Managerial Accounting Stacey Whitecotton 4th Edition- Test Bank

Managerial Accounting, 4e (Whitecotton) Chapter 1 Introduction to Managerial Accounting 1) Financial accounting information is generally used exclusively by internal parties such as managers. Answer: FALSE Explanation: Financial accounting information is used by external parties; managerial accounting information is used by internal business owners and managers. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 2) Financial accounting information is reported for the company as a whole. Answer: TRUE Explanation: Financial accounting information is provided at the company-wide level. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 3) Managers must direct, lead and motivate during the implementation function. Answer: TRUE Explanation: Directing/leading involves putting the plan into action, and motivating others to work toward the plan's success, and it is a key part of putting a plan into action (implementation). Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 1 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 4) Managers of small, private corporations use managerial accounting information whereas managers of large, public corporations use financial accounting information. Answer: FALSE Explanation: Managerial accounting information is used by managers in all types of organizations: large and small, public and private, profit and nonprofit. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 5) The Sarbanes-Oxley Act of 2002 places full responsibility on the board of directors for the accuracy of the reporting system. Answer: FALSE Explanation: SOX places more responsibility on all managers (not just accountants) for the accuracy of the reporting system. SOX also places additional responsibilities on the boards of directors and external auditors to reduce the opportunity for errors and fraud. Difficulty: 2 Medium Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 6) The Sarbanes-Oxley Act of 2002 focuses on three factors that affect the accounting reporting environment: ethics, fraud, and managers. Answer: FALSE Explanation: The Sarbanes-Oxley Act of 2002 focuses on three factors that affect the accounting reporting environment: opportunity, incentives, and character. Difficulty: 2 Medium Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 2 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7) A sustainable business is one with the ability to meet the needs of today without sacrificing the ability of future generations to meet their own needs. Answer: TRUE Explanation: In the context of business "sustainability" means the ability to meet the needs of today without sacrificing the ability of future generations to meet their own needs. Difficulty: 1 Easy Topic: Sustainability Accounting Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 8) The term "Big data" refers to the volume, velocity and veracity of data. Answer: FALSE Explanation: Veracity is a synonym for accuracy, which is not one of the characteristics of big data. The 3 characteristics of "Big data" are volume, velocity, and variety Difficulty: 1 Easy Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 9) Predictive analytics is the process of recommending a course of action based upon meaningful patterns and insights from collected data. Answer: FALSE Explanation: Prescriptive analytics, not predictive analytics, recommends courses of action Difficulty: 1 Easy Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 3 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 10) Descriptive analytics uses patterns and insights from collected data to show what has happened. Answer: TRUE Explanation: Descriptive analytics describes what has happened. Difficulty: 1 Easy Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 11) An opportunity cost is the cost of not doing something. Answer: TRUE Explanation: An opportunity cost is the foregone benefit of the path not taken, that is, the cost of not doing something. Difficulty: 1 Easy Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 12) Whether a cost is treated as direct or indirect depends on whether tracing the cost is both possible and feasible. Answer: TRUE Explanation: Direct costs can be traced directly to a specific cost object, while indirect costs cannot be traced to a specific cost object or are not worth the effort of tracing. Difficulty: 2 Medium Topic: Direct Versus Indirect Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 4 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 13) Variable costs are always direct costs. Answer: FALSE Explanation: Variable costs change, in total, in direct proportion to changes in activity levels. They are not always direct costs, which can be traced to a specific cost object. Difficulty: 2 Medium Topic: Direct Versus Indirect Costs; Variable Versus Fixed Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 14) Fixed costs stay the same, on a per-unit basis, as activity level changes. Answer: FALSE Explanation: Fixed costs stay the same, in total, as activity level changes. Difficulty: 1 Easy Topic: Variable Versus Fixed Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 15) Prime costs include direct materials, direct labor, and manufacturing overhead. Answer: FALSE Explanation: Taken together, direct materials and direct labor are referred to as prime cost. Difficulty: 1 Easy Topic: Manufacturing Versus Nonmanufacturing Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 5 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 16) All manufacturing costs are treated as product costs. Answer: TRUE Explanation: GAAP requires that all manufacturing costs be treated as product costs, or costs that are assigned to the product as it is being manufactured. Difficulty: 1 Easy Topic: Product Versus Period Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 17) All manufacturing costs are inventoriable costs. Answer: TRUE Explanation: Manufacturing costs are product costs that are assigned to the product as it is being manufactured. Product costs are also called inventoriable costs because they are counted as inventory until the product is finally sold. Difficulty: 2 Medium Topic: Product Versus Period Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 18) A cost that will occur in the future and differs between various alternatives under consideration is a relevant cost. Answer: TRUE Explanation: For a cost to be relevant, it must occur in the future and differ between the various alternatives the manager is considering. Difficulty: 1 Easy Topic: Relevant Versus Irrelevant Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 6 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19) What is the primary goal of accounting? A) To set long-term goals and objectives. B) To arrange for the necessary resources to achieve a plan. C) To provide information for decision making. D) To motivate others to work towards a plan's success. Answer: C Explanation: The primary goal of accounting is to capture, summarize, and report useful information for decision making. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 20) Of the following groups, which is the primary user of managerial accounting information? A) Investors B) Creditors C) Regulators D) Managers Answer: D Explanation: Managerial accounting information is used by internal business owners and managers. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 7 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 21) Managerial accounting, as compared to financial accounting, is primarily intended to facilitate: A) an understanding of GAAP. B) making decisions with timely, relevant information. C) conducting ethics investigations under SOX. D) reporting results to shareholders. Answer: B Explanation: Managers need information that is timely and relevant to the specific decisions at hand, and they use managerial accounting to facilitate that. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 22) Managerial accounting information includes all of the following except: A) budgets. B) performance evaluations, for example budget-to-actual reports. C) cost reports. D) financial statements prepared in accordance with generally accepted accounting principles. Answer: D Explanation: Managerial accounting is used by internal business owners and managers, who need internal information such as budgets, performance evaluations, and cost reports. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 8 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 23) Which of the following is not a characteristic of financial accounting? A) Financial reports are prepared according to GAAP. B) Information is used by external parties. C) Information is subjective, relevant, and future-oriented. D) Reports are prepared periodically. Answer: C Explanation: Managerial, not financial, accounting information is subjective, relevant, and future-oriented. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 24) Which of the following is not a characteristic of financial accounting? A) Information is reported at the decision making level. B) Information is used by external parties. C) Information is objective, reliable and historical. D) Reports are prepared periodically. Answer: A Explanation: Managerial, not financial, accounting information is reported at the decision making level. Financial accounting information is reported at the company level. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 9 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 25) Which of the following is not a characteristic of financial accounting? A) Financial reports are prepared according to GAAP. B) Information is used primarily by internal parties. C) Information is objective, reliable, and historical. D) Reports are prepared periodically. Answer: B Explanation: The primary users of managerial, not financial, accounting information are internal parties. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 26) Which of the following is not a characteristic of managerial accounting? A) Information is used by internal parties. B) Information is subjective, relevant, and future-oriented. C) Reports are prepared as needed. D) Reports are prepared according to GAAP. Answer: D Explanation: Financial, not managerial, accounting information is prepared according to GAAP. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 10 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 27) Which of the following is not a characteristic of managerial accounting? A) Information is used by external parties. B) Information is subjective, relevant, and future-oriented. C) Reports are prepared as needed. D) Information is reported at the decision making level. Answer: A Explanation: Financial, not managerial, accounting information is used by external parties such as investors, creditors, and regulators. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 28) Which of the following is not a characteristic of managerial accounting? A) Information is used by internal parties. B) Information is subjective, relevant, and future-oriented. C) Reports are prepared as needed. D) Information is reported for the company as a whole. Answer: D Explanation: Financial, not managerial, accounting information is reported for the company as a whole. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 11 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 29) Which of the following types of reports is more characteristic of managerial accounting than financial accounting? A) An internal report used by management B) An external report used by investors C) A report prepared according to GAAP D) A report prepared periodically (monthly, quarterly, annually) Answer: A Explanation: Managerial accounting information is used by internal business owners and managers, so an internal report used by management is more characteristic of managerial accounting than financial accounting. Difficulty: 1 Easy Topic: Comparison of financial and managerial accounting Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 30) The control function is: A) comparing actual with budgeted results and taking corrective action when needed. B) arranging of the necessary resources to carry out the plan. C) the directing, leading, and motivating of those necessary to carry out the plan. D) drafting the goals and strategies to achieve long-term results. Answer: A Explanation: During the control function, managers keep track of how they are doing, including comparing actual results with the budget, and they determine what corrective actions must be taken. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 12 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 31) During the last fiscal year, XYZ organization implemented managerial accounting to allocate program costs to its soup kitchen. The kitchen's manager is reviewing actual results from the prior month to compare the outcomes with the organization's objectives. Which function of the Plan-Implement-Control cycle is she conducting? A) Plan B) Implement C) Control D) Strategize Answer: C Explanation: This manager is keeping track of how she and her department are doing and whether actions must be taken to adjust the plan as part of the control function. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 01-01 Describe the key differences between financial accounting and managerial accounting. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation 32) Which of the following types of organizations purchases raw materials from suppliers and uses them to create a finished product? A) Manufacturing firms B) Merchandising companies C) Service companies D) Retailers Answer: A Explanation: Manufacturing firms purchase raw materials from suppliers and use them to create a finished product. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 13 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 33) Hair salons and law firms are examples of which of the following type of organization? A) Retailers B) Service companies C) Manufacturing firms D) Merchandising companies Answer: B Explanation: Service companies provide a service to customers or clients and include hair salons and law firms. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 34) Which of the following types of organizations sells goods to the general public? A) Service companies B) Manufacturing firms C) Merchandising companies D) Retailers Answer: D Explanation: Merchandising companies sell the goods that manufacturing firms produce and include wholesalers and retailers. Wholesalers are merchandisers that sell exclusively to other businesses; retailers are merchandisers who sell to the general public. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 14 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 35) Which of the following statements is true about the use of managerial accounting information in nonprofit organizations? A) Universities do not exist strictly to earn profit for shareholders, so managerial accounting information is not vital to their operations. B) Unlike other nonprofits, hospitals (which exist with a focus on financial results in addition to health metrics) make use of managerial accounting. C) Because managers of nonprofit organizations need timely and relevant information to make decisions, managerial accounting is vital to these organizations. D) Because nonprofit organizations—hospitals, educational institutions, charities—do not exist with a profit motive, they do not use managerial accounting principles. Answer: C Explanation: Managerial accounting information is vital to nonprofit organizations, including hospitals, universities, and charitable organizations. Although these organizations do not exist strictly to earn profit for shareholders, their managers still need timely and relevant information to prepare budgets, manage resources, and make strategic and operational decisions. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 36) Which of the following functions of management involves comparing actual results with budgeted results? A) Planning B) Implementing C) Reviewing D) Control Answer: D Explanation: Control involves comparing actual results to planned results, to see whether the objectives set in the planning stage are being met. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 15 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 37) Which of the following functions of management involves setting short and long-term objectives and the tactics to achieve them? A) Planning B) Implementing C) Reviewing D) Control Answer: A Explanation: Planning involves setting long-term goals and objectives, along with the short-term tactics necessary to achieve them. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 38) Which of the following functions of management involves arranging for the necessary resources to carry out the plan? A) Planning B) Implementing C) Reviewing D) Control Answer: B Explanation: Implementing involves arranging for the necessary resources needed to achieve the plan within the Plan-Implement-Control cycle. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 16 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 39) Which of the following functions of management involves providing motivation to achieve results? A) Planning B) Implementing C) Reviewing D) Control Answer: B Explanation: The implementation function within the Plan-Implement-Control cycle involves putting the plan into action and motivating others to work toward the plan's success. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 40) Which of the following functions of management involves taking corrective action if needed? A) Planning B) Implementing C) Reviewing D) Control Answer: D Explanation: Control involves comparing actual results to planned results, and taking corrective action if needed. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 17 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 41) Which of the following functions of management involves providing feedback for future plans? A) Planning B) Implementing C) Reviewing D) Control Answer: D Explanation: Control involves comparing actual results to planned results, to see whether the objectives set in the planning stage are being met, and providing feedback for future plans. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 42) Which of the following is the correct sequencing of the functions within the managerial cycle? A) Plan - Control - Implement B) Review - Plan - Implement C) Plan - Implement - Control D) Review - Control - Plan Answer: C Explanation: Planning leads to implementing and then control. Then, the loop begins again. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 18 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 43) Which of the following describes the Planning function within the management cycle? A) Setting short and long-term objectives B) Comparing actual to budgeted results and taking corrective action C) Taking actions to implement the plan D) Arranging the necessary resources to carry out the plan Answer: A Explanation: Planning involves setting long-term goals and objectives, along with the short-term tactics necessary to achieve them. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 44) Which of the following describes the Control function within the management cycle? A) Setting short and long-term objectives B) Comparing actual to budgeted results and taking corrective action C) Taking actions to implement the plan D) Arranging the necessary resources to carry out the plan Answer: B Explanation: Control involves comparing actual results to planned results, to see whether the objectives set in the planning stage are being met, and taking corrective action if needed. Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 19 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 45) Which of the following does not describe the Implementing function within the management cycle? A) Leading, directing, and motivating others to achieve the plan's goals B) Arranging the necessary resources to carry out the plan C) Taking actions to implement the plan D) Setting short- and long-term objectives Answer: D Explanation: Implementing means putting the plan into action, including leading, directing, and motivating others and arranging necessary resources. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 01-02 Describe how managerial accounting is used in different types of organizations to support the key functions of management. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 46) "Ethics" refers to all of the following except: A) the standards of conduct for judging fair from unfair. B) the standards of conduct for judging right from wrong. C) the standards of conduct for judging opportunity from incentives. D) the standards of conduct for judging honest from dishonest. Answer: C Explanation: Ethics refers to the standards of conduct for judging right from wrong, honest from dishonest, and fair from unfair. Difficulty: 1 Easy Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 20 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 47) Which of the following is not one of the factors affecting the accounting reporting environment focused on by the Sarbanes-Oxley Act? A) Industry B) Opportunity C) Character D) Incentives Answer: A Explanation: The Sarbanes-Oxley Act focuses on reducing the opportunity for error and fraud, counteracting the incentive to commit fraud, and emphasizing the importance of the character of managers and employees. Difficulty: 1 Easy Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 48) Which of the following is a requirement under the Sarbanes-Oxley Act? A) Financial statements must be audited by a Big Four accounting firm. B) Management must issue a report that indicates whether the financial statements are free of error. C) Management must conduct a review of the company's internal control system. D) Background checks must be performed on all employees. Answer: C Explanation: The Sarbanes-Oxley Act requires that management conduct a review of the company's internal control system. Difficulty: 1 Easy Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 21 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 49) Which of the following is not a provision of the Sarbanes-Oxley Act? A) Executives can avoid penalties for fraud by declaring personal bankruptcy. B) Stiffer penalties for fraud in terms of monetary fines and jail time decrease the incentive to commit fraud. C) Public companies must adopt a code of ethics for senior financial officers. D) Management must issue a report that indicates whether internal controls are effective at preventing errors and fraud. Answer: A Explanation: Executives cannot avoid monetary penalties by declaring personal bankruptcy. Difficulty: 1 Easy Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 50) Which of the following is not true about how the Sarbanes-Oxley Act counteracts incentives for committing fraud? A) It provides for stiffer monetary penalties. B) It increases the maximum jail sentence for fraudulent reporting. C) It removes legal protection from whistleblowers. D) It provides that violators must repay any money obtained via fraud and pay fines. Answer: C Explanation: The Sarbanes-Oxley Act gives whistleblowers legal protection from retaliation by those charged with fraud; it does not remove such protection from them. Difficulty: 1 Easy Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 22 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 51) The requirement of the Sarbanes-Oxley Act that requires management to issue a report on internal controls places responsibility for the accuracy of the reporting system on: A) accounting managers. B) marketing managers. C) production managers. D) all managers. Answer: D Explanation: The requirement that management must conduct a review of the company's internal control system and issue a report on its effectiveness places more responsibility on all managers (not just accountants) for the accuracy of the reporting system. Difficulty: 1 Easy Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 52) Which of the following changes introduced by the Sarbanes-Oxley Act is not one intended to reduce opportunities for error and fraud? A) Internal control report from management B) Code of ethics C) Stronger oversight by directors D) Internal control audit by external auditors Answer: B Explanation: The Sarbanes-Oxley Act requires adoption of a code of ethics as part of its attempt to encourage good character, not to reduce opportunities for error and fraud. Difficulty: 2 Medium Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 23 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 53) Which of the following changes introduced by the Sarbanes-Oxley Act is not one intended to encourage good character? A) Anonymous tip lines B) Whistle-blower protection C) Code of ethics D) Stiffer fines and prison terms Answer: D Explanation: As part of the act's attempt to reduce opportunities for error and fraud (not to encourage good character), it provides stiffer penalties in terms of monetary fines and jail time. Difficulty: 1 Easy Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 54) Which of the following changes introduced by the Sarbanes-Oxley Act is intended to counteract incentives for fraud? A) Stronger oversight by directors B) Code of ethics C) Stiffer fines and prison terms D) Anonymous tip lines Answer: C Explanation: The Sarbanes-Oxley Act attempts to counteract the incentive to commit fraud by providing much stiffer penalties in terms of monetary fines and jail time. Difficulty: 1 Easy Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 24 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 55) Which of the following is not true about how the Sarbanes-Oxley Act emphasizes the importance of the character of managers and employees? A) It requires that ethics be embedded in the organizational culture. B) It requires that audit committees establish anonymous tip lines. C) It provides protection for whistle-blowers. D) It requires that public companies adopt a code of ethics for senior financial officers. Answer: A Explanation: The Sarbanes-Oxley Act does not require that ethics be embedded in the organizational culture. Difficulty: 2 Medium Topic: Ethics and the Sarbanes-Oxley Act Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 56) Which of the following statements is correct about sustainability accounting? A) Sustainability accounting has been in existence since 1592. B) Sustainability accounting tracks a company's "green" score. C) Sustainability accounting aims to provide managers a broad set of information to meet the needs of multiple stakeholders. D) Sustainability accounting is a subset of GAAP applied only to socially responsible companies. Answer: C Explanation: Sustainability accounting is an emerging area of accounting that is aimed at providing managers with a broader set of information to meet the needs of multiple stakeholders, with a goal of ensuring a company's long-term survival in an uncertain and resource-constrained world. Difficulty: 2 Medium Topic: Sustainability Accounting Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 25 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 57) Which of the following statements is correct about the triple bottom line? A) The triple bottom line measures a company's social impact, without regard for profit. B) The triple bottom line captures three factors: People, Profit, and Planet. C) The triple bottom line has replaced net income as the most crucial measure of a company's success. D) The triple bottom line reports profit at the expense of social factors. Answer: B Explanation: The triple bottom line is often represented by the three P's: People, Profit, and Planet. Difficulty: 2 Medium Topic: Sustainability Accounting Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 58) Many organizations are building sustainable business practices into their strategies by issuing: A) corporate social responsibility reports. B) reports on internal controls. C) profit and loss statements that reflect people and planet costs. D) reports from the board of directors on sustainability. Answer: A Explanation: Most public companies now issue corporate social responsibility reports that provide sustainability-related information, including measures of social and environmental impact. Difficulty: 1 Easy Topic: Sustainability Accounting Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 26 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 59) All of the following terms are often used interchangeably to refer to the extraction of insights from large amounts of data except: A) big data. B) business intelligence. C) business analytics. D) business acumen. Answer: D Explanation: Although differences exist at a technical level, the terms big data, business analytics, and business intelligence are often used interchangeably to refer to the extraction of meaningful and actionable insights from big data so that managers can make more intelligent business decisions. Difficulty: 1 Easy Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 60) The term "Big data" refers to the: A) accuracy, completeness, and source of the data. B) accuracy, volume, and source of the data. C) variety, volume, and velocity of the data. D) velocity, veracity, and volume of the data. Answer: C Explanation: "BIG data" relates to the volume, velocity, and variety of data. Difficulty: 1 Easy Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 27 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 61) Recommending a course of action based upon patterns and insights from data is referred to as: A) predictive analytics. B) prescriptive analytics. C) descriptive analytics. D) diagnostic analytics. Answer: B Explanation: Prescriptive analytics is the recommending of a course of action. Difficulty: 1 Easy Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 62) Using data to estimate what is likely to occur in the future is an example of: A) predictive analytics. B) prescriptive analytics. C) descriptive analytics. D) diagnostic analytics. Answer: A Explanation: Predictive analytics is the forecasting of what is likely to happen. Difficulty: 2 Medium Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 28 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 63) Data that is received as events are occurring is an example of: A) volume B) velocity C) variety D) veracity Answer: B Explanation: The data arrives with great velocity or speed, including not just data on past events but also that which is created in real time, as events are occurring. Difficulty: 2 Medium Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 64) Data received from social media is an example of: A) volume. B) velocity. C) variety. D) veracity. Answer: C Explanation: Data comes in a variety of formats (e.g. text, numerics, images, audio, and video), and is generated from a variety of sources, devices, and sensors, including geographic, financial, and social media data. Difficulty: 2 Medium Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 29 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 65) Analytics provides meaningful patterns and insights from data useful for all of the following except: A) managing resources. B) enhancing customer service. C) pursuing other business opportunities. D) preparing financial statements in accordance with GAAP. Answer: D Explanation: Analytics is the process of discovering and communicating meaningful patterns and insights from the data to find more intelligent ways of operating a business, managing resources, enhancing customer service, reducing operating costs, or pursuing other business opportunities. Difficulty: 1 Easy Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 66) Which of the following is an example of the variety of big data? A) Data collected from YouTube videos B) The collection of petabytes of data per hour C) Data that is created in real time D) Delivering data as quickly as possible Answer: A Explanation: Data comes in a variety of formats (e.g. text, numerics, images, audio, and video), and is generated from a variety of sources, devices, and sensors, including geographic, financial, and social media data. Difficulty: 2 Medium Topic: Decision Analytics Learning Objective: 01-03 Describe the importance of ethics, sustainability, and decision analytics in managerial accounting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 30 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 67) An out-of-pocket costs is: A) an actual outlay of cash. B) the cost of not doing something. C) a deferred cost. D) a budgeted estimate. Answer: A Explanation: Out-of-pocket costs are amounts paid for items purchased, and they involve an actual outlay of cash, unlike opportunity costs. Difficulty: 1 Easy Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 68) Which of the following is not one of the categories used to sort costs in managerial accounting? A) Relevant or irrelevant B) Variable or fixed C) Out-of-pocket or opportunity D) Direct or indirect Answer: C Explanation: In managerial accounting costs are sorted into different categories including direct or indirect, variable or fixed, and relevant or irrelevant. An out-of-pocket cost involves an actual cash outlay, whereas an opportunity cost is the cost of not doing something—a foregone benefit. Difficulty: 2 Medium Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 31 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 69) Which of the following statements concerning costs is incorrect? A) Costs are treated differently depending on how the information will be used. B) Out-of-pocket costs include the costs associated with not taking a particular course of action. C) Any single cost can be classified in more than one way. D) Costs can be categorized on the basis of relevant or irrelevant costs. Answer: B Explanation: An opportunity cost, not an out-of-pocket cost, is the cost associated with not taking a particular course of action; it's the forgone benefit of a particular course of action. Difficulty: 2 Medium Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 70) The cost of not doing something is a(n): A) out-of-pocket cost. B) opportunity cost. C) direct cost. D) cost object. Answer: B Explanation: The cost of not doing something is its opportunity cost. Difficulty: 1 Easy Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 32 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 71) An actual outlay of cash is a(n): A) out-of-pocket cost. B) opportunity cost. C) direct cost. D) cost object. Answer: A Explanation: An out-of-pocket cost is an actual outlay of cash. Difficulty: 1 Easy Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 72) An opportunity cost is: A) the foregone benefit of the path not taken. B) an actual outlay of cash. C) the initial investment required to pursue an opportunity. D) a cost that cannot be traced to a specific cost object. Answer: A Explanation: An opportunity cost is the foregone benefit (or lost opportunity) of the path not taken. Difficulty: 1 Easy Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 33 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 73) An out-of-pocket cost involves which of the following? A) Choosing to do one thing instead of another. B) Tracing the cost directly to a cost object. C) An actual outlay of cash. D) Determining how the cost changes with a change in activity level. Answer: C Explanation: An out-of-pocket cost is an actual outlay of cash. Difficulty: 1 Easy Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 74) To earn summer money, Joe could mow lawns in his neighborhood, or he could work at a local grocery store. Which of the following is an opportunity cost of mowing lawns? A) Cash paid for gas to run the lawnmower. B) The time spent mowing the lawns. C) The wages he could have earned working at the grocery store. D) Depreciation on the lawnmower. Answer: C Explanation: An opportunity cost is the foregone benefit of the path not taken; in this case, the wages Joe could have earned working at the grocery store. Difficulty: 3 Hard Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 34 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 75) To earn summer money, Joe could mow lawns in his neighborhood, or he could work at a local grocery store. Which of the following is an out-of-pocket cost of mowing lawns? A) The use of his father's truck to get to job sites. B) The wages he could have earned working at the grocery store. C) The time spent mowing the lawns. D) Cash paid for gas to run the lawnmower. Answer: D Explanation: An out-of-pocket cost involves an actual outlay of cash. Thus, the cash Joe pays for gas to run the lawnmower is an out-of-pocket cost. Difficulty: 3 Hard Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 76) Which of the following cannot be an out-of-pocket cost? A) A direct cost B) An opportunity cost C) A variable cost D) A period cost Answer: B Explanation: Unlike an out-of-pocket cost, which involves an outlay of cash, an opportunity cost is the cost of not doing something. Difficulty: 2 Medium Topic: Cost Terminology Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 35 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 77) Costs that can be traced to a specific cost object are: A) opportunity costs. B) direct costs. C) indirect costs. D) irrelevant costs. Answer: B Explanation: Costs that can be traced directly to a specific cost object, and are worth the effort of tracing, are called direct costs. Difficulty: 1 Easy Topic: Direct Versus Indirect Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 78) Costs that are not worth the effort to trace to a specific cost object are: A) opportunity costs. B) direct costs. C) indirect costs. D) irrelevant costs. Answer: C Explanation: Costs that cannot be traced to a specific cost object, or that are not worth the effort of tracing, are indirect costs. Difficulty: 1 Easy Topic: Direct Versus Indirect Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 36 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 79) Which of the following statements is correct? A) A direct cost can be readily traced to a cost object while an indirect cost is traced only to manufacturing costs. B) An indirect cost can be readily traced to a cost object while a direct cost is traced only to manufacturing costs. C) A direct cost can be traced to a specific cost object, while an indirect cost cannot. D) An indirect cost can be traced to a specific cost object, while a direct cost cannot. Answer: C Explanation: An indirect cost cannot be readily traced to a cost object. A direct cost can be traced to a specific cost object. It does not necessarily involve manufacturing costs. Difficulty: 2 Medium Topic: Direct Versus Indirect Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 80) A direct cost is one that: A) involves an actual outlay of cash for a specific cost object. B) can be traced to a specific cost object. C) cannot be traced to a specific cost object. D) is not worth the effort of tracing to a specific cost object. Answer: B Explanation: Costs that can be traced directly to a specific cost object are direct costs. Difficulty: 1 Easy Topic: Direct Versus Indirect Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 37 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 81) What determines the difference between a direct and an indirect cost? A) Whether it changes when activity levels change. B) Whether it is relevant to a particular decision. C) Whether it can be traced to a specific cost object. D) Whether it is related to manufacturing or nonmanufacturing activities. Answer: C Explanation: Costs that can be traced directly to a specific cost object are direct costs. Costs that cannot be traced to a specific cost object, or that are not worth the effort of tracing, are indirect costs. Difficulty: 2 Medium Topic: Direct Versus Indirect Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 82) Which of the following is an indirect cost of manufacturing a table made of wood and glass for a firm that manufactures furniture? A) The cost of the wood in the table. B) The cost of the labor used to assemble the table. C) The cost of the glass in the table. D) The cost of rent on the factory where the table is manufactured. Answer: D Explanation: Costs that cannot be traced to a specific cost object, or that are not worth the effort of tracing, are indirect costs, such as the cost of rent on the factory. Difficulty: 3 Hard Topic: Direct Versus Indirect Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 38 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 83) Which of the following is a direct cost of manufacturing a table made of wood and glass, for a firm that manufactures furniture? A) The cost of the wood in the table. B) The cost of rent on the factory where the table is manufactured. C) The salary of the supervisor who oversees all production for the firm. D) Depreciation on the tools used to manufacture the table. Answer: A Explanation: Costs that can be traced directly to a specific cost object are direct costs, such as the cost of the wood in the table. Difficulty: 3 Hard Topic: Direct Versus Indirect Costs Learning Objective: 01-04 Define and give examples of different types of costs: Out-of-pocket or opportunity costs, Direct or indirect costs, Variable or fixed costs, Manufacturing or nonmanufacturing costs, Product or period costs, Relevant or irrelevant costs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 84) A cost object is: A) an item for which managers are trying to determine the cost. B) an item to which managers must directly trace costs. C) an ite