Basic Concepts

MODULE 1 A. Managerial accounting places more emphasis on precision than financial accounting.
BASIC CONCEPTS IN MANAGEMENT ACCOUNTING B. Both are highly dependent on timely information.
C. Both rely on the same accounting information system.
1. The major functions of management is (are): D. Managerial accounting is concerned with external decision makers. Bobadilla
A. strategic management and long-range planning.
B. planning and decision making. 8. Which of the following is true of managerial accounting rather than financial accounting?
C. identifying threats and opportunities for the firm. A. The outputs of this accounting system are the primary financial statements.
D. all of the above. Bobadilla B. The methods of this accounting system are established by an overseeing board.
C. The accounting methods are standardized to allow comparisons among companies.
2. The process of identifying, measuring, analyzing, interpreting, and communicating information in pursuit of an D. The accounting system would be unique to each company. Bobadilla
organization's goals is called
A. managerial accounting C. management 9. Management accounting’s role in the control processes is to provide
B. financial accounting D. promotional activities Bobadilla A. managers with information that can be used to determine customer satisfaction levels.
B. investors and creditors information on the financial stability of the company.
3. The primary objective of management accounting is C. managers with relevant information to compare with expectations.
A. to provide stockholders and potential investors with useful information for decision making. D. input to managers on the best ways to achieve continuous improvement in the production
B. to provide banks and other creditors with information useful in making credit decisions. process. Bobadilla
C. to provide management with information useful for planning and control of operations.
D. to provide supervising government agencies with information about the company’s management affairs. 10. Which of the following statements are true regarding financial and managerial accounting?
Bobadilla I. Both are mandatory.
II. Both rely on the same underlying financial data.
4. Management accounting information III. Both emphasize the segments of an organization, rather than just looking at the organization
A. uses historical cost as the basis for reports to managers who are making decisions about future courses of as a whole.
action. IV. Both are geared to the future, rather than to the past.
B. should be developed and provided only if its benefits exceed its costs. A. I, II, III, and IV C. Only II and III
C. does not reflect the financial criteria of verifiability or consistency. B. Only II, III and IV D. Only II Bobadilla
D. should serve the basic needs of investors and creditors. Bobadilla
11. Managerial accounting activity adds value to an organization by pursuing five major objectives,
5. Which of the following is included in the day-to-day work of the management team? which include
A. decision making C. controlling A. providing information for decision making and planning.
B. planning D. all of the above Bobadilla B. measuring the performance of activities within an organization.
C. assisting managers in directing and controlling operational activities.
6. Paying rent, purchasing supplies, and purchasing inventory are which of the day-to-day work activities of the D. all of them Bobadilla
management team?
A. decision making C. directing operational activities 12. Managerial accounting places considerable weight on:
B. planning D. only A and B Bobadilla A. generally accepted accounting principles.
B. the financial history of the entity.
7. Which of the following statements is true when comparing managerial accounting to financial accounting? C. ensuring that all transactions are properly recorded.

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D. detailed segment reports about departments, products, and customers. Bobadilla A. To conduct special studies, preparation of recommendations, development of plans and
programs, and provision of advice and assistance in their implementation.
13. Which of the following statement is FALSE? B. To provide services or to fulfill some social needs.
A. Managerial accounting need not conform to GAAP. C. To improve the client’s use of its capabilities and resources to achieve the objectives of the
B. Financial accounting reports focus on subunits of the organization. organization.
C. Managerial accounting is not required D. To earn the best rate of return on resources entrusted to its care with safety of investment
D. Managerial accounting focuses on the needs of internal users. Bobadilla being taken into account and consistent with firm’s social and legal responsibilities. Bobadilla

14. For internal uses, managers are more concerned with receiving information that is: 19. Managerial accounting information:
A. completely objective and verifiable. A. pertains to the entity as a whole and is highly aggregated.
B. completely accurate and precise. B. pertains to subunits of the entity and may be very detailed.
C. relevant, flexible, and immediately available. C. is prepared only once a year. Bobadilla
D. relevant, completely accurate, and precise. Bobadilla D. is constrained by the requirements of generally accepted accounting principles.

15. Which of the following statements is correct? 20. Managerial accounting is primarily concerned with:
A. A certified public accountant can readily render management advisory services to the public. A. segments of a company rather than the company as a whole.
B. A CPA with MBA and DBM degrees is automatically qualified to render management advisory services. B. the data needs of stockholders and creditors.
C. Competence as a standard in the rendition of management advisory services by a CPA may be equated to C. meeting the requirements of generally accepted accounting principles.
having excellent scholarly preparation to include the usual baccalaureate degree, an MBA and other post D. the company as a whole rather than a segment of the organization. Bobadilla
graduate studies.
D. Adequate training and experience in both the analytical approach and process in a particular undertaking are 21. The major reporting standard for presenting managerial accounting information is
requisites for the CPA to be involved in a management advisory service engagement. (RPCPA) A. relevance
B. generally accepted accounting principles
16. The following characterize management advisory services except C. the cost principle
A. It involves decision for the future D. the current tax law Bobadilla
B. It broader in scope and varied in nature
C. It utilizes more junior staff than senior members of the firm 22. With respect to the time dimension, how does managerial decision compare with
D. It relates to specific problems where expert help is required Bobadilla external performance evaluation?
Bobadilla A. B. C. D.
17. Which of the following statements is incorrect? Managerial Decision Making Past Past Future Future
A. CPAs provide management advisory services to go around the ethical constraints as mandated by the External Performance Past Future Past Future
Accountancy Law.
B. Businesses hire management consultants to help define specific problems and develop solutions.
23. Managerial accounting differs from financial accounting in that it is
C. CPAs who are performing management advisory services may be considered to be in the practice of
A. more concerned with segments of a company.
management consulting.
B. less constrained by rules and regulations.
D. Included in the practice of consulting is the provision of confidential service in which the identity of the client is
C. more concerned with the future.
concealed. (RPCPA)
D. all of the above. Bobadilla
18. The primary purpose of management advisory services is
24. The distinction between traditional accounting and cost management is
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A. the focus of the former on accounting matters and the latter in support to management in making the right A. both are governed by generally accepted accounting principles.
decisions for staying on a competitive position B. both deal with economic events.
B. the emphasis of former on record keeping and the latter on reporting C. both concentrate on historical data.
C. the focus of the former on cost cutting and the latter on product differentiation D. both classify reported information in the same manner. Bobadilla
D. the focus of the former on efficiency and the latter on quality. Bobadilla
31. How frequent is management accounting report when compared to report to external
25. Which of the following activities is not usually performed by a management accountant? users?
A. Assisting managers to interpret data in managerial accounting reports. Management Accounting Report External Report
B. Designing systems to provide information for internal and external reports. A. More frequent Less frequent
C. Gathering data from sources other than the accounting system. B. More frequent More frequent
D. Deciding the best level of inventory to be maintained. Bobadilla C. Less frequent Less frequent
D. Less frequent More frequent
26. Which of the following statements correctly distinguishes financial and managerial accounting? Bobadilla
A. managerial accounting reports on the whole organization
B. financial accounting is oriented toward the future 32. Managerial accounting differs from financial accounting in that financial accounting is
C. financial accounting is primarily concerned with providing information for internal users A. more oriented toward the future.
D. managerial accounting is oriented more toward the planning and control aspects of management Bobadilla B. primarily concerned with external financial reporting.
C. concerned with nonquantative information.
27. How does managerial decision making compare with external performance evaluation? D. heavily involved with decision analysis and implementation of decisions. Bobadilla
Managerial Decision Making External Performance Evaluation
A. Detailed Detailed 33. Managerial accounting provides data for all of the following major objectives except:
B. Detailed More aggregated A. planning and control of costs
C. More aggregated Detailed B. supporting management planning
D. More aggregated More aggregated C. compliance with SEC reporting requirements
Bobadilla D. determining the costs of products Bobadilla

28. Management accountants would not 34. Which statement is false? Managerial accounting information:
A. assist in budget planning. A. involves planning for the future
B. prepare reports primarily for external users. B. should be requested and used by management even if it is very costly to gather and analyze
C. determine cost behavior. C. helps managers make financing decisions
D. be concerned with the impact of cost and volume on profits. Bobadilla D. need not comply with generally accepted accounting principles Bobadilla

29. In the contemporary business environment, cost management focus is on 35. Internal reports must be communicated
A. financial reporting and cost analysis. A. daily C. annually
B. common emphasis on standardization and standard costs. B. monthly D. as needed Bobadilla
C. development and implementation of the business strategy.
D. all of the above. Bobadilla 36. Which of the following does not apply to the content of managerial reports?
A. Reporting standard is relevant to the decision to be made.
30. Management accounting is similar to financial accounting in that B. May extend beyond double-entry accounting system.

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C. Pertain to subunits of the entity and may be very detailed. B. financial planning D. bookkeeping Bobadilla
D. Pertains to the entity as a whole and is highly aggregated. Bobadilla
44. Which of the following is most associated with managerial accounting?
37. Which consideration influences the frequency of an internal report? A. Must follow generally accepted accounting principles.
A. The wishes of the managers receiving the report. B. May rely on estimates and forecasts.
B. The frequency with which decisions are made that require the information in the report. C. Is prepared for users outside the organization.
C. The cost of preparing the report. D. Always reports on the entire entity. Bobadilla
D. All of the above. Bobadilla
45. Which statement about the extent of detail in a management accounting report is true?
38. Which of the following statements about internal reports is not true? A. It may depend on the frequency of the report.
A. The content of internal reports may extend beyond the double-entry accounting system. B. It depends on the type of manager receiving the report.
B. Internal reports may show all amounts at market values. C. It depends on the level of the manager receiving the report.
C. Internal reports may discuss prospective events. D. All of the above. Bobadilla
D. Most internal reports are summarized rather than detailed. Bobadilla
46. Managerial accounting information
39. Management accountants help develop and maintain reporting systems that are aligned with organizational A. pertains to the entity as a whole and is highly aggregated.
structures and that provide useful information on an organization’s performance. Management decision processes B. pertains to subunits of the entity and may be very detailed.
fall into three categories that consist of C. is prepared only once a year. Bobadilla
A. Nonrepetitive, nonprogrammed, and nonstrategic. D. is constrained by the requirements of generally accepted accounting principles.
B. Repetitive, nonprogrammed, and strategic.
C. Repetitive, programmed, and strategic. 47. Which of the following characteristics is inherent to management accounting?
D. Nonrepetitive, nonprogrammed, and strategic. Bobadilla A. Reporting of historical information
B. Compliance to generally accepted accounting principles
40. Internal reports are generally C. Contribution approach income statement
A. aggregated C. regulated D. External users of financial report Bobadilla
B. detailed D. unreliable Bobadilla
48. In order to be useful to managers, management accounting reports should possess all of the
41. Managerial accounting reports can be described as: following characteristics except:
A. general-purpose C. classified financial statements A. Provide objective measures of past operations and subjective estimates about future
B. special purpose D. macro-report Bobadilla decisions.
B. Be prepared in accordance with generally accepted accounting principles.
42. The informational needs of internal users/management: C. Be provided at any time management needs information.
A. are historical in nature D. Be prepared to report information for any unit of the business to support decision making.
B. emphasize the company as a whole Bobadilla
C. emphasize accuracy over timeliness
D. may require more customized reports than external financial statements Bobadilla 49. The following are inherent to either management accounting or financial accounting:
1. External report
43. The role of the managerial accountant in today’s corporate world includes all of the following except: 2. Historical information
A. interpreting financial information C. financial modeling 3. Contribution approach income statement

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4. Generally accepted accounting principles 55. Under which ethical standard of conduct does the managerial accountant have the responsibility to
5. Prospective financial statements refuse any gift, favor, or hospitality that would influence or appear to influence his or her decision?
Which of the foregoing are related to management accounting and financial accounting, A. competence C. integrity
respectively? B. confidentiality D. objectivity Bobadilla
Bobadilla A. B. C. D.
Management Accounting 1, 2, 5 3, 5 2, 3 3 56. Under which ethical standard of conduct does the managerial accountant have the responsibility to
Financial Accounting 3, 4 1, 2, 4 1, 4, 5 1, 2, 4, 5 refrain from either actively or passively subverting the attainment of an organization's legitimate
and ethical objectives?
A. integrity C. objectivity
50. Which of the following is an incorrect statement?
B. competence D. confidentiality Bobadilla
A. There is no overlap between financial and managerial accounting.
B. Managerial accounting sometimes relies on past information.
57. Under which ethical standard of conduct does the managerial accountant have the responsibility to
C. Managerial accounting does not need to conform to generally accepted accounting principles. Bobadilla
disclose fully all relevant information that could reasonably be expected to influence an intended
D. Financial accounting must conform to generally accepted accounting principles.
user's understanding of the reports, comments, and recommendations presented?
A. objectivity C. confidentiality
51. For managerial reports, the accounting data used:
B. competence D. integrity Bobadilla
A. must be the same accounting data for reporting to shareholders, but may use different data for tax purposes.
B. must be the same accounting data for tax purposes, but may use different data for reporting to shareholders.
58. For managerial decision purposes, the volume of information should be evaluated on the basis of
Bobadilla
A. cost-benefit relationship.
C. must be the same accounting data for both tax purposes and reporting to shareholders.
B. A cost, but not benefit.
D. may be different accounting data for both tax purposes and reporting to shareholders.
C. A benefit, but not cost.
D. Neither costs nor benefits, but some other criteria. Bobadilla
52. Which of the following is an ethical standard of conduct for managerial accountants?
1. competence
59. What is the primary criterion for the preparation of managerial accounting reports?
2. confidentiality
A. Relevance of the reports. C. Timing of the reports.
3. integrity
B. Meet the manager’s needs. D. Cost of the reports. Bobadilla
4. objectivity
A. All of them C. 1, 2, 3 only
60. The first step in managerial decision making is to
B. 1, 3, 4 only D. 1 and 3 only Bobadilla
A. specify the standard or expected outcome.
B. gather information about the consequence of each alternative.
53. Under which ethical standard of conduct does the managerial accountant have the responsibility to prepare complete
C. identify a problem.
and clear reports and recommendations after appropriate analyses of relevant and reliable information?
D. list alternative courses of action. Bobadilla
A. competence C. integrity
B. confidentiality D. objectivity Bobadilla
61. In a broad sense, cost accounting can be defined within the accounting system as
A. internal and external reporting that may be used in making nonroutine decisions and in
54. Under which ethical standard of conduct does the managerial accountant have the responsibility to communicate
developing plans and policies.
information fairly and objectively?
B. external reporting to government, various outside parties, and stockholders.
A. competence C. integrity
C. internal reporting for use in management planning and control, and external reporting to the
B. confidentiality D. objectivity Bobadilla
extent its product-costing function satisfies external reporting requirements.

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D. internal reporting for use in planning and controlling routing operations. Bobadilla D. The accounting system would be unique to each company Bobadilla

62. The cost management function is usually under 69. Traditional managerial accounting systems are often criticized for:
A. the chief information officer. C. purchasing manager. A. not focusing on the activities that actually drive the costs.
B. treasurer. D. controller. Bobadilla B. only looking at historical data.
C. being too GAAP oriented.
63. If a distinction is made between cost accounting and managerial accounting, managerial accounting is more D. not emphasizing cost control. Bobadilla
oriented toward
A. valuation of inventory. 70. The managerial function of controlling
B. analysis of variances including spoilage. A. is performed only by the controller of a company.
C. financial reporting to third parties. B. is only applicable when the company sustains a loss.
D. the planning and controlling aspects of the management process. Bobadilla C. is concerned mainly with a operating a manufacturing segment.
D. includes performance evaluation by management. Bobadilla
64. Management accounting and financial accounting differ in that management accounting information
A. is prepared following prescribed rules 71. Planning is a function that involves
B. is prepared using whatever methods the company finds beneficial A. hiring the right people for a particular job.
C. is prepared for stockholders B. coordinating the accounting information system.
D. is prepared following Generally Accepted Accounting Principles Bobadilla C. setting goals and objectives for an entity.
D. analyzing financial statements. Bobadilla
65. Which of the following does not describe managerial accounting?
A. internally focused C. externally focused 72. In determining whether planned goals are being met, a manager is performing the function of
B. emphasis on the future D. detailed information Bobadilla A. planning C. motivating
B. controlling D. follow-up Bobadilla
66. Management accounting
A. reports are always objective 73. Which of the following is not a separate management function?
B. provides information to external users A. Motivating C. Controlling
C. generates general purpose financial statements and reports B. Planning D. Decision-making Bobadilla
D. has few externally imposed standards Bobadilla
74. Total quality management emphasizes
67. Management accounting reports are prepared A. zero defects C. elimination of waste
A. to meet the needs of decision makers within the firm B. continual improvement D. all of the above Bobadilla
B. whenever stockholders request them
C. according to guidelines prepared by the SEC 75. Automation of the manufacturing process increases
D. by CPAs Bobadilla A. the quantity of information C. the number of production employees
B. the timeliness of information D. both a and b Bobadilla
68. Which of the following is true of managerial accounting rather than financial accounting?
A. The outputs of this accounting system are the primary financial statements 76. Which of the following emerging themes in cost accounting deals with managers striving to
B. The methods of this accounting system are established by an overseeing board. create and environment which will enable workers to manufacture perfect (zero defect)
C. The accounting methods are standardized to allow comparisons among companies products?

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A. customer orientation C. total quality management Bobadilla B. Treasurer D. CFO Bobadilla

B. global competition D. advance in information technology
85. All of the following would be considered staff functions EXCEPT:
77. Managerial accounting creates value by: A. the vice-president of finance
A. by forcing managers to analyze historical figures and interpret the results B. the vice-president of corporate planning
B. by eliminating all pricing and costing errors C. the vice-president of research and development
C. by focusing managers attention on the relationship between financial and non-financial factors D. the vice president of marketing Bobadilla
D. all of the above Bobadilla
86. Management accountants generally exercise which type of authority?
78. Systems implemented to reduce defects in finished products with the goal of achieving zero defects are A. Company. C. Line.
A. activity-based costing systems. B. Functional. D. Staff. Bobadilla
B. enterprise resource planning systems.
C. value chain systems. 87. The treasurer function is usually not concerned with
D. total quality management systems. Bobadilla A. investor relations.
B. financial reports.
79. Which of the following functions is most directly related to management by objective? C. short-term financing.
A. Reporting C. Control D. credit extension and collection of bad debts. Bobadilla
B. Decision making D. Planning Bobadilla
88. Which of the following duties is usually assigned to the controller?
80. The setting of objectives and the identification of methods to achieve those objectives is called A. directing the granting of credit to clients
A. planning C. decision making B. investing the organization’s funds
B. controlling D. performance evaluation Bobadilla C. tax planning
D. independently evaluating the firm’s financial statements Bobadilla
81. Which of the following best describes what performance evaluation should be designed to do?
A. Modify goal and objectives each month C. Compare actual results to plan 89. Developing a company strategy for responding to anticipated new markets is an example of:
B. Establish sales goals and targets D. Establish blame Bobadilla A. decision making C. planning
B. controlling D. motivating Bobadilla
82. In the planning and control process, what is the proper sequence of events?
A. Set goals, set objectives, develop plans, implement plans, evaluate performance 90. Strategic cost management has emerged from a blending of:
B. Establish a master budget, set standard costs, develop variance analysis Bobadilla A. cost driver analysis C. value chain analysis
C. Develop engineered costs, develop pricing targets, calculate contribution margins B. strategic position analysis D. all of the above Bobadilla
D. Identify variable costs, identify fixed costs, project the sales mix, determine breakeven
91. Strategic cost management includes all of the following tools except:
83. Which of the following is a staff position? A. standard cost variance analysis C. activity based management
A. vice-president of production C. vice-president of finance B. value chain analysis D. all of the above Bobadilla
B. vice-president of marketing D. plant foreman Bobadilla
92. Strategic planning is different from operational planning in that operational planning:
84. Which management position is responsible for raising capital? A. involves large sums of money
A. Internal auditor C. Controller B. would be involved in determining production levels for next quarter

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C. involves only long range goals D. a high degree of quality control. Bobadilla
D. operational and strategic planning are the same Bobadilla
101.A form of strategy that a management may adopt in order to attempt in creating a perception of
93. Which of the following might be a performance measure for the financial perspective of a balanced scorecard? uniqueness that will permit a higher selling price.
A. percentage of on-time deliveries by the organization A. Value chain. C. Lead time.
B. percentage of product defects B. Lowest cost. D. Differentiation. Bobadilla
C. return on assets
D. percentage of market share held by the organization Bobadilla 102.Deciding whether to sell a product or process it further is an example of a(n):
A. controlling activity C. planning activity
94. The initiative to reduce non-value added activity is meeting which balanced scorecard objective? B. operating activity D. none of the above Bobadilla
A. internal operations perspective C. financial perspective Bobadilla
B. customer perspective D. learning and growth perspective 103.The benefits lost or forfeited as a result of selecting one alternative over another are called
A. Differential costs C. Opportunity costs
B. Sunk costs D. Indirect costs Bobadilla
95. The balanced scorecard internal operations perspective includes
A. customer complaints C. market share 104.Obtaining feedback is generally identified most directly with which of the functions of
B. number of engineering changes D. inventory turnover Bobadilla management?
A. Planning C. Controlling
96. Items that prevent the organization from attaining a higher level of achievement within its value chain are called the B. Directing and motivating D. Decision making Bobadilla
A. theory of constraints C. strategic costs management
B. value chain D. cost management systems Bobadilla 105.A staff position:
A. relates directly to the carrying out of the basic objectives of the organization.
97. The overall recognition of the importance of cost relationships among the activities in the value chain and the process B. is supportive in nature, providing service and assistance to other parts of the organization.
of managing those cost relationships among the activities in the value chain is called C. is superior in authority to a line position.
A. the theory of constraints C. activity-based management of activities D. none of these. Bobadilla
B. the value chain D. strategic cost management Bobadilla
106.The controller occupies:
98. The set of processes that transform raw materials into finished products is known as a A. a line position.
A. value chain C. lowest cost strategy Bobadilla B. a staff position.
B. differentiation strategy D. flexible manufacturing system C. neither a line nor a staff position, since the accounting department must be independent.
D. both a line and a staff position. Bobadilla
99. The period that begins with the arrival of materials and ends with the shipment of a completed goods refers to
A. performance period. C. manufacturing cell. 107.“Racing with no finish” refers to
B. computer-integrated manufacturing. D. cycle time. Bobadilla A. developing the best selling product.
B. research and development.
100.Conventional and just-in-time manufacturers differ in that the conventional manufacturer is likely to C. benchmarking and continuous improvement.
A. have a longer production cycle than its JIT competitors. D. designing the highest quality product in a given segmented market. Bobadilla
B. need less storage space than its JIT competitors.
C. have a flexible manufacturing system. 108.A company’s value chain reflects the

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A. organizational levels of authority and responsibility.

B. stages of production from raw materials to finished goods.
C. linked set of activities that increase the value of products or services.
D. sales distribution network for the company’s products and services. Bobadilla

109.The process of comparing, investigating, and evaluating the company’s processes or products against the best
level of performance is known as
A. attestation. C. product review.
B. feedback. D. benchmarking. Bobadilla

110.Benchmarking allows managers to:

A. determine who in the industry performs similar processes most effectively.
B. determine the processes that have high value-to-cost relationships.
C. compare certain internal processes, services and activities to those of other companies in order to identify
strengths and weaknesses.
D. reproduce another company’s product design and manufacturing processes to eliminate competitive
advantage. Bobadilla