Module 1

Question 1

Who are the users of managerial accounting?

Answer 1

Insiders - including executives, managers, and operators.

Question 2

Who focuses on financial accounting?

Answer 2

Outsiders - investors, creditors, government agencies, analysts & reporters.

Question 3

When comparing managerial and financial accounting, what kinds of information do they use?

Answer 3

Managerial will use economic, physical, and financial data.

Financial accounting only focuses on the financial data.

Question 4

Managerial accounting focuses more on the ______ information on the ________ of the organization

Answer 4

local

subunits

Question 5

Financial accounting focuses on the _______ information of the company, looking at the company as a _______.

Answer 5

global

whole

Question 6

Financial accounting is regulated by the ____ and _____ as well as GAAP.

Answer 6

SEC

FASB

Question 7

T or F: Managerial accounting is focused more on the value added principle as it relates to regulation.

Answer 7

True.

Question 8

Managerial accounting focuses on information that promotes ________ and enables ________.

Answer 8

relevance

timeliness

Question 9

Financial accounting is focused on ________ information only (objective, reliable and consistent).

Answer 9

factual

Question 10

Time horizon for managerial accounting is focused on the _______, ________, and _______ whereas financial is focused only on the ______.

Answer 10

past, present, and future

past

Question 11

How often is managerial and financial accounting reported?

Answer 11

managerial: continuously as needed

financial: delayed with emphasis on annual reporting

Question 12

What are the three types of costs that are incurred in the process of making products?

Answer 12

1. direct materials
2. direct labor
3. manufacturing overhead

Question 13

_____________ can be easily traced to the product while ________ cannot.

Answer 13

Direct costs

indirect cost

Question 14

What is a good example of an indirect cost and why?

Answer 14

Overhead is a good example because it includes indirect materials, indirect labor, depreciation, rent and utilities for manufacturing facilities.

Question 15

What is the process of allocating indirect costs of a product?

Answer 15

allocation

Question 16

Manufacturing costs are recorded as _______ when incurred and expensed as COGS when the product is _______.

Answer 16

inventory

sold

Question 17

What kind of material can be easily traced to a product?

Answer 17

direct materials

Question 18

How are the wages paid to production workers different from those paid to selling and admin employees?

Answer 18

Production worker wages are added to inventory and expensed as COGS when the product is sold. Selling & admin employee wages are expensed immediately.

Question 19

__________ costs are incurred before beginning the manufacturing process.

Answer 19

Upstream

Question 20

What kind of costs are incurred in the process of manufacturing?

Answer 20

midstream costs

Question 21

T or F: Downstream costs are the costs incurred prior to the manufacturing process.

Answer 21

False, they are costs incurred after the manufacturing process.

Question 22

What kind of costs is GAAP mostly concerned with?

Answer 22

Midstream costs (which are COGS)

Question 23

How do you calculate operating leverage?

Answer 23

Contribution margin / net income

Question 24

A contribution margin is calculated by subtracting _________ costs from ___________.

Answer 24

variable

revenue or sales revenue

Question 25

How can you find your break even point?

Answer 25

Fixed costs / contribution margin per unit

Question 26

If you want to make a certain profit above your break even point, how can that be calculated?

Answer 26

Fixed costs + profit / contribution margin per unit

Question 27

What is the high-low method?

Answer 27

A way to separate FC and VC given limited data.

Question 28

How is VC per unit calculated using the high-low method?

Answer 28

(High cost - low cost) / (high units / low units)

Question 29

FC is calculated in the high-low method by subtracting ____ per unit * _________ activity units from the _________ activity cost.

Answer 29

VC

highest

highest