Chapter 1—Introduction to Managerial Accounting
MULTIPLE CHOICE
1. Which of the following is not true about knowledge in the business environment?
a.
It is the same as data or information.
b.
It is the value added from shared information.
c.
It includes both quantitative and qualitative information.
d.
It must be managed in order for a company to remain competitive.
2. Which of the following statements is not true regarding enterprise resource planning (ERP)?
a.
It integrates traditional accounting information systems with other information systems.
b.
It can be customized to provide specific and relevant information to different types of
users.
c.
It has evolved in the past few years to address the shortcomings of traditional accounting
information systems.
d.
It captures quantitative but not qualitative information.
3. ERP systems capture:
a.
only qualitative data.
b.
only quantitative data.
c.
both qualitative and quantitative data.
d.
the same information as traditional accounting information systems.
4. An example of qualitative data is:
a.
warranty claims.
b.
customer satisfaction.
c.
net income.
d.
budgeted hours.
5. An example of quantitative data is:
a.
company reputation.
b.
number of customer complaints.
c.
Employee satisfaction.
d.
product quality.
6. Decision-makers should consider:
a.
only qualitative factors.
b.
only quantitative factors.
c.
both quantitative and qualitative factors.
d.
only sunk costs.
7. The main focus of managerial accounting is:
a.
decision making.
b.
the preparation of financial statements.
c.
the preparation of budgets.
d.
documenting cash flows.
8. Which of the following statements is true?
a.
External and internal users of accounting information have exactly the same information
needs.
b.
Financial accounting is less flexible than managerial accounting.
c.
Managerial accounting provides the best information to external users.
d.
Managerial accounting emphasizes on the organization as a whole more than financial
accounting.
9. Which of the following is not an example of an external user of accounting information?
a.
Potential and existing stockholders
b.
Government taxing agencies
c.
Potential and existing creditors
d.
Management
10. Which of the following is an example of an internal user of accounting information?
a.
Suppliers
b.
Creditors
c.
Managers
d.
Federal tax agency
11. Which of the following is a characteristic of managerial accounting?
a.
It is used primarily by external users.
b.
It often lacks flexibility.
c.
It is often future-oriented.
d.
The information it provides is extremely precise.
12. Which of the following is true regarding managerial accounting?
a.
It often emphasizes on segments rather than the organization as a whole.
b.
It must be prepared as according to generally accepted accounting principles.
c.
Its primary focus is on providing information to external users.
d.
It is less flexible than financial accounting.
13. Which of the following is not one of the three primary activities of managers?
a.
Budgeting activities
b.
Planning activities
c.
Operating activities
d.
Controlling activities
14. ____ involve(s) the development of short-terms objectives and goals.
a.
Controlling activities
b.
Strategic planning
c.
Operational planning
d.
Financial activities
15. ____ addresses long-term questions of how a company distinguishes itself from its competitors.
a.
Operational planning
b.
Strategic planning
c.
Internal planning
d.
Financial planning
16. A company’s decision on where to locate a new factory is most likely a result of:
a.
operating activities.
b.
operational planning.
c.
strategic planning.
d.
controlling activities.
17. Which manager activity would address the decision on whether or not to accept a special order within
the next few days?
a.
Sales activity
b.
Strategic planning activity
c.
Operating activity
d.
Controlling activity
18. All of the following are examples of operating activities except:
a.
decisions on whether or not to schedule overtime for employees.
b.
decisions on what price to charge for a product.
c.
decisions on whether or not to accept a special order.
d.
decisions on whether actual outcomes were similar to desired outcomes.
19. ____ decides how much inventory should be kept on hand by the business.
a.
Finance manager
b.
Operations/production manager
c.
Marketing manager
d.
Human resource manager
20. ____ decides whether a company should borrow money or issue stock as a way to raise capital.
a.
Human resource manager
b.
Operations/production manager
c.
Finance manager
d.
Marketing manager
21. ____ decides whether or not a company should lease or buy an expensive manufacturing equipment.
a.
Operations/production manager
b.
Human resource manager
c.
Finance manager
d.
Marketing manager
22. A(n) ____ would most likely decide whether or not employees need to work overtime in order to fill a
special order.
a.
Human resource manager
b.
Operations/production manager
c.
Finance manager
d.
Marketing manager
23. ____ would most likely be involved in product packaging decisions.
a.
Marketing manager
b.
Operations/production manager
c.
Finance manager
d.
Human resource manager
24. A(n) ____ would most likely be in charge of deciding on the type of benefit package an employee
receives.
a.
Finance manager
b.
Operations/production manager
c.
Human resource manager
d.
Marketing manager
25. The primary role of today’s managerial accountant is to:
a.
enter data into the accounting system.
b.
collect data.
c.
analyze information and create knowledge.
d.
prepare tax returns.
26. Which of the following statements about decision-making is true?
a.
Risk should not be taken into account.
b.
Objectives should be quantitative and not qualitative.
c.
Opportunity cost should be considered.
d.
Sunk costs should usually be taken into account.
27. In the decision-making process, an example of a quantitative measure would include:
a.
employee morale.
b.
product satisfaction.
c.
customer service.
d.
number of pounds needed.
28. Relevant costs are costs that:
a.
do not differ between alternatives.
b.
may not be eliminated by choosing one alternative over another.
c.
have already been incurred.
d.
differ between alternatives.
29. Costs that differ between alternatives are called:
a.
sunk costs.
b.
irrelevant costs.
c.
relevant costs.
d.
unavoidable costs.
30. Mary Ann is trying to decide whether to fly to Florida or New York. The cost of her ticket will be the
same either way. The cost of the ticket is an example of:
a.
sunk cost.
b.
opportunity cost.
c.
avoidable cost.
d.
irrelevant cost.
31. Sunk costs are:
a.
opportunity cost.
b.
costs that will occur in the future.
c.
not relevant.
d.
costs that can be avoided.
32. Relevant costs:
a.
are sunk costs.
b.
are costs that differ among alternatives.
c.
are unavoidable.
d.
can not be opportunity costs.
33. When making a decision, which of the following should not be considered?
a.
Relevant costs
b.
Opportunity costs
c.
Sunk costs
d.
Risk
34. Which of the following is not true with regard to opportunity costs?
a.
They are the benefits forgone by selecting one alternative over another.
b.
They are relevant.
c.
They are sometimes difficult to quantify.
d.
They have already occurred in the past.
35. You are now considering your housing options for next semester. If the cost of a dorm room and the
cost of an apartment are exactly the same, housing costs are:
a.
sunk costs.
b.
an opportunity cost.
c.
not relevant.
d.
avoidable.
36. You are now considering your housing options for next semester. If the cost of a dorm room and the
cost of an apartment are the same, but the apartment is larger, then:
a.
both cost and size are relevant.
b.
neither cost nor size is relevant.
c.
cost is relevant but size is not.
d.
size is relevant but cost is not.
37. You are considering your housing options for next semester. The cost of a dorm room and the cost of
an apartment are the same. You paid a $50 non-refundable deposit to live in the dorm last year. This
deposit is an example of a(n):
a.
opportunity cost.
b.
relevant cost.
c.
sunk cost.
d.
avoidable cost.
38. Which of the following would be an irrelevant cost?
a.
Future costs that differ among alternatives.
b.
Benefits foregone by choosing one alternative over another.
c.
Costs that have already been incurred.
d.
Costs that are avoidable.
39. Which of the following should not be taken into account in decision-making?
a.
Risk
b.
Ethical considerations
c.
Irrelevant costs
d.
Opportunity costs
40. Which of the following statements is true regarding ethics in decision-making?
a.
Since most business decisions are simply a matter of economics, ethical considerations
should be ignored.
b.
Decision-making can have an ethical as well as an economic impact.
c.
Managerial accountants do not face ethical issues.
d.
Business managers will always agree on ethical choices.
SHORT ANSWER
1. Accounting information systems generate both monetary and non-monetary accounting information.
List two examples of each type of accounting information.
2. How has the automation of accounting information altered the role of the managerial accountant?
3. Identify four internal and external users of accounting information. Provide a specific example of how
accounting information might be used by each.
4. Discuss how a managerial accounting report prepared for an internal user might differ from a financial
accounting report prepared for an external user.
5. Managers are responsible for numerous activities including planning, operating, and controlling.
Define these three types of activities and provide at least one example of each.
6. Select one of the following functional managers and provide an example of the type of accounting
information that they might request from the managerial accountant: marketing manager,
operations/production manager, human resource manager, or finance manager.
7. Select one of the following functional managers and discuss how they might use accounting
information in their managerial role: marketing manager, operations/production manager, human
resource manager, or finance manager.
8. Describe the role of the managerial accountant within an organization.
9. Grant Enterprises is considering the introduction of a new product. The marketing and production
departments have begun informal discussions about its design, production, and sales. List three
examples of accounting information that the marketing and production managers would find useful in
their meeting.
10. You are trying to decide what to do during your next school break. One campus group is planning a
trip to Jacksonville Beach. Another is planning a ski trip to Snowmass. Many students will be going
home to see family, and others will remain on campus. List three factors that you might consider in
making your decision.
PROBLEM
1. You and your roommate would like to purchase a projection TV for your apartment. You have
gathered the following information about the two leading models:
Factors
Xenabox 1000
BigScreen 1050
Screen size
32 inch
32 inch
Picture Quality
great
good
Cost
$400
$325
Delivery Charge
$50
$50
You paid $150 for your current TV two years ago.
Required:
a.
Which of the four factors listed above are relevant to your decision?
b.
Is the cost of your old TV relevant to your decision? Why or why not?
c.
Which of the factors are quantitative and which are qualitative?
2. A friend has informed you of a part-time job for which you are well-qualified. It would begin next
semester and require working 20 hours a week at a rate of $35 per hour. You would have to commute
2 hours round trip four days a week to work. You have already registered for 18 credit hours (6
classes) next semester, and you have been told that each of the classes is very demanding, requiring
projects and extensive study time. If you complete these 18 hours, you will graduate. You are only
taking 12 credit hours this semester. You have enough money for tuition ($100 per credit hour) and
room and board but would love some extra spending money.
Required:
a.
Define your problem related to the information above.
b.
What information above would you consider relevant to the decision? Why?
c.
What information above would you consider not relevant to the decision? Why?
a.
The picture quality and cost are relevant since they differ among the two alternatives.
b.
The cost of the old TV is a sunk cost and therefore is not relevant to the current decision.
c.
Only the picture quality variable is qualitative, the rest are quantitative.
d.
What other factors not provided above might be relevant to the decision?
e.
What are some possible alternatives?
f.
Which alternative would you choose? Why?
studies. Should you accept the part-time job?
for spending money.
Answers may vary.
Not relevant − number of hours this semester, tuition cost
Answers may vary.
commute in? Can you drop any classes?
drop any classes
f.
Answers will vary depending upon the “why.”