Test Bank for
Managerial
Accounting, 3e Charles
Davis, Elizabeth Davis
(All Chapters)
,1-1 Test Bank for Davis & Davis, Managerial Accounting, 3/e
Chapter 1
Accounting As a Tool for Management
CHAPTER LEARNING OBJECTIVES
1. Define managerial accounting (Unit 1.1)
There are several formal definitions of managerial accounting. A simple one is “the
generation of relevant information to support management’s decision-making
activities.”
2. Describe the differences between managerial and financial accounting
(Unit 1.1)
Managerial accounting’s primary users are managers and decision makers within an
organization, whereas financial accounting is aimed primarily at external users. Unlike
GAAP that guides financial accounting, there are no mandated rules in managerial
accounting. Managerial accounting reports focus on operating segments, while financial
accounting statements report results for the organization as a whole. Managerial
accounting is concerned more with projecting future results than reporting past results.
Managerial information is prepared to take advantage of a window of opportunity, even
if some accuracy must be sacrificed. Financial accounting information is balanced to the
penny and is delivered after the end of the accounting period.
3. List and describe the four functions of managers (Unit 1.1)
Planning means setting a direction for the organization. Long-term, or strategic planning
provides direction for a five- to ten-year period. Short-term or operational planning
provides more detailed guidance for the coming year; it translates the company’s
strategy into action steps. Controlling is the monitoring of day-to-day operations to
identify any problems that require corrective action. Evaluating is the process of
comparing a particular period’s actual results to planned results, for the purpose of
assessing managerial performance. Decision making means choosing between
alternative courses of action.
4. Explain how the selection of a particular business strategy determines the
information that managers need to run an organization effectively (Unit
1.2)
To run a business effectively, managers need information that shows how well
operations are meeting the organization’s strategic goals. For instance, if the
organization’s strategy is to be a low-cost producer, information about product costs
and cost variances will be more useful to managers than information about research
and development.
,1-2 Test Bank for Davis & Davis, Managerial Accounting, 3/e
5. Discuss the importance of ethical behavior in managerial accounting (Unit
1.3)
Ethical behavior means knowing right from wrong and then doing the right thing. Many
companies and most professional organizations have codes of conduct to guide
employees’ actions. Acting unethically can lead to illegal activity and ultimately to the
destruction of the firm. Furthermore, research has shown that a public commitment to
ethical behavior can lead to superior financial performance.
, 1-3 Test Bank for Davis & Davis, Managerial Accounting, 3/e
TRUE-FALSE STATEMENTS
1. Management accounting is the generation of relevant information and analysis provided to external
users.
Unit 1-1, LO1 – False – Management accounting is the generation of relevant information and analysis to
support managers’ decision making activities.
LO: 1, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Reporting
2. The American Institute of Certified Public Accountants is the leading organization for management
accountants in the United States.
Unit 1-1, LO1 – False – The Institute of Management Accountants (IMA) is the leading organization for
management accountants in the United States
LO: 1, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communications,
IMA: Business Economics
3. The primary users of managerial accounting information are managers and decision makers.
Unit 1-1, LO2 – True
LO: 2, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Reporting
4. Managerial accounting provides reports and information for a range of decision makers outside an
organization.
Unit 1-1, LO2 – False – Managerial accounting provides reports and information for a range of decision
makers within an organization.
LO: 2, Bloom: C, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
5. Managerial accounting differs from financial accounting in that managerial accounting has no
comparable set of rules governing what information must be provided to decision makers or how
that information is presented.
Unit 1-1, LO2 – True
LO: 2, Bloom: C, Unit: 1-1, Difficulty: Moderate Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
6. Managerial accounting reports historical information, often with the purpose of comparing actual
results to budgeted results.
Unit 1-1, LO2 – True
LO: 2, Bloom: K, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
7. Decision makers might have a long list of information they would find helpful, and they are generally
not willing to sacrifice accuracy for having the information quickly.
Unit 1-1, LO2 – False – Decision makers might have a long list of information they would find helpful. But
sometimes they might need to sacrifice precision for timeliness.
LO: 2, Bloom: C, Unit: 1-1, Difficulty: Difficult, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem Solving
and Decision Making, IMA: Decision Analysis
Managerial
Accounting, 3e Charles
Davis, Elizabeth Davis
(All Chapters)
,1-1 Test Bank for Davis & Davis, Managerial Accounting, 3/e
Chapter 1
Accounting As a Tool for Management
CHAPTER LEARNING OBJECTIVES
1. Define managerial accounting (Unit 1.1)
There are several formal definitions of managerial accounting. A simple one is “the
generation of relevant information to support management’s decision-making
activities.”
2. Describe the differences between managerial and financial accounting
(Unit 1.1)
Managerial accounting’s primary users are managers and decision makers within an
organization, whereas financial accounting is aimed primarily at external users. Unlike
GAAP that guides financial accounting, there are no mandated rules in managerial
accounting. Managerial accounting reports focus on operating segments, while financial
accounting statements report results for the organization as a whole. Managerial
accounting is concerned more with projecting future results than reporting past results.
Managerial information is prepared to take advantage of a window of opportunity, even
if some accuracy must be sacrificed. Financial accounting information is balanced to the
penny and is delivered after the end of the accounting period.
3. List and describe the four functions of managers (Unit 1.1)
Planning means setting a direction for the organization. Long-term, or strategic planning
provides direction for a five- to ten-year period. Short-term or operational planning
provides more detailed guidance for the coming year; it translates the company’s
strategy into action steps. Controlling is the monitoring of day-to-day operations to
identify any problems that require corrective action. Evaluating is the process of
comparing a particular period’s actual results to planned results, for the purpose of
assessing managerial performance. Decision making means choosing between
alternative courses of action.
4. Explain how the selection of a particular business strategy determines the
information that managers need to run an organization effectively (Unit
1.2)
To run a business effectively, managers need information that shows how well
operations are meeting the organization’s strategic goals. For instance, if the
organization’s strategy is to be a low-cost producer, information about product costs
and cost variances will be more useful to managers than information about research
and development.
,1-2 Test Bank for Davis & Davis, Managerial Accounting, 3/e
5. Discuss the importance of ethical behavior in managerial accounting (Unit
1.3)
Ethical behavior means knowing right from wrong and then doing the right thing. Many
companies and most professional organizations have codes of conduct to guide
employees’ actions. Acting unethically can lead to illegal activity and ultimately to the
destruction of the firm. Furthermore, research has shown that a public commitment to
ethical behavior can lead to superior financial performance.
, 1-3 Test Bank for Davis & Davis, Managerial Accounting, 3/e
TRUE-FALSE STATEMENTS
1. Management accounting is the generation of relevant information and analysis provided to external
users.
Unit 1-1, LO1 – False – Management accounting is the generation of relevant information and analysis to
support managers’ decision making activities.
LO: 1, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Reporting
2. The American Institute of Certified Public Accountants is the leading organization for management
accountants in the United States.
Unit 1-1, LO1 – False – The Institute of Management Accountants (IMA) is the leading organization for
management accountants in the United States
LO: 1, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communications,
IMA: Business Economics
3. The primary users of managerial accounting information are managers and decision makers.
Unit 1-1, LO2 – True
LO: 2, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Reporting
4. Managerial accounting provides reports and information for a range of decision makers outside an
organization.
Unit 1-1, LO2 – False – Managerial accounting provides reports and information for a range of decision
makers within an organization.
LO: 2, Bloom: C, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
5. Managerial accounting differs from financial accounting in that managerial accounting has no
comparable set of rules governing what information must be provided to decision makers or how
that information is presented.
Unit 1-1, LO2 – True
LO: 2, Bloom: C, Unit: 1-1, Difficulty: Moderate Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
6. Managerial accounting reports historical information, often with the purpose of comparing actual
results to budgeted results.
Unit 1-1, LO2 – True
LO: 2, Bloom: K, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
7. Decision makers might have a long list of information they would find helpful, and they are generally
not willing to sacrifice accuracy for having the information quickly.
Unit 1-1, LO2 – False – Decision makers might have a long list of information they would find helpful. But
sometimes they might need to sacrifice precision for timeliness.
LO: 2, Bloom: C, Unit: 1-1, Difficulty: Difficult, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem Solving
and Decision Making, IMA: Decision Analysis
