Managerial Accounting (45 Questions with Answers!)

1 1.) Which of the following statements is true of managerial accounting? Answer: Managerial accounting information is used to help managers plan and control their operations 2.) which of the following statements is true of financial accounting? Answer: It provides information to investors needed for their investment decsions 3.) You did not understand what the term accrual meant and failed to accrue the interest due at the end of the year on the company's bonds. Which of the IMA standards appears to have been violated here? Answer: Competence 4.) Which of the following is true of product costs? Answer: they are first recorded in an inventory account 5.) Goods that have been started in the manufacturing process but are not yet complete are included in the_____? Answer: Work-in-process inventory account 6.) which of the following is part of manufacturing overhead? Answer: factory insurance 7.) which of the following is an example of a period cost for a manufacturing company? Answer: Advertising expenses 8.) which of the following will be classified as a conversion cost? Answer: depreciation on factory equipment 9.) which of the following would be classified as a prime cost? Answer: cost of direct materials used 10.) Describe how managerial accounting and financial accounting differ? Answer: managerial accounting emphasizes data relevance over data objectivity 11.) What skills do management accountants need? Answer: -oral and written communication skills -knowledge of how business functions -knowledge of both financial and managerial accounting 12.) 3 primary responsibilities of managerial accounting Answer: Directing Planning Controlling 13.) Directing Answer: Overseeing the day to day operations using info related to cost, sales, and other info 14.) Planning Answer: -Budgeting 1 2 -Setting goals and objectives and determining how to achieve them 15.) Controlling Answer: -Management conducts variance by comparing budget to actual - comparing and evaluating actual results with planned results and taking corrective action 16.) Institute of Managerial Accountants (IMA) Answer: Professional Association for Management Accountants 17.) Treasurer Answer: Responsible for raising capital and investing funds 18.) Code of Conducts / Ethics Answer: -Integrity -Competence -Confidentiality -Credibility 19.) Integrity Answer: -Requires management accountants to mitigate conflicts of interest -Fairly and objectively disclosing info 20.) Competence Answer: Understanding 21.) Confidentiality Answer: Trade secrets / client info 22.) Credibility Answer: Requires management accountants to communicate information fairly and objectively and hold proper qualifications 23.) Managerial accounting Answer: -For internal use -Focus on future transactions -Segmented -No regulated by the SEC, therefore does not have to adhere to GAAP 24.) Core Ethical values Answer: -Promise keeping -Fairness -Pursuit of excellence -Accountability 25.) Common Business sectors Answer: -Service -Merchandising -Manufacturing 26.) Service 2 3 Answer: Intangible (e.g., oil changes, Dr. check ups) 27.) Merchandising Answer: Reselling tangible things, inventory and freight in 28.) Manufacturing Answer: Use of raw materials to building the product 29.) Value chain Answer: all activities that add value to the product and services -Research and development -Design -Production or purchases (which identifies a products cost) -Marketing -Distribution -Customer service 30.) Direct cost Answer: Easily traced back to production (e.g., materials, labor) 31.) Indirect cost Answer: More difficult to trace but still related to production (e.g., cost of running the building) 32.) Total cost Answer: everything in the value chain 33.) Inventoriable product costs Answer: Direct materials, Direct labor, and MOH 34.) MOH Answer: Anything that doesn't fall under a direct cost (e.g., indirect materials, indirect labor, facility expenses, insurance, etc.) 35.) Period costs Answer: Operating costs (e.g., design and distribution) 36.) Product cost Answer: anything related to manufacturing DM + DL + OH 37.) Prime cost Answer: DM+DL 3 4 38.) Conversion cost Answer: DL+OH 39.) Service companies Answer: sales- operating costs= operating income (salaries, rent, depreciation) 40.) merchandising companies Answer: INV = product cost 41.) gross product Answer: sales - cost of goods' 42.) operating inc Answer: gross product - operating exp 43.) Cost of goods sold Answer: beg inv + new purchases + freight in - end inv 44.) Job Costing Answer: -necessary for valuing inventory in a manufacturing environment -necessary to determine income and profitability -managers need it for decision making -EX: custom built/ unique, by job 45.) Process costing Answer: mass produced/nearly identical, by process or dept