Managerial Accounting MCQs

Management accounting focuses primarily on providing data for:

internal uses by managers.
external uses by stockholders and creditors.
external uses by the Internal Revenue Service.
external uses by the Securities and Exchange Commission.

Managerial accounting:

is more future oriented than financial accounting.
tends to summarize information more than financial accounting
is primarily concerned with providing information to external users.
is more concerned with precision than timeliness.

Compared to financial accounting, managerial accounting places more emphasis on:

the flexibility of information.
the precision of information.
the timeliness of information.
both A and C above.

The function of management that compares planned results to actual results is known as:

planning.
directing and motivating.
controlling.
decision making.

Which of the functions of management involves overseeing day-to-day activities?

Planning
Directing and motivating
Controlling
Decision making

Which of the following is not one of the three basic activities of a manager?

Planning
Controlling
Directing and motivating
Compiling management accounting reports

Which of the following statements are false concerning line and staff functions? I. Persons occupying staff functions have authority over persons occ...

Only I
Only II
Only I and II
I, II, and III

Which of following would normally be found on a manufacturing companyâ€™s organization chart?

the layout of the factory assembly lines
a list of the materials needed to produce each of the companyâ€™s products
the informal lines of reporting and communication
none of the above

For a hospital, what type of position (line or staff) is each of the following? Emergency Room Manager; Human Resource (Personnel) Manager

Staff; Staff
Staff; Line
Line; Staff
Line; Line

A detailed financial plan for the future is known as a:

budget.
performance report.
organization chart.
segment.

A performance report is:

a detailed report comparing budgeted data to actual data for a specific time period.
a formal statement of plans for the upcoming period.
required to be filed monthly by the Securities and Exchange Commission.
not used in decentralized organizations.

A clustering of two or more machines at a single workstation is referred to as:

a manufacturing cell.
an activity center.
a functional layout.
a setup.

A focused factory is:

a factory that makes only a single product.
a factory that performs a single step in the production process and subcontracts the other steps.
a plant layout in which all machines needed to make a particular product are brought together in one location.
required to bid for defense contracts.

Large work in process inventories:

are essential for efficient operations.
reduce defect rates.
increase throughput time.
are a key part of Just-In-Time systems.

Ideally, how many units should be produced in a just-in-time manufacturing system?

budgeted customer demand for the current week.
budgeted customer demand for the following week.
actual customer demand for the current week.
maximum production capacity for the current week.

Process Reengineering includes all of the following steps except:

constructing a diagram flowcharting the current process.
redesigning the process.
elimination of non-value-added activities.
elimination of all constraints.

According to the Theory of Constraints, improvement efforts should usually be focused on:

work centers that are not constraints.
the work center that is the constraint.
the work center with the highest total cost.
the work center with the most obsolete equipment

Which of the following is true regarding the theory of constraints?

The theory of constraints does not apply to companies with multiple products because of capacity measurement difficulties.
In any profit-seeking company, there must be at least one constraint.
Constraints or bottlenecks stop organizations from selling an infinite number of units or services.
both B and C above.

Pizza World makes forty-three kinds of pizza for takeout and delivery. Which of the following could be the constraint at Pizza World?

the person who makes the pizza crust.
the person who puts toppings on the pizzas.
the pizza oven.
any of the above could be the constraint.

The Standards of Ethical Conduct for Management Accountants developed by the Institute of Management Accountants contain a policy regarding confidenti...

except when authorized by management.
in all situations.
except when authorized by management, unless legally obligated to do so.
in all cases not prohibited by law.

Wide-spread adherence to ethical standards in an advanced market economy tends to result in all of the following except:

higher prices.
higher quality goods and services.
greater variety of goods and services available for sale.
safer products

The Institute of Management Accountants (IMA) has developed ethical standards for management accountants. What four categories has the IMA classified ...

Reliability, Objectivity, Commitment, and Competence
Observation, Integrity, Closure, and Competence
Objectivity, Integrity, Commitment, and Confidentiality
Competence, Objectivity, Integrity, and Confidentiality

Samantha Galloway is a managerial accountant in the accounting department of Mustang Industries, Inc. Samantha has just discovered evidence that some ...

notify the controller.
notify the marketing managers involved.
notify the president of the corporation.
ignore the evidence because she is not part of the Marketing Department.

Managerial accounting:

has its primary emphasis on the future
is required by regulatory bodies such as the SEC
focuses on the organization as a whole, rather than on the organization segments
responses A, B and C are all correct

The three basic elements of manufacturing cost are direct materials, direct labor, and:

cost of goods manufactured
cost of goods sold
work in process
manufacturing overhead

Prime cost consists of direct materials combined with:

direct labor
manufacturing overhead
indirect materials
cost of goods manufactured

The cost of fire insurance for a manufacturing plant is generally considered to be a:

product cost
period cost
variable cost
all of these

An example of a period cost is:

fire insurance on a factory building
salary of a factory supervisor
direct materials
rent on a headquarters building

Within the relevant range, the difference between variable costs and fixed costs is:

variable costs per unit fluctuate and fixed costs per unit remain constant
variable costs per unit are constant and fixed costs per unit fluctuate
both total variable costs and total fixed costs are constant
both total variable costs and total fixed costs fluctuate

A lawnmower manufacturer computed a cost per unit of $53 by adding together last monthâ€™s direct labor, direct materials, and manufacturing over...

cost per unit will remain the same
cost per unit will decrease
direction of change in unit costs cannot be determined
cost per unit will increase

An opportunity cost is:

the difference in total costs which results from selecting one alternative instead of another
the benefit forgone by selecting one alternative instead of another
a cost which may be saved by not adopting an alternative
a cost which may be shifted to the future with little or no effect on current operations

Buford Company rents out a small unused portion of its factory to another company for $1,000 per month. The rental agreement will expire next month, a...

sunk cost
period cost
opportunity cost
variable cost

The following costs were incurred in August: Direct materials: $37,000 Direct labor: $14,000 Manufacturing overhead: $38,000 Selling expenses: $10...

$127,000
$51,000
$52,000
$75,000

The following costs were incurred in August: Direct materials: $20,000 Direct labor: $18,000 Manufacturing overhead: $21,000 Selling expenses: $16...

$39,000
$59,000
$96,000
$38,000

During the month of August, direct labor cost totaled $13,000 and direct labor cost was 20% of prime cost. If total manufacturing costs during August ...

$75,000
$23,000
$65,000
$52,000

In August direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000 and the direct materials cost was $34,000, ...

$36,000
$22,667
$51,000
$81,000

Green Companyâ€™s costs for the month of August were as follows: Direct materials: $27,000 Direct labor: $34,000 Selling: $14,000 Administrat...

$105,000
$132,000
$138,000
$112,000

Consider the following costs incurred in a recent period: Direct materials: $33,000 Depreciation on factory equipment: $12,000 Factory janitorâ€...

$78,000
$71,000
$46,000
$37,000

The Lyons Companyâ€™s cost of goods manufactured was $120,000 when its sales were $360,000 and its gross margin was $220,000. If the ending inven...

$20,000
$50,000
$110,000
$150,000

Haan Inc. is a merchandising company. Last month the companyâ€™s cost of goods sold was $66,000. The companyâ€™s beginning merchandise inven...

$68,000
$96,000
$64,000
$66,000

Last month a manufacturing company had the following operating results: Beginning finished goods inventory: $90,000 Ending finished goods inventory:...

$350,000
$385,000
$377,000
$323,000

Walton Manufacturing Company gathered the following data for the month. Cost of goods sold: $35,000 Sales: $89,000 Selling expenses: $16,000 Admin...

$54,000
$17,000
$52,000
Cannot be determined

Direct materials used in production totaled $330,000. Direct labor was $415,000 and manufacturing overhead was $220,000. What were the total manufactu...

$530,000
$965,000
$745,000
$635,000

Expense A is a fixed cost; expense B is a variable cost. During the current year the activity level has increased, but is still within the relevant ra...

expense A has remained unchanged
expense B has decreased
expense A has decreased
expense B has increased

How much opportunity cost is represented in the following information concerning a machine? Annual operating cost: $80,000 Fixed operating costs oth...

$80,000
$14,000
$25,000
$68,000

Which of the following terms could be used to correctly describe the wages paid to the workers that cut up the cloth into the jean pattern shapes?

conversion cost and variable cost
conversion cost
variable cost
neither conversion cost or variable cost

Which of the following terms could be used to correctly describe the wages paid to the data entry clerk who enters customer order information into the...

period cost and product cost
period cost
product cost
neither period or product cost

Which costs will change with a decrease in activity within the relevant range?

Total fixed costs and total variable cost
Unit fixed costs and total variable cost
Unit variable cost and unit fixed cost
Unit fixed cost and total fixed cost

Data for Cost A and Cost B appear below: .tg {border-collapse:collapse;border-spacing:0;} .tg td{border-color:black;border-style:solid;border-wid...

Cost A is fixed, Cost B is variable.
Cost A is variable, Cost B is fixed.
Both Cost A and Cost B are variable.
Both Cost A and Cost B are fixed.

An example of a discretionary fixed cost would be:

Taxes on the factory
Depreciation on manufacturing equipment
Insurance
Research and development

Which of the following costs, if expressed on a per unit basis, would be expected to decrease as the level of production and sales increases?

Sales commissions
Fixed manufacturing overhead
Variable manufacturing overhead
Direct materials

In describing the cost equation, Y = a + bX, "a" is:

The dependent variable cost
The independent variable the level of activity
The total fixed cost
The variable cost per unit of activity

Contribution margin means:

What remains from total sales after deducting fixed expenses
What remains from total sales after deducting cost of goods sold
The sum of cost of goods sold and variable expenses
What remains from total sales after deducting all variable expenses

A sunk cost is:

A cost which may be saved by not adopting an alternative
A cost which may be shifted to the future with little or no effect on current operations
A cost which cannot be avoided because it has already been incurred
A cost which does not entail any dollar outlay but which is relevant to the decision-making process

Abbott Companyâ€™s manufacturing overhead is 20% of its total conversion costs. If direct labor is $38,000 and if direct materials are $23,000, t...

$9,500
$152,000
$5,750
$15,250

A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,400 and is paid at the beginning...

$800 $0
$0 $800
$560 $240
$240 $560

At a volume of 8,000 units, Pwerson Company incurred $32,000 in factory overhead costs, including $12,000 in fixed costs. If volume increases to 9,000...

$22,500
$32,000
$34,500
$20,000

At an activity level of 4,000 machine-hours in a month, Curt Corporationâ€™s total variable production engineering cost is $154,200 and its total...

$68.33
$68.55
$70.80
$65.86

Eddy Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single ...

$22.90
$119.80
$142.70
$97.10

Werner Brothers, Inc., used the high-low method to derive its cost formula for electrical power cost. According to the cost formula, the variable cost...

1,800 machine hours
1,900 machine hours
2,000 machine hours
1,700 machine hours

Anderson Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a s...

$388,000
$954,800
$376,000
$328,000

A partial listing of costs incurred during December at Rooks Corporation appears below: Factory supplies: $7,000 Administrative wages and salaries: ...

$82,000
$340,000
$389,000
$307,000

A partial listing of costs incurred at Gilhooly Corporation during September appears below: Direct materials: $183,000 Utilities, factory: $9,000 A...

$669,000
$366,000
$34,000
$59,000

Products might consume overhead in different proportions due to differences in

product complexity.
product size.
setup times
All of these choices are correct.

Which of the following is NOT a limitation of a plantwide overhead rate? a. b. c. d.

Overhead usage is not strictly linked to the units produced because some products are more complex and diverse than others.
Predetermined rates using budgeted overhead are usually the best estimate of the amount of overhead.
Overhead costs tend to be underallocated to highly complex products.
Product diversity may consume overhead activities under differing consumption ratios.

Berol Company, which plans to sell 200,000 units of finished product in July, anticipates a growth rate in sales of 5% per month. The desired monthly ...

712,025 units.
638,000 units.
665,720 units.
630,500 units.

Berol Company, which plans to sell 200,000 units of finished product in July, anticipates a growth rate in sales of 5% per month. The desired monthly ...

$2,200,000
$2,880,000
$2,640,000
$2,400,000

Moss Point Manufacturing recently completed and sold an order of 50 units that had costs as follows. Direct materials $ 1,500 Direct labor (1,000 ...

$26,400
$31,790
$37,950
$38,500

Moss Point Manufacturing recently completed and sold an order of 50 units that had costs as follows. Direct materials $ 1,500 Direct labor (1,000 ...

Show a 30 percent reduction in the total direct labor hours required with no learning curve.
Include increased fixed overhead costs.
Be 10 percent lower than the total bid at an 80 percent learning curve.
Include 6.40 direct labor hours per unit at $8.50 per hour.

Which one of the following is most relevant to a manufacturing equipment replacement decision?

Original cost of the old equipment.
Disposal price of the old equipment.
Gain or loss on the disposal of the old equipment.
A lump-sum write-off amount from the disposal of the old equipment.

Productive assets that are physically consumed in operations are:

Equipment.
Land.
Land improvements.
Natural resources.

Management accounting primarily is concerned with providing

information to managers inside the organization as well as information to shareholders, creditors, and others outside the organization.
information to shareholders, creditors, and others outside the organization.
information to managers inside the organization.
information to governmental regulatory agencies.

Managers involved in the planning function typically

avoid communicating their plans extensively throughout the organization in order to prevent competitors from learning of the plans.
deal only with long-term issues (leaving short-term considerations to lower-level employees) and communicate their plans throughout the organization in order to ensure that all employees are working toward the companyâ€™s objectives.
deal both with short-term and long-term issues and communicate their plans throughout the organization in order to ensure that all employees are working toward the companyâ€™s objectives.
deal both with short-term and long-term issues but avoid communicating their plans throughout the organization in order to prevent competitors from learning of the plans.

In decision making, managers use

financial accounting information exclusively since it is more objective and precise due to well-established principles and conventions.
information regarding the organization as a whole rather than segments of the organization in order to capture a broader perspective of the companyâ€™s operations.
non-monetary information most frequently since monetary information ignores the effects of inflation and changes in technology.
whatever information is relevant to the decision even though the information does not conform to generally accepted accounting principles.

The title of "controller" as applied to the manager in charge of the accounting department results from the fact that

the controller has final authority over all expenditures made by the organization.
the controller has line authority over the various managers of the organization.
the controller exercises control through the reporting and interpreting of data needed in decision making.
the controller must maintain strict "control" over the financial resources of the organization in order to avoid the occurrence of theft

Managerial accounting places considerable weight on

generally accepted accounting principles.
the financial history of the entity.
ensuring that all transactions are properly recorded.
Non-monetary data that may be difficult to quantify.

The concept of the European Community (EC) is that twelve European nations have abandoned most of the trade barriers that separated them for many cent...

enhance the strength of companies within the EC so they can compete more effectively against U. S. and Japanese firms.
facilitate mergers between European firms and firms of other nations.
enable EC firms to focus more on "niche" markets rather than on mass markets.
facilitate the entry of U. S. firms into the European markets.

The Standards of Ethical Conduct for Management Accountants developed by the Institute of Management Accountants contains a policy regarding confident...

refrain from disclosing confidential information acquired in the course of their work except when authorized by management.
refrain from disclosing confidential information acquired in the course of their work in all situations.
refrain from disclosing confidential information acquired in the course of their work except when authorized by management, unless legally obligated to do so.
refrain from disclosing confidential information acquired in the course of their work in all cases since the law requires them to do so.

The Standards of Ethical Conduct for Management Accountants developed by the Institute of Management Accountants states that significant ethical issue...

submitted to the next higher managerial level.
submitted to the chief executive officer of the firm.
submitted to the audit committee, executive committee, board of directors, or owners.
submitted to outside legal counsel.

When faced with an ethical dilemma, a manager should first

confront the parties involved in the situation.
identify the persons or organizations affected by the outcome of the dilemma.
identify the ethical issues involved.
determine the available courses of action that can be taken.

When faced with an ethical dilemma, a manager should follow a step-by-step format that culminates in

deciding on the best course of action consistent with applicable legal requirements.
deciding on the best course of action consistent with the principles of honesty, integrity, and fairness.
deciding on the best course of action consistent with the principles of honesty, integrity, and fairness, and with any existing code of conduct.
deciding on the best course of action consistent with any existing code of conduct.

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Managerial Accounting MCQs