Chapter 01: Introduction to Managerial Accounting

Chapter 01: Introduction to Managerial Accounting

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True / False

• Managerial accounting reports must be prepared according to generally accepted accounting principles.
• True
• False

• Managerial accounting uses only past data in reports to aid management in the decision-making process.
• True
• False

• Managerial accounting information includes both historical and estimated data.
• True
• False

• Although finance and accounting professionals often work within verticals and other horizontals, they do not normally

report directly to the heads of those units or departments.

• True
• False

• The philosophy of focusing on “unexpected” good or bad performance is called management by exception.
• True
• False

• The functions reporting to the CFO sometimes are grouped together and referred to as corporate finance.
• True
• False

• In smaller companies, the term controller may be used to refer to the chief financial officer.
• True
• False

• The role of horizontals is to provide services, assistance, and advice to the various verticals and other horizontal

departments.

• True
• False

• Horizontals are departments within a company that are responsible for developing products.
• True
• False

• While no two company structures are identical, most large companies are organized in terms of verticals and

diagonals.

• True
• False

• Verticals prepare their own income statements.

(Managerial Accounting, 16e Carl Warren, William Tayler) (Test Bank, Answer at the end of each Chapter) 1 / 4

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Chapter 01: Introduction to Managerial Accounting

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• True
• False

• Managerial accounting reports are designed to meet the specific needs of a company’s management.
• True
• False

• Strategic planning is the process of monitoring operating results and comparing actual results with the expected

results.

• True
• False

• Operational planning is the process of developing the company’s short-term objectives and actions needed to achieve

the company’s long-term, strategic objectives.

• True
• False

• Control is the process of choosing goals and deciding how to achieve them.
• True
• False

• Evaluation is the process by which management monitors operations by comparing actual and expected results.
• True
• False

• A major focus of managerial accounting is the development of costing information.
• True
• False

• Managerial accounting information is for external users as well as company managers.
• True
• False

• A report analyzing how many products need to be sold to cover operating costs is not typically a managerial

accounting report.

• True
• False

• A report analyzing the dollar savings of purchasing new equipment to speed up the production process is a managerial

accounting report.

• True
• False

• A performance report that identifies the amount of employee downtime is a financial accounting report.
• True
• False
• / 4

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• Managerial accounting provides useful information to managers on product costs.
• True
• False

• In a service company, the cost of services is accumulated and reported as inventory.
• True
• False

• A cost is a sacrifice made to obtain some benefit.
• True
• False

• Goods that are partway through the manufacturing process, but not yet complete, are referred to as materials

inventory.

• True
• False

• The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead

cost.

• True
• False

• The cost of materials entering directly into the manufacturing process is classified as factory overhead cost.
• True
• False

• The cost of wages paid to employees directly involved in converting materials to finished product is classified as

direct labor cost.

• True
• False

• If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as direct

materials cost.

• True
• False

• For a construction contractor, the wages of carpenters would be classified as overhead cost.
• True
• False

• For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.
• True
• False

• Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are classified as 3 / 4

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factory overhead cost.

• True
• False

• Depreciation on factory plant and equipment is an example of factory overhead cost.
• True
• False

• The cost of oil used to lubricate factory machinery and equipment is an example of a direct materials cost.
• True
• False

• If the cost of materials is not a significant portion of the total product cost, the materials may be classified as part of

factory overhead cost.

• True
• False

• Factory overhead cost is sometimes referred to as factory burden.
• True
• False

• Conversion cost is the combination of direct labor cost and factory overhead cost.
• True
• False

• Conversion cost is the combination of direct materials cost and factory overhead cost.
• True
• False

• Factory overhead is an example of a product cost.
• True
• False

• Direct labor costs are included in the conversion costs of a product.
• True
• False

• The costs of materials and labor that do not enter directly into the finished product are classified as factory overhead.
• True
• False

• The costs of materials and labor that do not enter directly into the finished product are classified as cost of goods sold.
• True
• False

• Indirect labor would be included in factory overhead.
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