,TESTBANK for Managerial Accounting Tools for
Business Decision Making, 9th Edition Jerry J.
Weygandt
Hello all ,
We have all what you need with best price
Our email :
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, CHAPTER 1
MANAGERIAL ACCOUNTING
CHAPTER LEARNING OBJECTIVES
1. Identify the features of managerial accounting and the functions of management. The
primary users of managerial accounting reports, issued as frequently as needed, are internal
users, who are officers, department heads, managers, and supervisors in the company. The
purpose of these reports is to provide special-purpose information for a particular user for a
specific decision. The content of managerial accounting reports pertains to subunits of the
business. It may be very detailed, and may extend beyond the accrual accounting system.
The reporting standard is relevance to the decision being made. No independent audits are
required in managerial accounting.
The functions of management are planning, directing, and controlling. Planning requires
management to look ahead and to establish objectives. Directing involves coordinating the
diverse activities and human resources of a company to produce a smooth-running
operation. Controlling is the process of keeping the activities on track.
2. Describe the classes of manufacturing costs and the differences between product and
period costs. Manufacturing costs are typically classified as either (1) direct materials, (2)
direct labor, or (3) manufacturing overhead. Raw materials that can be physically and directly
associated with the finished product during the manufacturing process are called direct
materials. The work of factory employees that can be physically and directly associated with
converting raw materials into finished goods is considered direct labor. Manufacturing
overhead consists of costs that are indirectly associated with the manufacture of the finished
product. Manufacturing costs are typically incurred at the manufacturing facility.
Product costs are costs that are a necessary and integral part of producing the finished
product. Product costs are also called inventoriable costs. These costs do not become
expenses until the company sells the finished goods inventory.
Period costs are costs that are identified with a specific time period rather than with a salable
product. These costs relate to nonmanufacturing costs and therefore are not inventoriable
costs. They are expensed as incurred.
3. Demonstrate how to compute cost of goods manufactured and prepare financial
statements for a manufacturer. Companies add the cost of the beginning work in process
inventory to the total manufacturing costs for the current year to arrive at the total cost of
work in process for the year. They then subtract the ending work in process inventory from
the total cost of work in process to arrive at the cost of goods manufactured.
The difference between a merchandising and a manufacturing balance sheet is in the current
assets section. The current assets section of a manufacturing company's balance sheet
presents three inventory accounts: finished goods inventory, work in process inventory, and
raw materials inventory.
The difference between a merchandising and a manufacturing income statement is in the
cost of goods sold section. A manufacturing cost of goods sold section shows beginning and
ending finished goods inventories and the cost of goods manufactured.
,1- 2 Test Bank for Managerial Accounting, Ninth Edition
4 Discuss trends in managerial accounting. Managerial accounting has experienced many
changes in recent years, including a shift toward service companies as well as emphasis on
ethical behavior. Improved practices include a focus on managing the value chain through
techniques such as just-in-time inventory, total quality management, activity-based costing,
and theory of constraints. The balanced scorecard is now used by many companies in order
to attain a more comprehensive view of the company's operations, and companies are now
evaluating their performance with regard to their corporate social responsibility. Finally, data
analytics and data visualizations are important tools that help businesses identify problems
and opportunities, and then make informed decisions
TRUE-FALSE STATEMENTS
1. Reports prepared in financial accounting are general-purpose reports while reports
prepared in managerial accounting are usually special-purpose reports.
Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication, IMA: Reporting
2. Managerial accounting information generally pertains to an entity as a whole and is highly
aggregated.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication, IMA: Reporting
3. All forms of business organizations need managerial accounting information.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication, IMA: Reporting
4. Determining the unit cost of manufacturing a product is an output of financial accounting.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: FSA
5. Managerial accounting internal reports are prepared more frequently than financial
statements that are distributed externally.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication, IMA: Reporting
6. The management function of organizing and directing is mainly concerned with setting
goals and objectives for the entity.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Leadership, IMA: Decision Analysis
7. The controller of a company is responsible for all of the accounting and finance issues a
company faces.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
8. Controlling is the process of determining whether planned goals are being met.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Leadership, IMA: Internal Controls
9. Decision-making is an integral part of the planning, directing, and controlling functions.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic Perspective, AICPA FC: None, AICPA PC: Leadership, IMA:
Decision Analysis
10. Direct materials costs and indirect materials costs are both included in manufacturing
overhead.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
, Managerial Accounting 1-3
11. Manufacturing costs that cannot be classified as direct materials or direct labor are
classified as manufacturing overhead.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
12. The balance in the raw materials inventory account is equal to total direct materials minus
total indirect materials.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
13. Raw materials that can be conveniently and directly associated with a finished product are
called materials overhead.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
14. The total cost of a finished product does not generally include equal amounts of materials,
labor, and overhead costs.
Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
15. Both direct labor cost and indirect labor cost are product costs.
Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
16. Period costs include selling and administrative expenses.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
17. Indirect materials and indirect labor are both inventoriable costs.
Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
18. Direct materials and direct labor are the only product costs.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
19. Total period costs are deducted from total cost of work in process to calculate cost of
goods manufactured.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
20. Period costs are not inventoriable costs.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
21. Ending finished goods inventory appears on both the balance sheet and the income
statement of a manufacturing company.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
22. The beginning work in process inventory appears on both the balance sheet and the cost
of goods manufactured schedule of a manufacturing company.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
23. In calculating gross profit for a manufacturing company, the cost of goods manufactured is
deducted from net sales.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
,1- 4 Test Bank for Managerial Accounting, Ninth Edition
24. Finished goods inventory does not appear on a cost of goods manufactured schedule.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
25. If ending work in process inventory is greater than beginning work in process inventory,
then cost of goods manufactured will be less than total manufacturing costs for the period.
Ans: T, LO: 3, Bloom: C, Difficulty: Moderate, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
26. The finished goods inventory account for a manufacturing company is equivalent to the
inventory account for a merchandising company.
Ans: T, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
27. Raw materials inventory shows the cost of completed goods available for sale to
customers.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
28. The balanced scorecard approach attempts to maintain minimal inventories on hand.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Performance Measurement
29. The supply chain is all the activities associated with providing a product or service.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Performance Measurement
30. Many companies have significantly lowered inventory levels and costs using just-in-time
inventory methods.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
31. Managerial accounting is primarily concerned with managers and external users.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Business Economics
32. Planning involves coordinating the diverse activities and human resources of a company
to produce a smoothly running operation.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Nonet, IMA: Cost Management
33. When the physical association of raw materials with the finished product is too difficult to
trace, these costs are usually classified as indirect materials.
Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
34. Product costs are also called inventoriable costs.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
35. Direct materials become a cost of goods manufactured when these items are acquired,
not when the items are used.
Ans: F, LO: 3, Bloom: K, Difficulty: Moderate, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
36. The sum of the direct materials costs, direct labor costs, and the beginning work in
process inventory is the total manufacturing costs for the year.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
, Managerial Accounting 1-5
37. In a manufacturing company balance sheet, manufacturing inventories are reported in the
current assets section in the order of their expected use in production.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
MULTIPLE CHOICE QUESTIONS
38. Managerial accounting is used in each of the following types of businesses except
a. service firms.
b. merchandising firms.
c. manufacturing firms.
d. Managerial accounting is used in all types of firms.
Ans: d, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
39. Managerial accounting information is generally prepared for
a. stockholders.
b. creditors.
c. managers.
d. regulatory agencies.
Ans: c, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
40. Managerial accounting information
a. pertains to the entity as a whole and is highly aggregated.
b. pertains to subunits of the entity and may be very detailed.
c. is prepared only once a year.
d. is constrained by the requirements of generally accepted accounting principles.
Ans: b, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
41. The major reporting standard for presenting managerial accounting information is
a. relevance.
b. generally accepted accounting principles.
c. the cost principle.
d. the current tax laws.
Ans: a, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
42. Managerial accounting is also called
a. management accounting.
b. controlling.
c. analytical accounting.
d. inside reporting.
Ans: a, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
43. Which of the following is not an internal user?
a. Creditor
b. Department manager
c. Controller
d. Treasurer
Ans: a, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Professional Behavior, IMA:
Business Economics
,1- 6 Test Bank for Managerial Accounting, Ninth Edition
44. Managerial accounting does not encompass
a. calculating product cost.
b. calculating earnings per share.
c. determining cost behavior.
d. profit planning.
Ans: b, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: FSA
45. Managerial accounting is applicable to
a. service entities.
b. manufacturing entities.
c. not-for-profit entities.
d. all of these.
Ans: d, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Cost Management
46. Management accountants would not
a. assist in budget planning.
b. prepare reports primarily for external users.
c. determine cost behavior.
d. be concerned with the impact of cost and volume on profits.
Ans: b, LO: 1, Bloom: K, Difficulty: Moderate, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Cost Management
47. Internal reports are prepared and distributed
a. daily.
b. monthly.
c. annually.
d. as needed.
Ans: d, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
48. Financial statements for external users can be described as
a. user-specific.
b. general-purpose.
c. special-purpose.
d. managerial reports.
Ans: b, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
49. Managerial accounting reports can be described as
a. general-purpose.
b. macro-reports.
c. special-purpose.
d. classified financial statements.
Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
50. Which of the following statements about internal reports is not true?
a. The content of internal reports may extend beyond the accrual accounting system.
b. Internal reports may show all amounts at market values.
c. Internal reports may discuss prospective events.
d. Internal reports are generally highly summarized rather than detailed.
Ans: d, LO: 1, Bloom: C, Difficulty: Moderate, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
, Managerial Accounting 1-7
51. While the preparation of financial statements for external users is guided by GAAP, the
guideline for the preparation of managerial accounting reports for internal users is
a. timeliness.
b. special-purpose.
c. relevance to decision.
d. aggregation.
Ans: c, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
52. Internal managerial accounting reports are generally
a. aggregated.
b. detailed.
c. regulated.
d. unreliable.
Ans: b, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
53. A distinguishing feature of managerial accounting is that
a. it is prepared for external users.
b. it produces general-purpose reports.
c. it generally results in very detailed reports.
d. it publishes quarterly and annual reports.
Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
54. What activities and responsibilities are not associated with managerial functions?
a. Planning
b. Accountability
c. Controlling
d. Directing
Ans: b, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Professional Behavior, IMA:
Reporting
55. Planning is a function that involves
a. hiring the right people for a particular job.
b. coordinating the accounting information system.
c. setting goals and objectives for an entity.
d. analyzing financial statements.
Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: None, IMA: Cost Management
56. The managerial function of controlling
a. is performed only by the controller of a company.
b. is only applicable when the company sustains a loss.
c. is concerned mainly with operating a manufacturing segment.
d. includes performance evaluation by management.
Ans: d, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: None, AICPA PC: Project Management, IMA: Decision
Analysis
57. Which of the following is not a management function?
a. Constraining
b. Planning
c. Controlling
d. Directing
Ans: a, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: None, AICPA PC: Project Management, IMA: Decision
Analysis
, 1- 8 Test Bank for Managerial Accounting, Ninth Edition
58. A manager that is establishing objectives is performing which management function?
a. Controlling
b. Directing
c. Planning
d. Constraining
Ans: c, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Project Management, IMA: Decision Analysis
59. The management function that requires managers to look ahead and establish objectives
is
a. controlling.
b. directing.
c. planning.
d. constraining.
Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Research Management, AICPA FC: None, AICPA PC: Project
Management, IMA: Decision Analysis
60. In determining whether planned goals are being met, a manager is performing the function
of
a. planning.
b. follow-up.
c. directing.
d. controlling.
Ans: d, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Project Management, IMA: Decision Analysis
61. Which of the following is not a separate management function?
a. Planning
b. Directing
c. Decision-making
d. Controlling
Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Project Management, IMA: Decision Analysis
62. Directing includes
a. providing a framework for management to have criteria to terminate employees when
needed.
b. running a department under quality control standards universally accepted.
c. coordinating a company's diverse activities and human resources to produce a
smooth-running operation.
d. developing a complex performance ranking system to give certain high performers
good raises.
Ans: c, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Project Management, IMA: Decision Analysis
63. Both direct materials and indirect materials are
a. raw materials.
b. manufacturing overhead.
c. merchandise inventory.
d. sold directly to customers by a manufacturing company.
Ans: a, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
Business Decision Making, 9th Edition Jerry J.
Weygandt
Hello all ,
We have all what you need with best price
Our email :
Our website :
testbanks-store.com
, CHAPTER 1
MANAGERIAL ACCOUNTING
CHAPTER LEARNING OBJECTIVES
1. Identify the features of managerial accounting and the functions of management. The
primary users of managerial accounting reports, issued as frequently as needed, are internal
users, who are officers, department heads, managers, and supervisors in the company. The
purpose of these reports is to provide special-purpose information for a particular user for a
specific decision. The content of managerial accounting reports pertains to subunits of the
business. It may be very detailed, and may extend beyond the accrual accounting system.
The reporting standard is relevance to the decision being made. No independent audits are
required in managerial accounting.
The functions of management are planning, directing, and controlling. Planning requires
management to look ahead and to establish objectives. Directing involves coordinating the
diverse activities and human resources of a company to produce a smooth-running
operation. Controlling is the process of keeping the activities on track.
2. Describe the classes of manufacturing costs and the differences between product and
period costs. Manufacturing costs are typically classified as either (1) direct materials, (2)
direct labor, or (3) manufacturing overhead. Raw materials that can be physically and directly
associated with the finished product during the manufacturing process are called direct
materials. The work of factory employees that can be physically and directly associated with
converting raw materials into finished goods is considered direct labor. Manufacturing
overhead consists of costs that are indirectly associated with the manufacture of the finished
product. Manufacturing costs are typically incurred at the manufacturing facility.
Product costs are costs that are a necessary and integral part of producing the finished
product. Product costs are also called inventoriable costs. These costs do not become
expenses until the company sells the finished goods inventory.
Period costs are costs that are identified with a specific time period rather than with a salable
product. These costs relate to nonmanufacturing costs and therefore are not inventoriable
costs. They are expensed as incurred.
3. Demonstrate how to compute cost of goods manufactured and prepare financial
statements for a manufacturer. Companies add the cost of the beginning work in process
inventory to the total manufacturing costs for the current year to arrive at the total cost of
work in process for the year. They then subtract the ending work in process inventory from
the total cost of work in process to arrive at the cost of goods manufactured.
The difference between a merchandising and a manufacturing balance sheet is in the current
assets section. The current assets section of a manufacturing company's balance sheet
presents three inventory accounts: finished goods inventory, work in process inventory, and
raw materials inventory.
The difference between a merchandising and a manufacturing income statement is in the
cost of goods sold section. A manufacturing cost of goods sold section shows beginning and
ending finished goods inventories and the cost of goods manufactured.
,1- 2 Test Bank for Managerial Accounting, Ninth Edition
4 Discuss trends in managerial accounting. Managerial accounting has experienced many
changes in recent years, including a shift toward service companies as well as emphasis on
ethical behavior. Improved practices include a focus on managing the value chain through
techniques such as just-in-time inventory, total quality management, activity-based costing,
and theory of constraints. The balanced scorecard is now used by many companies in order
to attain a more comprehensive view of the company's operations, and companies are now
evaluating their performance with regard to their corporate social responsibility. Finally, data
analytics and data visualizations are important tools that help businesses identify problems
and opportunities, and then make informed decisions
TRUE-FALSE STATEMENTS
1. Reports prepared in financial accounting are general-purpose reports while reports
prepared in managerial accounting are usually special-purpose reports.
Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication, IMA: Reporting
2. Managerial accounting information generally pertains to an entity as a whole and is highly
aggregated.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication, IMA: Reporting
3. All forms of business organizations need managerial accounting information.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication, IMA: Reporting
4. Determining the unit cost of manufacturing a product is an output of financial accounting.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: FSA
5. Managerial accounting internal reports are prepared more frequently than financial
statements that are distributed externally.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication, IMA: Reporting
6. The management function of organizing and directing is mainly concerned with setting
goals and objectives for the entity.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Leadership, IMA: Decision Analysis
7. The controller of a company is responsible for all of the accounting and finance issues a
company faces.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
8. Controlling is the process of determining whether planned goals are being met.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Leadership, IMA: Internal Controls
9. Decision-making is an integral part of the planning, directing, and controlling functions.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic Perspective, AICPA FC: None, AICPA PC: Leadership, IMA:
Decision Analysis
10. Direct materials costs and indirect materials costs are both included in manufacturing
overhead.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
, Managerial Accounting 1-3
11. Manufacturing costs that cannot be classified as direct materials or direct labor are
classified as manufacturing overhead.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
12. The balance in the raw materials inventory account is equal to total direct materials minus
total indirect materials.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
13. Raw materials that can be conveniently and directly associated with a finished product are
called materials overhead.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
14. The total cost of a finished product does not generally include equal amounts of materials,
labor, and overhead costs.
Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
15. Both direct labor cost and indirect labor cost are product costs.
Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
16. Period costs include selling and administrative expenses.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
17. Indirect materials and indirect labor are both inventoriable costs.
Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
18. Direct materials and direct labor are the only product costs.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
19. Total period costs are deducted from total cost of work in process to calculate cost of
goods manufactured.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
20. Period costs are not inventoriable costs.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
21. Ending finished goods inventory appears on both the balance sheet and the income
statement of a manufacturing company.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
22. The beginning work in process inventory appears on both the balance sheet and the cost
of goods manufactured schedule of a manufacturing company.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
23. In calculating gross profit for a manufacturing company, the cost of goods manufactured is
deducted from net sales.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
,1- 4 Test Bank for Managerial Accounting, Ninth Edition
24. Finished goods inventory does not appear on a cost of goods manufactured schedule.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
25. If ending work in process inventory is greater than beginning work in process inventory,
then cost of goods manufactured will be less than total manufacturing costs for the period.
Ans: T, LO: 3, Bloom: C, Difficulty: Moderate, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
26. The finished goods inventory account for a manufacturing company is equivalent to the
inventory account for a merchandising company.
Ans: T, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
27. Raw materials inventory shows the cost of completed goods available for sale to
customers.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
28. The balanced scorecard approach attempts to maintain minimal inventories on hand.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Performance Measurement
29. The supply chain is all the activities associated with providing a product or service.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Performance Measurement
30. Many companies have significantly lowered inventory levels and costs using just-in-time
inventory methods.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
31. Managerial accounting is primarily concerned with managers and external users.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Business Economics
32. Planning involves coordinating the diverse activities and human resources of a company
to produce a smoothly running operation.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Nonet, IMA: Cost Management
33. When the physical association of raw materials with the finished product is too difficult to
trace, these costs are usually classified as indirect materials.
Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
34. Product costs are also called inventoriable costs.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
35. Direct materials become a cost of goods manufactured when these items are acquired,
not when the items are used.
Ans: F, LO: 3, Bloom: K, Difficulty: Moderate, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
36. The sum of the direct materials costs, direct labor costs, and the beginning work in
process inventory is the total manufacturing costs for the year.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
, Managerial Accounting 1-5
37. In a manufacturing company balance sheet, manufacturing inventories are reported in the
current assets section in the order of their expected use in production.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
MULTIPLE CHOICE QUESTIONS
38. Managerial accounting is used in each of the following types of businesses except
a. service firms.
b. merchandising firms.
c. manufacturing firms.
d. Managerial accounting is used in all types of firms.
Ans: d, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
39. Managerial accounting information is generally prepared for
a. stockholders.
b. creditors.
c. managers.
d. regulatory agencies.
Ans: c, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
40. Managerial accounting information
a. pertains to the entity as a whole and is highly aggregated.
b. pertains to subunits of the entity and may be very detailed.
c. is prepared only once a year.
d. is constrained by the requirements of generally accepted accounting principles.
Ans: b, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
41. The major reporting standard for presenting managerial accounting information is
a. relevance.
b. generally accepted accounting principles.
c. the cost principle.
d. the current tax laws.
Ans: a, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
42. Managerial accounting is also called
a. management accounting.
b. controlling.
c. analytical accounting.
d. inside reporting.
Ans: a, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
43. Which of the following is not an internal user?
a. Creditor
b. Department manager
c. Controller
d. Treasurer
Ans: a, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Professional Behavior, IMA:
Business Economics
,1- 6 Test Bank for Managerial Accounting, Ninth Edition
44. Managerial accounting does not encompass
a. calculating product cost.
b. calculating earnings per share.
c. determining cost behavior.
d. profit planning.
Ans: b, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: FSA
45. Managerial accounting is applicable to
a. service entities.
b. manufacturing entities.
c. not-for-profit entities.
d. all of these.
Ans: d, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Cost Management
46. Management accountants would not
a. assist in budget planning.
b. prepare reports primarily for external users.
c. determine cost behavior.
d. be concerned with the impact of cost and volume on profits.
Ans: b, LO: 1, Bloom: K, Difficulty: Moderate, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Cost Management
47. Internal reports are prepared and distributed
a. daily.
b. monthly.
c. annually.
d. as needed.
Ans: d, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
48. Financial statements for external users can be described as
a. user-specific.
b. general-purpose.
c. special-purpose.
d. managerial reports.
Ans: b, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
49. Managerial accounting reports can be described as
a. general-purpose.
b. macro-reports.
c. special-purpose.
d. classified financial statements.
Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
50. Which of the following statements about internal reports is not true?
a. The content of internal reports may extend beyond the accrual accounting system.
b. Internal reports may show all amounts at market values.
c. Internal reports may discuss prospective events.
d. Internal reports are generally highly summarized rather than detailed.
Ans: d, LO: 1, Bloom: C, Difficulty: Moderate, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
, Managerial Accounting 1-7
51. While the preparation of financial statements for external users is guided by GAAP, the
guideline for the preparation of managerial accounting reports for internal users is
a. timeliness.
b. special-purpose.
c. relevance to decision.
d. aggregation.
Ans: c, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
52. Internal managerial accounting reports are generally
a. aggregated.
b. detailed.
c. regulated.
d. unreliable.
Ans: b, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
53. A distinguishing feature of managerial accounting is that
a. it is prepared for external users.
b. it produces general-purpose reports.
c. it generally results in very detailed reports.
d. it publishes quarterly and annual reports.
Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
54. What activities and responsibilities are not associated with managerial functions?
a. Planning
b. Accountability
c. Controlling
d. Directing
Ans: b, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Professional Behavior, IMA:
Reporting
55. Planning is a function that involves
a. hiring the right people for a particular job.
b. coordinating the accounting information system.
c. setting goals and objectives for an entity.
d. analyzing financial statements.
Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: None, IMA: Cost Management
56. The managerial function of controlling
a. is performed only by the controller of a company.
b. is only applicable when the company sustains a loss.
c. is concerned mainly with operating a manufacturing segment.
d. includes performance evaluation by management.
Ans: d, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: None, AICPA PC: Project Management, IMA: Decision
Analysis
57. Which of the following is not a management function?
a. Constraining
b. Planning
c. Controlling
d. Directing
Ans: a, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: None, AICPA PC: Project Management, IMA: Decision
Analysis
, 1- 8 Test Bank for Managerial Accounting, Ninth Edition
58. A manager that is establishing objectives is performing which management function?
a. Controlling
b. Directing
c. Planning
d. Constraining
Ans: c, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Project Management, IMA: Decision Analysis
59. The management function that requires managers to look ahead and establish objectives
is
a. controlling.
b. directing.
c. planning.
d. constraining.
Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Research Management, AICPA FC: None, AICPA PC: Project
Management, IMA: Decision Analysis
60. In determining whether planned goals are being met, a manager is performing the function
of
a. planning.
b. follow-up.
c. directing.
d. controlling.
Ans: d, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Project Management, IMA: Decision Analysis
61. Which of the following is not a separate management function?
a. Planning
b. Directing
c. Decision-making
d. Controlling
Ans: c, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Project Management, IMA: Decision Analysis
62. Directing includes
a. providing a framework for management to have criteria to terminate employees when
needed.
b. running a department under quality control standards universally accepted.
c. coordinating a company's diverse activities and human resources to produce a
smooth-running operation.
d. developing a complex performance ranking system to give certain high performers
good raises.
Ans: c, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Process and Resource Management Perspectives, AICPA FC: None, AICPA
PC: Project Management, IMA: Decision Analysis
63. Both direct materials and indirect materials are
a. raw materials.
b. manufacturing overhead.
c. merchandise inventory.
d. sold directly to customers by a manufacturing company.
Ans: a, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Cost Management
