Test Bank for Managerial Accounting for Managers, 6th Edition by Eric
Noreen, Peter C. Brewer & Ray H. Garrison | All 1-12 Chapters Covered With
Questions And Verified Solutions With Detailed Rationales And Case Studies.
, TABLE OF CONTENT
1. Managerial Accounting and Cost Concepts
2. Cost-Volume-Profit Relationships
3. Job-Order Costing: Calculating Unit Product Costs
4. Variable Costing and Segment Reporting: Tools for
Management
5. Activity-Based Costing: A Tool to Aid Decision
Making
6. Differential Analysis: The Key to Decision Making
7. Capital Budgeting Decisions
8. Master Budgeting
9. Flexible Budgets and Performance Analysis
10. Standard Costs and Variances
11. Responsibility Accounting Systems
12. Strategic Performance Measurement
,Chapter 1: Managerial Accounting and Cost Concepts
Section 1: Multiple Choice Questions
1. Which of the following best describes the primary difference between managerial accounting
and financial accounting?
• A) Managerial accounting is mandatory, while financial accounting is optional.
• B) Managerial accounting focuses on the past, while financial accounting focuses on the
future.
• C) Managerial accounting emphasizes detailed segment reporting, while financial accounting
emphasizes consolidated company-wide reporting.
• D) Managerial accounting is governed by GAAP, while financial accounting is not.
Correct Answer: C
• Rationale: Managerial accounting provides detailed information about specific segments
(products, departments, regions) to help internal managers make decisions. Financial
accounting provides summarized, consolidated reports for external stakeholders.
• Why others are incorrect:
o A is incorrect: Financial accounting is mandatory (for public companies), while
managerial accounting is optional but highly beneficial.
o B is incorrect: Managerial accounting focuses heavily on
the future (budgets/forecasts), while financial accounting is primarily historical.
o D is incorrect: Financial accounting must follow GAAP/IFRS; managerial accounting
has no external reporting rules.
2. Which of the following costs would be classified as a period cost for a manufacturing company?
• A) Depreciation on factory machinery
• B) Wages of assembly-line workers
• C) Salary of the company's Chief Financial Officer (CFO)
• D) Raw materials used in production
Correct Answer: C
• Rationale: Period costs are all costs that are not product costs. They are expensed
immediately on the income statement in the period they are incurred. Selling, general, and
administrative expenses (like the CFO's salary) are period costs.
• Why others are incorrect:
, o A, B, and D are incorrect: These are all product costs (manufacturing costs).
Depreciation on factory machinery is manufacturing overhead, wages of assembly
workers are direct labor, and raw materials are direct materials. These are capitalized
into inventory until the goods are sold.
3. Direct materials are defined as:
• A) Materials that cannot be easily traced to a specific product.
• B) Materials that become an integral part of a finished product and can be physically traced
to it.
• C) Materials used to run the manufacturing facility (e.g., cleaning supplies).
• D) Materials that are expensed in the period they are purchased.
Correct Answer: B
• Rationale: Direct materials are raw materials that are physically part of the finished product
and can be traced to it in a cost-effective manner (e.g., steel for a car, wood for a chair).
• Why others are incorrect:
o A is incorrect: This describes indirect materials.
o C is incorrect: This describes factory supplies, which are part of manufacturing
overhead (indirect costs).
o D is incorrect: Direct materials are not expensed when purchased; they are recorded
as an asset (raw materials inventory) until used.
4. Manufacturing overhead includes:
• A) Direct materials and direct labor.
• B) All selling and administrative costs.
• C) All manufacturing costs except direct materials and direct labor.
• D) Only indirect labor and indirect materials.
Correct Answer: C
• Rationale: Manufacturing overhead (MOH) is the catch-all category for all manufacturing
costs that are not direct materials or direct labor. It includes indirect materials, indirect labor,
depreciation on factory equipment, factory utilities, insurance, and property taxes on the
factory.
• Why others are incorrect:
o A is incorrect: Direct materials and direct labor are separate categories, not part of
MOH.
Noreen, Peter C. Brewer & Ray H. Garrison | All 1-12 Chapters Covered With
Questions And Verified Solutions With Detailed Rationales And Case Studies.
, TABLE OF CONTENT
1. Managerial Accounting and Cost Concepts
2. Cost-Volume-Profit Relationships
3. Job-Order Costing: Calculating Unit Product Costs
4. Variable Costing and Segment Reporting: Tools for
Management
5. Activity-Based Costing: A Tool to Aid Decision
Making
6. Differential Analysis: The Key to Decision Making
7. Capital Budgeting Decisions
8. Master Budgeting
9. Flexible Budgets and Performance Analysis
10. Standard Costs and Variances
11. Responsibility Accounting Systems
12. Strategic Performance Measurement
,Chapter 1: Managerial Accounting and Cost Concepts
Section 1: Multiple Choice Questions
1. Which of the following best describes the primary difference between managerial accounting
and financial accounting?
• A) Managerial accounting is mandatory, while financial accounting is optional.
• B) Managerial accounting focuses on the past, while financial accounting focuses on the
future.
• C) Managerial accounting emphasizes detailed segment reporting, while financial accounting
emphasizes consolidated company-wide reporting.
• D) Managerial accounting is governed by GAAP, while financial accounting is not.
Correct Answer: C
• Rationale: Managerial accounting provides detailed information about specific segments
(products, departments, regions) to help internal managers make decisions. Financial
accounting provides summarized, consolidated reports for external stakeholders.
• Why others are incorrect:
o A is incorrect: Financial accounting is mandatory (for public companies), while
managerial accounting is optional but highly beneficial.
o B is incorrect: Managerial accounting focuses heavily on
the future (budgets/forecasts), while financial accounting is primarily historical.
o D is incorrect: Financial accounting must follow GAAP/IFRS; managerial accounting
has no external reporting rules.
2. Which of the following costs would be classified as a period cost for a manufacturing company?
• A) Depreciation on factory machinery
• B) Wages of assembly-line workers
• C) Salary of the company's Chief Financial Officer (CFO)
• D) Raw materials used in production
Correct Answer: C
• Rationale: Period costs are all costs that are not product costs. They are expensed
immediately on the income statement in the period they are incurred. Selling, general, and
administrative expenses (like the CFO's salary) are period costs.
• Why others are incorrect:
, o A, B, and D are incorrect: These are all product costs (manufacturing costs).
Depreciation on factory machinery is manufacturing overhead, wages of assembly
workers are direct labor, and raw materials are direct materials. These are capitalized
into inventory until the goods are sold.
3. Direct materials are defined as:
• A) Materials that cannot be easily traced to a specific product.
• B) Materials that become an integral part of a finished product and can be physically traced
to it.
• C) Materials used to run the manufacturing facility (e.g., cleaning supplies).
• D) Materials that are expensed in the period they are purchased.
Correct Answer: B
• Rationale: Direct materials are raw materials that are physically part of the finished product
and can be traced to it in a cost-effective manner (e.g., steel for a car, wood for a chair).
• Why others are incorrect:
o A is incorrect: This describes indirect materials.
o C is incorrect: This describes factory supplies, which are part of manufacturing
overhead (indirect costs).
o D is incorrect: Direct materials are not expensed when purchased; they are recorded
as an asset (raw materials inventory) until used.
4. Manufacturing overhead includes:
• A) Direct materials and direct labor.
• B) All selling and administrative costs.
• C) All manufacturing costs except direct materials and direct labor.
• D) Only indirect labor and indirect materials.
Correct Answer: C
• Rationale: Manufacturing overhead (MOH) is the catch-all category for all manufacturing
costs that are not direct materials or direct labor. It includes indirect materials, indirect labor,
depreciation on factory equipment, factory utilities, insurance, and property taxes on the
factory.
• Why others are incorrect:
o A is incorrect: Direct materials and direct labor are separate categories, not part of
MOH.
