,TESTBANK for Managerial Accounting 3rd by
Charles E. Davis
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,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
,1-4 Test Bank for Davis & Davis, Managerial Accounting, 3/e
8. Managerial accounting is designed to assist managers with four general activities: planning,
controlling, evaluating, and decision making.
Unit 1-1, LO3 – True
LO: 3, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem Solving and
Decision Making, IMA: Decision Analysis
9. Long-term planning is often referred to as strategic planning.
Unit 1-1, LO3 – True
LO: 3, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem Solving and
Decision Making, IMA: Decision Analysis
10. One purpose of planning activities is to monitor day-to-day operations to ensure that processes are
operating as expected.
Unit 1-1, LO3 – False – One purpose of controlling activities is to monitor day-to-day operations to ensure
that processes are operating as expected.
LO: 3, Bloom: C, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem
Solving and Decision Making, IMA: Decision Analysis
11. All other things held equal, the more frequent the controlling activity, the faster an out-of-control
process can be corrected.
Unit 1-1, LO3 – True
LO: 3, Bloom: C, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem
Solving and Decision Making, IMA: Decision Analysis
12. The task of assessing how well employees have performed relative to expectations is a controlling
activity.
Unit 1-1, LO3 – False – The task of accessing how well employees have performed relative to
expectations is considered an evaluation activity.
LO: 3, Bloom: K, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem
Solving and Decision Making, IMA: Decision Analysis
13. Preparers of managerial accounting information are generally not active participants in the decision
making process.
Unit 1-1, LO3 – False – Preparers of managerial accounting information are no longer solely number
crunchers, but active participants in the decision making process.
LO: 3, Bloom: C, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem
Solving and Decision Making, IMA: Decision Analysis
14. Managerial accounting information is always prepared by the controller or cost accountant.
Unit 1-1, LO3 – False – Managerial accounting information can be provided by a controller, a plant
accountant, a cost accountant, a financial analyst, a budget or cost analyst, a general accountant, or
even a chief financial officer.
LO: 3, Bloom: C, Unit 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communications, IMA: Business Economics
15. Managerial accounting information provides feedback about how well the organization is
implementing its strategy and achieving its goals.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
,1-5 Test Bank for Davis & Davis, Managerial Accounting, 3/e
16. For the product differentiation strategy, companies will want information on quality, such as defect
rates, percentage of on-time deliveries, and customer satisfaction.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
17. If a company follows a strategy of product differentiation, it will seek ways to set its products apart
from competitors’ in terms of quality, design or service.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
18. A company that focuses on product differentiation does not need to monitor product costs because
if the quality is sufficient customers will pay the price.
Unit 1-2, LO4 – False – A company that focuses on product differentiation must monitor product costs
because if too much money is spent of quality, the sales price will be too high to be competitive.
LO: 4, Bloom: C, Unit 1-2, Difficulty: Difficult, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Strategic Planning
19. The four strategies based on a firm’s approach to market share growth are build, hold, harvest and
divest.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
20. Under a build strategy, a company aims to increase its market share and competitive position
relative to others in the industry, maximizing its short-term earnings and positive cash flow.
Unit 1-2, LO4 – False – Under a build strategy, a company aims to increase its market share and
competitive position relative to others in the industry, even at the expense of short-term earnings and
cash flows.
LO: 4, Bloom: C, Unit 1-2, Difficulty: Difficult, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Strategic Planning
21. A harvest strategy focuses on short-term profits and cash, even at the expense of market share.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
22. A divest strategy is appropriate when a company desires to enter a particular market.
Unit 1-2, LO4 – False – A divest strategy is appropriate when a company desires to exit a particular
market.
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
23. A tool that managerial accountants have developed to assist in monitoring organizational
performance is the balanced scorecard.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Performance Measurement
,1-6 Test Bank for Davis & Davis, Managerial Accounting, 3/e
24. The balanced scorecard uses only nonfinancial information such as customer satisfaction or
employee turnover to measure performance.
Unit 1-2, LO4 – False – While the balanced scorecard uses some financial performance measures, it
places equal emphasis on nonfinancial performance measures.
LO: 4, Bloom: C, Unit 1-2, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Performance Measurement
25. A supply chain is a network of facilities that procure raw materials, transform them into
intermediate goods and then into final products, and deliver the final products to customers
through a distribution system.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Performance Measurement
26. The supply chain’s goal is to reduce or eliminate defects.
Unit 1-2, LO4 – False – The supply chain’s goal is to get the right product to the right location in the right
quantities, at the right time, and at the right cost.
LO: 4, Bloom: K, Unit 1-2, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Performance Measurement
27. Just-in-time inventory management is an inventory strategy that focuses on reducing waste and
inefficiency by ordering inventory items so that they arrive just when they are needed.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
28. Just-in-time implementations are simple and take little or no effort to implement and will work for
most companies.
Unit 1-2, LO4 – False – Just-in-time implementations take time and effort to implement and will not work
for everyone.
LO: 4, Bloom: C, Unit 1-2, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Strategic Planning
29. The goal of an ERP system is to integrate all data from the company’s many business processes into
a single information system.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Information Management
30. Ethical behavior is knowing right from wrong and conducting yourself accordingly, so that your
decisions are consistent with your own value system and the values of those affected by your
decisions.
Unit 1-3, LO5 – True
LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Communication, IMA: Business
Applications
31. Ethical business behavior is compliance with the law.
Unit 1-3, LO5 – False – Ethical business behavior is not the same as mere compliance with the law.
LO: 5, Bloom: C, Unit 1-3, Difficulty: Moderate, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Business Applications
,1-7 Test Bank for Davis & Davis, Managerial Accounting, 3/e
32. A firm’s code of conduct is based on a set of core values that are meant to guide employees’
behavior.
Unit 1-3, LO5 – True
LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Communication, IMA: Business
Applications
Answers to True-False Statements
Item Ans. Item Ans. Item Ans. Item Ans.
1. F 9. T 17. T 25. T
2. F 10. F 18. F 26. F
3. T 11. T 19. T 27. T
4. F 12. F 20. F 28. F
5. T 13. F 21. T 29. T
6. T 14. F 22. F 30. T
7. F 15. T 23. T 31. F
8. T 16. T 24. F 32. T
, 1-8 Test Bank for Davis & Davis, Managerial Accounting, 3/e
MULTIPLE-CHOICE QUESTIONS
33. The leading professional organization for management accountants is the
a. American Association of Management Accountants.
b. Institute of Management Accountants.
c. National Association of Accountants.
d. Society of Management Accountants.
Unit 1-1, LO1 – B
Ans: B, LO: 1, Bloom: K, Unit 1-1, Difficulty: Moderate, Min: 2, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
34. In the context of managerial accounting, relevant information
a. is information that will make a difference in the decision.
b. is information that has been provided by the controller.
c. must be provided in quantitative terms.
d. must be analyzed by the chief financial officer before being provided to managers.
Unit 1-1, LO1 – A
Ans: A, LO: 1, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
35. Good managerial accounting information helps
a. creditors decide on good credit risks.
b. managers to do their jobs.
c. stockholders make informed investment decisions.
d. creditors assess liquidity.
Unit 1-1, LO1 – B
Ans: B, LO: 1, Bloom: K, Unit 1-1, Difficulty: Moderate, Min: 2, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
36. Managerial accounting is used by managers to
a. assure appropriate use of an organization’s resources.
b. assure accountability for an organization’s resources.
c. provide information used in planning, evaluation and controlling functions within an
organization.
d. assure appropriate use of an organization’s resources, accountability for an organization’s
resources, and provides information used in planning, evaluation and controlling functions
within an organization.
Unit 1-1, LO1 – D
Ans: D, LO: 1, Bloom: C, Unit 1-1, Difficulty: Moderate, Min: 2, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
37. Which of the following is not a way managers use managerial accounting?
a. Provide information used in planning, evaluation and controlling functions within an
organization
b. To assure appropriate use of its resources
c. To assure accountability for its resources
d. To communicate information to stockholders
Unit 1-1, LO1 – D
Charles E. Davis
Hello all ,
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,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
,1-4 Test Bank for Davis & Davis, Managerial Accounting, 3/e
8. Managerial accounting is designed to assist managers with four general activities: planning,
controlling, evaluating, and decision making.
Unit 1-1, LO3 – True
LO: 3, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem Solving and
Decision Making, IMA: Decision Analysis
9. Long-term planning is often referred to as strategic planning.
Unit 1-1, LO3 – True
LO: 3, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem Solving and
Decision Making, IMA: Decision Analysis
10. One purpose of planning activities is to monitor day-to-day operations to ensure that processes are
operating as expected.
Unit 1-1, LO3 – False – One purpose of controlling activities is to monitor day-to-day operations to ensure
that processes are operating as expected.
LO: 3, Bloom: C, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem
Solving and Decision Making, IMA: Decision Analysis
11. All other things held equal, the more frequent the controlling activity, the faster an out-of-control
process can be corrected.
Unit 1-1, LO3 – True
LO: 3, Bloom: C, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem
Solving and Decision Making, IMA: Decision Analysis
12. The task of assessing how well employees have performed relative to expectations is a controlling
activity.
Unit 1-1, LO3 – False – The task of accessing how well employees have performed relative to
expectations is considered an evaluation activity.
LO: 3, Bloom: K, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem
Solving and Decision Making, IMA: Decision Analysis
13. Preparers of managerial accounting information are generally not active participants in the decision
making process.
Unit 1-1, LO3 – False – Preparers of managerial accounting information are no longer solely number
crunchers, but active participants in the decision making process.
LO: 3, Bloom: C, Unit: 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Problem
Solving and Decision Making, IMA: Decision Analysis
14. Managerial accounting information is always prepared by the controller or cost accountant.
Unit 1-1, LO3 – False – Managerial accounting information can be provided by a controller, a plant
accountant, a cost accountant, a financial analyst, a budget or cost analyst, a general accountant, or
even a chief financial officer.
LO: 3, Bloom: C, Unit 1-1, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communications, IMA: Business Economics
15. Managerial accounting information provides feedback about how well the organization is
implementing its strategy and achieving its goals.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
,1-5 Test Bank for Davis & Davis, Managerial Accounting, 3/e
16. For the product differentiation strategy, companies will want information on quality, such as defect
rates, percentage of on-time deliveries, and customer satisfaction.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
17. If a company follows a strategy of product differentiation, it will seek ways to set its products apart
from competitors’ in terms of quality, design or service.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
18. A company that focuses on product differentiation does not need to monitor product costs because
if the quality is sufficient customers will pay the price.
Unit 1-2, LO4 – False – A company that focuses on product differentiation must monitor product costs
because if too much money is spent of quality, the sales price will be too high to be competitive.
LO: 4, Bloom: C, Unit 1-2, Difficulty: Difficult, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Strategic Planning
19. The four strategies based on a firm’s approach to market share growth are build, hold, harvest and
divest.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
20. Under a build strategy, a company aims to increase its market share and competitive position
relative to others in the industry, maximizing its short-term earnings and positive cash flow.
Unit 1-2, LO4 – False – Under a build strategy, a company aims to increase its market share and
competitive position relative to others in the industry, even at the expense of short-term earnings and
cash flows.
LO: 4, Bloom: C, Unit 1-2, Difficulty: Difficult, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Strategic Planning
21. A harvest strategy focuses on short-term profits and cash, even at the expense of market share.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
22. A divest strategy is appropriate when a company desires to enter a particular market.
Unit 1-2, LO4 – False – A divest strategy is appropriate when a company desires to exit a particular
market.
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
23. A tool that managerial accountants have developed to assist in monitoring organizational
performance is the balanced scorecard.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Performance Measurement
,1-6 Test Bank for Davis & Davis, Managerial Accounting, 3/e
24. The balanced scorecard uses only nonfinancial information such as customer satisfaction or
employee turnover to measure performance.
Unit 1-2, LO4 – False – While the balanced scorecard uses some financial performance measures, it
places equal emphasis on nonfinancial performance measures.
LO: 4, Bloom: C, Unit 1-2, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Performance Measurement
25. A supply chain is a network of facilities that procure raw materials, transform them into
intermediate goods and then into final products, and deliver the final products to customers
through a distribution system.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Performance Measurement
26. The supply chain’s goal is to reduce or eliminate defects.
Unit 1-2, LO4 – False – The supply chain’s goal is to get the right product to the right location in the right
quantities, at the right time, and at the right cost.
LO: 4, Bloom: K, Unit 1-2, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Performance Measurement
27. Just-in-time inventory management is an inventory strategy that focuses on reducing waste and
inefficiency by ordering inventory items so that they arrive just when they are needed.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Strategic Planning
28. Just-in-time implementations are simple and take little or no effort to implement and will work for
most companies.
Unit 1-2, LO4 – False – Just-in-time implementations take time and effort to implement and will not work
for everyone.
LO: 4, Bloom: C, Unit 1-2, Difficulty: Moderate, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Strategic Planning
29. The goal of an ERP system is to integrate all data from the company’s many business processes into
a single information system.
Unit 1-2, LO4 – True
LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Information Management
30. Ethical behavior is knowing right from wrong and conducting yourself accordingly, so that your
decisions are consistent with your own value system and the values of those affected by your
decisions.
Unit 1-3, LO5 – True
LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Communication, IMA: Business
Applications
31. Ethical business behavior is compliance with the law.
Unit 1-3, LO5 – False – Ethical business behavior is not the same as mere compliance with the law.
LO: 5, Bloom: C, Unit 1-3, Difficulty: Moderate, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Business Applications
,1-7 Test Bank for Davis & Davis, Managerial Accounting, 3/e
32. A firm’s code of conduct is based on a set of core values that are meant to guide employees’
behavior.
Unit 1-3, LO5 – True
LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Communication, IMA: Business
Applications
Answers to True-False Statements
Item Ans. Item Ans. Item Ans. Item Ans.
1. F 9. T 17. T 25. T
2. F 10. F 18. F 26. F
3. T 11. T 19. T 27. T
4. F 12. F 20. F 28. F
5. T 13. F 21. T 29. T
6. T 14. F 22. F 30. T
7. F 15. T 23. T 31. F
8. T 16. T 24. F 32. T
, 1-8 Test Bank for Davis & Davis, Managerial Accounting, 3/e
MULTIPLE-CHOICE QUESTIONS
33. The leading professional organization for management accountants is the
a. American Association of Management Accountants.
b. Institute of Management Accountants.
c. National Association of Accountants.
d. Society of Management Accountants.
Unit 1-1, LO1 – B
Ans: B, LO: 1, Bloom: K, Unit 1-1, Difficulty: Moderate, Min: 2, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
34. In the context of managerial accounting, relevant information
a. is information that will make a difference in the decision.
b. is information that has been provided by the controller.
c. must be provided in quantitative terms.
d. must be analyzed by the chief financial officer before being provided to managers.
Unit 1-1, LO1 – A
Ans: A, LO: 1, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
35. Good managerial accounting information helps
a. creditors decide on good credit risks.
b. managers to do their jobs.
c. stockholders make informed investment decisions.
d. creditors assess liquidity.
Unit 1-1, LO1 – B
Ans: B, LO: 1, Bloom: K, Unit 1-1, Difficulty: Moderate, Min: 2, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
36. Managerial accounting is used by managers to
a. assure appropriate use of an organization’s resources.
b. assure accountability for an organization’s resources.
c. provide information used in planning, evaluation and controlling functions within an
organization.
d. assure appropriate use of an organization’s resources, accountability for an organization’s
resources, and provides information used in planning, evaluation and controlling functions
within an organization.
Unit 1-1, LO1 – D
Ans: D, LO: 1, Bloom: C, Unit 1-1, Difficulty: Moderate, Min: 2, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
37. Which of the following is not a way managers use managerial accounting?
a. Provide information used in planning, evaluation and controlling functions within an
organization
b. To assure appropriate use of its resources
c. To assure accountability for its resources
d. To communicate information to stockholders
Unit 1-1, LO1 – D
