CHAPTER 1BASIC CONCEPTS IN MANAGEMENT ACCOUNTING

1.The main focus of management accounting is:

A. decision making.
B. the preparation of financial statements.C.

the preparation of budgets.D.

documenting cash flows.2.

Which of the following functions is most directly related to management by objective?A.

ReportingB.

Decision makingC.

Control
D.

Planning
3.

The setting of objectives and the identification of methods to achieve those objectives iscalled
A.

planning
B.

controllingC.

decision makingD.

performance evaluation4.

In the planning and control process, what is the proper sequence of events?
A.

Set goals, set objectives, develop plans, implement plans, evaluate performance.
B.

Establish a master budget, set standard costs, develop variance analysis.C.

Develop engineered costs, develop pricing targets, calculate contribution marginsD.

Identify variable costs, identify fixed costs, project the sales mix, determine breakeven.5.

The primary objective of management accounting is to provide:A.

stockholders and potential investors with useful information for decision making.B.

banks and other creditors with useful information in making credit decisions.
C.
management with information useful for planning and control of operations.
D.

supervising government agencies with information about the company’s manag

ementaffairs.6.

Management accounting informationA.

uses historical cost as the basis for reports to managers who are making decisionsabout future courses of
actions.
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B.

should be developed and provided only if the benefits exceed its costs.
C.

does not reflect the financial criteria of verifiability or consistency.D.

should serve the basic needs of investors and creditors.7.

Which of the following is included in the day-to-day work of the management team?A.

decision makingB.

planningC.

controlling
D.

all of the given choices

8.

Which of the following statements is true when comparing managerial accounting tofinancial accounting?
A.

Managerial accounting places more emphasis on precision than financial accounting.B.

Both are highly dependent on timely information.

C.

Both rely on the same accounting information system.

D.

Managerial accounting is concerned with external decision makers.9.

Which of the following is true of managerial accounting rather than financial accounting?A.

The outputs of this accounting system are the basic financial statements.B.
The methods of this accounting system are established by an overseeing board.C.

The accounting methods are standardized to allow comparisons among companies.

D.

The accounting system would be unique to each company.

10.

Management accountin
g’s role in the control processes is to provide
A.

managers with information that can be used to determine customer satisfaction levels.B.

investors and creditors the information about financial stability of the company.
C.

managers with relevant information to compare actual results with expectations.

D.

input to managers on the best ways to achieve continuous improvement in the production process.11.

Which of the following statements is (are) true regarding financial and managerialaccounting?I.

Both are mandatory.II.

Both rely on the same underlying financial data.III.

Both emphasize the segments of an organization, rather than just looking at theorganization as a
whole.IV.

Both are geared to the future, rather than to the past.A.

I, II, III and IVB.

Only II, III and IV

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C.

Only II and III

D.

Only II
12.

Which of the following statement is FALSE?A.

Managerial accounting need not mostly conform to PFRS.

B.

Financial accounting reports focus on subunits of the organization.

C.

Managerial accounting is not required.D.

Managerial accounting focuses on the needs of internal users.13.

For internal users, managers are more concerned with receiving information that is:A.

completely objective and verifiable.B.

completely accurate and precise.

C.

relevant, flexible, and immediately available.

D.

relevant, completely accurate, and precise.14.

Which of the following statements is correct?A.

A certified public accountant can readily render management advisory services to the public.B.

A CPA with MBA and DBM degrees is automatically qualified to rendermanagement advisory
services.C.

Competence as a standard in the rendition of management advisory services by aCPA may be equated to
having excellent scholarly preparation to include the usual baccalaureate degree, an MBA and other post
graduate studies.
D.

Adequate training and experience in both the analytical approach and process ina particular undertaking are
requisites for the CPA to be involved in amanagement advisory service engagement.
15.

The following characterize management advisory services exceptA.

It involves decision for the future.B.

It is broader in scope and varied in nature.

C.

It utilizes more junior staff than senior members of the firm.

D.

It relates to specific problems where an expert’s help is required.

16.

Which of the following statement is incorrect?

A.

CPAs provide management advisory services to go around the ethicalconstraints as mandated by the accounting
profession.
B.

Businesses hire management consultants to help define specific problems and developdecisions.C.

CPAs who are performing management advisory service may be considered to be inthe practice of
management consulting.
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D.

Included in the practice of consulting is the provision of confidential service in whichthe identity of the
client is concealed.17.

The primary purpose of management advisory services is toA.

conduct special studies, preparation of recommendations, development of plans ad programs, and

provision of advice and assistance in their implementation.B.

provide services or to fulfill some social needs.

C.

improve the client’s use of its capabilities and resources to achiev

e the objectivesof the organization.
D.

earn the best rate of return on resources entrusted to its care with safety of investment
being taken into account and consistent with firm’s social and legal responsibilities.
18.

The major reporting standard for presenting managerial accounting information is

A.

relevance
B.

generally accepted accounting principlesC.

the cost principleD.

the current tax law19.

With respect to the time dimension, how does managerial decision compare with external performance
evaluation?Managerial Decision ExternalMaking PerformanceA.

Past PastB.
Past Future
C.

Future Past
D.

Future Future20.

Which of the following activities is not usually performed by a management accountant?A.

Assisting managers to interpret data in managerial accounting reports.B.

Designing systems to provide information for internal and external reports.C.

Gathering data from sources other than the accounting system.

D.

Deciding the best level of inventory to be maintained.

21.

How does the managerial decision making compare with external performanceevaluation?
Managerial Decision Making External Performance EvaluationA. Detailed Detailed
B. Detailed More aggregated
C. More aggregated DetailedD. More aggregated More aggregated

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22.

Management accountants would notA.

assist in budget planning.

B.

prepare reports primarily for external users.

C.

determine cost behavior.D.

be concerned with the impact of cost and volume on profits.23.

In the contemporary business environment, cost management focuses onA.

financial reporting and cost analysis.B.

common emphasis on standardization and standard costs.

C.

development and implementation of the business strategy.

D.

all of the given choices.24.

Management accounting is similar to financial accounting in that both:A.

are governed by financial reporting framework.

B.

deal with economic events.

C.

concentrate on historical data.D.

classify reported information in the same manner.25.

Managerial accounting provides data to achieve all of the following major objectivesexcept:A.

planning and control of costs.B.

supporting management planning

C.
compliance with SEC reporting requirements
D.

determining the costs of products26.

Internal reports must be communicatedA.

dailyB.

monthlyC.

annually
D.

as needed
27.

Which consideration influences the frequency of an internal report?A.

The wishes of the managers receiving the report.B.

The frequency with which decisions that require the information are made.C.

The cost of preparing the report.

D.

All of the given choices.

28.

Which of the following statements about internal reports is not true?A.

The content of internal reports may extend beyond the double-entry accountingsystem.
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B.

Internal reports may show all amounts at market values.C.

Internal reports may discuss prospective events.

D.

Most internal reports are summarized rather than detailed.

29.

The informational needs of internal users/management:A.

are historical in natureB.

emphasize the company as a wholeC.

emphasize accuracy over timeliness
D.

may require more customized reports than external financial statements

30.

Which of the following is most associated with managerial accounting?A.

Must follow generally accepted accounting principles.

B.

May rely on estimates and forecasts.

C.

Is prepared for users outside the organization.D.

Always reports on the entire entity.31.

Which statement about the extent of detail in a management accounting report is true?A.

It may depend on the frequency of the report.B.

It depends on the type of manager receiving the report.

C.

It depends on the level of the manager receiving the report.

D.

All of the given choices.32.

Which of the following characteristics is inherent to management accounting?A.

Reporting of historical informationB.

Compliance to generally accepted accounting principles

C.

Contribution approach income statement

D.

External users of financial report33.

In order to be useful to managers, management accounting reports should possess all ofthe following
characteristics except:A.

Provide objective measures of past operations and subjective estimates about futuredecisions
B.

Be prepared in accordance with generally accepted accounting principles.

C.
Be provided at any time management needs information.D.

Be prepared to report information for any unit of the business to support decisionmaking.34.

Which ethical standard of conduct requires that a managerial accountant be responsible to prepare
complete and clear reports and recommendations are based on appropriateanalyses of relevant and
reliable information?
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A.

competence
B.

confidentialityC.

integrityD.

objectivity35.

Which ethical standard of conduct requires the managerial accountant have tocommunicate information
fairly and objectively?A.

competenceB.

confidentialityC.

integrity
D.

objectivity
36.

Under which ethical standard of conduct does the managerial accountant have theresponsibility to refuse
any gift, favor, or hospitality that would influence or appear toinfluence his or her decision?A.

competenceB.

confidentiality
C.

integrity
D.

objectivity37.

Under which ethical standard of conduct does the managerial accountant have theresponsibility to refrain
from either actively or passively subverting the attainment of an
organization’s legitimate and ethical objectives?
A.

integrity
B.

competenceC.

objectivityD.

confidentiality38.

Under which ethical standard of conduct does the managerial accountant have theresponsibility to
disclose fully all relevant information that could reasonably expected to
influence an intended user’s understanding of the reports, comments, and
recommendations presented?
A.

objectivity
B.

competenceC.

confidentialityD.

integrity39.

For managerial decision purposes, the volume of information should be evaluated on the basis of
A.

cost-benefit relationship
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B.

A cost, but not benefit.C.

A benefit, but not cost.D.

Neither cost nor benefits, but some other criteria.40.

The first step in managerial decision making is toA.

specify the standard or expected outcome.B.

gather information about the consequence of each alternative.

C.

identify a problem.
D.
list alternative courses of action.41.

In a broad sense, cost accounting can be defined within the accounting system asA.

internal and external reporting that may be used in making nonroutine decisions andin developing plans
and policies.B.

external reporting to government, various outside parties, and stockholders.

C.

internal reporting for use in management planning and control, and externalreporting to the extent its product-
costing function satisfies external reportingrequirements.
D.

internal reporting for use in planning and controlling routing operations.42.

The cost management function is usually under the :A.

chief information officer.B.

treasurer.C.

purchasing manager.
D.

controller.
43.

If a distinction is made between cost accounting and managerial accounting, managerialaccounting is

more oriented towardA.

valuation inventory.B.

analysis of variances including spoilage.C.

financial reporting to third parties.

D.

the planning and controlling aspects of the management process.

44.

Which of the following does not describe managerial accounting?A.

internally focused.B.

emphasis on the future

C.

externally focused
D.
detailed information45.

The managerial function of controllingA.

is performed only by the controller of a company.

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B.

is only applicable when the company sustains a loss.C.

is concerned mainly with a operating a manufacturing segment.

D.

includes performance evaluation by management.

46.

Planning is a function that involvesA.

hiring the right people for a particular job.B.

coordinating the accounting information system.

C.

setting goals and objectives for an entity.

D.

analyzing financial statements.47.

In determining whether planned goals are being met, a manager is performing thefunction ofA.

planning
B.

controlling
C.

motivatingD.

follow-up48.

Managerial accounting creates value by:A.

by forcing managers to analyze historical figures and interpret the resultsB.

by eliminating all pricing and costing errors

C.

by focusing managers attention on the relationship between financial and non-financial factors
D.

all of the given choices.49.

Which of the following best describes what performance evaluation should be designedto do?A.

Modify goal and objectives each month.B.

Establish sales goals and targets.

C.

Compare actual results to plan.

D.

Establish blame50.

Which of the following is a staff position?A.

vice-president of productionB.

vice-president of marketing
C.

vice-president of finance
D.

plant foreman51.

Which management position is responsible for raising capital?A.

Internal auditor
B.

Treasurer
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C.

ControllerD.

CFO52.

Each of the following would be considered a staff function EXCEPT the:A.

vice-president of financeB.

vice-president of corporate planningC.

vice-president of research and development

D.
vice-president of marketing
53.

Management accountants generally exercise which type of authority?A.

CompanyB.

FunctionalC.

Line
D.

Staff
54.

The treasurer function is usually not concerned withA.

investor relations
B.

financial reports
C.

short-term financingD.

credit extension and collection of bad debts.55.

Which of the following duties is usually assigned to the controller?A.

directing the granting of credit to clientsB.

investing the organization’s funds

C.

tax planning
D.

independently
evaluating the firm’s financial statements
56.

Developing a company strategy for responding to anticipated new markets is an exampleof:A.

decision makingB.

controlling
C.

planning
D.

motivating57.

Deciding whether to sell a product or process it further is an example of a(n):A.

controlling activity
B.

operating activity
C.

planning activityD.

none of the given choices

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58.

Obtaining feedback is generally identified most directly with the management function ofA.

PlanningB.

Directing and motivating

C.

Controlling
D.

Decision making59.

A staff positionA.

relates directly to the carrying out of the basic objectives of the organization.
B.

is supportive in nature, providing service and assistance to other parts of theorganization.

C.

is superior in authority to a line position.D.

none of these.60.

Which of the following statements is true regarding ethics in decision-making?A.

Since most business decisions are simply a matter of economics, ethicalconsiderations should be ignored.
B.

Decision-making can have an ethical as well as an economic impact.

C.
Managerial accountants do not face ethical issues.D.

Business managers will always agree on ethical choices.