,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
Chapter 01
Managerial Accounting Concepts and Principles
True / False Questions
1. Much of managerial accounting is directed at gathering useful information about costs for
planning and control decisions.
True False
2. Control is the process of setting goals and determining ways to achieve them.
True False
3. Managerial accounting is an activity that provides financial and nonfinancial information to
an organization's managers and other internal decision makers.
True False
4. One of the usual differences between financial and managerial accounting is the time
dimension of the information reported.
True False
5. 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.
True False
6. One difference between financial and managerial accounting is that the external users that
use financial information must plan a company's future, but the internal users of managerial
accounting information generally must decide whether to invest in or lend to a company.
True False
1-1
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
7. Financial accounting relies on accepted principles that are enforced through an extensive
set of rules and guidelines; on the other hand, managerial accounting systems are flexible.
True False
8. The focus of financial accounting is on an organization's projects, processes, and
subdivisions, and the focus of managerial accounting is on the whole organization.
True False
9. Both financial and managerial accounting report monetary information; managerial
accounting also reports considerable nonmonetary information.
True False
10. Both financial and managerial accounting affect people's decisions and actions.
True False
11. The concept of total quality management focuses on continuous improvement.
True False
12. The orientation of just-in-time manufacturing is that products are "pulled" through the
manufacturing process by the orders received from customers.
True False
13. When the attitude of continuous improvement exists throughout an organization, every
manager and employee seeks to continuously experiment with new and improved business
practices.
True False
1-2
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
14. The main principle of the lean business model is the elimination of waste of every kind
while satisfying the customer and providing a positive return to the company.
True False
15. The management concept of customer orientation causes a company to spend large
amounts on advertising to convince customers to buy the company's standard products.
True False
16. 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.
True False
17. Total quality management and just-in-time manufacturing are two modern systems
designed to improve the quality of management and the products and services offered.
True False
18. Under a just-in-time manufacturing system, large quantities of inventory are accumulated
throughout the factory to be certain that needed components are available each time that they
are needed.
True False
19. The balanced scorecard aids in continuous improvement by augmenting financial
measures with drivers or indicators of future financial performance.
True False
20. The Lean Business Model should have no effect on cost in a modern manufacturing
environment.
True False
1-3
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
21. Fraud affects all business.
True False
22. Fraud involves the deliberate or accidental misuse of the employer's assets.
True False
23. Direct materials are not usually easily traced to a product.
True False
24. Costs may be classified by many different cost classifications.
True False
25. Product costs can be classified as one of three types: direct materials, direct labor, or
overhead.
True False
26. Whether a cost is controllable or not controllable by an employee depends on the
employee's level of responsibility.
True False
27. Indirect materials are accounted for as factory overhead because they are not easily traced
to specific units or batches of production.
True False
28. A variable cost changes in proportion to changes in the volume in activity.
True False
1-4
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
29. Direct costs are incurred for the benefit of more than one cost object.
True False
30. A sunk cost has already been incurred and cannot be avoided or changed, so it is irrelevant
to decision making.
True False
31. An out-of-pocket cost requires a future cash outlay and is relevant for decision making.
True False
32. An opportunity cost requires a future cash outlay and is relevant for decision making.
True False
33. Period costs are incurred by purchasing merchandise or manufacturing finished goods.
True False
34. Product costs are expenditures necessary and integral to finished products.
True False
35. Cost concepts such as variable, fixed, mixed, direct and indirect apply only to
manufacturers and not to service companies.
True False
36. Although direct labor and raw materials costs are treated as manufacturing costs and
therefore make up part of the finished goods inventory cost, factory overhead is charged to
expense as it is incurred because it is a period cost.
True False
1-5
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
37. Selling and administrative expenses are normally product costs.
True False
38. The cost of partially completed products is included in the balance of the Goods in
Process Inventory account.
True False
39. Raw materials that become part of a product and are identified with specific units or
batches of a product are called direct materials.
True False
40. Manufacturers usually have three inventories: raw materials, goods in process, and
finished goods.
True False
41. Raw materials inventory includes only direct materials.
True False
42. The Goods in Process Inventory account is found only in the ledgers of merchandising
companies.
True False
43. The main difference between the income statement of a manufacturer and a merchandiser
is that the merchandiser includes cost of goods manufactured rather than cost of goods
purchased.
True False
1-6
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
44. Raw materials purchased plus beginning raw materials inventory equals the ending
balance of raw materials inventory.
True False
45. Four factors come together in the manufacturing process: beginning goods in process
inventory, direct materials, direct labor, and factory overhead.
True False
46. Newly completed units are combined with beginning finished goods inventory to make up
total ending goods in process inventory.
True False
47. The series of activities that add value to a company's products or services is called a value
chain.
True False
48. Cycle time equals process time plus inspection time plus move time plus wait time.
True False
49. A manufacturer's cost of goods manufactured is the sum of direct materials, direct labor,
and factory overhead costs incurred in producing products.
True False
50. Indirect labor refers to the cost of the workers whose efforts are directly traceable to
specific units or batches of product.
True False
1-7
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
51. Factory overhead includes selling and administrative expenses because they are indirect
costs of a product.
True False
52. Prime costs consist of direct labor and factory overhead.
True False
53. The manufacturing statement is also known as the schedule of manufacturing activities or
the schedule of cost of goods manufactured.
True False
54. The manufacturing statement must be prepared monthly as it is a required general-purpose
financial statement.
True False
Multiple Choice Questions
55. Managerial accounting information:
A. Is used mainly by external users.
B. Involves gathering information about costs for planning and control decisions.
C. Is generally the only accounting information available to managers.
D. Can be used for control purposes but not for planning purposes.
E. Has little to do with controlling costs.
1-8
, Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
56. Managerial accounting is different from financial accounting in that:
A. Managerial accounting is more focused on the organization as a whole and financial
accounting is more focused on subdivisions of the organization.
B. Managerial accounting never includes nonmonetary information.
C. Managerial accounting includes many projections and estimates whereas financial
accounting has a minimum of predictions.
D. Managerial accounting is used extensively by investors, whereas financial accounting is
used only by creditors.
E. Managerial accounting is mainly used to set stock prices.
57. Flexibility of practice when applied to managerial accounting means that:
A. The information must be presented in electronic format so that it is easily changed.
B. Managers must be willing to accept the information as the accountants present it to them,
rather than in the format they ask for.
C. The managerial accountants need to be on call twenty-four hours a day.
D. The design of a company's managerial accounting system largely depends on the nature of
the business and the arrangement of the internal operations of the company.
E. Managers must be flexible with information provided in varying forms and using
inconsistent measures.
58. Which of the following items does not represent a difference between financial and
managerial accounting?
A. Users of the information.
B. Flexibility of practices.
C. Timeliness and time dimension of the information reported.
D. Nature of the information.
E. Purpose of accounting.
59. Which of the following items is a management concept that was not created to improve
companies' performances?
A. Just-in-time manufacturing.
B. Customer orientation.
C. Total quality management.
D. Continuous improvement.
E. Theory of Constraints.
1-9
Chapter 01
Managerial Accounting Concepts and Principles
True / False Questions
1. Much of managerial accounting is directed at gathering useful information about costs for
planning and control decisions.
True False
2. Control is the process of setting goals and determining ways to achieve them.
True False
3. Managerial accounting is an activity that provides financial and nonfinancial information to
an organization's managers and other internal decision makers.
True False
4. One of the usual differences between financial and managerial accounting is the time
dimension of the information reported.
True False
5. 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.
True False
6. One difference between financial and managerial accounting is that the external users that
use financial information must plan a company's future, but the internal users of managerial
accounting information generally must decide whether to invest in or lend to a company.
True False
1-1
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
7. Financial accounting relies on accepted principles that are enforced through an extensive
set of rules and guidelines; on the other hand, managerial accounting systems are flexible.
True False
8. The focus of financial accounting is on an organization's projects, processes, and
subdivisions, and the focus of managerial accounting is on the whole organization.
True False
9. Both financial and managerial accounting report monetary information; managerial
accounting also reports considerable nonmonetary information.
True False
10. Both financial and managerial accounting affect people's decisions and actions.
True False
11. The concept of total quality management focuses on continuous improvement.
True False
12. The orientation of just-in-time manufacturing is that products are "pulled" through the
manufacturing process by the orders received from customers.
True False
13. When the attitude of continuous improvement exists throughout an organization, every
manager and employee seeks to continuously experiment with new and improved business
practices.
True False
1-2
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
14. The main principle of the lean business model is the elimination of waste of every kind
while satisfying the customer and providing a positive return to the company.
True False
15. The management concept of customer orientation causes a company to spend large
amounts on advertising to convince customers to buy the company's standard products.
True False
16. 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.
True False
17. Total quality management and just-in-time manufacturing are two modern systems
designed to improve the quality of management and the products and services offered.
True False
18. Under a just-in-time manufacturing system, large quantities of inventory are accumulated
throughout the factory to be certain that needed components are available each time that they
are needed.
True False
19. The balanced scorecard aids in continuous improvement by augmenting financial
measures with drivers or indicators of future financial performance.
True False
20. The Lean Business Model should have no effect on cost in a modern manufacturing
environment.
True False
1-3
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
21. Fraud affects all business.
True False
22. Fraud involves the deliberate or accidental misuse of the employer's assets.
True False
23. Direct materials are not usually easily traced to a product.
True False
24. Costs may be classified by many different cost classifications.
True False
25. Product costs can be classified as one of three types: direct materials, direct labor, or
overhead.
True False
26. Whether a cost is controllable or not controllable by an employee depends on the
employee's level of responsibility.
True False
27. Indirect materials are accounted for as factory overhead because they are not easily traced
to specific units or batches of production.
True False
28. A variable cost changes in proportion to changes in the volume in activity.
True False
1-4
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
29. Direct costs are incurred for the benefit of more than one cost object.
True False
30. A sunk cost has already been incurred and cannot be avoided or changed, so it is irrelevant
to decision making.
True False
31. An out-of-pocket cost requires a future cash outlay and is relevant for decision making.
True False
32. An opportunity cost requires a future cash outlay and is relevant for decision making.
True False
33. Period costs are incurred by purchasing merchandise or manufacturing finished goods.
True False
34. Product costs are expenditures necessary and integral to finished products.
True False
35. Cost concepts such as variable, fixed, mixed, direct and indirect apply only to
manufacturers and not to service companies.
True False
36. Although direct labor and raw materials costs are treated as manufacturing costs and
therefore make up part of the finished goods inventory cost, factory overhead is charged to
expense as it is incurred because it is a period cost.
True False
1-5
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
37. Selling and administrative expenses are normally product costs.
True False
38. The cost of partially completed products is included in the balance of the Goods in
Process Inventory account.
True False
39. Raw materials that become part of a product and are identified with specific units or
batches of a product are called direct materials.
True False
40. Manufacturers usually have three inventories: raw materials, goods in process, and
finished goods.
True False
41. Raw materials inventory includes only direct materials.
True False
42. The Goods in Process Inventory account is found only in the ledgers of merchandising
companies.
True False
43. The main difference between the income statement of a manufacturer and a merchandiser
is that the merchandiser includes cost of goods manufactured rather than cost of goods
purchased.
True False
1-6
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
44. Raw materials purchased plus beginning raw materials inventory equals the ending
balance of raw materials inventory.
True False
45. Four factors come together in the manufacturing process: beginning goods in process
inventory, direct materials, direct labor, and factory overhead.
True False
46. Newly completed units are combined with beginning finished goods inventory to make up
total ending goods in process inventory.
True False
47. The series of activities that add value to a company's products or services is called a value
chain.
True False
48. Cycle time equals process time plus inspection time plus move time plus wait time.
True False
49. A manufacturer's cost of goods manufactured is the sum of direct materials, direct labor,
and factory overhead costs incurred in producing products.
True False
50. Indirect labor refers to the cost of the workers whose efforts are directly traceable to
specific units or batches of product.
True False
1-7
,Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
51. Factory overhead includes selling and administrative expenses because they are indirect
costs of a product.
True False
52. Prime costs consist of direct labor and factory overhead.
True False
53. The manufacturing statement is also known as the schedule of manufacturing activities or
the schedule of cost of goods manufactured.
True False
54. The manufacturing statement must be prepared monthly as it is a required general-purpose
financial statement.
True False
Multiple Choice Questions
55. Managerial accounting information:
A. Is used mainly by external users.
B. Involves gathering information about costs for planning and control decisions.
C. Is generally the only accounting information available to managers.
D. Can be used for control purposes but not for planning purposes.
E. Has little to do with controlling costs.
1-8
, Full file at http://gettestbank.eu/Test-Bank-for-Managerial-Accounting,-3rd-Edition-Wil
56. Managerial accounting is different from financial accounting in that:
A. Managerial accounting is more focused on the organization as a whole and financial
accounting is more focused on subdivisions of the organization.
B. Managerial accounting never includes nonmonetary information.
C. Managerial accounting includes many projections and estimates whereas financial
accounting has a minimum of predictions.
D. Managerial accounting is used extensively by investors, whereas financial accounting is
used only by creditors.
E. Managerial accounting is mainly used to set stock prices.
57. Flexibility of practice when applied to managerial accounting means that:
A. The information must be presented in electronic format so that it is easily changed.
B. Managers must be willing to accept the information as the accountants present it to them,
rather than in the format they ask for.
C. The managerial accountants need to be on call twenty-four hours a day.
D. The design of a company's managerial accounting system largely depends on the nature of
the business and the arrangement of the internal operations of the company.
E. Managers must be flexible with information provided in varying forms and using
inconsistent measures.
58. Which of the following items does not represent a difference between financial and
managerial accounting?
A. Users of the information.
B. Flexibility of practices.
C. Timeliness and time dimension of the information reported.
D. Nature of the information.
E. Purpose of accounting.
59. Which of the following items is a management concept that was not created to improve
companies' performances?
A. Just-in-time manufacturing.
B. Customer orientation.
C. Total quality management.
D. Continuous improvement.
E. Theory of Constraints.
1-9
