Managerial Accounting -- Overview & Chapter 1

True or false: A budget is a detailed plan for the future that is usually expressed in formal qualitative terms.

False; quantitative

Within the relevant range of activity, ______ costs remain constant in total

Fixed

The contribution approach to constructing income statements distinguishes between ______ costs.

Fixed and Variable

Which of the following statements is true?

Management accountants need strong financial accounting skills.

Customers, employees, suppliers, communities, and environmental and human rights advocates are all stakeholders which a company might have a corporate _______ to serve

Social Responsibility

A game plan that enables a company to attract customers by distinguishing itself from competitors is a(n)

Strategy

Which of the following is NOT required to be viewed as a credible leader?

Strong mentoring skills

Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called _____ costs

Sunk

Which of the following statements are true?

A direct cost can be easily and conveniently traced to a specific cost object; A regional sales manager's salary is a direct cost of the regional office in which the sales manager works

When a company says "You should choose us because we understand and respond to your individual needs better than our competitors," it is following a(n) _____ _______ strategy

Customer Intimacy

The essence of strategy are __________ propositions.

Customer Value

A customer chooses one company over another because of ______.

Customer Value Proposition

Companies should provide ______ with competent, courteous, and rapid delivery of products and services and easy-to-use information systems for shopping and tracking orders.

Customers

Many organizations use ________ incentives to highlight important goals and motivate employees to achieve them

Extrinsic

True or false: Giving employees an annual bonus increases their intrinsic motivation to pursue company goals

False

Cost objects include ______.

Anything for which cost data is desired; Customers; Organizational subunits

Preventive controls include ______

Authorization and Segregation of Duties

How individual costs react to changes in activity level is referred to as cost

Behavior

Management's detailed plans for the future are often expressed formally in a(n)

Budget

Management's detailed plans for the future are often expressed formally in a(n) ________

Budget

Cost behavior ______.

Categorizes costs as fixed, mixed and variable AND Refers to how a cost will change as activity level changes

Major business functions that add value to a company's products and service comprise a company's value ______

Chain

A type of indirect cost incurred to benefit more than one cost object is a(n) ______ cost.

Common

Costs that are shared by multiple cost objects in a company are known as ______ costs

Common

Companies should provide ______ with payment of fair taxes, honest information about plans such as plant closings, and reasonable access to media sources

Communities

A strategy helps a company distinguish itself from ______.

Competitors

Sales revenue minus variable expenses equals

Contribution Margin

Direct labor and overhead costs incurred to change raw materials into finished products are known as ____ costs

Conversion

Direct labor and overhead costs incurred to change raw materials into finished products are known as ______ costs.

Conversion

Any item for which cost data is desired is called a(n) ___________

Cost Object

Premium brands such as Ritz-Carlton and Nordstrom tend to rely on a(n) ______ strategy.

Customer Intimacy

Prime costs include _____

Direct materials and Direct labor

Selling and administrative costs are ______ costs

Direct or Indirect

A cost that can be easily and conveniently traced to a specific cost object is a(n) _______ cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are _______ costs

Direct, Indirect

Companies should provide _______ with nondiscriminatory treatment, the right to organize and file grievances, and fair compensation

Employees

A process used by a company to identify and manage risks is known as _________ management

Enterprise Risk

A process used by a company to proactively identify and manage risks is called _____

Enterprise Risk Management

Minor items such as nails and glue are usually considered to be ______.

Indirect Materials

Motivation that comes from within is known as ______ motivation

Intrinsic

A management approach that only produces in response to customer orders is one component of _______ which is also referred to as just-in-time.

Lean Production

Resources, such as people and machines, are organized around the flow of business processes and units are pulled through these processes in response to customer orders under the ________ management approach

Lean Resource

Perhaps the most basic managerial skill is the ability to ______.

Make intelligent decisions

Indirect materials and indirect labor are classified as ______.

Manufacturing Overhead

The management activity of _______ includes specifying how to achieve established goals.

Planning

Managerial accounting helps managers perform three vital activities

Planning, Controlling, and Decision Making

Three activities vital to the role of managerial accounting are ______.

Planning, Controlling, and Decision Making

Having strict guidelines for check authorizations is an example of a ______ control.

Preventative

True or false: Personal humility towards others' contributions is an important attribute of a leader who is respectful of co-workers' value to the organization.

True

True or false: The finished product of one company can become raw materials for another company.

True

The term often used to describe how an organization's functional departments interact with one another to form business processes is __________

Value Chain

A cost that changes in direct proportion to changes in the activity level is a ______ cost

Variable

Which type of cost changes in total, in direct proportion to changes in activity level?

Variable

Which of the following is not one of the basic questions asked during the decision making process?

When should we be selling?

A performance report ______.

can be used to help evaluate and reward employees, helps identify and eliminate sources of unsatisfactory performance

Without ethical behavior, the quality of products and services would ______.

decrease

The primary role of managerial accountants is to ______

partner with co-workers within the organization to improve performance

Contribution margin is ______.

sales revenue minus variable costs

Managerial accounting skills are ______.

useful in a variety of careers and industries

Cost objects include ______

Customers, organizational subunits, anything for which cost data is desired

Direct labor is also called ______ labor

Touch

True or false: Labor costs that can be specifically traced to a product are indirect labor costs

False

True or false: Giving employees an annual bonus increases their intrinsic motivation to pursue company goals.

False; extrinsic incentive

Companies have a corporate social responsibility to serve ______.

Customers, Suppliers, Communities, and Employees

True or false: A cost may be direct or indirect, depending on the cost object.

True

True or false: Managerial accounting skills are needed in for profit, not-for-profit and governmental entities.

True

Differential costs, opportunity costs and sunk costs are all cost classifications used in ______.

Decision Making

Undesirable events that have already happened are uncovered by _____ controls

Detective

The difference in costs between two alternatives is called a(n) ______ cost.

Differential

Costs that can be easily and conveniently traced to a specific product are called ______ costs.

Direct

Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) ______ cost of the customer placing the order.

Direct

Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are ______ materials.

Direct

In an automobile manufacturing plant, the assembly-line workers are classified as _____ cost

Direct Labor

In an automobile manufacturing plant, the assembly-line workers are classified as ______ cost

Direct Labor

A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost

Direct Material

Common activity bases include ______.

Direct labor hours Units sold Machine hours

Manufacturing costs include ______

Direct materials, Direct labor, Manufacturing overhead

Lower quality goods and services, less from which to choose and higher prices are all possible effects of abandoning ______.

Ethical Behavior

Within the relevant range of activity ______.

Fixed costs remain constant in total; Costs and activity can be approximated by a straight line

In terms of corporate social responsibility, companies should provide customers with ______.

Full disclosure of product-related risks

In terms of corporate social responsibility, what should companies provide to suppliers?

Hassle-free acceptance of timely and complete deliveries

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the ______.

Income Statement

Differential costs are also known as ______ costs

Incremental

A manufacturing cost that cannot be easily traced to a specific cost object is a(n) _______ cost

Indirect

Which of the following is not a COST CLASSIFICATION associated with decision making?

Indirect Costs

Which of the following statements is true?

Managerial accounting provides financial data for internal use and financial accounting provides data to external users.

Factory materials, such as cleaning supplies, that are not components of finished products are classified as ______

Manufacturing Overhead

Manufacturing costs can be divided into three categories: direct _______ , _______ labor, and manufacturing ________.

Materials; Direct; Overhead

The components of prime costs are direct _____ costs and direct ______ costs.

Materials; Labor

An activity base ______

Measures whatever causes costs to vary, Is sometimes called a cost driver

A cost than contains both variable and fixed costs elements is called a(n) _______ cost

Mixed

A cost that contains both variable and fixed cost elements is a(n) ______ cost.

Mixed

Indirect materials include ______.

Nails, Glue, Thread

A report comparing actual results to budgeted amounts that is often used to reward and evaluate employees is called a(n)

Performance Report

Which of the following statements are true?

Period costs are expensed in the same period in which they are incurred; Sales commissions are period costs.

Which of the following statements are true?

Period costs are expensed when incurred, Period costs do not flow through the inventory accounts.

Direct materials, direct labor, and manufacturing overhead are all ______ costs.

Product

On a traditional income statement, cost of goods sold reports the ______ costs attached to merchandise sold during the period, while selling and administrative expenses report all ______ costs that have been expensed as incurred.

Product; Period

Parties more interested in managerial accounting data than in financial accounting data include ______.

Production Managers and Sales Managers

The materials that go into the final product are called ______ materials

Raw

The assumption that cost behavior is strictly linear is reasonably valid within the ______ of activity

Relevant Range

To meet the goal of corporate social responsibility, companies should provide communities with ______

Resources that support charities, schools, and civic activities

Companies should provide __________ with reasonable times to prepare orders and hassle free acceptance of timely and complete deliveries.

Suppliers

An income statement focusing on product and period costs has been prepared using a(n) ______ format, while a(n) ______ format income statement makes a distinction between fixed and variable costs.

Traditional; Contribution

Nonmanufacturing costs include ______.

Company president's salary, Sales commissions

Which of the following are differences between the traditional and contribution format to income statements?

Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior.

Planning involves

Establishing goals and specifying how to achieve them

Administrative costs include ______.

Executive Compensation and Public Relations Costs

Giving employees a bonus for meeting a specific goal is an example of a(n) ______ incentive

Extrinsic

Which of the following are most likely fixed costs?

Factory insurance, Factory rent, Administrative salaries

Indirect labor costs include ______.

Factory security guard wages, Assembly-line supervisor salary

In terms of corporate social responsibility, companies should provide employees with ______

Fair Compensation

What type of cost is never relevant and should be disregarded when making decisions?

Sunk

Based on the following information, calculate net income for Dana's Dress Shop using the traditional format. Sales $360,000 Gross Margin $140,000 Contribution Margin $110,000 Total Selling & Administrative Exp. $60,000

Net Income = Gross Margin - Selling&Admin Expenses 140,000 - 60,000 = 80,000 Net Income = 80,000

A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) _________

Opportunity Cost

An internal control that deters the occurrence of undesirable events is a(n) _______ control

Preventive

A contribution approach income statement ______.

Separates costs into their fixed and variable components Can assist with management decision making

Opportunity costs ______.

Should be considered in decision making; Are benefits that are given up when selecting one alternative over another