Basic Concepts 6

CHAPTER 1: INTRODUCTION
Multiple Choice
a 1. 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.
c 2. Which item is NOT an IMA Standard for Ethical Conduct?

a. Integrity.
b. Competence.
c. Loyalty.
d. Objectivity.
d 3. 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.
b 4. 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.
d 5. 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.
b 6. 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.
d 7. 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.
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c 8. 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.
d 9. 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.
a 10. 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.
a 11. Which classification of costs is most relevant for income statements to be used internally?
a. Behavior.
b. Function.
c. Method of payment.
d. Object.
d 12. 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.
a 13. 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.
a 14. 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.
a 15. Which function is most directly related to management by objectives?

a. Planning.
b. Control.
c. Decision making.
d. Reporting.
d 16. 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.
a 17. A just-in-time manufacturer is more likely than a conventional manufacturer to

a. receive more frequent deliveries of materials.
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b. spend less money on advertising.
c. need workers with fewer skills.
c 18. 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.
a 19. The professional certification most relevant for managerial accountants is the
a. CMA.
b. CPA.
c. CSA.
d. MAS.
d 20. 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
b 21. 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.
a 22. 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.
c 23. 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.
d 24. 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.
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d 25. 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.
True-False
F 1. Published financial statements show costs classified by behavior.
T 2. Generally accepted accounting principles govern financial accounting but not managerial accounting.
T 3. Economic events are the raw data for both financial and managerial accounting.
F 4. Internal financial statements must be prepared using generally accepted accounting principles.
T 5. The form and content of reports can influence decisions made by managers.
F 6. Management-by-objectives and management-by-exception are two names for the same general management
principle.
F 7. "Pro forma" is the name given to an income statement that classifies costs by function.
T 8. Some managerial accounting reports contain costs not incorporated in the basic accounting system.
F 9. A professional examination exists to test the competence of financial accountants, but not of managerial
accountants.
F 10. Managerial accountants should, but have no obligation to, maintain their professional skills.

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CHAPTER 1: INTRODUCTION

a 1. The controller of a company or other organization is

c 2. Which item is NOT an IMA Standard for Ethical Conduct?

d 3. Which statement about the degree of detail in a report is true?

b 4. Managerial accounting is similar to financial accounting in that

d 5. Managerial accounting differs from financial accounting in that it is

d 7. Which activity is NOT normally performed by managerial accountants?

d 9. Classifying costs by behavior is

a 10. Which is NOT a common accounting classification of costs?

a 13. Income statements classifying costs by object show such items as

a 15. Which function is most directly related to management by objectives?

d 16. Which consideration influences the frequency of an internal report?

a 17. A just-in-time manufacturer is more likely than a conventional manufacturer to

c 18. A conventional manufacturer is more likely than a just-in-time manufacturer to

b 21. Planning and control are

a 22. In contrast to a balance sheet, an income statement

c 23. One characteristic of the conventional manufacturing environment is

d 24. A characteristic of the just-in-time manufacturing environment is

F 1. Published financial statements show costs classified by behavior.

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