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accounting chapter 1 e1

Evaluating operations by comparing actual results to budgeted results is a part of the controlling responsibility of management.:
Controlling means overseeing the company’s day-to-day operations
The purpose of managerial accounting is to gather, summarize, and report the cost and revenue data relevant to each decision that is made
Budgeting is the process of evaluating the results of business operations against a plan and then making adjustments to that plan
Planning, directing, and controlling are a manager’s three primary responsibilities
Managerial accounting develops reports that help internal parties effectively and efficiently run the company.:
Directing means setting goals and objectives for the company and determining how to achieve them
Budgets are the quantitative expression of management’s plans
The SEC requires that reports generated by the managerial accounting system must be audited by an independent certified public accountant (CPA).
The design of a management accounting system should consider how reports affect employees’ behavior
GAAP must be followed when preparing managerial accounting reports.:
Management accounting requires independent audits of the firm’s books
The primary purpose of managerial accounting information is to help external users make investing and lending decisions
Internal users such as managers are the primary users of managerial accounting information.
The primary managerial accounting product is the company’s audited financial statements
Managerial accounting information emphasizes relevance over reliability and objectivity
Managerial accounting information tends to report on segments of the business.
Managerial accounting reports are always prepared on a quarterly and annual
Managerial information is always based on historical transactions with external parties.
Management accountants rarely interact with employees from other business functions such as marketing and customer service.:
The CFO is the person responsible for the day-to-day operations of the company
The treasurer and the controller report directly to the CFO.:
The internal audit department reports directly to the audit committee, a subcommittee of the board of
Managerial accountants no longer perform routine mechanical accounting tasks in most companies.:
Managerial accountants are now considered to be similar to advisors and business analysts
Oral and written communications skills are considered among the most valuable skills a management accountant can possess.:
Technology has been a driving factor in the changing roles of management accountants
Management accountants spend more time planning, analyzing and interpreting accounting data and less time recording routine accounting transactions than they have in the past.
The only skill required of managerial accountants is that they have a solid knowledge of both financial and managerial accounting.
Managerial accountants only need a solid understanding of managerial accounting, and not financial accounting.
The IMA suggests that members discuss ethical dilemmas with the company’s board of directors
The IMA is the professional association for managerial accountants.:
The IMA issues the CMA designation.:
Your company sends you to a conference to update your skills. It is a violation of the professional competency and integrity standards if you decide to skip the afternoon session and go sightseeing.
The ethical principles and standards of the IMA always give clear guidance for every ethical situation
The “Ethics Hotline” provides specific resolutions (answers) to IMA members who face ethical
Just because a behavior is legal does not always mean it is ethical
The IMA’s overarching ethical principles include: Honesty, Fairness, Objectivity, and Responsibility.:
The IMA suggests that, when faced with an ethical dilemma, the first thing management accountants should do is call the IMA’s ethics hotline
Managerial accounting is becoming less relevant as the U.S. economy shifts away from the manufacturing industry towards the service industry.:
The Sarbanes-Oxley Act was designed to hold corporations accountable for internal control and financial reporting functions
The Sarbanes-Oxley Act has significantly impacted the responsibility for financial reporting by publicly traded corporations
CPA firms cannot provide consulting services for their current audit clients.:
Trends in the modern business environment include a shift to a service economy and the rise of the global marketplace.:
The concept of the lean thinking philosophy is generally credited to General Motors
Implementing a program to bill customers electronically, therefore saving paper, is a green initiative that would reduce not only waste, but also company costs
Lean production cuts the throughput time of a manufacturing concern
ISO 9001:2008 is a certification program for companies that adhere to an international set of quality management standards and guidelines
According to SOX, at least one member of the audit committee should be a financial expert
IFRS stands for “important financial reporting standards
XBRL will be required of both public and private companies.:
Managerial accounting has its roots in the industrial age of manufacturing.:
Lean thinking is both a philosophy and a business strategy of manufacturing without waste
The American Institute of Certified Public Accountants was the first professional membership organization in the United States to earn the ISO 9001 certification.:
Sustainability is generally described as the ability to meet the needs of the present without compromising the ability of future generations to meet their own needs.
Company initiatives to address sustainability and corporate responsibility not only “do the right thing,” but also can lead to economic profits by increasing demand for the company’s products and services
________ gathers, summarizes, and reports on the financial impact of changes to business operations
managerial accounting
Creating budgets are part of which primary management responsibility?
Which of the following is not one of the primary responsibilities of management?
Adhering to GAAP
Planning involves which of the following activities?
Setting goals and objectives for the company
Which of the following is being fulfilled when management compares the budget to actual results?
When management uses feedback to take corrective action on the budgets, which of the following management responsibilities are being fulfilled?
When management analyzes whether to move production to another country or to keep the production located where it currently is, which of the following management responsibilities is being performed?
Which one of the following items is not one of the three primary manager responsibilities?
Using product cost information to determine sales prices is an example of
directing and planning
When management reviews hourly sales reports to determine the level of staffing needed to service customers, which of management’s three primary responsibilities is fulfilled?
Directing and planning
Budgets are a way for managers to communicate their
Comparing actual results to budgets is an example of which of the following management functions?
Overseeing the day-to-day operations of a company is an example of which of the following management functions?
Preparing budgets is an example of which of the following management functions?
Evaluating results against the plan is an example of which of the following management functions?
What are the three primary responsibilities of managers as described in the chapter? Give an example of each type of responsibility.
a. Planning: An example of planning is when the manager of a local McDonald’s restaurant makes the schedule of employee work hours for the upcoming week.
b. Directing: An example of directing is when the manager of the local McDonald’s adjusts the menu to reflect local tastes and preferences.
c. Controlling: An example of controlling is when the manager of the local McDonald’s compares the actual number of hamburger patties used over the past week to the budgeted number of hamburger patties.
What is one constraint placed on the information provided by a managerial accounting system?
Cost – Benefit
How often should managerial accounting reports be prepared?
as often as necessary
Which of the following statements is true regarding managerial accounting information?
It is audited by CPAs.
The focus of management accounting is on
internal reporting.
Which of the following people is most likely to only use financial accounting information?
Bank loan officer
Managerial accounting would use which of the following types of information?
Forecasts of future earnings
Financial information
Nonfinancial information
D) All of the above
Which of the following persons or groups would be least likely to receive detailed managerial accounting reports?
Current shareholders
________ is designed to meet the needs of internal decision makers.
Managerial accounting
The primary goal of managerial accounting is to provide information to
internal decision-makers.
The primary goal of financial accounting is to provide information for
governmental regulators.
potential investors.
D) all of the above.
Which of following statements is true?
Management accounting focuses on relevant data.
Which statement is true?
Management uses financial information to analyze costs.
Management uses financial information to plan internal operations.
Management uses reports created for internal parties.
D) All of the above are true.
Which of the following statements is false?
Financial accounting provides sufficient information for managers to effectively plan and control operations.
Which of the following statements is true?
Managerial accounting reports provide detailed internal information.
Which of the following are the internal decision-makers of a company?
Which one of the following reports is most likely to be required to be audited by an outside entity?
Annual financial statements
Which of the following groups are external users of financial information?
Customers of the company
Potential investors of the company
Vendors of the company
D) All of the above
A company’s budget information is most likely to be used by which of the following groups?
________ are a company’s decision makers.
________ are owners of a company.
External parties receive information about past performance from
financial accounting reports
Internal parties receive information about past performance from
managerial accounting reports
What position is typically responsible for financial accounting, managerial accounting, and tax reporting?
Despite the proliferation of technology, managerial accountants are still needed to provide professional judgment in which of the following areas?
Recording non-routine transactions
Adjusting the financial records
Designing computer information systems
D) All of the about activities require professional judgment
The IMA issues which of the following certifications?
A CFO would have all of the following responsibilities except
investing in new production equipment.
Which of the following positions typically manages the daily operations of a company?
the CEO
Oversight and strategy formulation and guidance for a large corporation are typically provided by which of the following positions?
The Board of Directors
To whom would the vice-president of operations typically directly report?
the COO
The COO is responsible for managing which of the following aspect(s) of the company?
Research and development, production, and distribution
Which of the following positions report to the audit committee of the Board of Directors?
The internal audit department and the independent CPA firm
Which of the following positions is primarily responsible for raising capital and investing funds?
the treasurer
What factor has changed the way that we now view managerial accountants?
Which of the following tasks are performed by management accountants?
Help design information systems
Provide decision support
Ensure financial records are correct
D) All of the above
Managerial accountants may be responsible for
providing decision support.
communicating results.
analyzing data.
D) all of the above.
Managerial accountants are required to possess which of the following skills?
Analytical skills
Oral and written communication skills
The ability to work on a team
D) All of the above
The ________ is a subgroup of the Board of Directors.
audit committee
Which person or group is not an employee of the corporation?
A member of the audit committee
Which person is hired directly by the board of directors to manage the daily operations of the company?
According to the textbook, managerial accountants often work on
cross-functional teams.
A company’s Board of Directors meets
periodically, as needs dictate.
Companies listed on the New York Stock Exchange (NYSE) are required to have an internal audit function by
The person who is directly responsible for all financial functions is the
The person who is directly responsible for the company’s operations, such as research and development, production and distribution is the
To resolve ethical dilemmas, the IMA suggests that management accountants should first
follow their company’s established policies for reporting unethical behavior.
Which of the following is not one of the IMA’s overarching ethical principles?
The standards in the IMA Statement of Ethical Professional Practice include
Competence, Confidentiality, Integrity, and Credibility
All of the following are overarching principles in the IMA Statement of Ethical Professional Practice except
The standards of the IMA Statement of Ethical Professional Practice include which of the following?
Preparing financial statements in accordance with GAAP is an example of
Communicating information fairly and objectively is an example of which ethical standard?
Performing duties in accordance with relevant laws, regulations, and technical standards comprise the IMA professional ethics standard of
Inflating your expenses for a company-sponsored conference is a violation of what ethical standard?
To ensure a profit in the current year a company ships out pre-ordered merchandise the last week of December, instead of in mid-January as the customer instructed. This early shipment could be a violation of which ethical standard?
What ethical standard is being violated when you tell a friend that the company you work for is going to report lower than expected earnings next week?
An accountant who does not understand “accrual accounting” fails which ethical standard?
What ethical standard would you violate if you take pens home from work for personal use?
What is the name of the professional association for managerial accountants?
Institute of Management Accountants
Which of the following certifications is issued by the IMA?
Which of the following is an example of the IMA’s competence standard?
Provide decision support that is accurate, clear, concise and timely.
Which of the following is an example of the IMA’s credibility standard?
Communicate information fairly and objectively.
Which of the following is an example of the IMA’s integrity standard?
Abstain from engaging in or supporting any activity that might discredit the profession.
Which of the following is an example of the IMA’s confidentiality standard?
Keep information confidential, except when disclosure is legally required.
Which of the following is not one of the IMA’s credibility standards?
To disclose all relevant information
To disclose deficiencies in internal control
To communicate information fairly and objectively
D) All of the above are part of IMA’s credibility standard.
Which ethical standard is demonstrated when you attend a class to maintain your professional knowledge?
Not disclosing sensitive information is an example of which ethical standard?
Refusing gifts or favors that could be perceived to influence your actions is an example of which ethical standard?
Refusing gifts or favors that could be perceived to influence your actions is an example of which ethical standard?
Accepting a job that you know can be better performed by someone else with the required skills would violate the ethical conduct standard of
It would be a violation of which ethical standard to withhold relevant information?
Failure to mitigate a conflict of interest would violate which ethical standard of conduct?
A wave of accounting scandals around the turn of the 21st century prompted which of the following?
Increased competition with foreign companies and the rise of the global marketplace is mainly due to which of the following?
Decreased barriers to international trade
Which type of system integrates ALL of the company’s departments, functions, and data?
ERP System
According to the Sarbanes-Oxley Act, who is responsible for establishing and maintaining internal controls over financial reporting?
The CEO and CFO
The Sarbanes-Oxley Act requires the CPA firm to rotate the audit partner off of the audit engagement every ________ year(s).
Which of the following is not an advantage of an ERP system?
Lower initial cost than traditional systems
The ability to meet the needs of the present without compromising the needs of the future is often referred to as
The “triple bottom line” focuses on these three factors that influence a firm’s ability to survive and thrive in the long run:
profit, people, planet
Under SOX, a CPA firm is permitted to perform which of the following services for an audit client with pre-approval from the client’s audit committee?
According to SOX, a company’s financial statements must be certified by the company’s
A requirement of SOX is that publicly traded companies must have which of the following assessed annually?
Internal control system and financial reporting system
The SEC is considering the move to adopt IFRS for which types of companies?
All U.S. publicly traded companies
IFRS stands for
International Financial Reporting Standards.
XBRL stands for
eXtensible Business Reporting Language.
In what year will XBRL be required for all publicly traded companies?
XBRL can best be described as a
a tagging system for financial statement data.
Which of the following statements about XBRL is false?
The US is the first country to mandate use of XBRL.
________ is the business philosophy and a strategy of manufacturing without waste.
Lean thinking
Companies may adopt which of the following in an attempt to increase their competitive edge?
Green initiatives
Lean thinking
D) All of the above
Movements toward sustainability and corporate responsibility often
result in increased demand for the company’s product or service.
include monetary support of local schools and charities.
include green initiatives.
D) All of the above are correct.
The Sarbanes-Oxley Act was enacted
to prevent accounting scandals like Enron.
Which of the following was not a result of the Sarbanes-Oxley Act?
The COO assumes financial statement responsibility.
The Sarbanes-Oxley Act requires companies to have their internal audit procedures assessed at least
The Sarbanes-Oxley Act allows for a maximum of ________ years of imprisonment for knowingly destroying or creating documents to obstruct any federal investigation.
What is a business philosophy that focuses on providing customers with superior products and services?
What is a system that requires suppliers to deliver materials at the exact time the materials are needed?
ISO 9001:2008 is a(n)
certification that a company complies with international quality standards.
Which of the following is a software system that integrates all of a company’s departments?
Companies that wish to demonstrate their commitment to international quality standards may become certified by what organization?
Which of the following methods cuts throughput time?
Which type of company utilizes managerial accounting?
D) All of the above
CPA firms are permitted to provide which of the following services to audit clients?
Tax preparation
The philosophy that centers on production as needed is known as
What is the business philosophy of providing superior goods and services?
What would a company need to conduct when considering whether to install an ERP system or not?
cost-benefit analysis
Which of the following would have the least effect on a cost-benefit analysis?
Constant prices
Which of the following is not used in a cost-benefit analysis?
Book value of past investment in equipment
Torque Engine Company is considering opening a plant in China. It will cost $3,500,000 to set up the plant and $750,000 to train employees. An additional $100,000 will be spent to build relationships with the local suppliers. The company anticipates gross profit of $4,400,000 from this new plant. Do the benefits outweigh the costs or do the costs outweigh the benefits, and by how much?
Benefits outweigh costs by $50,000.
Country Western Clothing Outfitters is considering investing in an inventory tracking system. It will have $10,000 in software costs and $8,000 in employee training costs. Computer hardware also needs to be upgraded for the system; the hardware upgrades are expected to be $12,000. The expected benefits from the inventory tracking system should be $28,000. Do the benefits outweigh the costs or do the costs outweigh the benefits, and by how much?
Costs outweigh benefits by $2,000.
Pete’s Cola Company is investigating the possibility of adopting a lean thinking philosophy throughout their organization. Estimated costs to set up the computer system are $1,650,000; training employees in lean operations is estimated to cost $175,000; and the general expenses of establishing the program are estimated at $315,000. The estimated value of the potential savings is $1,975,000. Do the benefits outweigh the costs or do the costs outweigh the benefits, and by how much?
Costs outweigh benefits by $165,000.
Gilmore Corporation is investigating the possibility of adopting a lean thinking philosophy in its manufacturing facilities. The plant manager has done a cost-benefit analysis and has found that the costs of the lean production program exceed the benefits by $115,000. You analyze the situation and make some adjustments to the cost estimates. After doing your analysis, you find that costs still outweigh benefits by less than 5%. Which might be a sound course of action?
Consider dropping the plan.
Look for ways to lessen costs.
Re-evaluate the value of benefits.
D) All of the above should be considered.
Johnson Scooter Company is considering whether or not to expand into a new area of the US. They produce high-performance gas scooters with moderate gas mileage, but have developed a new battery technology that combines a small amount of electrical energy with the existing gas power. This new technology will significantly increase the fuel economy of their bikes. They will need to spend $5,075,000 to retrofit a building to incorporate the new fuel-saving technology. New worker training will cost $1,984,000. Other expenses involved in getting the new plant up and running amount to $332,000. The CEO anticipates that, with gas price increases, the profit potential of this expansion is $7,588,000. Do the benefits outweigh the costs or do the costs outweigh the benefits, and by how much?
Sales from expansion $ 7,588,000
Less costs:

Cost to retrofit a building $ (5,075,000)
New worker training $ (1,984,000)
Other plant expenses $ (332,000)

Benefits outweigh costs by $ 197,000

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