(Test Bank) Introduction To Managerial Accounting

Garrison,Noreen, 12

Business

Test Bank

12th Edition

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Test Bank for Introduction To Managerial Accounting, The downloadable file consists of 860 pages, and the total size of the file is 4.24 MB. Purchase now only for highly discounted price.

Author(s): Garrison, Noreen

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Chapter 1 Managerial Accounting and the Business Environment Garrison, Managerial Accounting, 12th Edition 3 True/False Questions 1 . A l t h o u g h f i n a n c i a l a n d m a n a g e r i a l a c c o u n t i n g differ in many ways, they are similar in that both rely on the same underlying financial data. Answer: True Level: Medium LO: 1 2 . M a n a g e r i a l a c c o u n t i n g i s a branch of financial accounti ng and serves essentially the same purposes as financial accounting. Answer: False Level: Medium LO: 1 3 . M a n a g e r i a l a c c o u n t i n g p l a c e s g r e a t e r emphasis on the future than financial accounting, which is primarily concerned with the past. Answer: True Level: Easy LO: 1 4 . M a n a g e r i a l a c c o u n t i n g i s n o t n e e d e d i n a non-profit or governme ntal organization. Answer: False Level: Easy LO: 1 5 . W h e n c a r r y i n g o u t t h e i r p l a n n i n g a c t i v i t i e s , managers select a course of action and specify how the action will be implemented. Answer: True Level: Easy LO: 2 6 . W h e n c a r r y i n g o u t t h e i r p l a n n i n g a c t i v i t i e s , managers obtain feedback to ensure that the plan is actually carried out and is appr opriately modified as circumstances change. Answer: False Level: Medium LO: 2 7 . T h e c o n t r o l l e r o c c u p i e s a l i n e position in an organization. Answer: False Level: Easy LO: 2 8. Decentralization means the delegation of decision-making authority throughout an organization by allowing managers at various operating levels to make key decisions relating to their own ar ea of responsibility. Answer: True Level: Easy LO: 2 Chapter 1 Managerial Accounting and the Business Environment 4 Garrison, Managerial Accounting, 12th Edition 9. A firm's organization chart will normally s how both the formal and informal lines of reporting and communication. Answer: False Level: Easy LO: 2 10. The Chief Financial Officer of an organi zation is responsible for ensuring that line operations run smoothly. Answer: False Level: Medium LO: 2 11. Traditionally, companies have maintained large amounts of raw materials, work in process, and finished goods inventories to act as buffers so that operations can proceed smoothly even if there are unanticipated disruptions. Answer: True Level: Medium LO: 3 12. Process Reengineering is generally consid ered to be a more radical approach to improvement than Total Quality Management. Answer: True Level: Easy LO: 3 1 3 . P r o c e s s R e e n g i n e e r i n g e m p h a s i z e s a t e a m approach involving front-line workers, whereas Total Quality Management is usua lly implemented using outside specialists and is imposed from above. Answer: False Level: Medium LO: 3 14. If ethical standards were not generally followed, one of the results would probably be fewer goods and services available in the marketplace. Answer: True Level: Medium LO: 4 15. The Standards of Ethical Conduct for Ma nagement Accountants promulgated by the Institute of Management Accountants specif ically state that management accountants' sole ethical responsibility is to not break any laws. Answer: False Level: Easy LO: 4 Chapter 1 Managerial Accounting and the Business Environment Garrison, Managerial Accounting, 12th Edition 5 Multiple Choice Questions 16. Management accounting focuses primarily on providing data for: A) internal uses by managers. B ) e x t e r n a l u s e s b y s t o c k h o l d e r s a n d c r e d i t o r s . C) external uses by the In ternal Revenue Service. D) external uses by the Securities and Exchange Commission. Answer: A Level: Easy LO: 1 1 7 . M a n a g e r i a l a c c o u n t i n g : A) is more future oriented than financial accounting. B) tends to summarize information more than financial accounting C ) i s p r i m a r i l y c o n c e r n e d w i t h p r o v i d ing information to external users. D) is more concerned with precision than timeliness. Answer: A Level: Easy LO: 1 18. Compared to financial accounting, mana gerial accounting places more emphasis on: A) the flexibility of information. B) the precision of information. C ) t h e t i m e l i n e s s o f i n f o r m a t i o n . D) both A and C above. Answer: D Level: Easy LO: 1 1 9 . T h e f u n c t i o n o f m a n a g e m e n t t h a t c o m p a r e s planned results to actual results is known as: A ) p l a n n i n g . B) directing and motivating. C ) c o n t r o l l i n g . D) decision making. Answer: C Level: Easy LO: 2 20. Which of the functions of management i nvolves overseeing day- to-day activities? A ) P l a n n i n g B) Directing and motivating C ) C o n t r o l l i n g D) Decision making Answer: B Level: Easy LO: 2 Chapter 1 Managerial Accounting and the Business Environment 6 Garrison, Managerial Accounting, 12th Edition 21. Which of the following is not one of th e three basic activitie s of a manager? A ) P l a n n i n g B ) C o n t r o l l i n g C) Directing and motivating D) Compiling manageme nt accounting reports Answer: D Level: Easy LO: 2 2 2 . T h e d e l e g a t i o n o f d e c i s i o n m a k i n g t o l o w e r levels in an organization is known as: A ) t h e p l a n n i n g a n d c o n t r o l c y c l e . B ) c o n t r o l l i n g . C) decentralization. D) none of these. Answer: C Level: Easy LO: 2 2 3 . W h i c h o f t h e f o l l o w i n g s t a t e m e n t s a r e false concerning line and staff functions? I. Persons occupying staff functions have authority over persons occupying line functions. II. Both line and staff functions are de picted on the organization chart. III. Line functions are directly related to the basic objec tives of an organization. A) Only I B) Only II C) Only I and II D ) I , I I , a n d I I I Answer: A Level: Medium LO: 2 24. Which of following would normally be found on a manufacturing company's organization chart? A) the layout of the factory assembly lines B ) a l i s t o f t h e m a t e r i a l s n e e d e d t o produce each of the company's products C) the informal lines of reporting and communication D) none of the above Answer: D Level: Easy LO: 2 Chapter 1 Managerial Accounting and the Business Environment Garrison, Managerial Accounting, 12th Edition 7 25. For a hospital, what type of position (line or staff) is each of the following? E m e r g e n c y R o o m M a n a g e r H u m a n R e s o u r c e s ( P e r s o n n e l ) M a n a g e r A) Staff Staff B) Staff Line C) Line Staff D) Line Line Answer: C Level: Easy LO: 2 2 6 . A d e t a i l e d f i n a n c i a l p l a n f o r the future is known as a: A ) b u d g e t . B) performance report. C) organization chart. D) segment. Answer: A Level: Easy LO: 2 27. A performance report is: A) a detailed report comparing budgeted data to actual data for a specific time period. B) a formal statement of plans for the upcoming period. C) required to be filed monthly by th e Securities and Exchange Commission. D ) n o t u s e d i n d e c e n t r a l i z e d o r g a n i z a t i o n s . Answer: A Level: Easy LO: 2 2 8 . A c l u s t e r i n g o f t w o o r m o r e m a c h i n e s a t a single workstation is referred to as: A ) a m a n u f a c t u r i n g c e l l . B ) a n a c t i v i t y c e n t e r . C ) a f u n c t i o n a l l a y o u t . D ) a s e t u p . Answer: A Level: Medium LO: 3 2 9 . A f o c u s e d f a c t o r y i s : A) a factory that make s only a single product. B) a factory that performs a single step in the production proce ss and subcontracts the other steps. C ) a p l a n t l a y o u t i n w h i c h a l l m a c h i n e s needed to make a particular product are brought together in one location. D ) r e q u i r e d t o b i d f o r d e f e n s e c o n t r a c t s . Answer: C Level: Easy LO: 3 Chapter 1 Managerial Accounting and the Business Environment 8 Garrison, Managerial Accounting, 12th Edition 3 0 . L a r g e w o r k i n p r o c e s s i n v e n t o r i e s : A ) a r e e s s e n t i a l f o r e f f i c i e n t o p e r a t i o n s . B ) r e d u c e d e f e c t r a t e s . C) increase throughput time. D ) a r e a k e y p a r t o f J u s t - I n - T i m e s y s t e m s . Answer: C Level: Medium LO: 3 31. Ideally, how many units should be produced in a just-in-time manufacturing system? A) budgeted customer demand for the current week. B) budgeted customer demand for the following week. C ) a c t u a l c u s t o m e r d e m a n d f o r t h e c u r r e n t w e e k . D) maximum production capac ity for the current week. Answer: C Level: Medium LO: 3 32. After careful planning, Jammu Manufacturi ng Corporation has deci ded to switch to a just-in-time inventory system. At the beginni ng of this switch, Jammu has 30 units of product in inventory. Jammu has 2,000 labor hour s available in the first month of this switch. These hours could produce 500 units of product. Customer demand for this first month is 400 units. If just-in-time principles are correct ly followed, how many units should Jammu plan to produce in the first month of the switch? A) 370 B) 400 C) 430 D) 470 Answer: A Level: Medium LO: 3 33. Process Reengineering includes a ll of the following steps except: A) constructing a diagram flow charting the current process. B ) r e d e s i g n i n g t h e p r o c e s s . C) elimination of non- value-added activities. D ) e l i m i n a t i o n o f a l l c o n s t r a i n t s . Answer: D Level: Hard LO: 3 Chapter 1 Managerial Accounting and the Business Environment Garrison, Managerial Accounting, 12th Edition 9 34. According to the Theory of Constraint s, improvement efforts should usually be focused on: A ) w o r k c e n t e r s t h a t a r e n o t c o n s t r a i n t s . B ) t h e w o r k c e n t e r t h a t i s t h e c o n s t r a i n t . C ) t h e w o r k c e n t e r w i t h t h e h i g h e s t t o t a l c o s t . D) the work center with the most obsolete equipment. Answer: B Level: Medium LO: 3 3 5 . W h i c h o f t h e f o l l o w i n g i s t r u e r e g a rding the theory of constraints? A) The theory of constraints does not apply to companies with multiple products because of capacity measurement difficulties. B ) I n a n y p r o f i t - s e e k i n g c o m p a n y , t h e r e must be at least one constraint. C) Constraints or bottlenec ks stop organizations from se lling an infinite number of units or services. D) both B and C above. Answer: D Level: Medium LO: 3 36. Pizza World makes forty-three kinds of pizza for takeout and delivery. Which of the following could be the cons traint at Pizza World? A) the person who makes the pizza crust. B ) t h e p e r s o n w h o p u t s t o p p i n g s o n t h e p i z z a s . C) the pizza oven. D) any of the above c ould be the constraint. Answer: D Level: Medium LO: 3 37. The Standards of Ethical Conduct for Management Accountants developed by the Institute of Management Accountants cont ain a policy regarding confidentiality that requires management accountants to refrain from disclosing confidential information acquired in the course of their work: A ) e x c e p t w h e n a u t h o r i z e d b y m a n a g e m e n t . B) in all situations. C) except when authorized by manageme nt, unless legally obligated to do so. D ) i n a l l c a s e s n o t p r o h i b i t e d b y l a w . Answer: C Level: Hard LO: 4 Chapter 1 Managerial Accounting and the Business Environment 10 Garrison, Managerial Accounting, 12th Edition 38. Wide-spread adherence to ethical standard s in an advanced market economy tends to result in all of the following except: A) higher prices. B ) h i g h e r q u a l i t y g o o d s a n d s e r v i c e s . C) greater variety of goods and services available for sale. D) safer products. Answer: A Level: Medium LO: 4 39. The Institute of Management Accountant s (IMA) has developed ethical standards for management accountants. What four categorie s has the IMA classified these standards into? A ) R e l i a b i l i t y , O b j e c t i v i t y , Commitment, and Competence B ) O b j e c t i v i t y , I n t e g r i t y , C o m m i t m e n t , a n d C o n f i d e n t i a l i t y C) Observation, Integrity, Closure, and Competence D) Competence, Objectivity, Integrity, and Confidentiality E ) R e l i a b i l i t y , U n d e r s t a n d a b i l i ty, Flexibility, and Integrity Answer: D Level: Medium LO: 4 4 0 . S a m a n t h a G a l l o w a y i s a m a n a g e r i a l accountant in the accounting department of Mustang Industries, Inc. Samantha has just discovered evidence that some of the corporation's marketing managers have been wrongfully inflating their expense reports in order to obtain higher reimbursements from the firm. According to the Institute of Management Accountants' Standards of Et hical Conduct, what should Samantha do upon discovering this evidence? A ) n o t i f y t h e c o n t r o l l e r . B) notify the marketing managers involved. C) notify the presiden t of the corporation. D ) i g n o r e t h e e v i d e n c e b e c a u s e s h e i s n o t part of the Marketing Department. Answer: A Level: Hard LO: 4 Chapter 2 Cost Terms, Concepts, and Classifications Garrison, Managerial Accounting, 12th Edition 15 True/False Questions 1. Manufacturing overhead is an indirect co st with respect to units of product. Answer: True Level: Medium LO: 1 2. Depreciation on office equipment would not be included in the cost of goods manufactured. Answer: True Level: Easy LO: 2,4 3. Rent on a factory building used in the pr oduction process would be classified as a period cost and as a fixed cost. Answer: False Level: Medium LO: 2,5 4 . P e r i o d c o s t s a r e f o u n d o n l y i n m a n u f a c turing companies, not in merchandising companies. Answer: False Level: Medium LO: 2 5. Depreciation on equipment a company uses in its selling and administrative activities would be classified as a product cost. Answer: False Level: Medium LO: 2 6. If the finished goods inventory increase s between the beginnin g and the end of a period, then the cost of goods manufactured is smaller than the cost of goods sold. Answer: False Level: Hard LO: 3,4 7. The cost of goods manufactured is calcul ated by adding the amount of work in process at the end of the year to the cost of ra w materials used, dire ct labor worked, and manufacturing overhead incurred for the year and then subtracting work in process at the beginning of the year. Answer: False Level: Medium LO: 4 8 . A p u b l i s h e r t h a t s e l l s i t s b o o k s t h r o u g h a g ents who are paid a constant percentage commission on each book sold would classify the commissions as a fixed cost. Answer: False Level: Medium LO: 5 Chapter 2 Cost Terms, Concepts, and Classifications 16 Garrison, Managerial Accounting, 12th Edition 9. Variable costs per unit are a ffected by changes in activity. Answer: False Level: Easy LO: 5 10. A cost is either direct or indirect. The classification will not cha nge if the cost object changes. Answer: False Level: Medium LO: 6 1 1 . T h e a m o u n t t h a t a m a n u f a c t u r i n g c o m p a ny could earn by renting unused portions of its warehouse is an exampl e of an opportunity cost. Answer: True Level: Easy LO: 7 12. Labor fringe benefits may be charged to direct labor or manufacturing overhead while overtime premiums paid usually are consider ed a part of manuf acturing overhead. Answer: True Level: Easy LO: 8 Appendix: 2A 13. The cost of idle time should be charged as direct labor of the j ob that is in process when the breakdown occurs. Answer: False Level: Medium LO: 8 Appendix: 2A 14. Internal failure costs result from identific ation of defects during the appraisal process. Such costs may include scrap, rejected products, rework, and downtime. Answer: True Level: Easy LO: 9 Appendix: 2B 1 5 . I S O 9 0 0 0 c e r t i f i c a t i o n i s r e latively easy to achieve b ecause little documentation on quality control procedures is needed. Answer: False Level: Easy LO: 11 Appendix: 2B Chapter 2 Cost Terms, Concepts, and Classifications Garrison, Managerial Accounting, 12th Edition 17 Multiple Choice Questions 16. Indirect labor is a part of: A) Prime cost. B ) C o n v e r s i o n c o s t . C) Period cost. D) Nonmanufacturing cost. Answer: B Level: Medium LO: 1,2 Source: CPA, adapted 17. The cost of lubricants used to grea se a production machin e in a manufacturing company is an example of a(n): A) period cost. B ) d i r e c t m a t e r i a l c o s t . C ) i n d i r e c t m a t e r i a l c o s t . D) none of the above. Answer: C Level: Easy LO: 1,2 1 8 . T h e s a l a r y p a i d t o t h e p r esident of King Company would be classified on the income statement as a(n): A) administrative expense. B ) d i r e c t l a b o r c o s t . C ) m a n u f a c t u r i n g o v e r h e a d c o s t . D) selling expense. Answer: A Level: Easy LO: 1 1 9 . D i r e c t l a b o r c o st is a part of: Conversion cost Prime cost A) No No B) No Yes C) Yes Yes D) Yes No Answer: C Level: Easy LO: 1 Source: CPA, adapted Chapter 2 Cost Terms, Concepts, and Classifications 18 Garrison, Managerial Accounting, 12th Edition 20. Direct material cost is a: Conversion cost Prime cost A) No No B) No Yes C) Yes Yes D) Yes No Answer: B Level: Medium LO: 1 Source: CPA, adapted 21. Prime cost and conversion cost shar e what common element of total cost? A) Direct materials. B) Direct labor. C) Variable overhead. D) Fixed overhead. Answer: B Level: Easy LO: 1 Source: CPA, adapted 2 2 . P r i m e c o s t c o n s i s t s o f : A) direct labor and manufacturing overhead. B) direct materials a nd manufacturing overhead. C) direct materials and direct labor. D) direct materials, direct la bor and manufacturing overhead. Answer: C Level: Easy LO: 1 2 3 . W a g e s p a i d t o a t i m e k e e p e r i n a f a c t o r y a r e a : Prime cost Conversion cost A) Yes No B) Yes Yes C) No No D) No Yes Answer: D Level: Medium LO: 1 Source: CPA, adapted 2 4 . P r o p e r t y t a x e s o n a c o m p a n y ' s f a c t o r y b u ilding would be classified as a(n): A) product cost. B ) o p p o r t u n i t y c o s t . C) period cost. D) variable cost. Answer: A Level: Easy LO: 2,5,7 Chapter 2 Cost Terms, Concepts, and Classifications Garrison, Managerial Accounting, 12th Edition 19 25. Depreciation on a personal computer us ed in the marketing department of a manufacturing firm would be classified as: A ) a p r o d u c t c o s t t h a t i s f i x e d w ith respect to the company's output. B) a period cost that is fixed w ith respect to the company's output. C ) a p r o d u c t c o s t t h a t i s v a r i a b l e w i th respect to the company's output. D) a period cost that is fixed w ith respect to the company's output. Answer: B Level: Medium LO: 2,5 2 6 . T h e n u r s i n g s t a t i o n o n t h e f o u r t h f l o o r o f Central Hospital is responsible for the care of patients who have undergone orthopedic su rgery. The costs of drugs administered by the nursing station to patient s would be classified as: A ) d i r e c t c o s t s o f t h e p a t i e n t s . B) indirect costs of the patients. C) overhead costs of the nursing station. D ) p e r i o d c o s t s o f t h e h o s p i t a l . Answer: A Level: Hard LO: 2,6 27. All of the following would be cl assified as produc t costs except: A) property taxes on production equipment. B ) i n s u r a n c e o n f a c t o r y m a c h i n e r y . C) salaries of the advertising staff. D) wages of machine operators. Answer: C Level: Easy LO: 2 2 8 . P r o d u c t c o s t s a p p e a r o n t h e b a l a n c e s h e e t : A) only if goods are partially comp leted at the end of the period. B) only if goods are unsold at the end of a period. C) only if goods are partially completed or are unsold at the end of a period. D ) o n l y i n m e r c h a n d i s i n g f i r m s . Answer: C Level: Medium LO: 2 Chapter 2 Cost Terms, Concepts, and Classifications 20 Garrison, Managerial Accounting, 12th Edition 29. Ross Corporation shipped finished goods to a customer on credit, but the sale was not recorded and the costs of the finished goods were incorrectly included on the period's balance sheet as part of the finished goods inventory. Which one of the following statements is correct concerning the effects of this error? A) Accounts receivable was not affecte d, inventory was overstated, sales were understated, and cost of goods sold was understated. B) Accounts receivable was understated, i nventory was not affected, sales were understated, and cost of goods sold was understated. C) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of goods sold was overstated. D) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of goods sold was understated. Answer: D Level: Easy LO: 3 Source: CMA, adapted 30. Data for Cost A and Cost B are as follows: Number of Units Produced Unit Cost Total Cost Cost A 1 ? $ 1 0 1 0 ? $ 1 0 0 1 0 0 ? $ 1 , 0 0 0 1 , 0 0 0 ? $ 1 0 , 0 0 0 Cost B 1 $ 5 , 0 0 0 ? 1 0 $ 5 0 0 ? 1 0 0 $ 5 0 ? 1 , 0 0 0 $ 5 ? Which of the above best describe s the behavior of Costs A and B? A) Cost A is fixed, Cost B is variable. B) Cost A is variab le, Cost B is fixed. C) Both Cost A and Cost B are variable. D) Both Cost A and Cost B are fixed. Answer: B Level: Medium LO: 5 Chapter 2 Cost Terms, Concepts, and Classifications Garrison, Managerial Accounting, 12th Edition 21 31. Fixed costs expressed on a per unit basis: A) will increase with increases in activity. B ) w i l l d e c r e a s e w i t h i n c r e a s e s i n a c t i v i t y . C ) a r e n o t a f f e c t e d b y a c t i v i t y . D) should be ignored in making d ecisions since they cannot change. Answer: B Level: Medium LO: 5 32. The costs of staffing and operating the accounting department at Central Hospital would be considered by the Depa rtment of Surgery to be: A) direct costs. B) indirect costs. C ) i n c r e m e n t a l c o s t s . D ) o p p o r t u n i t y c o s t s . Answer: B Level: Hard LO: 6,7 3 3 . A c o s t i n c u r r e d i n t h e p a s t t h a t i s n o t r e levant to any current d ecision is classified as a(n): A) period cost. B ) o p p o r t u n i t y c o s t . C) sunk cost. D ) d i f f e r e n t i a l c o s t . Answer: C Level: Easy LO: 7 3 4 . D i f f e r e n t i a l c o s t s c a n : A ) o n l y b e f i x e d c o s t s . B ) o n l y b e v a r i a b l e c o s t s . C) be either fixed or variable. D ) b e i n c r e m e n t a l b u t n o t d e c r e m e n t a l . Answer: C Level: Easy LO: 7 3 5 . J o h n J o h n s o n d e c i d e d t o l e a v e h i s f o r m e r job where he earned $12 per hour to go to a new job where he will earn $13 per hour. In the decision process, the former wage of $12 per hour would be cl assified as a(n): A) sunk cost. B) direct cost. C ) f i x e d c o s t . D ) o p p o r t u n i t y c o s t . Answer: D Level: Easy LO: 7