Test Bank for Managerial Accounting 4th Edition Charles E. Davis Chapters 1–13 Multiple Choice Questions

1-1 Test Bank for Davis & Davis, Managerial Accounting, 4/e



TEST BANK
Managerial Accounting 4th Edition
By Charles Davis Elizabeth Davis Chapter 1 - 13

, 1-2 Test Bank for Davis & Davis, Managerial Accounting, 4/e



Table Of Contents

1. Accounting as a Tool for Management
2.Cost Behavior and Cost Estimation
3. Cost-Volume-Profit Analysis and Pricing Decisions
4. Product Costs and Job Order Costing
5. Planning and Forecasting
5A: Planning and Forecasting in a Retail Setting* (online only)
6. Performance Evaluation: Variance Analysis
7. Activity-Based Costing and Activity-Based Management
8. Using Accounting Information to Make Managerial Decisions
9. Capital Budgeting
10. Decentralization and Performance Evaluation
11. Performance Evaluation Revisited: A Balanced Approach
12. Financial Statement Analysis
13. Statement of Cash Flows

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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.

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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.