Chapter 19: Introduction to Management Accounting
Multiple Choice


1.  

All of the following statements are true regarding management accounting except __________.

the focus is on the future and includes activities such as preparing next year's operating budget.
reports include detailed information on the various operating segments of the business such as product lines or departments.
Generally accepted accounting principles (GAAP) does not have to be followed. There are no rules to be followed in management accounting.
it is used primarily by investors and creditors.


2.  

All of the following statements are true regarding service, merchandising, and manufacturing companies except __________.

for service companies, the most significant cost is usually labor.
merchandising companies re-sell products previously purchased from suppliers.
examples of merchandising companies including Nike and Reebok.
manufacturing companies convert raw materials into finished products.


3.  

All of the following statements are true regarding the value chain except __________.

managers are concerned about all steps within the value chain and view it as a whole.
it is important for managers to control costs of the entire chain.
managers proceed step by step in an exact order through the value chain.
the value chain applies equally to service, merchandising, and manufacturing firms.


4.  

All of the following statements are true regarding costs except __________.

direct costs can be specifically traced to a cost object.
examples of direct costs include the wheels and gears of a bicycle.
indirect costs cannot be specifically traced to a cost object.
examples of indirect costs include the salaries of employees assembling the bicycles.


5.  

All of the following statements are true regarding full product costs except __________.

they include all of the costs from research and development through production and through customer service, relating to a product.
they include costs in addition to those defined by GAAP as product costs.
they are used for internal decisions such as setting selling prices and deciding which products to emphasize or continue.
all of the above statements are true regarding full product costs.


6.  

All of the following statements are true regarding inventoriable product costs except __________.

they get reported on the financial statements.
they include costs such as designing and marketing the product.
they include only a portion of full product costs. The definition of inventoriable product costs is narrower in scope than that of full product costs.
they must conform with GAAP.


7.  

All of the following are period costs for a merchandising company except __________.

depreciation expense.
the cost of merchandise purchased for resale to customers.
the cost of rent incurred this accounting period.
employee salary expenses.


8.  

All of the following statements are true regarding inventoriable product costs for a manufacturing firm except __________.

utility costs for executive headquarters (separate from the plant).
janitorial salaries for the factory.
depreciation expense on plant equipment.
prime costs.


9.  

All of the following are true regarding the financial statements of a service corporation except __________.

the largest reported expense is usually employee salaries.
on the balance sheet, there is only one type of inventory reported.
the income statement reports no COGS.
on the income statement, all expenses are period costs.


10.  

All of the following are true regarding the financial statements of a merchandising corporation except __________.

employee salaries are product costs.
the largest reported expense is usually COGS.
the only inventoriable costs are for the purchase of goods + freight-in.
the multiple-step format of the income statement is generally used.


11.  

All of the following are true regarding the financial statements of a manufacturing corporation except __________.

the format of a manufacturer’s income statement is identical to the format of a merchandiser’s income statement.
a manufacturer uses purchases in computing COGS.
COGM is the cost of products that were completed during production this accounting period.
the balance sheet reports three different types of inventory accounts.


12.  

All of the following are current trends in the business environment except __________.

a shift toward an economy based on the service industry, rather than manufacturing.
globalization of the world economy.
using a just-in-time(JIT)management philosophy.
an emphasis on greater profitability by minimizing the quality goods and services.


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