Multiple Choice Answers

1. Nonmanufacturing costs:
include only fixed costs
seldom influence financial success or failure
include the cost of selling, distribution, and after-sales costs for customers
are considered by GAAP to be an element of product costs

2. The one cost that would be classified as part of both prime cost and conversion cost would be:
indirect material
direct labor
direct material
indirect labor

3. A key element of any organization’s strategy is identifying:
its potential shareholders
its target customers
competitor’s products
employee needs

4. In July direct labor was 40% of conversion cost. If the manufacturing overhead cost for the month was $34,000 and the direct materials cost was $23,000, the direct labor cost was:
$22,667
$15,333
$51,000
$34,500
5. The information below relates to Derby Manufacturing Company’s operations for a recent month. (Assume that all raw materials are direct materials.):
Purchases of raw materials $91,000
Direct labor cost $122,000
Selling costs (total) $42,000
Administrative costs (total) $56,000
Manufacturing overhead costs (total) $340,000
Raw materials inventory, beginning $22,000
Work in process inventory, beginning $27,000
Finished goods inventory, beginning $42,000
Raw materials inventory, ending $7,000
Work in process inventory, ending $35,000
Finished goods inventory, ending $15,000
What was Derby’s cost of goods manufactured for the month?
$545,000
$560,000
$568,000
$587,000
6. Management accounting information can be used for all of the following except:
calculate the cost of a product or service.
evaluate the performance of a company.
project materials needs.
evaluate the market price of the stock

7. Materials used in the operation of a factory, such as cleaning supplies, that are not an integral part of the final product should be classified as:

direct materials.
a period cost.
administrative expense.
manufacturing overhead.

8. The Institute of Management Accountants’ Materials used in the operation of a factory confidentiality that requires that management accountants:
refrain from disclosing confidential information acquired in the course of their work except when authorized by management.
refrain from disclosing confidential information acquired in the course of their work in all situations.
refrain from disclosing confidential information acquired in the course of their work except when authorized by management, unless legally obligated to do so.
refrain from disclosing confidential information acquired in the course of their work in all cases since the law requires them to do so.

9. All of the following are characteristics of a pull production system EXCEPT:

Inventories are reduced to a minimum by purchasing raw materials and producing units only as needed to meet consumer demand.
Raw materials are released to a production far in advance of being needed to ensure no interruptions in work flows due to shortages of raw materials.
Products are completed just in time to be shipped to customers.
Manufactured parts are completed just in time to be assembled into products.

10. Abel Company’s manufacturing overhead is 20% of its total conversion costs. If direct labor is $38,000 and if direct materials are $47,000, the manufacturing overhead is:

$152,000
$11,750
$21,250
$9,500

11. For a manufacturing company, what type of position (line or staff) is each of the following?

a. Manager of a Data Processing Department
b. Manager of a Production Department
a. Staff
b. Staff
a. Staff
b. Line
a. Line
b. Staff
a. Line
b. Line
12. During the month of July, direct labor cost totaled $12,000 and direct labor cost was 30% of prime cost. If total manufacturing costs during July were $86,000, the manufacturing overhead was:
$46,000
$40,000
$28,000
$74,000

13. The plans of management are often expressed formally in:
financial statements.
performance reports.
budgets.
ledgers.
14. Prime costs consist of:
direct materials and the variable portion of manufacturing overhead.
direct labor and indirect labor.
indirect labor and the fixed portion of manufacturing overhead.
direct labor and direct materials.
15. Which of the following statements about products is true?
Product costs are deducted from revenue when the production process is completed.
Product costs are deducted from revenue as expenditures are made.
Product costs associated with unsold finished goods and work in process appear on the balance sheet as assets.
Product costs appear on financial statements only when products are sold.
16. Management accounting:
focuses on estimating future revenues, costs, and other measures to forecast activities and their results.
provides information about the company as a whole.
reports information that has occurred in the past that is verifiable and reliable.
provides information that is generally available only on a quarterly or annual basis.

17. The person MOST likely to use management accounting information is a(n):
banker evaluating a credit application
shareholder evaluating a stock investment
governmental taxing authority
assembly department supervisor

18. The person MOST likely to use ONLY financial accounting information is a:
factory shift supervisor
vice president of operations
current shareholder
department manager

 

19. Management accounting information can be used for all of the following except:
calculate the cost of a product or service.
evaluate the performance of a company.
project materials needs.
evaluate the market price of the stock.
20. One consequence of a change from a push to a properly implemented pull production system can be:
an increase in work in process inventories.
an extremely difficult cultural change due to enforced idleness when demand falls below production capacity.
an increased mismatch between what is produced and what is demanded by customers.
an increase in raw materials inventories.

21. Currently, management accounting information within government and nonprofit organizations is in greater demand because: (Points :2) public and private donors are demanding accountability citizens are requesting responsive and efficient performance from their governing units more nonprofit organizations are competing for limited funds All of the above are correct.

22. Financial accounting information: (Points :2)
provides a signal that something is wrong
identifies what is wrong
explains what is wrong
simply summarizes information but gives no indication that anything is wrong

23. The act of simply measuring and reporting information on certain processes: (Points :2) focuses the attention of employees on those processes that are being measured
diverts the employee’s attention to other activities that are not being measured
disproves the saying “What gets measured gets managed.” has no effect on employee behavior

24. Management accounting information includes: (Points :2) tabulated results of customer satisfaction surveys the cost of producing a product the percentage of units produced that is defective All of these are correct.

25. The person MOST likely to use management accounting information is a(n): (Points :2) banker evaluating a credit application shareholder evaluating a stock investment governmental taxing authority assembly department supervisor

26. The accounting process is constrained by mandated reporting requirements by all of the following organizations EXCEPT the: (Points :2) Internal Revenue Service (IRS) Institute of Management Accountants (IMA) Financial Accounting Standards Board (FASB) Securities and Exchange Commission (SEC) for companies that are publicly traded

2 7. In general, it was not until the 1970s that management accounting systems: (Points :2) were improved because of demands by the FASB and the SEC stagnated and proved inadequate started to develop innovations in costing and performance-measurement systems due to intense pressure from overseas competitors started to address the decision-making needs of managers

28. A key element of any organization’s strategy is identifying: (Points :2) its potential shareholders its target customers competitor’s products employee needs

29. Which of the following groups would be LEAST likely to receive detailed management accounting reports? (Points :2) stockholders customer service representatives production supervisor vice president of operations

30. Top executives of a multi-plant firm are LEAST likely to use management accounting information: (Points :2) to support decisions that result in long-term consequences to evaluate the performance of individual plants for strategic planning for operational control

31. A national company manufactures a line of modern furniture. Information MOST useful to the employee who assembles the furniture includes: (Points :2)
a daily report comparing the actual time it took to assemble a piece of furniture to the standard time allowed
a monthly report on the portion of furniture pieces assembled with defects
the number of furniture pieces sold this month
revenue per employee

32. Recently, increased demand for management accounting information has been: (Points :2) primarily from manufacturing firms from service organizations from both the manufacturing and the service industries an illusion; in fact, the demand for management accounting has changed very little

33. Currently, management accounting information within government and nonprofit organizations is in greater demand because: (Points :2) public and private donors are demanding accountability citizens are requesting responsive and efficient performance from their governing units more nonprofit organizations are competing for limited funds All of these are correct.

34. Decentralized responsibility refers to allowing lower-level managers to do all of the following EXCEPT: (Points :2) make decisions without seeking higher approval take advantage of local opportunities make periodic financial reports to upper-management pursue individual objectives even though they may not contribute to the entire company

35. All of the following are true regarding the return on investment (ROI) formula developed at Dupont EXCEPT that: (Points :2) it is the sole measure top-management utilizes to evaluate which division should receive additional capital it allows companies to have centralized control with decentralized responsibility it produces a measure of divisional performance it equals (Operating income/Sales) x (Sales/Investment)

36. The act of simply measuring and reporting information: (Points :2) focuses the attention of employees on those processes diverts the employee’s attention to other activities disproves the saying “What gets measured gets managed.” has no effect on employee behavior

37. When a change is introduced, employees tend to: (Points :2) embrace the change be indifferent to the change exhibit no change in behavior resist the change

38. The introduction of a new management system is MOST likely to motivate UNWANTED employee behavior when it is used for: (Points :2) evaluation planning decision making coordinating individual efforts

39. Management accountants are MOST likely to feel outside pressure to favorably influence the numbers favorably when the information is used for: (Points :2) budgeting compensation and promotions continuous improvement product costing

40. The Institute of Management Accountants (IMA): (Points :2) is a professional organization of management accountants is a professional organization of financial accountants issues standards for management accounting issues standards for financial accounting