Chapter 1:
Managerial Accounting
True/False Questions
True 1. Managerial accounting places less emphasis on precision and more emphasis on flexibility and
relevance than financial accounting.
True 2. Managerial accounting is not governed by generally accepted accounting principles (GAAP).
False 3. Financial accounting and managerial accounting reports must be prepared in accordance with
generally accepted accounting principles (GAAP).
True 4. When carrying out their directing and motivating activities, managers mobilize the
organization's human and other resources so that the organization's plans are carried out.
False 5. When carrying out planning activities, managers rely on feedback to ensure that the plan is
actually carried out and is appropriately modified as circumstances change.
False 6. When carrying out their directing and motivating activities, managers select a course of action
and specify how the action will be implemented.
True 7. Persons occupying staff positions provide support and assistance to other parts of the
organization.
False 8. Staff departments generally have direct authority over line departments in an organization.
True 9. Informal relationships and channels of communication often develop that do not appear on the
organization chart.
False 10.The controller's position in a retail company is considered a line position rather than a staff
position.
False 11.The Chief Financial Officer of an organization should present facts and refrain from offering
advice and personal opinion.
True 12. A strategy is a game plan that enables a company to attract customers by distinguishing itself
from competitors.
False 13. A strategy requires effective use of Six Sigma improvement techniques.
True 14. A customer value proposition is essentially a reason for customers to choose a company's
products over its competitors' products.
True 15. Customer value propositions tend to fall into three broad categories--customer intimacy,
operational excellence, and product leadership.
True 16. Companies that adopt a customer intimacy strategy are in essence saying to their target
customers, “The reason you should choose us is because we understand and respond to your
individual needs better than our competitors.”
False 17. Companies that choose an operational excellence strategy are in essence saying to their
customers, “Choose us rather than our competitors because we strive for zero defects.”
True 18. A value chain consists of the major business functions that add value to the company's products
and services.
True 19.Efforts designed to increase the rate of output should generally be applied to the workstation
that is the constraint.
True 20. The lean thinking model is a five step management approach that organizes resources such as
people and machines around the flow of business processes and that pulls units through these
processes in response to customer orders.
False 21. Supply chain management involves acquiring and bringing inside the company all of the
processes that bring value to customers.
True 22. An enterprise system integrates data across an organization into a single software system that
enables all employees to have simultaneous access to a common set of data.
False 23. Corporate governance is the legal framework that allows managers to control and direct lower-
level workers on the job.
True 24. The Sarbanes-Oxley Act of 2002 was intended to protect the interests of those who invest in
publicly traded companies by improving the reliability and accuracy of corporate financial
reports and disclosures.
True 25.The Standards of Ethical Conduct promulgated by the Institute of Management Accountants
specifically states, among other things, that management accountants have a responsibility to
disclose fully all relevant information that could be reasonably be expected to influence an
intended user's understanding of the reports, comments and recommendations presented.
Multiple Choice Questions
D 26. 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.
C 27. The plans of management are often expressed formally in:
A) financial statements.
B) performance reports.
C) budgets.
D) ledgers.
B 28. The phase of accounting concerned with providing information to managers for use in planning
and controlling operations and in decision making is called:
A) throughput time.
B) managerial accounting.
C) financial accounting.
D) controlling.
B 29. A staff position:
A) 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 the organization.
C) is superior in authority to a line position.
D) none of these.
B 30. For a manufacturing company, what type of position (line or staff) is each of the following?
Manager of a Data Processing Manager of a Production
Department Department
A) Staff Staff
B) Staff Line
C) Line Staff
D) Line Line
A 31. A _______________ position in an organization is directly related to the achievement of the
organization's basic objectives.
A) line
B) management
C) staff
D) None of the above.
C 32. ______________ is an example of a line position.
A) Controller for a merchandising company
B) Chief financial officer of a merchandising company
C) Store manager for Best Buy
D) Human resources manager for a community college
B 33. Which of the following is NOT one of the three major customer value propositions discussed in
the text?
A) customer intimacy
B) discount pricing
C) operational excellence
D) product leadership
C 34. Which of the following is NOT one of the five steps in the lean thinking model discussed in the
text?
A) Continuously pursue perfection in the business process.
B) Identify value in specific products/services.
C) Implement an enterprise system.
D) Create a pull system that responds to customer orders.
B 35. One consequence of a change from a push to a properly implemented pull production system
can be:
A) an increase in work in process inventories.
B) an extremely difficult cultural change due to enforced idleness when demand falls below
production capacity.
C) an increased mismatch between what is produced and what is demanded by customers.
D) an increase in raw materials inventories.
B 36. All of the following are characteristics of a pull production system EXCEPT:
A) Inventories are reduced to a minimum by purchasing raw materials and producing units
only as needed to meet consumer demand.
B) Raw materials are released to production far in advance of being needed to ensure no
interruptions in work flows due to shortages of raw materials.
C) Products are completed just in time to be shipped to customers.
D) Manufactured parts are completed just in time to be assembled into products.
C 37. The five step framework used to guide Six Sigma improvement efforts includes all of the
following EXCEPT:
A) Analyze.
B) Control.
C) Digitize.
D) Measure.
B 38. The Sarbanes-Oxley Act of 2002 contains all of the following provisions EXCEPT:
A) The audit committee of the board of directors of a company must hire, compensate, and
terminate the public accounting firm that audits the company's financial reports.
B) Financial statements must be audited once every three years by the Government
Accounting Office.
C) Both the CEO and CFO must certify in writing that their company's financial statements and
accompanying disclosures fairly represent the results of operations.
D) A company's annual report must contain an internal control report.
C 39. The Institute of Management Accountants' Standards of Ethical Conduct contains a policy
regarding confidentiality that requires that management accountants:
A) refrain from disclosing confidential information acquired in the course of their work except
when authorized by management.
B) refrain from disclosing confidential information acquired in the course of their work in all
situations.
C) refrain from disclosing confidential information acquired in the course of their work except
when authorized by management, unless legally obligated to do so.
D) refrain from disclosing confidential information acquired in the course of their work in all
cases since the law requires them to do so.
C 40. Which of the following is NOT one of the Institute of Management Accountants' five Standards
of Ethical Conduct?
A) Competence
B) Confidentiality
C) Independence
D) Integrity
Answer: C AACSB: Ethics AICPA BB: Critical Thinking AICPA FN: Decision Making LO: 4 Level:
Medium
Managerial vs. Financial Accounting. It is a good idea to begin the course by
contrasting managerial with financial accounting. Financial accounting is concerned with reports
to owners, creditors, and others outside of the company. Managerial accounting is concerned
with reports prepared for the internal use of management. Since these are internal reports, there
is no requirement that management accounting reports conform to GAAP. Indeed, it is desirable
to depart from GAAP in some instances.
