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Chapter 1—Introduction to Managerial Accounting
TRUE/FALSE
1. Management accounting information is only used by manufacturing organizations.
2. The managerial activity of monitoring a plan's implementation and taking corrective action as needed
is referred to as decision making.
3. The process of choosing among competing alternatives is decision making.
4. Managerial accounting information is not important for not-for-profit organizations.
5. Managerial Accounting is designed primarily for internal users.
6. Managerial accounting has its emphasis on the future.
NOT: 1 min.
7. Financial accounting is governed by GAAP.
8. The value chain is the set of activities required to design, develop, produce, market, and deliver
products and service to customers.
9. Time is not a crucial element in all phases of the value chain.
10. Activity-based costing is a less detailed approach to determining the cost of goods and services than
traditional cost accounting.
11. Excellent customer service is an example of a value-added activity.
12. A cost accountant would normally occupy a staff position within an organization.
13. Positions that have direct responsibility for the basic objectives of an organization are referred to as
line positions.
14. Virtually all managerial accounting practices were developed to assist managers in maximizing profits.
15. The belief that each member of a group bears no responsibility for the well-being of other members is
a common principle underlying all ethical systems.
16. The four emphasized areas of the CMA examination reflect the needs of managerial accounting and
highlights that managerial accounting has more of an interdisciplinary flavor than other areas of
accounting.
17. The purpose of the Certificate in Public Accounting is to provide minimal professional qualification
for external auditors.
COMPLETION
1. The detailed formulation of action to achieve a particular end is the management activity
called_____________.
2. ______________________________ is the provision of accounting information for a company’s
internal users.
3. The process of choosing among competing alternatives is called ________________________.
4. The managerial activity of monitoring a plan’s implementation and taking corrective action as needed
is referred to as ______________.
5. The managerial accounting system produces information for __________ users.
6. ____________________ is primarily concerned with producing information for external users.
7. Managerial accounting strongly emphasizes providing information about _________________.
8. The _____________________ is the set of activities required to design, develop, produce, market and
deliver products and services as well as provide support services to customers.
9. __________________________ organizes costs according to the value chain and collects both
financial and nonfinancial information.
10. __________________________________________ is a management philosophy in which
manufacturers strive to create an environment that will enable workers to manufacture perfect
(zero-defect) products.
11. _____________________________ is the continual search for ways to increase the overall efficiency
and productivity of activities by reducing waste, increasing quality and managing costs.
12. _________ is a crucial element in all phases of the value chain.
13. The________________supervises all accounting functions and reports directly to the general manager
and chief operating officer (COO).
14. Positions that are supportive in nature and have only indirect responsibility for an organization’s basic
objectives are called ________________________.
15. The ____________________ is responsible for the finance function.
16. In June 2002, Congress passed the____________________________________ in response to
financial scandals such as Enron.
17. ________________________ involves choosing actions that are right, proper, and just.
18. To promote ethical behavior by managers and employees, organizations commonly establish
a__________________________.
19. Only a _________________________ is permitted to serve as an external auditor.
20. A __________________________ has passed a comprehensive examination designed to ensure
technical competence and has two years of experience.
MULTIPLE CHOICE
1. Which of the following is not an objective of managerial accounting?
a.
To prepare external reports for investors, creditors, government agencies, and other
outside users.
b.
To provide information for costing of services, products, and other objects of interest to
management.
c.
To provide information for planning, controlling, evaluating and continuous improvement.
d.
To provide information for decision making.
2. Which of the following is an example of the management activity referred to as planning?
a.
Developing a strategy for disposing of hazardous waste.
b.
The decision to eliminate an unprofitable segment of an organization.
c.
The decision to outsource an organization's payroll processing.
d.
All of these are correct
3. Developing a company strategy for responding to anticipated new markets is an example of
a.
planning.
b.
controlling.
c.
decision making.
d.
all of these are correct.
4. Investigating production variances and adjusting the production process is an example of
a.
planning.
b.
controlling.
c.
decision making.
d.
all of these.
5. The primary objective of managerial accounting is
a.
to provide stockholders and potential investors with useful information for decision
making.
b.
to provide banks and other creditors with information useful in making credit decisions.
c.
to provide management with information useful for planning and control of operations.
d.
to provide the Internal Revenue Service with information about taxable income.
6. Managerial accounting
a.
is primarily for external users.
b.
has no mandatory rules.
c.
provides information based on historical information.
d.
must adhere to GAAP.
7. Managerial accounting reports are prepared
a.
according to GAAP guidelines.
b.
to meet the needs of decision makers within the firm.
c.
for external users.
d.
all of these are correct
8. Financial accounting
a.
is concerned with the information about the firm as a whole.
b.
has to adhere to GAAP policies.
c.
focuses on external users.
d.
all of these are correct
9. Which of the following would not be an example of a value-added activity?
a.
timely delivery of products
b.
offering the customer a variety of products
c.
storage of finished products
d.
excellent customer service
10. Total quality management emphasizes
a.
zero defects.
b.
continuous improvement.
c.
elimination of waste.
d.
all of these are correct.
11. Activity-based costing
a.
strives to create an environment that will enable workers to manufacture zero-defect
products.
b.
is the process of choosing among competing alternatives.
c.
was established in response to financial scandals.
d.
encourages process-value analysis.
12. Which of the following would normally occupy a line position?
a.
staff accountant
b.
accounting manager
c.
vice-president of marketing
d.
treasurer
13. Which of the following would normally occupy a staff position?
a.
assembly worker
b.
cost accounting manager
c.
factory manager
d.
all of these
14. Which of the following would occupy a line position in a hospital?
a.
manager of the cafeteria
b.
hospital administrator
c.
chief of surgery
d.
none of these
15. The controller of an organization participates in
a.
planning.
b.
controlling.
c.
decision making.
d.
all of these are correct
16. The objective of profit maximization
a.
should be the only goal of an organization.
b.
is an objective of financial accounting but not managerial accounting.
c.
should be achieved through legal and ethical means.
d.
should outweigh the goal of product quality.
17. The standards of ethical conduct for managerial accountants include
a.
competence and performance.
b.
integrity and respect for others.
c.
confidentiality, confidence, integrity, and observance.
d.
competence, confidentiality, integrity, and credibility.
18. Which of the following areas is not emphasized on the CMA examination?
a.
external auditing and business law
b.
economics, finance, and management
c.
decision analysis and information systems
d.
financial accounting and reporting
19. Accountants that have a Certificate in Public Accounting (CPA):
a.
are the only accountants permitted to serve as external auditors.
b.
must pass a national examination and be licensed by the state in which they practice.
c.
may be held responsible to provide assurance concerning the reliability of a firm's
financial statements.
d.
all of these statements are true.
20. Persons in the United States who provide assurance service are designated as
a.
Certified Public Accountants.
b.
Certified Financial Accountants.
c.
Chartered Accountants.
d.
Certified Management Accountants.
PROBLEM
1. Describe the major differences between managerial accounting and financial accounting.
2. Discuss in detail the three uses of managerial accounting information.
3. The Institute of Management Accountants (IMA) established ethical standards for accountants known
as the Statement of Ethical Professional Practice. Briefly describe the four standards.
4. Briefly describe activity-based costing (ABC), value chain, lean accounting and enterprise risk
management (ERM).
5. List the different types of certifications that can be obtained by an accountant.
6. Describe the provisions of the Sarbanes-Oxley Act of 2002.
ESSAY
1. You have been working as a staff accountant at Sanborn Industries for three months. Mr. Jones, the
accounting manager as well as your boss, has informed you that he has decided to change vendors for
the company’s office supplies. He notifies you that your company will now be utilizing the store
owned by his best friend. Mr. Jones is hopeful that this will bring in a significant profit for his
friend’s business possibly preventing the closing of his store. You receive the first invoice from that
store and realize that the prices are nearly double the amount that the company was paying when using
a large retail chain.
What should you do about the situation?
