Managerial Accounting Exam #1

Beta Information Systems designs and installs accounting software. Last month, Beta had software licensing costs of $11,000, software technicians' costs of $43,000, and research and development costs of $70,000. Selling expenses totaled $8,200, and administrative expenses amounted to $9,000. Sales totaled $190,000. Determine the operating profit of Beta Information Systems. a.$57,800 b.$48,800 c.$66,000 d.$57,000

(Operating profit = $190,000 - $11,000 - $43,000 - $70,000 - $8,200 - $9,000 = $48,800)

Which of the following is allowed to serve as an external auditor? a.A Certified Public Accountant b.A Certified Management Accountant c.A Certified Fraud Examiner d.A Certified Internal Auditor

A. A Certified Public Accountant

Which of the following is true of a treasurer in a large corporation? a.A treasurer raises capital and manages cash and investments. b.A treasurer is responsible for SEC reports and financial statements. c.A treasurer is responsible for the internal auditing function of an organization. d.A treasurer has authority over the managers in the production area.

A. A treasurer raises capital and manages cash and investments.

Which of the following is true of decision making in managerial accounting? a.It is followed by the planning activity. b.It is the process of choosing among competing alternatives. c.It is followed by the controlling activity. d.It is the process of monitoring a plan's implementation.

B. It is the process of choosing among competing alternatives.

The benefit sacrificed when one alternative is chosen over another is known as a(n): a.indirect cost. b.opportunity cost. c.fixed cost. d.sunk cost.

B. opportunity cost.

The value chain is a: a.set of parameters used by managers for decision making. b.set of activities required to design, develop, produce, market, and deliver products and services to customers. c.set of activities required to achieve quality control within the accounting function. d.code of ethical conduct established for management accountants.

B. set of activities required to design, develop, produce, market, and deliver products and services to customers.

Which of the following is a feature of financial accounting? a.It produces broad information that is subjective in nature. b.It focuses on the internal evaluation of the various departments of an entity. c.It produces information by following well defined, externally imposed rules. d.It focuses on providing information as needed by the management of a company.

C. It produces information by following well defined, externally imposed rules.

Identify a true statement about the controller of an organization. a.The controller is a member of the middle-level management. b.The controller has only indirect responsibility for an organization's basic objectives. c.The controller participates in the decision-making activity of managerial accounting. d.The controller has full authority over the managers in the production areas of an organization.

C. The controller participates in the decision-making activity of managerial accounting.

_____ must pass a national examination and be licensed by the state in which they practice. a.Certified Fraud Examiners b.Certified Management Accountants c.Certified Internal Auditors d.Certified Public Accountants

D. Certified Public Accountants

The IMA's Statement of Ethical Professional Practice: a.has not been revised since the Sarbanes-Oxley Act of 2002 was enacted. b.applies to all accountants with accounting degrees. c.is different depending on the state where the accountant is practicing. d.lists overarching ethical principles for IMA members which include honesty, fairness, objectivity, and responsibility.

D. lists overarching ethical principles for IMA members which include honesty, fairness, objectivity, and responsibility.

Organizations establish standards of conduct referred to as Company Codes of Conduct to promote ethical behavior by: a.suppliers and distributors. b.trade creditors. c.trade debtors. d.managers and employees.

D. managers and employees.

Managerial accounting is focused: a.on following externally imposed rules. b.on providing objective financial information about the firm as a whole. c.on providing only the externally focused financial information about a firm. d.on providing information to internal management only.

D. on providing information to internal management only.

The detailed formulation of action to achieve a particular end is the management activity called: a.controlling. b.decision making. c.monitoring. d.planning.

D. planning

Continuous improvement includes efforts to: a.improve profitability without considering quality implications. b.reduce quality by decreasing the cost of raw materials. c.increase an organization's overall level of activity with little attention to the impact on quality. d.reduce costs while improving overall quality.

D. reduce costs while improving overall quality.

Which of the following costs forms a part of prime cost as well as conversion cost? a.The cost of direct labor b.The cost of direct materials c.The cost of direct materials and direct labor d.Manufacturing overhead

a. The cost of direct labor

Which of the following groups of terms describes the essential characteristics of managerial accounting? a.Internally focused, oriented towards the future, and functioning without mandatory rules b.Externally focused, oriented towards the future, and following externally imposed rules c.Internally focused, historically oriented, and functioning without mandatory rules d.Externally focused, historically based, and following externally imposed rules

a.Internally focused, oriented towards the future, and functioning without mandatory rules

Which of the following items appear on the income statement of a service firm? a.Operating expenses b.Gross margin c.Manufacturing overhead d.Cost of goods sold

a.Operating expenses

Which of the following is a certification designed to meet the specific needs of managerial accountants? a.The Certificate in Management Accounting b.The Certificate in Public Auditing c.The Certificate in Public Accounting d.The Certificate in Managerial Auditing

a.The Certificate in Management Accounting

Which of the following costs forms a part of prime cost as well as conversion cost? a.The cost of direct labor b.Manufacturing overhead c.The cost of direct materials and direct labor d.The cost of direct materials

a.The cost of direct labor

The cost of delivering a product to a customer is an example of: a.a period cost. b.a prime cost. c.manufacturing overhead. d.a conversion cost.

a.a period cost.

The managerial activity of monitoring a plan's implementation and taking corrective action as needed is referred to as: a.controlling. b.scheduling. c.decision making. d.planning.

a.controlling.

A characteristic of total quality management (TQM) is that it: a.emphasizes the need for a managerial accounting system that provides information about quality. b.measures the quality cost and reports for only the service industry. c.empowers employees to manufacture "acceptable quality" products instead of "zero-defect". d.follows traditional quality measures.

a.emphasizes the need for a managerial accounting system that provides information about quality.

The IMA's Statement of Ethical Professional Practice: a.lists overarching ethical principles for IMA members which include honesty, fairness, objectivity, and responsibility. b.is different depending on the state where the accountant is practicing. c.applies to all accountants with accounting degrees. d.has not been revised since the Sarbanes-Oxley Act of 2002 was enacted.

a.lists overarching ethical principles for IMA members which include honesty, fairness, objectivity, and responsibility.

The cost of goods sold is: a.the cost of producing the units that were sold during a time period. b.the total of direct materials, direct labor, and selling overhead. c.the cost of selling the units that were sold during a time period. d.the sum of cost of goods manufactured and administrative expenses.

a.the cost of producing the units that were sold during a time period.

The following costs were incurred by ABC Company in January: Direct materials $105,000 Direct labor 80,000 Manufacturing overhead 66,000 Selling expense 25,000 Administrative salaries. 7,000 Determine ABC's total product cost. a.$301,000 b.$251,000 c.$269,000 d.$283,000

b.$251,000 (Product Cost = Direct Material + Direct Labor + Manufacturing Overhead = $105,000 + $80,000 + $66,000 = $251,000)

Impact Corporation reported $460,000 of revenue for the year. Selling expenses amounted to $52,000, and administrative expenses were $75,000. Cost of goods sold was 44% of revenue. Impact's gross margin is: a.$333,000. b.$257,600. c.$202,400. d.$385,000.

b.$257,600. (Gross margin is calculated using sales revenue and cost of goods sold.)

Alpha Company manufactures computers. On July 1, Alpha had $73,000 of materials in inventory. During the month of July, the company purchased $330,000 of materials. On July 31, materials inventory equaled $42,000. Determine the cost of direct materials used in production for the month of July. a.$288,000 b.$361,000 c.$403,000 d.$299,000

b.$361,000 (Cost of Direct Materials Used in Production = Beginning Inventory of Materials + Materials Purchased During the Period - Ending Inventory of Materials = $73,000 + $330,000 - $42,000 = $361,000)

Which of the following is true of opportunity costs? a.They are equal to the sum of the prime cost and conversion cost. b.They are never included in the accounting records because they are costs of something that did not occur. c.They are costs that can be easily and accurately traced to their cost objects. d.They are costs that vary in total as output increases or decreases

b.They are never included in the accounting records because they are costs of something that did not occur.

The cost of research and development activities is classified as: a.prime cost. b.administrative cost. c.manufacturing cost. d.conversion cost.

b.administrative cost.

The ending inventories of materials, work-in-process, and finished goods appear: a.as non-current assets on the balance sheet. b.as current assets on the balance sheet. c.as operating expenses on the income statement. d.as non-operating expenses on the income statement.

b.as current assets on the balance sheet.

The property tax paid for a factory building is an example of a(n): a.variable cost. b.fixed cost. c.direct cost. d.opportunity cost.

b.fixed cost.

Cost allocation is: a.done only for variable costs. b.the process of assigning indirect costs to cost objects. c.is same as cost accumulation. d.the tracking of direct costs to cost objects.

b.the process of assigning indirect costs to cost objects.

Super Co. manufactured 10,000 units and reported the following information for December:Direct materials$41,000Direct labor20,000Manufacturing overhead40,000Beginning work in process inventory23,000Ending work in process inventory24,000The prime cost per unit is: a.$4.00. b.$6.00. c.$6.10. d.$4.10.

c. $6.10 (Prime Cost = Direct Materials + Direct Labor = ($41,000 + $20,000) ÷ 10,000 units = $6.10)

Which of the following is true of cost of goods sold? a.The balance in this account is transferred to finished goods inventory. b.It represents the total conversion cost of the goods manufactured. c.It is an expense that appears on the income statement. d.It includes all selling and administrative expenses.

c. It is an expense that appears on the income statement.

Wages paid to a factory supervisor are treated as: a.a direct labor cost but not as a period cost. b.both a direct labor cost and a product cost. c.a product cost but not as a direct labor cost. d.a period cost but not as a direct labor cost.

c. a product cost but not as a direct labor cost.

Gross margin is computed as: a.cost of goods manufactured plus beginning finished goods inventory, minus ending finished goods inventory. b.operating income minus operating expenses. c.sales revenue minus cost of goods sold. d.direct materials plus direct labor plus manufacturing overhead.

c. sales revenue minus cost of goods sold.

The following costs were incurred by ABC Company in January: Direct materials. $100,000 Direct labor. 84,000 Manufacturing overhead. 66,000 Selling expense. 22,000 Administrative salaries. 5,000 Determine ABC's total product cost. a.$267,000 b.$294,000 c.$250,000 d.$277,000

c.$250,000 (Product Cost = Direct Material + Direct Labor + Manufacturing Overhead = $100,000 + $84,000 + $66,000 = $250,000)

Which of the following is true of managerial accounting? a.It provides only nonfinancial information to its users. b.It is bound by formal criteria such as generally accepted accounting principles (GAAP). c.It represents a company's internal accounting system. d.It is the provision of accounting information for a company's external users only.

c.It represents a company's internal accounting system.

Identify a difference between managerial accounting and financial accounting. a.Managerial accounting focuses on external users; financial accounting focuses on internal users. b.Managerial accounting is self-contained in nature; financial accounting is multidisciplinary in nature. c.Managerial accounting provides internal evaluation of a firm; financial accounting provides information about a firm as a whole. d.Managerial accounting has a historical orientation; financial accounting emphasizes the future.

c.Managerial accounting provides internal evaluation of a firm; financial accounting provides information about a firm as a whole.

Which of the following is the formula to calculate prime cost? a.Prime Cost = Conversion Cost + Direct Labor b.Prime Cost = Direct Labor + Manufacturing Overhead c.Prime Cost = Direct Materials + Direct Labor d.Prime Cost = Direct Materials + Manufacturing Overhead

c.Prime Cost = Direct Materials + Direct Labor

Which of the following statements is true of the controller of a large company having a separate treasury department? a.The controller manages cash and investments. b.The controller is responsible for the finance function. c.The controller is responsible for SEC reports. d.The controller is responsible for raising capital.

c.The controller is responsible for SEC reports.

The AICPA and IMA codes of ethics stress the importance of: a.responsible citizenship, accountability, and fairness. b.caring for others, accountability, and fidelity. c.competence, confidentiality, integrity, and objectivity. d.promise keeping, fidelity, and fairness.

c.competence, confidentiality, integrity, and objectivity.

Continuous improvement is fundamental to establish excellence is a philosophy related to: a.a cross-functional perspective. b.the cost leadership strategy. c.total quality management. d.the value chain analysis

c.total quality management.

Which of the following is true of a treasurer in a large corporation? a.A treasurer has authority over the managers in the production area. b.A treasurer is responsible for the internal auditing function of an organization. c.A treasurer is responsible for SEC reports and financial statements. d.A treasurer raises capital and manages cash and investments

d.A treasurer raises capital and manages cash and investments

Which of the following certifications do managerial accountants obtain? a.The Certificate in Management Accounting b.The Certificate in Public Accounting c.The Certificate in Internal Auditing d.All of these answer choices are correct

d.All of these answer choices are correct

Which of the following is true of cost of goods sold? a.It represents the total conversion cost of the goods manufactured. b.It includes all selling and administrative expenses. c.The balance in this account is transferred to finished goods inventory. d.It is an expense that appears on the income statement.

d.It is an expense that appears on the income statement.

Direct costs are: a.assigned to a cost object using a reasonable and convenient method. b.costs that do not increase in total as output increases. c.also referred to as opportunity costs. d.easily traceable to a cost object

d.easily traceable to a cost object

The property tax paid for a factory building is an example of a(n): a.variable cost. b.opportunity cost. c.direct cost. d.fixed cost

d.fixed cost