Financial and Managerial Accounting, 8e (Wild)
Chapter 14 Managerial Accounting Concepts and Principles
1) Managerial accounting is an activity that helps managers determine costs of products and
services, plan future activities, and compare actual to planned results.
2) Control is the process of setting goals and determining ways to achieve them.
3) Control is the process of monitoring planning decisions and evaluating an organization’s
activities and employees.
4) Managerial accounting provides financial and nonfinancial information to an organization’s
managers and other internal decision makers.
5) One of the usual differences between financial and managerial accounting is the timeliness of
the information reported.
6) Managerial accounting information can be forwarded to the managers of a company quickly
since external auditors do not have to review it, and estimates and projections are acceptable.
7) Marketing managers can use managerial accounting information to decide whether to
advertise on social media.
8) Managerial accounting reports and information are used by external users and financial
accounting by internal users.
9) Both financial and managerial accounting rely on accepted principles that are enforced
through an extensive set of rules and guidelines.
10) Both financial and managerial accounting report monetary information; managerial
accounting also reports considerable nonmonetary information.
11) Both financial and managerial accounting affect user’s decisions and actions.
12) The focus of managerial accounting information is on the organization as a whole.
13) Planning is the process of setting goals and making plans to achieve them.
14) Feedback provided by the control function allows managers to revise their plans.
15) An important managerial accounting report is the budget, which predicts revenues and
expenses.
16) The concept of total quality management focuses on quality improvement.
17) Just-in-time manufacturing is a system that acquires inventory and produces product only
when needed for an order.
18) When the attitude of continuous improvement exists throughout an organization, every
manager and employee is challenged to continuously experiment with new and improved
business practices.
19) The main goal of the lean business model is the elimination of waste while satisfying the
customer and providing a positive return to the company.
20) The management concept of customer orientation motivates a company to spend large
amounts on advertising to convince customers to buy the company’s standard products.
21) The management concept of customer orientation encourages a company to set up its
production system to produce large quantities of the same product for all customers.
22) Total quality management and just-in-time manufacturing focus on quality improvement as
well as on time customer deliveries.
23) Under a just-in-time manufacturing system, large quantities of inventory are accumulated
throughout the factory to be certain that components are available each time that they are needed.
24) The balanced scorecard aids in continuous improvement by augmenting financial measures
with information on the drivers or indicators of future financial performance.
25) Adopting a lean business model should have no effect on cost in a modern manufacturing
environment.
26) The Institute of Management Accountants (IMA) Statement of Ethical Professional Practice
requires that management accountants be competent and act with integrity.
27) An employee overstates his reimbursable expenses in one period in order to receive needed
additional cash. Since he intends to reduce his expenses the next period by the current
overstatement, this act is not considered fraudulent.
28) Direct materials are not easily traced to a product.
29) Costs may be classified by many different cost classifications.
30) Straight-line depreciation, rent, and manager salaries are examples of variable costs.
31) Cost concepts such as variable, fixed, mixed, direct, and indirect apply only to manufacturers
and not to service companies.
32) Total variable costs change in proportion to changes in the volume of activity.
33) Total fixed costs change in proportion to changes in the volume of activity.
34) Direct costs can be traced to more than one cost object.
35) Indirect costs cannot be easily and cost-beneficially traced to a single cost object.
36) Product costs can refer to expenditures necessary to manufacture products and to
administrative support during the time period.
37) Period costs can refer to expenditures necessary to manufacture products during the time
period.
38) Product costs are capitalized as inventory on the balance sheet and period costs are expensed
on the income statement.
39) The sales commission incurred based on units of product sold during the month is an
example of a product cost.
40) Period costs are incurred by manufacturing finished goods.
41) Product costs can be classified as one of three types: direct materials, direct labor, or factory
overhead.
42) Product costs are expenditures necessary to manufacture finished products.
43) Selling and administrative expenses are normally period costs.
44) The cost of partially completed products is included in the balance of the Work in Process
Inventory account.
45) Manufacturers usually have three inventories: raw materials, work in process, and finished
goods.
46) The main difference between the cost of goods sold of a manufacturer and a merchandiser is
that the merchandiser includes cost of goods manufactured rather than cost of goods purchased.
47) The main difference between the cost of goods sold of a manufacturer and a merchandiser is
that the manufacturer includes cost of goods manufactured rather than cost of goods purchased.
48) Raw materials that become part of a product and are identified with specific units or batches
of a product are called direct materials.
49) Raw materials inventory should not include indirect materials.
50) The Work in Process Inventory account is found only in the ledgers of merchandising
companies.
51) The Work in Process Inventory account is found only in the ledgers of manufacturing
companies.
52) Raw materials purchased plus beginning raw materials inventory equals the ending balance
of raw materials inventory.
53) Four factors come together in production activity: beginning work in process inventory,
direct materials, direct labor, and factory overhead.
54) Newly completed units are combined with beginning finished goods inventory to make up
total ending work in process inventory.
55) Beginning finished goods inventory plus cost of goods manufactured equals cost of goods
sold.
56) Beginning finished goods inventory plus cost of goods manufactured equals cost of goods
available for sale.
57) Beginning finished goods inventory plus cost of goods manufactured minus ending finished
goods inventory equals cost of goods sold.
58) The series of activities that add value to a company’s products or services is called a value
chain.
59) The triple bottom line focuses on three measures: financial, social, and environmental.
60) A lean business model aims to eliminate waste while satisfying the customer and providing a
positive return to the company.
61) Total quality management (TQM) focuses on quality improvement to business activities.
62) Just-in-time manufacturing (JIT) focuses on quality improvement and applies this standard to
all aspects of business activities.
63) Just-in-time manufacturing (JIT) is a system that acquires inventory and produces only when
needed.
64) Total quality management (TQM) is a system that acquires inventory and produces only
when needed.
65) The raw materials inventory turnover ratio is raw materials purchased divided by the average
raw materials inventory.
66) A manufacturer’s cost of goods manufactured is the sum of direct materials, direct labor, and
factory overhead costs incurred in producing products.
67) Indirect materials are accounted for as factory overhead because they are not clearly
identified with specific product units.
68) Indirect labor refers to the cost of workers who assist or supervise manufacturing, but they
are not clearly identified with specific product units.
69) Direct labor refers to employees who physically convert materials to finished product.
70) Factory overhead is charged to expense as it is incurred because it is a period cost.
71) Factory overhead includes selling and administrative expenses because they are indirect costs
of a product.
72) Prime costs consist of direct labor and factory overhead.
73) Prime costs consist of direct materials and direct labor.
74) The schedule of cost of goods manufactured is also known as a manufacturing statement.
75) The schedule of cost of goods manufactured must be prepared monthly as it is a required
general-purpose financial statement.