Chapter 1 Managerial Accounting and the Business Environment
Multiple Choice Questions
1. Management accounting focuses primarily on providing data for:
A) internal uses by managers.
B) external uses by stockholders and creditors.
C) external uses by the Internal Revenue Service.
D) external uses by the Securities and Exchange Commission.
2. Managerial accounting:
A) is more future oriented than financial accounting.
B) tends to summarize information more than financial accounting
C) is primarily concerned with providing information to external users.
D) is more concerned with precision than timeliness.
3. Compared to financial accounting, managerial accounting places more emphasis on:
A) the flexibility of information.
B) the precision of information.
C) the timeliness of information.
D) both A and C above.
4. The function of management that compares planned results to actual results is known
as:
A) planning.
B) directing and motivating.
C) controlling.
D) decision making.
5. Which of the functions of management involves overseeing day-to-day activities?
A) Planning
B) Directing and motivating
C) Controlling
D) Decision making
6. Which of the following is not one of the three basic activities of a manager?
A) Planning
B) Controlling
C) Directing and motivating
D) Compiling management accounting reports
7. The delegation of decision making to lower levels in an organization is known as:
A) the planning and control cycle.
B) controlling.
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C) decentralization.
D) none of these.
8. Which of the following statements are false concerning line and staff functions?
I. Persons occupying staff functions have authority over persons occupying line
functions.
II. Both line and staff functions are depicted on the organization chart.
III. Line functions are directly related to the basic objectives of an organization.
A) Only I
B) Only II
C) Only I and II
D) I, II, and III
9. Which of following would normally be found on a manufacturing company's
organization chart?
A) the layout of the factory assembly lines
B) a list of the materials needed to produce each of the company's products
C) the informal lines of reporting and communication
D) none of the above
10. For a hospital, what type of position (line or staff) is each of the following?
Emergency Room Manager Human Resources (Personnel) Manager
A) Staff Staff
B) Staff Line
C) Line Staff
D) Line Line
11. A detailed financial plan for the future is known as a:
A) budget.
B) performance report.
C) organization chart.
D) segment.
12. A performance report is:
A) a detailed report comparing budgeted data to actual data for a specific time period.
B) a formal statement of plans for the upcoming period.
C) required to be filed monthly by the Securities and Exchange Commission.
D) not used in decentralized organizations.
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13. A clustering of two or more machines at a single workstation is referred to as:
A) a manufacturing cell.
B) an activity center.
C) a functional layout.
D) a setup.
14. A focused factory is:
A) a factory that makes only a single product.
B) a factory that performs a single step in the production process and subcontracts the
other steps.
C) a plant layout in which all machines needed to make a particular product are
brought together in one location.
D) required to bid for defense contracts.
15. Large work in process inventories:
A) are essential for efficient operations.
B) reduce defect rates.
C) increase throughput time.
D) are a key part of Just-In-Time systems.
16. Ideally, how many units should be produced in a just-in-time manufacturing system?
A) budgeted customer demand for the current week.
B) budgeted customer demand for the following week.
C) actual customer demand for the current week.
D) maximum production capacity for the current week.
17. After careful planning, Jammu Manufacturing Corporation has decided to switch to a
just-in-time inventory system. At the beginning of this switch, Jammu has 30 units of
product in inventory. Jammu has 2,000 labor hours available in the first month of this
switch. These hours could produce 500 units of product. Customer demand for this
first month is 400 units. If just-in-time principles are correctly followed, how many
units should Jammu plan to produce in the first month of the switch?
A) 370
B) 400
C) 430
D) 470
18. Process Reengineering includes all of the following steps except:
A) constructing a diagram flowcharting the current process.
B) redesigning the process.
C) elimination of non-value-added activities.
D) elimination of all constraints.
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19. According to the Theory of Constraints, improvement efforts should usually be
focused on:
A) work centers that are not constraints.
B) the work center that is the constraint.
C) the work center with the highest total cost.
D) the work center with the most obsolete equipment.
20. Which of the following is true regarding the theory of constraints?
A) The theory of constraints does not apply to companies with multiple products
because of capacity measurement difficulties.
B) In any profit-seeking company, there must be at least one constraint.
C) Constraints or bottlenecks stop organizations from selling an infinite number of
units or services.
D) both B and C above.
21. Pizza World makes forty-three kinds of pizza for takeout and delivery. Which of the
following could be the constraint at Pizza World?
A) the person who makes the pizza crust.
B) the person who puts toppings on the pizzas.
C) the pizza oven.
D) any of the above could be the constraint.
22. The Standards of Ethical Conduct for Management Accountants developed by the
Institute of Management Accountants contain a policy regarding confidentiality that
requires management accountants to refrain from disclosing confidential information
acquired in the course of their work:
A) except when authorized by management.
B) in all situations.
C) except when authorized by management, unless legally obligated to do so.
D) in all cases not prohibited by law.
23. Wide-spread adherence to ethical standards in an advanced market economy tends to
result in all of the following except:
A) higher prices.
B) higher quality goods and services.
C) greater variety of goods and services available for sale.
D) safer products.
24. The Institute of Management Accountants (IMA) has developed ethical standards for
management accountants. What four categories has the IMA classified these standards
into?
A) Reliability, Objectivity, Commitment, and Competence
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B) Objectivity, Integrity, Commitment, and Confidentiality
C) Observation, Integrity, Closure, and Competence
D) Competence, Objectivity, Integrity, and Confidentiality
E) Reliability, Understandability, Flexibility, and Integrity
25. Samantha Galloway is a managerial accountant in the accounting department of
Mustang Industries, Inc. Samantha has just discovered evidence that some of the
corporation's marketing managers have been wrongfully inflating their expense reports
in order to obtain higher reimbursements from the firm. According to the Institute of
Management Accountants' Standards of Ethical Conduct, what should Samantha do
upon discovering this evidence?
A) notify the controller.
B) notify the marketing managers involved.
C) notify the president of the corporation.
D) ignore the evidence because she is not part of the Marketing Department.
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