Chapter 1: Managerial Accounting

Question 1

What is managerial accounting?

Answer 1

Managerial accounting, also called management accounting, provides economic and financial information for managers and other internal users for decision-making.

Question 2

What are the distinguishing features of managerial accounting?

Answer 2

Managerial accounting focuses on providing information for internal decision-making, planning, directing, controlling, and is often more detailed and focused on subunits of the organization

Question 3

What are the three broad functions of management in managerial accounting?

Answer 3

The three broad functions of management are planning, directing, and controlling.

Question 4

How does managerial accounting fit into an organizational structure?

Answer 4

Managerial accountants serve as internal team members who assist managers in the decision-making process by providing relevant economic and financial information.

Question 5

Why is business ethics important in managerial accounting?

Answer 5

Business ethics ensure that the management accounting practices align with the overall goals of the organization and maintain trust and integrity in financial reporting.

Question 6

What is the primary purpose of managerial accounting reports?

Answer 6

The primary purpose of managerial accounting reports is to provide detailed financial and operational information for internal decision-making.

Question 7

How often are managerial accounting reports generated?

Answer 7

Managerial accounting reports are generated as frequently as needed, unlike financial accounting reports which are typically quarterly and annually.

Question 8

What is the verification process for managerial accounting?

Answer 8

Managerial accounting does not typically involve independent audits, whereas financial accounting reports are audited by CPAs.

Question 9

What are the primary users of managerial accounting reports?

Answer 9

The primary users of managerial accounting reports are internal users, such as officers and managers within the organization.

Question 10

What are the three broad functions of management?

Answer 10

The three broad functions of management are planning, directing, and controlling.

Question 11

What does planning entail in management?

Answer 11

Planning requires management to look ahead and establish objectives, such as maximizing short-term profits and market share, maintaining a commitment to environmental protection, and contributing to social programs.

Question 12

How does directing function in management?

Answer 12

Directing involves coordinating a company’s diverse activities and human resources to produce a smoothly running operation, including implementing planned objectives and providing necessary incentives to motivate employees.

Question 13

What is involved in the controlling function of management?

Answer 13

Controlling is the process of keeping the company’s activities on track, determining whether planned goals are being met, and taking corrective action as needed.

Question 14

What is the difference between line and staff positions within a company?

Answer 14

Line positions are directly involved in the company’s main revenue-generating operating activities, while staff positions support the efforts of the line employees and are not directly involved in these primary operations.

Question 15

What are the responsibilities of the chief financial officer (CFO)?

Answer 15

The CFO is responsible for maintaining the accounting records, ensuring an adequate system of internal control, and preparing financial statements, tax returns, and internal reports.

Question 16

What are the duties of the internal audit staff?

Answer 16

The internal audit staff is responsible for reviewing the reliability and integrity of financial information, ensuring that control systems are functioning properly, and investigating compliance with policies and regulations.

Question 17

Why is business ethics important in managerial accounting?

Answer 17

Business ethics is crucial in managerial accounting because all employees are expected to act ethically in their business activities, which is fundamental to the trust and integrity of financial reporting and corporate governance.

Question 18

What can happen when companies create improper incentives for managers?

Answer 18

Companies that create improper incentives may unintentionally encourage managers to take unethical actions to meet targets, such as using budgetary slack or engaging in fraudulent activities to receive higher compensation or maintain employment.

Question 19

What are some key provisions of the Sarbanes-Oxley Act of 2002?

Answer 19

The Sarbanes-Oxley Act requires CEOs and CFOs to certify financial statements, mandates an adequate system of internal controls, and requires audit committees of the board to be independent, among other things to ensure corporate accountability and financial integrity.

Question 20

What is corporate social responsibility?

Answer 20

Corporate social responsibility (CSR) refers to a company’s efforts to employ sustainable business practices with regard to its employees, society, and the environment, going beyond mere profitability to also consider the impact on people, planet, and profit.

Question 21

True or False: As a result of the Sarbanes-Oxley Act of 2002, managerial accounting reports must now comply with accounting principles accepted by the accounting profession.

Answer 21

True.

Question 22

True or False: Top managers must certify that a company maintains an adequate system of internal controls.

Answer 22

True.

Question 23

True or False: A company’s efforts to employ sustainable business practices with regard to its employees, society, and the environment is referred to as corporate social responsibility.

Answer 23

True.

Question 24

What is the focus of service industry trends in managerial accounting?

Answer 24

Service industry trends in managerial accounting focus on providing services rather than goods, with approximately 80% of Canadian and U.S. workers employed by service companies.

Question 25

What is the value chain in the context of managerial accounting?

Answer 25

The value chain includes all activities associated with providing a product or service, such as research and development, production, sales and marketing, delivery, customer relations, and subsequent service.

Question 26

How has technology affected the value chain?

Answer 26

Technology, like ERP systems and computer-integrated manufacturing (CIM), has centralized information management and automated processes, enhancing efficiency and reducing direct labor costs.

Question 27

What is just-in-time (JIT) inventory?

Answer 27

JIT inventory is a method where goods are manufactured or purchased just in time for use, reducing inventory levels and costs, and necessitating an increased emphasis on product quality.

Question 28

What is total quality management (TQM)?

Answer 28

TQM is a system aimed at reducing defects in finished products with the goal of achieving zero defects and improving product redesign processes.

Question 29

What is activity-based costing (ABC)?

Answer 29

ABC is a costing method that allocates overhead based on each product’s use of resources throughout various activities, leading to more accurate product costing.

Question 30

What is the theory of constraints?

Answer 30

The theory of constraints identifies and manages limitations within the value chain that limit a company’s profitability, focusing on identifying and eliminating the most significant constraints.

Question 31

What is lean manufacturing?

Answer 31

Lean manufacturing is a process that aims to eliminate waste and focus on customer needs by accurately managing operations and production, originally pioneered by Toyota.

Question 32

What is a balanced scorecard?

Answer 32

A balanced scorecard is a performance-measurement approach that uses both financial and non-financial measures to evaluate a company’s operations in an integrated way, ensuring alignment with the company’s overall objectives.

Question 33

How does a balanced scorecard benefit management?

Answer 33

It corrects management’s sometimes limited perspective and integrates various measures to ensure all parts of a company’s performance are assessed, not just financial metrics.

Question 34

What is the value of data analytics in managerial accounting?

Answer 34

Data analytics helps managers make more informed decisions by providing insights into the relationships between variables and business trends, making use of the vast amounts of data generated in every aspect of operations.

Question 35

How does Disney use data analytics with MagicBands?

Answer 35

Disney uses data from MagicBands for behavioral analytics to predict and influence customer behavior, adjust operations, plan for long-term improvements, and enhance customer experience.

Question 36

What are some key terms associated with trends in managerial accounting?

Answer 36

Key terms include Activity-Based Costing, Balanced Scorecard, Just-in-Time (JIT) Inventory, Total Quality Management (TQM), and Value Chain.

Question 37

Match the description to the term: All activities associated with providing a product or service.

Answer 37

Value Chain.

Question 38

Match the description to the term: A method of allocating overhead based on each product’s use of activities in making the product.

Answer 38

Activity-Based Costing.

Question 39

Match the description to the term: Systems implemented to reduce defects in finished products with the goal of achieving zero defects.

Answer 39

Total Quality Management (TQM).

Question 40

Match the description to the term: A performance-measurement approach that uses both financial and non-financial measures, tied to company objectives, to evaluate a company’s operations in an integrated fashion.

Answer 40

Balanced Scorecard.

Question 41

Match the description to the term: Inventory system in which goods are manufactured or purchased just as they are needed for use.

Answer 41

Just-in-Time (JIT) Inventory.