Accounting 2600 Managerial Chapter 1 & 2 Practice

Stone Inc. is a company that purchases goods (e.g., chess sets, pottery) from overseas and resells them to gift shops in the United States. Stone Inc. is which of the following? a. Wholesaler b. Retailer c. Service firm d. Manufacturing firm e. None of these.

a. Wholesaler

2. The management activity called _____ is detailed formulation of action to achieve a particular end. a. planning b. controlling c. decision making d. none of the above

a. planning

Setting objectives and identifying methods to achieve those objectives is called a. planning. b. decision making. c. controlling. d. performance evaluation. e. None of these choices are correct.

a. planning.

2. A Certified Internal Auditor must pass a comprehensive examination designed to ensure technical competence and has _____ year(s) of experience. a. two b. one c. four d. three

a. two

1. The set of activities required to design, develop, produce, market, and deliver products and services, as well as provide support services to customers is termed as a: a. strategic positioning. b. supply chain. c. value chain. d. product differentiation.

c. value chain.

b. Operating Manager: This report indicates that we have 30% more defects than originally targeted. An investigation into the cause has revealed the problem. We were using a lower-quality material than expected, and the waste has been higher than normal. By switching to the quality level originally specified, we can reduce the defects to the planned level.

Controlling

Manager: Perhaps the Harrison Medical Clinic should not offer a full range of medical services. Some services seem to be having a difficult time showing any kind of profit. I am particularly concerned about the mental health service. It has not shown a profit since the clinic opened. I want to know what costs can be avoided if I drop the service. I also want some assessment of the impact on the other services we offer. Some of our patients may choose this clinic because we offer a full range of services.

Decision Making

d. Plant Manager: Foreign competitors are producing goods with lower costs and delivering them more rapidly than we can to customers in our markets. We need to decrease the cycle time and increase the efficiency of our manufacturing process. There are two proposals that should help us accomplish these goals, both of which involve investing in computer-aided manufacturing. I need to know the future cash flows associated with each system and the effect each system has on unit costs and cycle time.

Decision Making

a. Laboratory Manager: An HMO approached me recently and offered us its entire range of blood tests. It provided a price list revealing the amount it is willing to pay for each test. In many cases, the prices are below what we normally charge. I need to know the costs of the individual tests to assess the feasibility of accepting its offer and perhaps suggest price adjustments on some of the tests.

Decision making

Divisional Manager: Our market share has increased because of higher-quality products. Current projections indicate that we should sell 25% more units than last year. I want a projection of the effect that this increase in sales will have on profits. I also want to know our expected cash receipts and cash expenditures on a month-by-month basis. I have a feeling that some short-term borrowing may be necessary.

Planning

Manager: At the last board meeting, we established an objective of earning a 25% return on sales. I need to know how many units of our product we need to sell to meet this objective. Once I have the estimated sales in units, we need to outline a promotional campaign that will take us where we want to be. However, in order to compute the targeted sales in units, I need to know the expected unit price and a lot of cost information.

Planning

Last year, Barnard Company incurred the following costs: Direct materials $ 50,000 Direct labor 20,000 Manufacturing overhead 130,000 Selling expense 40,000 Administrative expense 36,000 Barnard produced and sold 10,000 units at a price of $31 each. Refer to the information for Barnard Company above. Prime cost per unit is a. $7.00. b. $20.00. c. $15.00. d. $5.00. e. $27.60.

Prime costs consist of direct materials and direct labor. Then divide by number of units. (50,000+20,000)/10,000 = $7.00 a. $7.00.

1. Which of the following is a standard of ethical conduct for managerial accountants as per the Institute of Management Accountants? a. Competence b. Confidence c. Performance d. Respect for others

a. Competence

3. Which of the following is true of lean accounting? a. It organizes costs according to the value chain and collects both financial and nonfinancial information. b. It is the accounting process in which all business transactions are recorded when cash is exchanged. c. It is the accounting process in which business transactions are recorded when expenses are incurred and revenue is generated. d. It records all financial and nonfinancial business transactions in accordance with US GAAP.

a. It organizes costs according to the value chain and collects both financial and nonfinancial information

1. Which of the following is permitted by law to serve as an external auditor? a. A Certified in Management Accountant b. A Certified Public Accountant c. A Certified Internal Auditor d. A Chartered Financial Analyst

b. A Certified Public Accountant

Which of the following is a period expense? a. Factory insurance b. CEO salary c. Direct labor d. Factory maintenance e. All of these.

b. CEO salary

Which of the following is not a common form of certification for managerial accountants? a. Certificate in Internal Auditing b. Certificate in External Auditing c. Certificate in Public Accounting d. Certificate in Management Accounting

b. Certificate in External Auditing

2. Which of the following is a difference between financial accounting and managerial accounting? a. Financial accounting focuses on providing information for internal users, while managerial accounting focuses on providing information for external users. b. Financial accounting has a historical orientation, while managerial accounting emphasizes on the future. c. Financial accounting includes various disciplines and is broad in scope, while managerial accounting is more self-containing. d. Financial accounting does not follow externally imposed rules, while managerial accounting must follow externally imposed rules.

b. Financial accounting has a historical orientation, while managerial accounting emphasizes on the future.

Target is which of the following? a. Wholesaler b. Retailer c. Service firm d. Manufacturing firm e. None of these.

b. Retailer

2. Which of the following officers is responsible for the finance function? a. Chief operating officer b. Treasurer c. Controller d. Chief accounting officer

b. Treasurer

The process of choosing among competing alternatives is called a. planning. b. decision making. c. controlling. d. performance evaluation. e. None of these choices are correct.

b. decision making.

The use and importance of managerial accounting is growing in each of the following areas except for a. enterprise risk management. b. nanotechnology advancements. c. corporate sustainability reporting. d. quality accounting. e. lean accounting.

b. nanotechnology advancements.

Bobby Dee's is an owner-operated company that details (thoroughly cleans—inside and out) automobiles. Bobby Dee's is which of the following? a. Wholesaler b. Retailer c. Service firm d. Manufacturing firm e. None of these choices are correct.

c. Service firm

1. Which of the following is referred to as controlling? a. The provision of accounting information for a company's internal users. b. The process of choosing among competing alternatives. c. The managerial activity of monitoring a plan's implementation and taking corrective action as needed. d. The detailed formulation of action to achieve a particular end.

c. The managerial activity of monitoring a plan's implementation and taking corrective action as needed.

Accumulating costs means that a. costs must be summed and entered on the income statement. b. each cost must be linked to some cost object. c. costs must be measured and tracked. d. costs must be allocated to units of production. e. costs have expired and must be transferred from the balance sheet to the income statement.

c. costs must be measured and tracked.

In terms of strategic positioning, which two general strategies may be chosen by a company? a. Revenue production and cost enhancement b. Activity-based costing and value chain emphasis c. Increasing customer value and decreasing supplier orientation d. Cost leadership and product differentiation e. Product differentiation and cost enhancement

d. Cost leadership and product differentiation

2. The Statement of Ethical Professional Practice is issued by the: a. U.S. Congress. b. Securities and Exchange Commission. c. New York Stock Exchange. d. Institute of Management Accountants.

d. Institute of Management Accountants.

1. Which of the following is true of financial accounting? a. It is primarily concerned with producing information for internal users. b. It does not follow any externally imposed rules. c. It strongly emphasizes providing information about future events. d. It focuses on overall firm performance, providing a more aggregated viewpoint.

d. It focuses on overall firm performance, providing a more aggregated viewpoint.

1. Which of the following is true of line positions? a. Line positions account for less than 40% of the workforce for any corporations. b. Line positions include critical business functions such as auditing and supply chain. c. Line positions are supportive in nature. d. Line positions have direct responsibility for the basic objectives of an organization.

d. Line positions have direct responsibility for the basic objectives of an organization.

Kellogg's makes a variety of breakfast cereals. Kellogg's is which of the following? a. Wholesaler b. Retailer c. Service firm d. Manufacturing firm e. None of these.

d. Manufacturing firm

Which of the following is an indirect cost? a. The cost of denim in a jeans factory b. The cost of mixing labor in a factory that makes over-the-counter pain relievers c. The cost of bottles in a shampoo factory d. The cost of restriping the parking lot at a perfume factory e. All of these.

d. The cost of restriping the parking lot at a perfume factory

2. Platanus Inc. was one of the largest manufacturers of automobile engines and fixtures. Platanus Inc.'s management created an automated process of improving efficiency and minimizing human error in its production process so that the company produced zero-defect engines. Employees were monetarily rewarded when their units were free from defects. It also maintained relevant managerial accounting information regarding the cost of existing poor quality and efforts to improve future quality. Based on the information, which of the following is the most likely conclusion? a. The management of Platanus Inc. has adopted the philosophy of strategic positioning. b. The management of Platanus Inc. has adopted the philosophy of customer orientation. c. The management of Platanus Inc. has adopted the philosophy of value chain management. d. The management of Platanus Inc. has adopted the philosophy of total quality management.

d. The management of Platanus Inc. has adopted the philosophy of total quality management.

The objective of profit maximization should be constrained by the requirement that profits be achieved through a. legal means only. b. ethical means only. c. any means possible. d. both legal and ethical means. e. None of these.

d. both legal and ethical means.

An effective managerial accounting system should track information about an organization's activities in which of the following areas? a. Development b. Marketing c. Production d. Design e. All of these.

e. All of these.

The accountant in a factory that produces biscuits for fast-food restaurants wants to assign costs to boxes of biscuits. Which of the following costs can be traced directly to boxes of biscuits? a. The cost of flour and baking soda b. The wages of the mixing labor c. The cost of the boxes d. The cost of packing labor e. All of these.

e. All of these.

The chief accounting officer for a firm is the a. chief executive officer. b. chief operating officer. c. vice president of sales. d. production head. e. controller.

e. controller.