Managerial Accounting: Making Decisions and Motivating Performance (Datar/Rajan)
Chapter 1 The Manager and Management Accounting
Learning Objective 1-1
1) Managers use management accounting information to do all of the following except:
A) collect.
B) analyze.
C) perform.
D) categorize.
E) summarize.
Answer: C
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-28
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
2) Managers make cost management decisions to increase the value of products and services they provide
to customers and to achieve organizational goals. Which of the following is not an example of an effective
cost management decision?
A) The decision to enter a new market.
B) A decision to change the design of a product.
C) The decision to implement new organizational processes.
D) Information and the accounting systems themselves.
E) Decisions to use the information from accounting systems.
Answer: D
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-21
AACSB: Analytic Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
3) Management accounting:
A) focuses on measuring, analyzing, and reporting financial and nonfinancial information to help
managers estimate future revenue, costs, and other measures to forecast activities and formulate
strategies to increase the competitive advantage of the organization.
B) financial-information purpose is to communicate organization's financial position to investors, banks,
regulators, and suppliers.
C) focus and emphasis is on past-oriented reports.
D) rules of measurement reporting require financial statements to be prepared in accordance of GAAP.
E) behavioral information primarily reports economic events, but also influences behavior because
manager's compensation is often based on reported financial data.
Answer: A
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-21
AACSB: Analytic Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
1
Copyright © 2014 Pearson Education, Inc.
,4) Financial accounting:
A) focuses on reporting financial information to managers of the organization.
B) financial statements must comply with Generally Accepted Accounting Principles (GAAP).
C) focus and emphasis is on future-oriented reports.
D) rules of measurement are internal measures and reports do not have to follow GAAP, but are based on
cost-benefit analysis.
E) behavioral implications are designed primarily to influence the behavior of managers and other
employees.
Answer: B
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-1
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
5) An Enterprise Resource Planning (ERP) system is:
A) a cost-management system that specifically focuses on strategic issues.
B) a single database that collects data and feeds it into applications that support each of the company's
business activities, such as purchasing, production, distribution, and sales.
C) a sequence of business functions in which customer usefulness is added to products.
D) a strategy that integrates people and technology in all business functions to deepen relationships with
customers, partners, and distributors.
E) an integrated philosophy of management for continuously improving the quality of products and
processes.
Answer: B
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-15
AACSB: Use of Information Technology
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
6) Users of management accounting information include:
A) banks.
B) investors.
C) suppliers.
D) regulators.
E) managers of the organization.
Answer: E
Diff: 1 Page Ref: 3
LO: 1-1
EOC: E1-7
AACSB: Analytic Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
2
Copyright © 2014 Pearson Education, Inc.
,7) Financial accounting managers are more concerned about:
A) future-oriented budgets.
B) past-oriented reports.
C) reports that do not follow GAPP.
D) reports that are based on cost-benefit analysis.
E) utilizing information to help managers make decisions to achieve organizational goals.
Answer: B
Diff: 3 Page Ref: 3
LO: 1-1
EOC: E1-15
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
8) ________ ________ measures, analyzes and reports financial information and nonfinancial information
that helps managers make decisions to fulfill the goals of an organization.
A) Financial Accounting
B) Management Accounting
C) Cost Accounting
D) Cost Management
E) Account Auditing
Answer: B
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-14
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
9) Financial accounting reports financial information to internal parties.
Answer: FALSE
Explanation: External users such as investors, banks, regulators, and suppliers use financial accounting
reports.
Diff: 1 Page Ref: 3
LO: 1-1
EOC: E1-1
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
10) There is no difference in the goals of financial accounting and management accounting.
Answer: FALSE
Explanation: Financial accounting and management accounting have different goals. Financial
accounting focuses on reporting financial information to external parties, for example investors,
government, agencies, banks and suppliers. Management accounting measures analyzes, and reports
financial and nonfinancial information that helps managers make decisions to fulfill the goals of an
organization.
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-2
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts and principles.
MA-1: Describe the basics of managerial accounting and its function within an organization.
3
Copyright © 2014 Pearson Education, Inc.
, 11) Managers use management accounting information to develop, communicate, and implement
strategy.
Answer: TRUE
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-14
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
12) Managers use management accounting information to develop, communicate, and implement
strategy.
Answer: TRUE
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-14
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
13) The purpose of information in financial accounting is to communicate the organization's financial
position to investors, banks, regulators, and other outside parties.
Answer: TRUE
Diff: 1 Page Ref: 3
LO: 1-1
EOC: E1-21
AACSB: Communication Abilities
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
14) Discuss the major differences between management accounting and financial accounting. In your
analysis, discuss who benefits from the reports or statements and discuss the differences between the
individuals that use the accounting information. Be specific.
Answer: Management accounting data is typically used by the internal employees within the
organization. For example, the managers, supervisors, and employees benefit from the reports because
these internal reports could be used to implement new processes, other planning and control decisions, or
the development of goals.
Financial accounting data is typically used by individuals or groups outside of the company that has an
interest in the financial position at the company. For example, banks, stockholders, or regulatory agencies
could use this information to make a decision about the organization.
Diff: 2 Page Ref: 3
LO: 1-1
EOC: E1-18
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts and principles.
MA-1: Describe the basics of managerial accounting and its function within an organization.
4
Copyright © 2014 Pearson Education, Inc.
Chapter 1 The Manager and Management Accounting
Learning Objective 1-1
1) Managers use management accounting information to do all of the following except:
A) collect.
B) analyze.
C) perform.
D) categorize.
E) summarize.
Answer: C
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-28
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
2) Managers make cost management decisions to increase the value of products and services they provide
to customers and to achieve organizational goals. Which of the following is not an example of an effective
cost management decision?
A) The decision to enter a new market.
B) A decision to change the design of a product.
C) The decision to implement new organizational processes.
D) Information and the accounting systems themselves.
E) Decisions to use the information from accounting systems.
Answer: D
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-21
AACSB: Analytic Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
3) Management accounting:
A) focuses on measuring, analyzing, and reporting financial and nonfinancial information to help
managers estimate future revenue, costs, and other measures to forecast activities and formulate
strategies to increase the competitive advantage of the organization.
B) financial-information purpose is to communicate organization's financial position to investors, banks,
regulators, and suppliers.
C) focus and emphasis is on past-oriented reports.
D) rules of measurement reporting require financial statements to be prepared in accordance of GAAP.
E) behavioral information primarily reports economic events, but also influences behavior because
manager's compensation is often based on reported financial data.
Answer: A
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-21
AACSB: Analytic Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
1
Copyright © 2014 Pearson Education, Inc.
,4) Financial accounting:
A) focuses on reporting financial information to managers of the organization.
B) financial statements must comply with Generally Accepted Accounting Principles (GAAP).
C) focus and emphasis is on future-oriented reports.
D) rules of measurement are internal measures and reports do not have to follow GAAP, but are based on
cost-benefit analysis.
E) behavioral implications are designed primarily to influence the behavior of managers and other
employees.
Answer: B
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-1
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
5) An Enterprise Resource Planning (ERP) system is:
A) a cost-management system that specifically focuses on strategic issues.
B) a single database that collects data and feeds it into applications that support each of the company's
business activities, such as purchasing, production, distribution, and sales.
C) a sequence of business functions in which customer usefulness is added to products.
D) a strategy that integrates people and technology in all business functions to deepen relationships with
customers, partners, and distributors.
E) an integrated philosophy of management for continuously improving the quality of products and
processes.
Answer: B
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-15
AACSB: Use of Information Technology
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
6) Users of management accounting information include:
A) banks.
B) investors.
C) suppliers.
D) regulators.
E) managers of the organization.
Answer: E
Diff: 1 Page Ref: 3
LO: 1-1
EOC: E1-7
AACSB: Analytic Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
2
Copyright © 2014 Pearson Education, Inc.
,7) Financial accounting managers are more concerned about:
A) future-oriented budgets.
B) past-oriented reports.
C) reports that do not follow GAPP.
D) reports that are based on cost-benefit analysis.
E) utilizing information to help managers make decisions to achieve organizational goals.
Answer: B
Diff: 3 Page Ref: 3
LO: 1-1
EOC: E1-15
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
8) ________ ________ measures, analyzes and reports financial information and nonfinancial information
that helps managers make decisions to fulfill the goals of an organization.
A) Financial Accounting
B) Management Accounting
C) Cost Accounting
D) Cost Management
E) Account Auditing
Answer: B
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-14
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
9) Financial accounting reports financial information to internal parties.
Answer: FALSE
Explanation: External users such as investors, banks, regulators, and suppliers use financial accounting
reports.
Diff: 1 Page Ref: 3
LO: 1-1
EOC: E1-1
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
10) There is no difference in the goals of financial accounting and management accounting.
Answer: FALSE
Explanation: Financial accounting and management accounting have different goals. Financial
accounting focuses on reporting financial information to external parties, for example investors,
government, agencies, banks and suppliers. Management accounting measures analyzes, and reports
financial and nonfinancial information that helps managers make decisions to fulfill the goals of an
organization.
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-2
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts and principles.
MA-1: Describe the basics of managerial accounting and its function within an organization.
3
Copyright © 2014 Pearson Education, Inc.
, 11) Managers use management accounting information to develop, communicate, and implement
strategy.
Answer: TRUE
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-14
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
12) Managers use management accounting information to develop, communicate, and implement
strategy.
Answer: TRUE
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-14
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
13) The purpose of information in financial accounting is to communicate the organization's financial
position to investors, banks, regulators, and other outside parties.
Answer: TRUE
Diff: 1 Page Ref: 3
LO: 1-1
EOC: E1-21
AACSB: Communication Abilities
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
14) Discuss the major differences between management accounting and financial accounting. In your
analysis, discuss who benefits from the reports or statements and discuss the differences between the
individuals that use the accounting information. Be specific.
Answer: Management accounting data is typically used by the internal employees within the
organization. For example, the managers, supervisors, and employees benefit from the reports because
these internal reports could be used to implement new processes, other planning and control decisions, or
the development of goals.
Financial accounting data is typically used by individuals or groups outside of the company that has an
interest in the financial position at the company. For example, banks, stockholders, or regulatory agencies
could use this information to make a decision about the organization.
Diff: 2 Page Ref: 3
LO: 1-1
EOC: E1-18
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts and principles.
MA-1: Describe the basics of managerial accounting and its function within an organization.
4
Copyright © 2014 Pearson Education, Inc.
