consists of several management accountants. All of the
following would most likely be on the controller's staff EXCEPT:
a.general accountants
b.budgets and budget analysts
c.investments and shareholder relations managers
d.cost accountants
260.9. Managerial accounting
a.is prepared according to GAAP.
b.is prepared according to management needs.
c.is prepared periodically only.
d.is related to the entire business entity only.

261.10. Who are the individuals charged with the responsibility for directing the
day-to-day operations of a business?
a.Investors
b.Managers
c.Employees
d.Customers
262.11. Which of the following are the basic functions of management?
a.Supervising and directing
b.Decision making and supervising
c.Organizing and directing
d.Planning and controlling

263.12. What term is used to describe the process of directing operations to


achieve the organization’s goals and plans?
a.Supervising
b.Control
c.Directing
d.Planning
264.13. What term is used to describe the process of developing the organization’s
objectives and goals?
a.Supervising
b.Planning
c.Improving
d.Decision making

265.14. Which of the following is the principle reason for preparing managerial
accounting reports?
a.Usefulness to management
b.Cost of preparation
c.Clarity
d.GAAP

266.15. Which of the following is not a characteristic of useful managerial


accounting reports?
a.Accuracy
b.GAAP
c.historical and estimated data
d.reports prepared as needed

267.16. Compute conversion costs given the following data: Direct Materials,
$352,700; Direct Labor, $196,300; Factory Overhead, $177,600.
a.$549,000
b.$726,600
c.$373,900
d.$530,300
268.17. Which of the following is false in regards to direct materials for an auto
manufacturer?
a.Steel would probably be a direct material.
b.Upholstery fabric would probably be a direct material
c.Oil to lubricate factory machines would not be a direct material.
d.Small plastic clips to hold on door panels, because they become part of the auto, must be
accounted for as direct materials.

269.18. The cost of a manufactured product generally consists of which of the


following costs?
a.Direct materials cost and factory overhead cost
b.Direct labor cost and factory overhead cost
c.Direct labor cost, direct materials cost, and factory overhead cost
d.Direct materials cost and direct labor cost

270.19. The cost of materials entering directly into the manufacturing process is
classified as:
a.direct labor cost
b.factory overhead cost
c.burden cost
d.direct materials cost

271.20. Which of the following is an example of direct materials cost for an


automobile manufacturer?
a.Cost of oil lubricants for factory machinery
b.Cost of wages of assembly worker
c.Salary of production supervisor
d.Cost of interior upholstery
ANS: D DIF: Difficult OBJ: 16(1)-02
NAT: AACSB Analytic | IMA-Cost Management

272.21. If the cost of direct materials is a small portion of total production cost, it
may be classified as part of:
a.direct labor cost
b.selling and administrative costs
c.miscellaneous costs
d.factory overhead cost

273.22. The cost of wages paid to employees directly involved in the


manufacturing process in converting materials into finished product is classified as:
a.factory overhead cost
b.direct labor cost
c.wages expense
d.direct materials cost

274.23. Which of the following is an example of direct labor cost for an airplane
manufacturer?
a.Cost of oil lubricants for factory machinery
b.Cost of wages of assembly worker
c.Salary of plant supervisor
d.Cost of jet engines

NAT: AACSB Analytic | IMA-Cost Management


275.24. Costs other than direct materials cost and direct labor cost incurred in the
manufacturing process are classified as:
a.factory overhead cost
b.miscellaneous expense
c.product costs
d.other manufacturing costs

276.25. Which of the following is an example of a factory overhead cost?


a.Repair and maintenance cost on the administrative building
b.Factory heating and lighting cost
c.Insurance premiums on salespersons' automobiles
d.President's salary

277.26. Another term often used to refer to factory overhead is:


a.surplus
b.other manufacturing cost
c.supervisory cost
d.factory burden

278.27. Which of the following costs are referred to as conversion costs?


a.Direct labor cost and factory overhead cost
b.Direct materials cost and direct labor cost
c.Factory overhead cost
d.Direct materials cost and factory overhead cost

279.28. What term is used to refer to the cost of changing direct materials into a
finished manufactured product?
a.Factory overhead cost
b.Period cost
c.Conversion cost
d.Direct labor cost

280.29. Which of the following items would not be classified as part of factory
overhead?
a.Direct labor used
b.Amortization of manufacturing patents
c.Production supervisors' salaries
d.Factory supplies used

281.30. Which of the following is considered a part of factory overhead cost?


a.Sales commissions
b.Depreciation of factory buildings
c.Depreciation of office equipment
d.Direct materials used

282.31. Which of the following manufacturing costs is an indirect cost of


producing a product?
a.Oil lubricants used for factory machinery
b.Commissions for sales personnel
c.Hourly wages of an assembly worker
d.Memory chips for a microcomputer manufacturer

283.32. Prime costs are


a.direct materials and factory overhead
b.direct materials and direct labor
c.direct labor and factory overhead
d.period costs and factory overhead

284.33. Conversion costs are


a.direct materials and direct labor
b.direct materials and factory overhead
c.factory overhead and direct labor
d.direct materials and indirect labor

285.34. Which of the following is not a prime cost?


a.Supervisor’s wages
b.Direct labor wages
c.Machine operator wages
d.Assembly line wages
286.35. The following are all product costs except:
a.Direct materials
b.Sales and administrative expenses
c.Direct labor
d.Factory overhead
287.36. One on the following will not be found on the balance sheet of a
manufacturing company.
a.cost of goods sold
b.materials
c.work in process
d.finished goods

288.37. In the income statement of a manufacturing company, what replaces


purchases in the cost of goods section of a retail company?
a.Finished goods
b.Cost of merchandise available
c.Cost of goods manufactured
d.Work in process completed

289.38. What is the purpose of the Statement of Cost of Goods Manufactured?


a.to determine the ending materials inventory
b.to determine the ending work in process inventory
c.to determine the amounts transferred to finished goods
d.all of the answers are true

290. Which of the following accounts will be found on the income statement?
a.inventory
b.work in process
c.finished goods
d.cost of merchandise sold
291. All of the following are ways that managers use managerial information except
a.to evaluate the company’s stock performance
b.to evaluate the performance of a company’s operations
c.to support long-term planning decisions
d.to determine the cost of manufacturing a product

292 Accounting is an information system that provides essential data about the economic
activities of an entity to various users to aid them in making informed judgments and
decisions.

Managerial accounting reports are prepared according to generally accepted accounting


principles.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

293. Managerial accounting information includes both historical and estimated data.
ANS: T DIF: Easy OBJ: 16(1)-01
NAT: AACSB Analytic | IMA-Cost Management

Since there are few rules to restrict how an organization chooses to arrange its own internal data
for decision making, managerial accounting provides ample opportunity for creativity and
change.
ANS: T DIF: Easy OBJ: 16(1)-01
NAT: AACSB Analytic | IMA-Cost Management

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
294. A diagram of the operating structure of an organization is called an organization chart.

In most business organizations, the chief accountant is called the treasurer.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

295. In most business organizations, the chief accountant is called the controller.

A staff department or unit is one that provides services, assistance, and advice to the
departments with line or other staff responsibilities.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

296. The vice presidents of production and sales and the controller hold line positions in most
large organizations.

A staff department has no direct authority over a line department.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

297. The controller's staff consists of management accountants responsible for systems and
procedures, general accounting, budgets, taxes, and cost accounting.

Managerial accounting reports must be useful to the user of the information.


Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

298. Planning is the process of directing operations to achieve the organization’s goals and
plans.

Planning is the process of setting goals for the use of an organization’s resources and of
developing ways to achieve these goals.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

299. Control is the process of directing operations to achieve the organization’s goals and
plans.

Managerial accounting provides useful information to managers on product costs.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

300. The payment of dividends is an example of a cost.

A cost can be a payment of cash for the purpose of generating revenues.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
301. The cost of a manufactured product generally consists of direct materials cost, direct labor
cost, and factory overhead cost.

The cost of materials entering directly into the manufacturing process is classified as factory
overhead cost.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

302. The cost of wages paid to employees directly involved in converting materials to finished
product is classified as direct labor cost.

If the cost of employee wages is not a significant portion of the total product cost, the wages are
classified as direct materials cost.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

303. For a construction contractor, the wages of carpenters would be classified as factory
overhead cost.

For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

304. Costs other than direct materials cost and direct labor cost incurred in the manufacturing
process are classified as factory overhead cost.
Depreciation on factory plant and equipment is an example of factory overhead cost.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

305. Cost of oil used to lubricate factory machinery and equipment is an example of a direct
materials cost.
If the cost of materials is not a significant portion of the total product cost, the materials may
be classified as part of factory overhead cost.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

306. Factory overhead cost is sometimes referred to as factory burden.

Conversion cost is the combination of direct labor cost and factory overhead cost.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

307. Conversion cost is the combination of direct materials cost and factory overhead cost.

Factory overhead is an example of a product cost.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
308. Direct labor costs are included in the conversion costs of a product.
The costs of materials and labor that do not enter directly into the finished product are
classified as factory overhead.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

309. The costs of materials and labor that do not enter directly into the finished product are
classified as cost of goods sold.

Indirect labor would be included in factory overhead.


Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

310. A cost object is how costs are related or identified.


Direct costs can be specifically traced to a cost object.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

311. Indirect costs can be specifically identified to a cost object.


Nonmanufacturing costs are classified into two categories: selling and administrative.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
312. Prime costs are the combination of direct labor costs and factory overhead costs.

Prime costs are the combination of direct materials and direct labor costs.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

313. Conversion costs are the combination of direct labor and factory overhead costs.

Product costs are also referred to as inventoriable costs.

Which statement is true?


a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

314. Period costs include direct materials and direct labor.


Period costs can be found in the balance sheet or in the income statement.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

315. On the balance sheet for a manufacturing business, the cost of direct materials, direct
labor, and factory overhead are categorized as either materials inventory, work in process
inventory, or finished goods inventory.

Only the value of the inventory that is sold will appear in the income statement.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false
316. The statement of cost of goods manufactured is an extension of the income statement for
a manufacturing company.
Managers use managerial information to evaluate performance of a company’s operation.
Which statement is true?
a. Statement I only
b. Statement 2 only
c. Both statements are true
d. Both statements are false

The following are some of the costs incurred by Cake Factory Company. Identify them as either:

317. Salesman commissions


a. Direct Materials
b. Direct Labor
c. Factory Overhead
d. Non manufacturing cost

318. Factory Rent


a. Direct Materials
b. Direct Labor
c. Factory Overhead
d. Non manufacturing cost

319. Depreciation expense - factory


a. Direct Materials
b. Direct Labor
c. Factory Overhead
d. Non manufacturing cost
320. Frosting
a. Direct Materials
b. Direct Labor
c. Factory Overhead
d. Non manufacturing cost

321. Baker’s wages


a. Direct Materials
b. Direct Labor
c. Factory Overhead
d. Non manufacturing cost

322. Depreciation expense - office


a. Direct Materials
b. Direct Labor
c. Factory Overhead
d. Non manufacturing cost

323. Cake mix


a. Direct Materials
b. Direct Labor
c. Factory Overhead
d. Non manufacturing cost
324. Sprinkles for decoration (indirect material)
a. Direct Materials
b. Direct Labor
c. Factory Overhead
d. Non manufacturing cost
The following are some of the costs incurred by Cake Factory Company. Identify them as either:

325. Salesman commissions


a. Prime costs
b. Conversion costs
c. Both prime and conversion costs
d. Neither prime or conversion costs

326. Factory rent


a. Prime costs
b. Conversion costs
c. Both prime and conversion costs
d. Neither prime or conversion costs

327. Depreciation expense - factory


a. Prime costs
b. Conversion costs
c. Both prime and conversion costs
d. Neither prime or conversion costs

328. Frosting
a. Prime costs
b. Conversion costs
c. Both prime and conversion costs
d. Neither prime or conversion costs

329. Baker’s wages


a. Prime costs
b. Conversion costs
c. Both prime and conversion costs
d. Neither prime or conversion costs

330. Depreciation expense - office


a. Prime costs
b. Conversion costs
c. Both prime and conversion costs
d. Neither prime or conversion costs

331. Cake mix


a. Prime costs
b. Conversion costs
c. Both prime and conversion costs
d. Neither prime or conversion costs

332. Sprinkles for decoration (indirect material)


a. Prime costs
b. Conversion costs
c. Both prime and conversion costs
d. Neither prime or conversion costs
334. Managerial accounting applies to each of the following types of businesses except
a. service firms.
b. merchandising firms.
c. manufacturing firms.
d. Managerial accounting applies to all types of firms.

335. Managerial accounting information is generally prepared for


a. stockholders.
b. creditors.
c. managers.
d. regulatory agencies.

336. Managerial accounting information


a. pertains to the entity as a whole and is highly aggregated.
b. pertains to subunits of the entity and may be very detailed.
c. is prepared only once a year.
d. is constrained by the requirements of generally accepted accounting principles.

337. The major reporting standard for presenting managerial accounting information is
a. relevance.
b. generally accepted accounting principles.
c. the cost principle.
d. the current tax law.

338. Managerial accounting is also called


a. management accounting.
b. controlling.
c. analytical accounting.
d. inside reporting.

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


a. Creditor
b. Department manager
c. Controller
d. Treasurer

340. Managerial accounting does not encompass


a. calculating product cost.
b. calculating earnings per share.
c. determining cost behavior.
d. profit planning.

341. Managerial accounting is applicable to


a. service entities.
b. manufacturing entities.
c. not-for-profit entities.
d. all of these.

342. Management accountants would not


a. assist in budget planning.
b. prepare reports primarily for external users.
c. determine cost behavior.
d. be concerned with the impact of cost and volume on profits.

343. Internal reports must be communicated


a. daily.
b. monthly.
c. annually.
d. as needed.

344. Financial statements for external users can be described as


a. user-specific.
b. general-purpose.
c. special-purpose.
d. managerial reports.

345. Managerial accounting reports can be described as


a. general-purpose.
b. macro-reports.
c. special-purpose.
d. classified financial statements.

346. The reporting standard for external financial reports is


a. industry-specific.
b. company-specific.
c. generally accepted accounting principles.
d. department-specific.
347. Which of the following statements about internal reports is not true?
a. The content of internal reports may extend beyond the double-entry accounting
system.
b. Internal reports may show all amounts at market values.
c. Internal reports may discuss prospective events.
d. Most internal reports are summarized rather than detailed.

348. In an analogous sense, external user is to internal user as generally accepted accounting
principles are to
a. timely.
b. special-purpose.
c. relevance to decision.
d. SEC.

349. Internal reports are generally


a. aggregated.
b. detailed.
c. regulated.
d. unreliable.

350. A distinguishing feature of managerial accounting is


a. external users.
b. general-purpose reports.
c. very detailed reports.
d. quarterly and annual reports.

351. What activities and responsibilities are not associated with management's functions?
a. Planning
b. Accountability
c. Controlling
d. Directing

352. Planning is a function that involves


a. hiring the right people for a particular job.
b. coordinating the accounting information system.
c. setting goals and objectives for an entity.
d. analyzing financial statements.
353. The managerial function of controlling
a. is performed only by the controller of a company.
b. is only applicable when the company sustains a loss.
c. is concerned mainly with operating a manufacturing segment.
d. includes performance evaluation by management.

354. Which of the following is not a management function?


a. Constraining
b. Planning
c. Controlling
d. Directing

355. A manager that is establishing objectives is performing which management function?


a. Controlling
b. Directing
c. Planning
d. Constraining

356. The management function that requires managers to look ahead and establish objectives
is
a. controlling.
b. directing.
c. planning.
d. constraining.

357. In determining whether planned goals are being met, a manager is performing the
function of
a. planning.
b. follow-up.
c. directing.
d. controlling.

358. Which of the following is not a separate management function?


a. Planning
b. Directing
c. Decision-making
d. Controlling
359. Directing includes
a. providing a framework for management to have criteria to terminate employees when
needed.
b. running a department under quality control standards universally accepted.
c. coordinating a company's diverse activities and human resources to produce a
smooth-running operation.
d. developing a complex performance ranking system to give certain high performers
good raises.

360. Both direct materials and indirect materials are


a. raw materials.
b. manufacturing overhead.
c. merchandise inventory.
d. sold directly to customers by a manufacturing company.

361. The work of factory employees that can be physically and directly associated with
converting raw materials into finished goods is
a. manufacturing overhead.
b. indirect materials.
c. indirect labor.
d. direct labor.

362. Which one of the following would not be classified as manufacturing overhead?
a. Indirect labor
b. Direct materials
c. Insurance on factory building
d. Indirect materials
363. Manufacturing costs include
a. direct materials and direct labor only.
b. direct materials and manufacturing overhead only.
c. direct labor and manufacturing overhead only.
d. direct materials, direct labor, and manufacturing overhead.

364. Which one of the following is not a direct material?


a. A tire used for a lawn mower
b. Plastic used in the covered case for a home PC
c. Steel used in the manufacturing of steel-radial tires
d. Lubricant for a ball-bearing joint for a large crane
365. Which one of the following is not a cost element in manufacturing a product?
a. Manufacturing overhead
b. Direct materials
c. Office salaries
d. Direct labor

366. A manufacturing process requires small amounts of glue. The glue used in the production
process is classified as a(n)
a. period cost.
b. indirect material.
c. direct material.
d. miscellaneous expense.

367. The wages of a timekeeper in the factory would be classified as


a. a period cost.
b. direct labor.
c. indirect labor.
d. compliance costs.

368. Which one of the following is not considered as material costs?


a. Partially completed motor engines for a motorcycle plant
b. Bolts used in manufacturing the compressor of an engine
c. Rivets for the wings of a new commercial jet aircraft
d. Lumber used to build tables

369. Which of the following is not a manufacturing cost category?


a. Cost of goods sold
b. Direct materials
c. Direct labor
d. Manufacturing overhead

370. As current technology changes manufacturing processes, it is likely that direct


a. labor will increase.
b. labor will decrease.
c. materials will increase.
d. materials will decrease.
371. For the work of factory employees to be considered as direct labor, the work must be
conveniently and
a. materially associated with raw materials conversion.
b. periodically associated with raw materials conversion.
c. physically associated with raw materials conversion.
d. promptly associated with raw materials conversion.

372. Which of the following is not classified as direct labor?


a. Bottlers of beer in a brewery
b. Copy machine operators at a copy shop
c. Wages of supervisors
d. Bakers in a bakery

373. Cotter pins and lubricants used irregularly in a production process are classified as
a. miscellaneous expense.
b. direct materials.
c. indirect materials.
d. nonmaterial materials.

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

375. Because of automation, which component of product cost is declining?


a. Direct labor
b. Direct materials
c. Manufacturing overhead
d. Advertising

376. The product cost that is most difficult to associate with a product is
a. direct materials.
b. direct labor.
c. manufacturing overhead.
d. advertising.
377. Manufacturing costs that cannot be classified as either direct materials or direct labor are
known as
a. period costs.
b. nonmanufacturing costs.
c. selling and administrative expenses.
d. manufacturing overhead.

378. Which one of the following is an example of a period cost?


a. A change in benefits for the union workers who work in the New York plant of a
Fortune 1000 manufacturer
b. Workers' compensation insurance on factory workers' wages allocated to the factory
c. A box cost associated with computers
d. A manager's salary for work that is done in the corporate head office

379. Which one of the following costs would not be inventoriable?


a. Period costs
b. Factory insurance costs
c. Indirect materials
d. Indirect labor costs

380. Direct materials and direct labor of a company total $6,000,000. If manufacturing
overhead is $3,000,000, what is direct labor cost?
a. $3,000,000
b. $6,000,000
c. $0
d. Cannot be determined from the information provided

381. Which of the following are period costs?


a. Raw materials
b. Direct materials and direct labor
c. Direct labor and manufacturing overhead
d. Selling expenses

382. Sales commissions are classified as


a. overhead costs
b. period costs.
c. product costs.
d. indirect labor.
383. Product costs consist of
a. direct materials and direct labor only.
b. direct materials, direct labor, and manufacturing overhead.
c. selling and administrative expenses.
d. period costs.

384. Which one of the following represents a period cost?


a. The VP of Sales' salary and benefits
b. Overhead allocated to the manufacturing operations
c. Labor costs associated with quality control
d. Fringe benefits associated with factory workers

385. Product costs are also called


a. direct costs.
b. overhead costs.
c. inventoriable costs.
d. capitalizable costs.

386. For inventoriable costs to become expenses under the matching principle,
a. the product must be finished and in stock.
b. the product must be expensed based on its percentage-of-completion.
c. the product to which they attach must be sold.
d. all accounts payable must be settled.

387. As inventoriable costs expire, they become


a. selling expenses.
b. gross profit.
c. cost of goods sold.
d. sales revenue.

388. A manufacturing company calculates cost of goods sold as follows:


a. Beginning FG inventory + cost of goods purchased – ending FG inventory.
b. Ending FG inventory – cost of goods manufactured + beginning FG inventory.
c. Beginning FG inventory – cost of goods manufactured – ending FG inventory.
d. Beginning FG inventory + cost of goods manufactured – ending FG inventory.

389. A manufacturing company reports cost of goods manufactured as a(n)


a. current asset on the balance sheet.
b. administrative expense on the income statement.
c. component in the calculation of cost of goods sold on the income statement.
d. component of the raw materials inventory on the balance sheet.

390. The subtotal, "Cost of goods manufactured" appears on


a. a merchandising company's income statement.
b. a manufacturing company's income statement.
c. both a manufacturing and a merchandising company's income statement.
d. neither a merchandising nor a manufacturing company's income statement.

391. Cost of goods manufactured in a manufacturing company is analogous to


a. Ending inventory in a merchandising company.
b. Beginning inventory in a merchandising company.
c. Cost of goods available for sale in a merchandising company.
d. Cost of goods purchased in a merchandising company.

392. Cost of goods sold


a. only appears on merchandising companies' income statements.
b. only appears on manufacturing companies' income statements.
c. appears on both manufacturing and merchandising companies' income
statements.
d. is calculated exactly the same for merchandising and manufacturing companies.

393. Hollern Combines, Inc. has $10,000 of ending finished goods inventory as of December
31, 2008. If beginning finished goods inventory was $5,000 and cost of goods sold was
$20,000, how much would Hollern report for cost of goods manufactured?
a. $22,500
b. $5,000
c. $25,000
d. $15,000

394. Cost of goods manufactured is calculated as follows:


a. Beginning WIP + direct materials used + direct labor + manufacturing overhead +
ending WIP.
b. Direct materials used + direct labor + manufacturing overhead – beginning WIP +
ending WIP.
c. Beginning WIP + direct materials used + direct labor + manufacturing overhead
– ending WIP.
d. Direct materials used + direct labor + manufacturing overhead – ending WIP –
beginning WIP.
395. If the amount of "Cost of goods manufactured" during a period exceeds the amount of
"Total manufacturing costs" for the period, then
a. ending work in process inventory is greater than or equal to the amount of the
beginning work in process inventory.
b. ending work in process is greater than the amount of the beginning work in process
inventory.
c. ending work in process is equal to the cost of goods manufactured.
d. ending work in process is less than the amount of the beginning work in process
inventory.

396. On the costs of goods manufactured schedule, depreciation on factory equipment


a. is not listed because it is included with Depreciation Expense on the income
statement.
b. appears in the manufacturing overhead section.
c. is not listed because it is not a product cost.
d. is not an inventoriable cost.

397. On the costs of goods manufactured schedule, the item raw materials inventory (ending)
appears as a(n)
a. addition to raw materials purchases.
b. addition to raw materials available for use.
c. subtraction from raw materials available for use.
d. subtraction from raw materials purchases.

Use the following information for questions 107–109.


Carly Manufacturing Company's accounting records reflect the following inventories:

Dec. 31, 2008 Dec. 31, 2007


Raw materials inventory $310,000 $260,000
Work in process inventory 300,000 160,000
Finished goods inventory 190,000 150,000
During 2008, $500,000 of raw materials were purchased, direct labor costs amounted to $600,000,
and manufacturing overhead incurred was $480,000.

398. The total raw materials available for use during 2008 for Carly Manufacturing Company
is
a. $810,000.
b. $260,000.
c. $450,000.
d. $760,000.

399. Carly Manufacturing Company's total manufacturing costs incurred in 2008 amounted to
a. $1,530,000.
b. $1,490,000.
c. $1,390,000.
d. $1,580,000.

400. If Carly Manufacturing Company's cost of goods manufactured for 2008 amounted to
$1,390,000, its cost of goods sold for the year is
a. $1,500,000.
b. $1,250,000.
c. $1,350,000.
d. $1,430,000.
401. What is work in process inventory generally described as?
a. Costs applicable to units that have been started in production but are only
partially completed
b. Costs associated with the end stage of manufacturing that are almost always complete
and ready for customers
c. Costs strictly associated with direct labor
d. Beginning stage production costs associated with labor costs dealing with bringing in
raw materials from the shipping docks

402. Utley Manufacturing Company reported the following year-end information: beginning
work in process inventory, $180,000; cost of goods manufactured, $516,000; beginning
finished goods inventory, $252,000; ending work in process inventory, $220,000; and
ending finished goods inventory, $264,000. Utley Manufacturing Company's cost of
goods sold for the year is
a. $504,000.
b. $528,000.
c. $476,000.
d. $252,000.

403. Neeley Manufacturing Company reported the following year-end information:

Beginning work in process inventory $1,080,000


Beginning raw materials inventory 300,000
Ending work in process inventory 900,000
Ending raw materials inventory 480,000
Raw materials purchased 960,000
Direct labor 900,000
Manufacturing overhead 600,000
Neeley Manufacturing Company's cost of goods manufactured for the year is
a. $2,280,000.
b. $2,460,000.
c. $2,100,000.
d. $2,640,000.

Use the following information for questions 113–115.


Hopkins Manufacturing Inc.'s accounting records reflect the following inventories:
Dec. 31, 2007 Dec. 31, 2008
Raw materials inventory $ 80,000 $ 64,000
Work in process inventory 104,000 116,000
Finished goods inventory 100,000 92,000

During 2008, Hopkins purchased $760,000 of raw materials, incurred direct labor costs of
$100,000, and incurred manufacturing overhead totaling $128,000.

404. How much is raw materials transferred to production during 2008 for Hopkins Manu-
facturing?
a. $992,000
b. $776,000
c. $760,000
d. $744,000

405. How much is total manufacturing costs incurred during 2008 for Hopkins?
a. $992,000
b. $1,004,000
c. $988,000
d. $1,000,000

406. Assume Hopkins Manufacturing’s cost of goods manufactured for 2008 amounted to
$960,000. How much would it report as cost of goods sold for the year?
a. $968,000
b. $1,000,000
c. $1,060,000
d. $952,000

407. McNally Manufacturing Company reported the following year-end information:

Beginning work in process inventory $ 46,000


Beginning raw materials inventory 24,000
Ending work in process inventory 50,000
Ending raw materials inventory 20,000
Raw materials purchased 680,000
Direct labor 240,000
Manufacturing overhead 100,000
How much is McNally Manufacturing’s cost of goods manufactured for the year?
a. $684,000
b. $1,024,000
c. $1,020,000
d. $1,028,000

Use the following information for questions 117–118.

Modine Manufacturing Inc.'s accounting records reflect the following inventories:


Dec. 31, 2007 Dec. 31, 2008
Raw materials inventory $120,000 $ 96,000
Work in process inventory 156,000 174,000
Finished goods inventory 150,000 138,000

During 2008, Modine purchased $1,140,000 of raw materials, incurred direct labor costs of
$150,000, and incurred manufacturing overhead totaling $192,000.

408. How much is total manufacturing costs incurred during 2008 for Modine?
a. $1,488,000
b. $1,506,000
c. $1,482,000
d. $1,500,000
409. How much would Modine Manufacturing report as cost of goods manufactured for 2008?
a. $1,464,000
b. $1,524,000
c. $1,518,000
d. $1,488,000

410. Sauder Manufacturing Company reported the following year-end information:


Beginning work in process inventory $ 35,000
Beginning raw materials inventory 18,000
Ending work in process inventory 38,000
Ending raw materials inventory 15,000
Raw materials purchased 510,000
Direct labor 180,000
Manufacturing overhead 75,000
How much is Sauder Manufacturing’s total cost of work in process for the year?
a. $513,000
b. $768,000
c. $765,000
d. $803,000

411. Hardigan Manufacturing Company reported the following year-end information:


beginning work in process inventory, $80,000; cost of goods manufactured, $980,000;
beginning finished goods inventory, $50,000; ending work in process inventory, $70,000;
and ending finished goods inventory, $40,000. How much is Hardigan’s cost of goods
sold for the year?
a. $980,000
b. $990,000
c. $970,000
d. $1,000,000

Use the following information for questions 121–124.


Raw materials inventory, January 1 $ 20,000
Raw materials inventory, December 31 40,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Finished goods, January 1 40,000
Finished goods, December 31 32,000
Raw materials purchases 1,000,000
Direct labor 460,000
Factory utilities 150,000
Indirect labor 50,000
Factory depreciation 400,000
Selling and administrative expenses 420,000

412. Direct materials used is


a. $1,060,000.
b. $1,020,000.
c. $1,000,000.
d. $980,000.

413. Assume your answer to question 121 above is $1,000,000. Total manufacturing costs
equal
a. $2,060,000.
b. $2,054,000.
c. $1,860,000.
d. $2,480,000.

414. Assume your answer to question 122 above is $2,000,000. Cost of goods manufactured
equals
a. $1,992,000.
b. $1,994,000.
c. $2,006,000.
d. $2,008,000.

415. Assume your answer to question 123 above is $2,040,000. The cost of goods sold is
a. $2,046,000.
b. $2,008,000.
c. $2,032,000.
d. $2,048,000.

Use the following information for questions 125–128:


Raw materials inventory, January 1 $ 30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
Raw materials purchases 1,500,000
Direct labor 690,000
Factory utilities 225,000
Indirect labor 75,000
Factory depreciation 600,000
Selling and administrative expenses 630,000

416. Direct materials used is


a. $1,590,000.
b. $1,530,000.
c. $1,500,000.
d. $1,470,000.

417. Assume your answer to question 125 above is $1,500,000. Total manufacturing costs
equal
a. $3,090,000.
b. $3,081,000.
c. $2,790,000.
d. $3,720,000.

418.. Assume your answer to question 126 above is $3,000,000. Cost of goods manufactured
equals
a. $2,988,000.
b. $2,991,000.
c. $3,009,000.
d. $3,012,000.

419. Assume your answer to question 127 above is $3,060,000. The cost of goods sold is
a. $3,069,000.
b. $3,012,000.
c. $3,048,000.
d. $3,072,000.
420. Samson Company reported total manufacturing costs of $130,000, manufacturing
overhead totaling $26,000, and direct materials totaling $32,000. How much is direct
labor cost?
a. Cannot be determined from the information provided.
b. $188,000
c. $58,000
d. $72,000

421. Given the following data for Mehring Company, compute (A) total manufacturing costs
and (B) costs of goods manufactured:
Direct materials used $180,000 Beginning work in process $30,000
Direct labor 75,000 Ending work in process 15,000
Manufacturing overhead 225,000 Beginning finished goods 38,000
Operating expenses 263,000 Ending finished goods 23,000
(A) (B)
a. $465,000 $495,000
b. $480,000 $465,000
c. $480,000 $495,000
d. $495,000 $510,000

422. Penner Company reported total manufacturing costs of $195,000, manufacturing


overhead totaling $39,000, and direct materials totaling $48,000. How much is direct
labor cost?
a. Cannot be determined from the information provided.
b. $282,000
c. $87,000
d. $108,000
423. Given the following data for Glennon Company, compute (A) total manufacturing costs
and (B) costs of goods manufactured:
Direct materials used $240,000 Beginning work in process $40,000
Direct labor 100,000 Ending work in process 20,000
Manufacturing overhead 300,000 Beginning finished goods 50,000
Operating expenses 350,000 Ending finished goods 30,000
(A) (B)
a. $620,000 $660,000
b. $640,000 $620,000
c. $640,000 $660,000
d. $660,000 $680,000

424. Which one of the following does not appear on the balance sheet of a manufacturing
company?
a. Finished goods inventory
b. Work in process inventory
c. Cost of goods manufactured
d. Raw materials inventory
425. The equivalent of finished goods inventory for a merchandising firm is referred to as
a. purchases.
b. cost of goods purchased.
c. merchandise inventory.
d. raw materials inventory.

426. What term describes all activities associated with providing a product or service?
a. The manufacturing chain
b. The product chain
c. The supply chain
d. The value chain

427. How have many companies significantly lowered inventory levels and costs?
a. They use activity-based costing.
b. They utilize an enterprise resource planning system.
c. They have a just-in-time method.
d. They focus on a total quality management system.

428. Which one of the following managerial accounting approaches attempts to allocate manu-
facturing overhead in a more meaningful fashion?
a. Theory of constraints
b. Just-in-time inventory
c. Activity-based costing
d. Total-quality management

429. What is one primary benefit of an enterprise resource planning (ERP) system?
a. It reduces inventory levels.
b. It permits companies to be more streamlined in production.
c. It replaces research and development in a company.
d. It requires an increased emphasis on product quality.

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


a. The number of products produced
b. The emphasis on financial and non-financial performance measurements
c. The amount of costs allocated to products
d. The number of defects found on each product

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


a. To reduce product defects
b. To balance performance measurement
c. To identify and manage constraints that bottle-neck operations
d. To reduce inventory levels

432. Which one of the following characteristics would likely be associated with a just-in-time
inventory method?
a. Ending inventory of work in process that would allow several production runs
b. A backlog of inventory orders not yet shipped
c. Minimal finished goods inventory on hand
d. An understanding with customers that they may come to the showroom and select
from inventory on hand

433. Which one of the following is a cost that would not likely be associated with computer-
integrated manufacturing?
a. Manufacturing overhead associated with allocation of equipment depreciation
b. Direct labor costs of a welder on the production floor
c. Manufacturing overhead associated with allocation of the plant lease to the latest
production run
d. Direct materials cost with several fuse plates for a new automobile

434. Which one of the following is an activity not associated with TQM?
a. Tightening the bolts on a chassis so that the frame will not drop out
b. Redesigning the gas tank after fuel efficiency standards are not being met
c. Verifying the 10 check points associated with producing the highest quality loaf of
bread
d. Ensuring that the mattress just manufactured meets the standard of comfort of a
random factory line worker

435. What is ERP’s primary benefit?


a. It can eliminate stand alone systems that do not share information easily for
manage-ment’s use.
b. It allows management to rely on the simplest way to utilize information systems in a
manufacturing environment.
c. It permits line workers to perform accounting and marketing tasks.
d. It calculates year end bonuses to a precision not available in traditional information
systems management.

436. Some companies implement systems to reduce defects in finished products with the goal
of achieving zero defects. What are these systems called?
a. Activity-based costing systems
b. Enterprise resource planning systems
c. Value chain systems
d. Total quality management systems

437. Many companies now manufacture products that are untouched by human hands. What
do they use to achieve this?
a. Activity-based costing
b. Computer-integrated manufacturing
c. Enterprise resource planning systems
d. Total quality management systems

438. When a company prepares a worksheet for a manufacturing company, to which column is
the Indirect Labor account extended?
a. To the adjustment columns
b. To the income statement columns
c. To the cost of goods manufactured columns
d. To the balance sheet columns

439. When a worksheet is prepared for a manufacturing company, an offsetting entry must be
made to balance the cost of goods manufactured columns. Where does the offsetting entry
appear?
a. In the balance sheet debit column
b. In the income statement debit column
c. In the balance sheet credit column
d. In the income statement credit column

440. Which one of the following accounts would not appear in the cost of goods manufactured
columns of a worksheet?
a. Ending Work in Process Inventory
b. Ending Finished Goods Inventory
c. Raw Materials Inventory
d. Direct Labor

441. When making closing entries for a manufacturing company, to which account do all
accounts that appear on the cost of goods manufactured schedule get closed?
a. Income Summary
b. Materials, Labor, and Overhead
c. Manufacturing Summary
d. Finished Goods Inventory

442.Financial and managerial accounting are similar in that both


a. have the same primary users.
b. produce general-purpose reports.
c. have reports that are prepared quarterly and annually.
d. deal with the economic events of an enterprise.

443.. The function that pertains to keeping the activities of the enterprise on track is
a. planning.
b. directing.
c. controlling.
d. accounting.

444.Property taxes on a manufacturing plant are an element of a


Product Cost Period Cost
a. Yes No
b. Yes Yes
c. No Yes
d. No No

445.For a manufacturing company, which of the following is an example of a period cost rather
than a product cost?
a. Depreciation on factory equipment
b. Wages of salespersons
c. Wages of machine operators
d. Insurance on factory equipment

446. For a manufacturing firm, cost of goods available for sale is computed by adding the
beginning finished goods inventory to
a. cost of goods purchased.
b. cost of goods manufactured.
c. net purchases.
d. total manufacturing costs.

447.If the cost of goods manufactured is less than the cost of goods sold, which of the following
is correct?
a. Finished Goods Inventory has increased.
b. Work in Process Inventory has increased.
c. Finished Goods Inventory has decreased.
d. Work in Process Inventory has decreased.

448. The principal difference between a merchandising and a manufacturing income statement
is the
a. cost of goods sold section.
b. extraordinary item section.
c. operating expense section.
d. revenue section.

449.If the total manufacturing costs are greater than the cost of goods manufactured, which of
the following is correct?
a. Work in Process Inventory has increased.
b. Finished Goods Inventory has increased.
c. Work in Process Inventory has decreased.
d. Finished Goods Inventory has decreased.

450. The sum of the direct materials costs, direct labor costs, and manufacturing overhead
incurred is the
a. cost of goods manufactured.
b. total manufacturing overhead.
c. total manufacturing costs.
d. total cost of work in process.

451.The inventory accounts that show the cost of completed goods on hand and the costs
applicable to production that is only partially completed are, respectively
a. Work in Process Inventory and Raw Materials Inventory.
b. Finished Goods Inventory and Raw Materials Inventory.
c. Finished Goods Inventory and Work in Process Inventory.
d. Raw Materials Inventory and Work in Process Inventory.

452. The controller of a company or other organization is


a. a staff manager.
b. an operating manager.
c. an accountant, not a manager.
d. a natural manager.

453. Which item is NOT an IMA Standard for Ethical Conduct?


a. Integrity.
b. Competence.
c. Loyalty.
d. Objectivity.

454. Which statement about the degree of detail in a report is true?


a. It depends on the level of the manager receiving the report.
b. It may depend on the frequency of the report.
c. It depends on the type of manager receiving the report.
d. All of the above.

455. Managerial accounting is similar to financial accounting in that


a. both are governed by generally accepted accounting principles.
b. both deal with economic events.
c. both concentrate on historical costs.
d. both classify reported information in the same way.

456. Managerial accounting differs from financial accounting in that it is


a. more concerned with the future.
b. more concerned with segments of a company.
c. less constrained by rules and regulations.
d. all of the above.
457. One of the ways managerial accounting differs from financial accounting is that managerial
accounting
a. is bound by generally accepted accounting principles.
b. classifies information in different ways.
c. does not use financial statements.
d. deals only with economic events.

458. Which activity is NOT normally performed by managerial accountants?


a. Assisting managers to interpret data in managerial accounting reports.
b. Designing systems to provide information for internal and external reports.
c. Gathering data from sources other than the accounting system.
d. Deciding the best level of inventory to be maintained.

459. Conventional and just-in-time manufacturers both


a. Maintain large inventories of their products.
b. Sell only to other manufacturing companies.
c. Desire to meet customers' deadlines.
d. Require about the same amount of space to operate.

460. Classifying costs by behavior is


a. associated primarily with financial accounting.
b. not relevant to a company that has only selling expenses.
c. common in reports prepared for external readers.
d. none of the above.

461. Which is NOT a common accounting classification of costs?


a. By the method of payment for the expenditure.
b. By the objective of expenditure.
c. By behavior.
d. By the function incurring the expenditure.

462. Which classification of costs is most relevant for income statements to be used internally?
a. Behavior.
b. Function.
c. Method of payment.
d. Object.

463. The set of processes that transform raw materials into finished products is known as a
a. differentiation strategy.
b. flexible manufacturing system.
c. lowest cost strategy.
d. value chain.

464. Income statements classifying costs by object show such items as


a. tax expense, wages expense, depreciation expense.
b. cost of goods sold, selling expenses, administrative expenses.
c. assets, liabilities, owners' equity.
d. all of the above.

465. The period that begins with the arrival of materials and ends with the shipment of a
completed good is the
a. cycle time.
b. manufacturing cell.
c. computer-integrated manufacturing.
d. performance period.

466. Which function is most directly related to management by objectives?


a. Planning.
b. Control.
c. Decision making.
d. Reporting.

467.Which consideration influences the frequency of an internal report?


a. The wishes of the managers receiving the report.
b. The frequency with which decisions are made that require the information in the report.
c. The cost of preparing the report.
d. All of the above.

468. A just-in-time manufacturer is more likely than a conventional manufacturer to


a. receive more frequent deliveries of materials.
b. spend less money on advertising.
c. need workers with fewer skills.
d. all of the above.
469. A conventional manufacturer is more likely than a just-in-time manufacturer to
a. have a short production cycle.
b. produce goods in small batches.
c. hold large inventories to serve as buffers.
d. none of the above.

470. The professional certification most relevant for managerial accountants is the
a. CMA.
b. CPA.
c. CSA.
d. MAS.

471 A firm that is competing using a _______________________ strategy is attempting to create


a perception of uniqueness that will permit a higher selling price.
a. value chain
b. lowest cost
c. lead time
d. differentiation

472. Planning and control are


a. different names for the same thing.
b. the basic functions of management.
c. described equally well by the terms "decision making" and "performance evaluation."
d. exemplified by, respectively, financial statements and budgeting.

473. In contrast to a balance sheet, an income statement


a. is for a period of time, a balance sheet is at a point in time.
b. gives information about cash and a balance sheet does not.
c. is prepared after the statement of retained earnings.
d. has two columns, while a balance sheet has more than two.

474. One characteristic of the conventional manufacturing environment is


a. flexible manufacturing systems.
b. manufacturing cells.
c. a just-in-case philosophy.
d. a high degree of quality control.
475. A characteristic of the just-in-time manufacturing environment is
a. frequent deliveries of materials.
b. manufacturing cells.
c. little or no inventory of finished product.
d. all of the above.
476. Conventional and just-in-time manufacturers differ in that the conventional manufacturer is
likely to
a. be a new entrant into its industry.
b. need less storage space than its JIT competitors.
c. give less credibility to management accounting reports.
d. have a longer production cycle than its JIT competitors.
477. Managerial accounting:
A. is governed by generally accepted accounting principles.
B. places emphasis on special-purpose information.
C. pertains to the entity as a whole and is highly aggregated.
D. is limited to cost data
.
478. The management of an organization performs several broad functions. They are:
A. planning, directing, and selling.
B. planning, directing, and controlling.
C. planning, manufacturing, and controlling.
D. directing, manufacturing, and controlling.

479. Direct materials are a:


Product Manufacturing Period
Cost Overhead Cost
A. Yes Yes No
B. Yes No No
C. Yes Yes Yes
D. No No No
480. Indirect labor is a:
A. non-manufacturing cost.
B. raw material cost.
C. product cost.
D. period cost

481. Which of the following costs would a computer manufacturer include in


manufacturing overhead?
A. The cost of the disk drives.
B. The wages earned by computer assemblers.
C. The cost of the memory chips.
D. Depreciation on testing equipment.

482. Which of the following is not an element of manufacturing overhead?


A. Sales manager's salary.
B. Plant manager's salary.
C. Factory repairman's wages.
D. Product inspector's salary.

483. For the year, Redder Company has cost of goods manufactured of $600,000,
beginning finished goods inventory of $200,000, and ending finished goods inventory
of $250,000. The cost of goods sold is:
A. $450,000.
B. $500,000.
C. $550,000.
D. $600,000.

484. A cost of goods manufactured schedule shows beginning and ending inventories for:
A. raw materials and work in process only.
B. work in process only.
C. raw materials only.
D. raw materials, work in process, and finished goods.
485. A manufacturer may report three inventories on its balance sheet: (1) raw materials,
(2) work in process, and (3) finished goods. Indicate in what sequence these
inventories generally appear on a balance sheet.
A. (1), (2), (3)
B. (2), (3), (1)
C. (3), (1), (2)
D. (3), (2), (1)

486. Which of the following managerial accounting techniques attempts to allocate


manufacturing overhead in a more meaningful fashion?
A. Just-in-time inventory.
B. Total-quality management.
C. Balanced scorecard.
D. Activity-based costing

487. 1. Managerial accounting applies to all types of business--service, merchandising, and


manufacturing and to all forms of business organizations.
A. True
B. False

488. Planning is the process of keeping the company's activities on track.


A. True
B. False

489. Indirect materials may not physically become part of the finished product.
A. True
B. False

490. Manufacturing overhead consists of costs that are indirectly associated with the manufacture
of the finished product.
A. True
B. False

491. Product costs are costs that are a necessary and integral part of producing the finished
product.
A. True
B. False

492. Manufacturers compute cost of goods sold by adding the beginning finished goods inventory
to the cost of goods purchased and subtracting the ending finished goods inventory.
A. True
B. False

493. The costs assigned to beginning work in process inventory are based on the manufacturing
costs incurred in the prior period.
A. True
B. False

494. The cost of the beginning work in process plus the total manufacturing costs for the current
period is the cost of goods manufactured.
A. True
B. False

495. Companies generally list manufacturing inventories in the order of completion—raw


materials, work in process, and finished goods.
A. True
B. False

496. Under the just-in-time method, goods are manufactured or purchased just-in-time for use.
A. True
B. False

497. All of the following are distinguishing features of managerial accounting except:
A. internal users.
B. independent audits.
C. reports pertaining to subunits of the entity.
D. to provide special-purpose information.

498. The management function that requires management to look ahead and establish objectives
is:
A. controlling.
B. directing
C. evaluating.
D. planning.
499. The process of keeping the company's activities on track is:
A. controlling.
B. directing.
C. evaluating.
D. planning

500. Manufacturing overhead includes all of the following except:


A. depreciation.
B. direct materials.
C. indirect labor.
D. maintenance.