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Principles of Accounting, Volume 2: Managerial Accounting

Chapter 1

Principles of Accounting, Volume 2: Managerial AccountingChapter 1

Chapter 1

Multiple Choice

1.

D

3.

A

5.

A

7.

A

9.

C

11.

A

13.

C

15.

C

17.

C

19.

B

21.

D

23.

D

25.

D

27.

C

Questions

1.

Answers will vary but should include that cost analysis, branding, pricing, and competition all fall under positioning, and this information comes from the managerial accounting staff. It is used to plan for future processes.

3.

Answers will vary but should include the following: Managers must determine what modifications and changes need to be made to operations to get back on track to meet the stated goals and objectives. Managers need to decide if stated goals and objectives should continue to be pursued as they are, or if they should be modified or completely scrapped. Examples may include revising inventory controls to include antitheft tags that trigger an alarm when inventory is moved from an approved location in order to reduce inventory losses; installing more cameras in more strategic locations to further reduce theft from shoplifting; revising the financial metrics such as ratios or other performance measurements to provide more meaningful and timely insight to help determine how to get back on track; investigating why market share has not changed as expected by talking to the sales force and analyzing market data; evaluating same-store sales to understand how to expand sales in accordance with goals and objectives; and investigating why a production process has experienced a bottleneck and how to relieve the pressure in that specific area, such as making sure appropriate raw materials are available in a timely manner to avoid machine shutdowns waiting on materials to arrive.

5.

Reports generated from financial accounting are a compilation of a company’s various transactions and contain aggregated information for the entire company in the form of financial statements. For publicly traded companies, these reports follow the rules set forth by the Financial Accounting Standards Board (FASB). In addition, the financial statements are verified by external auditors. Reports generated by managerial accounting are varied in nature because they are driven by the questions that need to be addressed by management. Different companies and different questions require different reports. Managerial accounting reports are therefore on a more detailed level, such as on a product or division level. There are no specific rules guiding the creation of these reports, and they are usually unaudited.

7.

The primary users of information gathered by managerial accountants are internal users, including management, employees, and officers.

9.

Six qualities a managerial accountant should exhibit are commercial awareness, collaboration, effective communication, strong technology skills, analytical skills, and ethics.

11.

The chain of command for someone being hired into an organization as a staff managerial accounting is: Management accounting supervisor → Controller → CFO → CEO → Board of Directors

13.

Specialization areas for management accountants includes budget analyst, financial analyst, accounting manager, controller, chief financial officer.

15.

Professional business organizations that have a code of ethics include the American Institute of Public Accountants, the Association of Certified Fraud Examiners, the Financial Executives Institute, the American Marketing Association, and National Society of Professional Engineers.

17.

Several accounting scandals involving publicly traded companies (Enron, WorldCom, and Arthur Andersen) led to the act. It was aimed particularly at public accounting organizations that performed audits of publicly traded corporations.

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