1-1
,Review .Questions
1. The .primary .purpose .of .managerial .accounting .is .to .provide .information .to .help .managers
.plan, .direct, .control, .and .make .decisions.
2. Financial .accounting .and .managerial .accounting .differ .on .the .following .6 .dimensions: . (1)
.primary .users, .(2) .purpose .of .information, .(3) .focus .and .time .dimension .of .the .information, .(4)
.rules .and .restrictions, .(5) .scope .of .information, .and .(6) .behavioral.
3. Line .positions .are .directly .involved .in .providing .goods .or .services .to .customers. .Staff
.positions .support .line .positions.
4. Planning .means .choosing .goals .and .deciding .how .to .achieve .them. .Directing .involves .running
.the .day-to-day .operations .of .a .business. .Controlling .is .the .process .of .monitoring .operations .and
.keeping .the .company .on .track.
5. The .four .IMA .standards .of .ethical .practice .and .a .description .of .each .follow.
I. Competence.
Maintain .an .appropriate .level .of .professional .leadership .and .expertise .by
.enhancing .knowledge .and .skills.
Perform .professional .duties .in .accordance .with .relevant .laws, .regulations, .and
.technical .standards.
Provide .decision .support .information .and .recommendations .that .are .accurate, .clear,
.concise, .and .timely.
Recognise .and .help .mange .risk.
II. Confidentiality.
Keep .information .confidential .except .when .disclosure .is .authorized .or .legally .required.
Inform .all .relevant .parties .regarding .appropriate .use .of .confidential .information. . Monitor
.to .ensure .compliance.
Refrain .from .using .confidential .information .for .unethical .or .illegal .advantage.
III. Integrity.
Mitigate .actual .conflicts .of .interest. .Regularly .communicate .with .business .associates .to
.avoid .apparent .conflicts .of .interest. . Advise .all .parties .of .any .potential .conflicts.
Refrain .from .engaging .in .any .conduct .that .would .prejudice .carrying .out .duties .ethically.
1-2
, Abstain .from .engaging .in .or .supporting .any .activity .that .might .discredit .the .profession.
Contribute .to .a .positive .ethical .culture .and .place .integrity .of .the .profession .above
.personal .interest.
5, .cont.
IV. Credibility.
Communicate .information .fairly .and .objectively.
Provide .all .relevant .information .that .could .reasonably .be .expected .to .influence .an
.intended .user’s .understanding .of .the .reports, .analyses, .or .recommendations.
Report .any .delays .or .deficiencies .in .information, .timeliness, .processing, .or .internal
.controls .in .conformance .with .organization .policy .and/or .applicable .law.
Communicate .any .professional .limitations .or .other .constraints .that .would .preclude
.responsi- .ble .judgment .or .successful .performance .of .an .activity.
6. Service .companies .sell .time, .skills, .and .knowledge. . Examples .of .service .companies .include
.phone .service .companies, .banks, .cleaning .service .companies, .accounting .firms, .law .firms,
.medical .physicians, .and .online .auction .services.
7. Merchandising .companies .resell .products .they .buy .from .suppliers. . Merchandisers .keep .an
.inventory .of .products, .and .managers .are .accountable .for .the .purchasing, .storage, .and .sale .of .the
.products. .Examples .of .merchandising .companies .include .toy .stores, .grocery .stores, .and .clothing
.stores.
8. Merchandising .companies .resell .products .they .previously .bought .from .suppliers, .whereas
.manufacturing .companies .use .labor, .equipment, .supplies, .and .facilities .to .convert .raw .materials
.into .new .finished .products. . In .contrast .to .merchandising .companies, .manufacturing .companies
.have .a .broad .range .of .production .activities .that .require .tracking .costs .on .three .kinds .of
.inventory.
9. The .three .inventory .accounts .used .by .manufacturing .companies .are .Raw .Materials .Inventory,
.Work- .in-Process .Inventory, .and .Finished .Goods .Inventory.
Raw .Materials .Inventory .includes .materials .used .to .manufacture .a .product. . Work-in-Process
.Inventory .includes .goods .that .have .been .started .in .the .manufacturing .process .but .are .not .yet
.complete. . Finished .Goods .Inventory .includes .completed .goods .that .have .not .yet .been .sold.
10. A .direct .cost .is .a .cost .that .can .be .easily .and .cost-effectively .traced .to .a .cost .object .(which .is
.anything .for .which .managers .want .a .separate .measurement .of .cost). . An .indirect .cost .is .a .cost
.that .cannot .be .easily .or .cost-effectively .traced .to .a .cost .object.
11. The .three .manufacturing .costs .for .a .manufacturing .company .are .direct .materials, .direct .labor,
.and .manufacturing .overhead. . Direct .materials .are .materials .that .become .a .physical .part .of .a
.finished .product .and .whose .costs .are .easily .traceable .to .the .finished .product. . Direct .labor .is .the
.labor .cost .of .the .employees .who .convert .materials .into .finished .products. . Manufacturing
1-3
, .overhead .includes .all .manufacturing .costs .except .direct .materials .and .direct .labor, .such .as
.indirect .materials, .indirect .labor, .factory .depreciation, .factory .rent, .and .factory .property .taxes.
1-4
,Review .Questions
1. The .primary .purpose .of .managerial .accounting .is .to .provide .information .to .help .managers
.plan, .direct, .control, .and .make .decisions.
2. Financial .accounting .and .managerial .accounting .differ .on .the .following .6 .dimensions: . (1)
.primary .users, .(2) .purpose .of .information, .(3) .focus .and .time .dimension .of .the .information, .(4)
.rules .and .restrictions, .(5) .scope .of .information, .and .(6) .behavioral.
3. Line .positions .are .directly .involved .in .providing .goods .or .services .to .customers. .Staff
.positions .support .line .positions.
4. Planning .means .choosing .goals .and .deciding .how .to .achieve .them. .Directing .involves .running
.the .day-to-day .operations .of .a .business. .Controlling .is .the .process .of .monitoring .operations .and
.keeping .the .company .on .track.
5. The .four .IMA .standards .of .ethical .practice .and .a .description .of .each .follow.
I. Competence.
Maintain .an .appropriate .level .of .professional .leadership .and .expertise .by
.enhancing .knowledge .and .skills.
Perform .professional .duties .in .accordance .with .relevant .laws, .regulations, .and
.technical .standards.
Provide .decision .support .information .and .recommendations .that .are .accurate, .clear,
.concise, .and .timely.
Recognise .and .help .mange .risk.
II. Confidentiality.
Keep .information .confidential .except .when .disclosure .is .authorized .or .legally .required.
Inform .all .relevant .parties .regarding .appropriate .use .of .confidential .information. . Monitor
.to .ensure .compliance.
Refrain .from .using .confidential .information .for .unethical .or .illegal .advantage.
III. Integrity.
Mitigate .actual .conflicts .of .interest. .Regularly .communicate .with .business .associates .to
.avoid .apparent .conflicts .of .interest. . Advise .all .parties .of .any .potential .conflicts.
Refrain .from .engaging .in .any .conduct .that .would .prejudice .carrying .out .duties .ethically.
1-2
, Abstain .from .engaging .in .or .supporting .any .activity .that .might .discredit .the .profession.
Contribute .to .a .positive .ethical .culture .and .place .integrity .of .the .profession .above
.personal .interest.
5, .cont.
IV. Credibility.
Communicate .information .fairly .and .objectively.
Provide .all .relevant .information .that .could .reasonably .be .expected .to .influence .an
.intended .user’s .understanding .of .the .reports, .analyses, .or .recommendations.
Report .any .delays .or .deficiencies .in .information, .timeliness, .processing, .or .internal
.controls .in .conformance .with .organization .policy .and/or .applicable .law.
Communicate .any .professional .limitations .or .other .constraints .that .would .preclude
.responsi- .ble .judgment .or .successful .performance .of .an .activity.
6. Service .companies .sell .time, .skills, .and .knowledge. . Examples .of .service .companies .include
.phone .service .companies, .banks, .cleaning .service .companies, .accounting .firms, .law .firms,
.medical .physicians, .and .online .auction .services.
7. Merchandising .companies .resell .products .they .buy .from .suppliers. . Merchandisers .keep .an
.inventory .of .products, .and .managers .are .accountable .for .the .purchasing, .storage, .and .sale .of .the
.products. .Examples .of .merchandising .companies .include .toy .stores, .grocery .stores, .and .clothing
.stores.
8. Merchandising .companies .resell .products .they .previously .bought .from .suppliers, .whereas
.manufacturing .companies .use .labor, .equipment, .supplies, .and .facilities .to .convert .raw .materials
.into .new .finished .products. . In .contrast .to .merchandising .companies, .manufacturing .companies
.have .a .broad .range .of .production .activities .that .require .tracking .costs .on .three .kinds .of
.inventory.
9. The .three .inventory .accounts .used .by .manufacturing .companies .are .Raw .Materials .Inventory,
.Work- .in-Process .Inventory, .and .Finished .Goods .Inventory.
Raw .Materials .Inventory .includes .materials .used .to .manufacture .a .product. . Work-in-Process
.Inventory .includes .goods .that .have .been .started .in .the .manufacturing .process .but .are .not .yet
.complete. . Finished .Goods .Inventory .includes .completed .goods .that .have .not .yet .been .sold.
10. A .direct .cost .is .a .cost .that .can .be .easily .and .cost-effectively .traced .to .a .cost .object .(which .is
.anything .for .which .managers .want .a .separate .measurement .of .cost). . An .indirect .cost .is .a .cost
.that .cannot .be .easily .or .cost-effectively .traced .to .a .cost .object.
11. The .three .manufacturing .costs .for .a .manufacturing .company .are .direct .materials, .direct .labor,
.and .manufacturing .overhead. . Direct .materials .are .materials .that .become .a .physical .part .of .a
.finished .product .and .whose .costs .are .easily .traceable .to .the .finished .product. . Direct .labor .is .the
.labor .cost .of .the .employees .who .convert .materials .into .finished .products. . Manufacturing
1-3
, .overhead .includes .all .manufacturing .costs .except .direct .materials .and .direct .labor, .such .as
.indirect .materials, .indirect .labor, .factory .depreciation, .factory .rent, .and .factory .property .taxes.
1-4
