Basic Concepts

MODULE 1 the day-to-day work activities of the management team?

BASIC CONCEPTS IN MANAGEMENT ACCOUNTING
1. The major functions of management is (are):
A. strategic management and long-range planning.
B. planning and decision making.
C. identifying threats and opportunities for the firm.
D. all of the above.
2. The process of identifying, measuring, analyzing, interpreting, and
communicating information in pursuit of an organization's goals is called
A. managerial accounting C. management
B. financial accounting D. promotional activities
3. The primary objective of management accounting is
A. to provide stockholders and potential investors with useful
information for decision making.
B. to provide banks and other creditors with information useful in
making credit decisions.
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.
4. Management accounting information
A. uses historical cost as the basis for reports to managers who are
making decisions about future courses of action.
B. should be developed and provided only if its 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.
A. decision making C. directing operational
activities
B. planning D. only A and B
7. Which of the following statements is true when comparing managerial
accounting to financial 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.
8. 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.
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.
9. Management accounting’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 information on the financial stability of the
company.
C. managers with relevant information to compare with expectations.
D. input to managers on the best ways to achieve continuous
improvement in the production process.

5. Which of the following is included in the day-to-day work of the 10. Which of the following statements are true regarding financial and
management team? managerial accounting?
A. decision making C. controlling I. Both are mandatory.
B. planning D. all of the above II. Both rely on the same underlying financial data.
III. Both emphasize the segments of an organization, rather than just
6. Paying rent, purchasing supplies, and purchasing inventory are which of looking at the organization as a whole.

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IV. Both are geared to the future, rather than to the past.
A. I, II, III, and IV C. Only II and III
B. Only II, III and IV D. Only II
11. Managerial accounting activity adds value to an organization by pursuing
five major objectives, which include
A. providing information for decision making and planning.
B. measuring the performance of activities within an organization.
C. assisting managers in directing and controlling operational activities.
D. all of them
12. Managerial accounting places considerable weight on:
A. generally accepted accounting principles.
B. the financial history of the entity.
C. ensuring that all transactions are properly recorded.
D. detailed segment reports about departments, products, and
customers.
13. Which of the following statement is FALSE?
A. Managerial accounting need not conform to GAAP.
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.
14. For internal uses, 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.
15. 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
render management advisory services.
C. Competence as a standard in the rendition of management
advisory services by a CPA may be equated to having excellent
scholarly preparation to include the usual baccalaureate degree,
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an MBA and other post graduate studies.
D. Adequate training and experience in both the analytical approach
and process in a particular undertaking are requisites for the CPA
to be involved in a management advisory service engagement.
(RPCPA)
16. The following characterize management advisory services except
A. It involves decision for the future
B. It 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 expert help is required
17. Which of the following statements is incorrect?
A. CPAs provide management advisory services to go around the
ethical constraints as mandated by the Accountancy Law.
B. Businesses hire management consultants to help define specific
problems and develop solutions.
C. CPAs who are performing management advisory services may be
considered to be in the practice of management consulting.
D. Included in the practice of consulting is the provision of confidential
service in which the identity of the client is concealed. (RPCPA)
18. The primary purpose of management advisory services is
A. To conduct special studies, preparation of recommendations,
development of plans and programs, and provision of advice and
assistance in their implementation.
B. To provide services or to fulfill some social needs.
C. To improve the client’s use of its capabilities and resources to
achieve the objectives of the organization.
D. To 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.
19. Managerial accounting information:
A. pertains to the entity as a whole and is highly aggregated.
B. pertains to subunits of the entity and may be very detailed.
C. is prepared only once a year.
D. is constrained by the requirements of generally accepted accounting
principles.
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25. Which of the following activities is not usually performed by a

20. Managerial accounting is primarily concerned with: management accountant?
A. segments of a company rather than the company as a whole. A. Assisting managers to interpret data in managerial accounting
B. the data needs of stockholders and creditors. reports.
C. meeting the requirements of generally accepted accounting B. Designing systems to provide information for internal and external
principles. reports.
D. the company as a whole rather than a segment of the organization. C. Gathering data from sources other than the accounting system.
D. Deciding the best level of inventory to be maintained.
21. The major reporting standard for presenting managerial accounting
information is 26. Which of the following statements correctly distinguishes financial and
A. relevance managerial accounting?
B. generally accepted accounting principles A. managerial accounting reports on the whole organization
C. the cost principle B. financial accounting is oriented toward the future
D. the current tax law C. financial accounting is primarily concerned with providing
information for internal users
22. With respect to the time dimension, how does managerial D. managerial accounting is oriented more toward the planning and
decision compare with external performance evaluation? control aspects of management
A. B. C. D.
Managerial Decision Past Past Future Future 27. How does managerial decision making compare with
Making external performance evaluation?
External Performance Past Future Past Future Managerial Decision Making External Performance
Evaluation
23. Managerial accounting differs from financial accounting in that it is A. Detailed Detailed
A. more concerned with segments of a company. B. Detailed More aggregated
B. less constrained by rules and regulations. C. More aggregated Detailed
C. more concerned with the future. D. More aggregated More aggregated
D. all of the above.

24. The distinction between traditional accounting and cost management is
A. the focus of the former on accounting matters and the latter in
support to management in making the right decisions for staying on
a competitive position
B. the emphasis of former on record keeping and the latter on
reporting
C. the focus of the former on cost cutting and the latter on product
differentiation
D. the focus of the former on efficiency and the latter on quality.
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28. Management accountants would not
A. 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.
29. In the contemporary business environment, cost management focus is
on
A. financial reporting and cost analysis.
B. common emphasis on standardization and standard costs.
C. development and implementation of the business strategy.
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D. D. need not comply with generally accepted accounting principles

35. Internal reports must be communicated

30. Management accounting is similar to financial accounting in that A. daily C. annually
A. both are governed by generally accepted accounting principles. B. monthly D. as needed
B. both deal with economic events.
C. both concentrate on historical data. 36. Which of the following does not apply to the content of managerial
D. both classify reported information in the same manner. reports?
A. Reporting standard is relevant to the decision to be made.
31. How frequent is management accounting report when compared B. May extend beyond double-entry accounting system.
to report to external users? C. Pertain to subunits of the entity and may be very detailed.
Management Accounting External Report D. Pertains to the entity as a whole and is highly aggregated.
Report
A. More frequent Less frequent 37. Which consideration influences the frequency of an internal report?
B. More frequent More frequent A. The wishes of the managers receiving the report.
C. Less frequent Less frequent B. The frequency with which decisions are made that require the
D. Less frequent More frequent information in the report.
C. The cost of preparing the report.
D. All of the above.
32. Managerial accounting differs from financial accounting in that financial
accounting is 38. Which of the following statements about internal reports is not true?
A. more oriented toward the future. A. The content of internal reports may extend beyond the double-entry
B. primarily concerned with external financial reporting. accounting system.
C. concerned with nonquantative information. B. Internal reports may show all amounts at market values.
D. heavily involved with decision analysis and implementation of C. Internal reports may discuss prospective events.
decisions. D. Most internal reports are summarized rather than detailed.

33. Managerial accounting provides data for all of the following major 39. Management accountants help develop and maintain reporting systems
objectives except: that are aligned with organizational structures and that provide useful
A. planning and control of costs information on an organization’s performance. Management decision
B. supporting management planning processes fall into three categories that consist of
C. compliance with SEC reporting requirements A. Nonrepetitive, nonprogrammed, and nonstrategic.
D. determining the costs of products B. Repetitive, nonprogrammed, and strategic.
C. Repetitive, programmed, and strategic.
34. Which statement is false? Managerial accounting information: D. Nonrepetitive, nonprogrammed, and strategic.
A. involves planning for the future
B. should be requested and used by management even if it is very 40. Internal reports are generally
costly to gather and analyze A. aggregated C. regulated
C. helps managers make financing decisions B. detailed D. unreliable

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accounting?
41. Managerial accounting reports can be described as: A. Reporting of historical information
A. general-purpose C. classified financial B. Compliance to generally accepted accounting principles
statements C. Contribution approach income statement
B. special purpose D. macro-report D. External users of financial report

42. The informational needs of internal users/management: 48. In order to be useful to managers, management accounting reports
A. are historical in nature should possess all of the following characteristics except:
B. emphasize the company as a whole A. Provide objective measures of past operations and subjective
C. emphasize accuracy over timeliness estimates about future decisions.
D. may require more customized reports than external financial B. Be prepared in accordance with generally accepted accounting
statements principles.
C. Be provided at any time management needs information.
43. The role of the managerial accountant in today’s corporate world D. Be prepared to report information for any unit of the business to
includes all of the following except: support decision making.
A. interpreting financial information C. financial modeling
B. financial planning D. bookkeeping 49. The following are inherent to either management accounting or
financial accounting:
44. Which of the following is most associated with managerial accounting? 1. External report
A. Must follow generally accepted accounting principles. 2. Historical information
B. May rely on estimates and forecasts. 3. Contribution approach income statement
C. Is prepared for users outside the organization. 4. Generally accepted accounting principles
D. Always reports on the entire entity. 5. Prospective financial statements
Which of the foregoing are related to management
45. Which statement about the extent of detail in a management accounting and financial accounting, respectively?
accounting report is true? A. B. C. D.
A. It may depend on the frequency of the report. Management Accounting 1, 2, 5 3, 5 2, 3 3
B. It depends on the type of manager receiving the report. Financial Accounting 3, 4 1, 2, 4 1, 4, 5 1, 2, 4,
C. It depends on the level of the manager receiving the report. 5
D. All of the above.
50. Which of the following is an incorrect statement?
46. Managerial accounting information
A. There is no overlap between financial and managerial accounting.
A. pertains to the entity as a whole and is highly aggregated.
B. Managerial accounting sometimes relies on past information.
B. pertains to subunits of the entity and may be very detailed.
C. Managerial accounting does not need to conform to generally
C. is prepared only once a year.
accepted accounting principles.
D. is constrained by the requirements of generally accepted
D. Financial accounting must conform to generally accepted
accounting principles.
accounting principles.
47. Which of the following characteristics is inherent to management

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51. For managerial reports, the accounting data used: subverting the attainment of an organization's legitimate and ethical
A. must be the same accounting data for reporting to shareholders, objectives?
but may use different data for tax purposes. A. integrity C. objectivity
B. must be the same accounting data for tax purposes, but may use B. competence D. confidentiality
different data for reporting to shareholders.
C. must be the same accounting data for both tax purposes and 57. Under which ethical standard of conduct does the managerial accountant
reporting to shareholders. have the responsibility to disclose fully all relevant information that could
D. may be different accounting data for both tax purposes and reasonably be expected to influence an intended user's understanding of
reporting to shareholders. the reports, comments, and recommendations presented?
A. objectivity C. confidentiality
52. Which of the following is an ethical standard of conduct for managerial B. competence D. integrity
accountants?
1. competence 58. For managerial decision purposes, the volume of information should be
2. confidentiality evaluated on the basis of
3. integrity A. cost-benefit relationship.
4. objectivity B. A cost, but not benefit.
A. All of them C. 1, 2, 3 only C. A benefit, but not cost.
B. 1, 3, 4 only D. 1 and 3 only D. Neither costs nor benefits, but some other criteria.

53. Under which ethical standard of conduct does the managerial accountant 59. What is the primary criterion for the preparation of managerial
have the responsibility to prepare complete and clear reports and accounting reports?
recommendations after appropriate analyses of relevant and reliable A. Relevance of the reports. C. Timing of the
information? reports.
A. competence C. integrity B. Meet the manager’s needs. D. Cost of the reports.
B. confidentiality D. objectivity
60. The first step in managerial decision making is to
54. Under which ethical standard of conduct does the managerial accountant A. specify the standard or expected outcome.
have the responsibility to communicate information fairly and objectively? B. gather information about the consequence of each alternative.
A. competence C. integrity C. identify a problem.
B. confidentiality D. objectivity D. list alternative courses of action.

55. Under which ethical standard of conduct does the managerial accountant
have the responsibility to refuse any gift, favor, or hospitality that would
influence or appear to influence his or her decision?
A. competence C. integrity
B. confidentiality D. objectivity
56. Under which ethical standard of conduct does the managerial accountant
have the responsibility to refrain from either actively or passively
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 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
external reporting to the extent its product-costing function satisfies

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external reporting requirements. financial accounting?

D. internal reporting for use in planning and controlling routing
operations.
62. The cost management function is usually under
A. the chief information officer. C. purchasing manager.
B. treasurer. D. controller.
63. If a distinction is made between cost accounting and managerial
accounting, managerial accounting is more oriented toward
A. valuation of inventory.
B. analysis of variances including spoilage.
C. financial reporting to third parties.
D. the planning and controlling aspects of the management process.
A. The outputs of this accounting system are the primary 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
69. Traditional managerial accounting systems are often criticized for:
A. not focusing on the activities that actually drive the costs.
B. only looking at historical data.
C. being too GAAP oriented.
D. not emphasizing cost control.

64. Management accounting and financial accounting differ in that 70. The managerial function of controlling
management accounting information A. is performed only by the controller of a company.
A. is prepared following prescribed rules B. is only applicable when the company sustains a loss.
B. is prepared using whatever methods the company finds beneficial C. is concerned mainly with a operating a manufacturing segment.
C. is prepared for stockholders D. includes performance evaluation by management.
D. is prepared following Generally Accepted Accounting Principles
71. Planning is a function that involves
65. Which of the following does not describe managerial accounting? A. hiring the right people for a particular job.
A. internally focused C. externally focused B. coordinating the accounting information system.
B. emphasis on the future D. detailed information C. setting goals and objectives for an entity.
D. analyzing financial statements.
66. Management accounting
A. reports are always objective 72. In determining whether planned goals are being met, a manager is
B. provides information to external users performing the function of
C. generates general purpose financial statements and reports A. planning C. motivating
D. has few externally imposed standards B. controlling D. follow-up

67. Management accounting reports are prepared 73. Which of the following is not a separate management function?
A. to meet the needs of decision makers within the firm A. Motivating C. Controlling
B. whenever stockholders request them B. Planning D. Decision-making
C. according to guidelines prepared by the SEC
D. by CPAs 74. Total quality management emphasizes
A. zero defects C. elimination of waste
68. Which of the following is true of managerial accounting rather than B. continual improvement D. all of the above

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75. Automation of the manufacturing process increases 81. Which of the following best describes what performance evaluation
A. the quantity of information C. the number of should be designed to do?
production employees A. Modify goal and objectives each month C. Compare actual
B. the timeliness of information D. both a and b results to plan
B. Establish sales goals and targets D. Establish blame
76. Which of the following emerging themes in cost accounting deals with
managers striving to create and environment which will enable workers 82. In the planning and control process, what is the proper sequence of
to manufacture perfect (zero defect) products? events?
A. customer orientation C. total quality A. Set goals, set objectives, develop plans, implement plans, evaluate
management performance
B. global competition D. advance in B. Establish a master budget, set standard costs, develop variance
information technology analysis
C. Develop engineered costs, develop pricing targets, calculate
77. Managerial accounting creates value by: contribution margins
A. by forcing managers to analyze historical figures and interpret the D. Identify variable costs, identify fixed costs, project the sales mix,
results determine breakeven
B. by eliminating all pricing and costing errors
C. by focusing managers attention on the relationship between financial 83. Which of the following is a staff position?
and non-financial factors A. vice-president of production C. vice-president of
D. all of the above finance
B. vice-president of marketing D. plant foreman
78. Systems implemented to reduce defects in finished products with the
goal of achieving zero defects are 84. Which management position is responsible for raising capital?
A. activity-based costing systems. A. Internal auditor C. Controller
B. enterprise resource planning systems. B. Treasurer D. CFO
C. value chain systems.
D. total quality management systems. 85. All of the following would be considered staff functions EXCEPT:
A. the vice-president of finance
79. Which of the following functions is most directly related to management B. the vice-president of corporate planning
by objective? C. the vice-president of research and development
A. Reporting C. Control D. the vice president of marketing
B. Decision making D. Planning
86. Management accountants generally exercise which type of authority?
80. The setting of objectives and the identification of methods to achieve A. Company. C. Line.
those objectives is called B. Functional. D. Staff.
A. planning C. decision making
B. controlling D. performance 87. The treasurer function is usually not concerned with
evaluation A. investor relations.

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B. financial reports. balanced scorecard objective?

C. short-term financing. A. internal operations perspective C. financial perspective
D. credit extension and collection of bad debts. B. customer perspective D. learning and growth
perspective
88. Which of the following duties is usually assigned to the controller?
A. directing the granting of credit to clients
B. investing the organization’s funds 95. The balanced scorecard internal operations perspective includes
C. tax planning A. customer complaints C. market share
D. independently evaluating the firm’s financial statements B. number of engineering changes D. inventory turnover

89. Developing a company strategy for responding to anticipated new 96. Items that prevent the organization from attaining a higher level of
markets is an example of: achievement within its value chain are called the
A. decision making C. planning A. theory of constraints C. strategic costs
B. controlling D. motivating management
B. value chain D. cost management
90. Strategic cost management has emerged from a blending of: systems
A. cost driver analysis C. value chain analysis
B. strategic position analysis D. all of the above 97. The overall recognition of the importance of cost relationships among the
activities in the value chain and the process of managing those cost
91. Strategic cost management includes all of the following tools except: relationships among the activities in the value chain is called
A. standard cost variance analysis C. activity based A. the theory of constraints C. activity-based
management management of activities
B. value chain analysis D. all of the above B. the value chain D. strategic cost
management
92. Strategic planning is different from operational planning in that
operational planning: 98. The set of processes that transform raw materials into finished
A. involves large sums of money products is known as a
B. would be involved in determining production levels for next quarter A. value chain C. lowest cost strategy
C. involves only long range goals B. differentiation strategy D. flexible
D. operational and strategic planning are the same manufacturing system

93. Which of the following might be a performance measure for the financial 99. The period that begins with the arrival of materials and ends with the
perspective of a balanced scorecard? shipment of a completed goods refers to
A. percentage of on-time deliveries by the organization A. performance period. C. manufacturing cell.
B. percentage of product defects B. computer-integrated manufacturing. D. cycle time.
C. return on assets
D. percentage of market share held by the organization 100.Conventional and just-in-time manufacturers differ in that the
conventional manufacturer is likely to
94. The initiative to reduce non-value added activity is meeting which A. have a longer production cycle than its JIT competitors.

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B. need less storage space than its JIT competitors.

C. have a flexible manufacturing system. 107.“Racing with no finish” refers to
D. a high degree of quality control. A. developing the best selling product.
B. research and development.
101.A form of strategy that a management may adopt in order to attempt in C. benchmarking and continuous improvement.
creating a perception of uniqueness that will permit a higher selling D. designing the highest quality product in a given segmented market.
price.
A. Value chain. C. Lead time. 108.A company’s value chain reflects the
B. Lowest cost. D. Differentiation. A. organizational levels of authority and responsibility.
B. stages of production from raw materials to finished goods.
102.Deciding whether to sell a product or process it further is an example of C. linked set of activities that increase the value of products or
a(n): services.
A. controlling activity C. planning activity D. sales distribution network for the company’s products and services.
B. operating activity D. none of the above
109.The process of comparing, investigating, and evaluating the company’s
103.The benefits lost or forfeited as a result of selecting one alternative over processes or products against the best level of performance is known
another are called as
A. Differential costs C. Opportunity costs A. attestation. C. product review.
B. Sunk costs D. Indirect costs B. feedback. D. benchmarking.

104.Obtaining feedback is generally identified most directly with which of 110.Benchmarking allows managers to:
the functions of management? A. determine who in the industry performs similar processes most
A. Planning C. Controlling effectively.
B. Directing and motivating D. Decision making B. determine the processes that have high value-to-cost relationships.
C. compare certain internal processes, services and activities to
105.A staff position: those of other companies in order to identify strengths and
A. relates directly to the carrying out of the basic objectives of the weaknesses.
organization. D. reproduce another company’s product design and manufacturing
B. is supportive in nature, providing service and assistance to other processes to eliminate competitive advantage.
parts of the organization.
C. is superior in authority to a line position.
D. none of these.

106.The controller occupies:

A. a line position.
B. a staff position.
C. neither a line nor a staff position, since the accounting department
must be independent.
D. both a line and a staff position.

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