Management Advisory Services

Module 1 – Basic Concepts in Management Accounting

THE WORK OF MANAGEMENT AND THE NEED FOR MANAGERIAL ACCOUNTING INFORMATION
1. The major functions of management is (are):
a. strategic management and long-range planning.
b. planning and decision making.
c. identifying threats and opportunities for the firm.
d. all of the above.

2. The process of identifying, measuring, analyzing, interpreting, and communicating information in pursuit of an
organization's goals is called
a. managerial accounting c. financial accounting
b. management d. promotional activities

3. Which of the following is included in the day-to-day work of the management team?
a. decision making c. planning
b. controlling d. all of the above

4. Which of the following is true about planning carried out by management?

a. Identifying alternatives
b. Selecting from among the alternatives
c. Plans of management are often expressed formally in budgets.
d. All of the above

5. The activity of management by overseeing the day-to-day operations of the organization is called:
a. Planning. c. Controlling.
b. Directing and motivating. d. All of the above.

6. In the planning and control process, what is the proper sequence of events?
a. Set goals, set objectives, develop plans, implement plans, evaluate performance
b. Establish a master budget, set standard costs, develop variance analysis
c. Develop engineered costs, develop pricing targets, calculate contribution margins
d. Identify variable costs, identify fixed costs, project the sales mix, determine breakeven

7. Which of the following is true about controlling activities carried out by management?
a. It does not ensure that the plan is being followed.
b. By means of feedback, management is being signaled whether operations are on track.
c. Both A and B.
d. Neither A nor B.

COMPARISON OF FINANCIAL AND MANAGERIAL ACCOUNTING

8. Which of the following statements is true when comparing managerial accounting to financial accounting?
a. Managerial accounting places more emphasis on precision than financial accounting.
b. Both are highly dependent on timely information.
c. Both rely on the same accounting information system.
d. Managerial accounting is concerned with external decision makers.

9. Managerial accounting:
a. has its primary emphasis on the future.
b. is required by regulatory bodies such as the SEC.
c. focuses on the organization as a whole, rather than on the organization's segments.
d. All of the above.

10. Which of the following is a characteristic of financial accounting?

a. not mandatory
b. must follow GAAP
c. emphasis on relevance of data, rather than precision
d. both A and C above

11. Which of the following statements are true regarding financial and managerial accounting?
a. Both are mandatory.
b. Both rely on the same underlying financial data.
c. Both emphasize the segments of an organization, rather than just looking at the organization as a whole.
d. Both are geared to the future, rather than to the past.

12. Management accounting and financial accounting differ in that management accounting information
a. is prepared following prescribed rules
b. is prepared using whatever methods the company finds beneficial
c. is prepared for stockholders
d. is prepared following Generally Accepted Accounting Principles

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13. Which of the following does not describe managerial accounting?
a. internally focused c. emphasis on the future
b. externally focused d. detailed information
14. Management accounting reports are prepared
a. to meet the needs of decision makers within the firm
b. whenever stockholders request them
c. according to guidelines prepared by the SEC
d. by CPAs

DECENTRALIZATION AND THE CONTROLLER

15. A concept which refers to a technique of highlighting those which vary significantly from plans and standards in
line with the management principle that executive time should be spent on items that are non-routine and are
identified as top priority.
a. Management by objective. c. Either A or B.
b. Management by exception. d. Neither A nor B.

16. Which of the following functions is most directly related to management by objective?
a. Reporting c. Decision making
b. Control d. Planning

17. Decentralization refers to:

a. reporting for the company as a whole.
b. focusing reporting on parts of the company.
c. the delegation of decision-making authority throughout an organization.
d. differences in organizations.

18. Which of the following persons would occupy a line position in a department store?
a. Sales manager
b. Manager, advertising department
c. Manager, personnel department
d. Manager, finance department

19. Which of the following is a staff position?

a. vice-president of production c. vice-president of marketing
b. vice-president of finance d. plant foreman

20. A chief management accountant generally exercises which type of authority within an organization?
a. Company. c. Functional.
b. Line. d. Staff.

21. The treasurer function is usually not concerned with

a. investor relations.
b. financial reports.
c. short-term financing.
d. credit extension and collection of bad debts.

22. Which of the following duties is usually assigned to the controller?

a. directing the granting of credit to clients
b. investing the organization’s funds
c. tax planning
d. independently evaluating the firm’s financial statements

ETHICAL CONDUCT
23. Which item is not an IMA Standard of Ethical Conduct for Management Accountants?
a. Competence c. Loyalty
b. Integrity d. Objectivity
24. Which item is not true about competence according to IMA Standard of Ethical Conduct for Management
Accountants?
a. Management accountant must follow applicable laws, regulations, and standards.
b. Management accountants must provide accurate, clear, concise, and timely decision support information.
c. Management accountant must recognize and communicate professional limitations that preclude responsible
judgment.
d. Management accountants should not disclose confidential information unless legally obligated to do so.

25. Which item is not true about confidentiality according to IMA Standard of Ethical Conduct for Management
Accountants?
a. Do not disclose confidential information unless legally obligated to do so.
b. Ensure that subordinates do not disclose confidential information.
c. Communicate information fairly and objectively.
d. Do not use confidential information for unethical or illegal advantage.

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26. Which item is true about integrity according to IMA Standard of Ethical Conduct for Management Accountants?
a. Mitigate conflicts of interest and do not advise others of potential conflicts.
b. Perform conduct that would prejudice carrying out duties ethically.
c. Abstain from activities that might discredit the profession if someone is watching only.
d. All of the above.
e. None of the above.

27. Which item is not true about credibility according to IMA Standard of Ethical Conduct for Management
Accountants?
a. Communicate information fairly and objectively.
b. Disclose all relevant information that could influence a user’s understanding of reports and
recommendations.
c. Disclose delays or deficiencies in information timeliness, processing, or internal controls.
d. None of the above.

28. Which of the following is the first thing that a management accountant should do in case of ethical conflicts?
a. Discuss the conflict with immediate supervisor or next highest uninvolved managerial level.
b. If immediate supervisor is the CEO, consider the board of directors or the audit committee.
c. Consult an attorney regarding your legal obligations.
d. Follow the organization’s established policies for resolving ethical conflict.

29. In instances of ethical conflicts

a. Communication with individuals not employed by the organization is not appropriate even if legally
prescribed.
b. Remember that contact with levels above immediate supervisor could only be initiated even without
supervisor’s knowledge, assuming the supervisor is not involved.
c. Clarify relevant ethical issues with an objective advisor, such as a member of the IMA’s Ethics Counseling
Service.
d. All of the above.

CURRENT FOCUS OF MANAGEMENT ACCOUNTING

30. Which of the following is not one of the three major customer value propositions?
a. customer intimacy c. zero defects
b. lowest cost d. product leadership

31. A form of strategy that a management may adopt in order to attempt in creating a perception of uniqueness that
will permit a higher selling price.
a. Value chain. c. Lowest cost.
b. Lead time. d. Differentiation.

32. A company’s value chain reflects the

a. organizational levels of authority and responsibility.
b. stages of production from raw materials to finished goods.
c. linked set of activities that increase the value of products or services.
d. sales distribution network for the company’s products and services.

33. Creates a pull system where production is not initiated until a customer has ordered a product.
a. Supply chain management c. Just-in-time production or JIT
b. Theory of constraints d. Six Sigma

34. Which of the following is not an approach to improve business processes?

a. Lean production/lean thinking model c. All of the above.
b. Theory of constraints d. None of the above.

CERTIFICATION AVAILABLE TO MANAGEMENT ACCOUNTING

35. Which of the following statements is true concerning the Certified Management Accountants?
a. Experience in the accounting field is not necessary to earn the CMA.
b. Compliance with the Institute of Management Accountants' Statement of Ethical Professional Practice is not
necessary to earn the CMA.
c. To earn the CMA designation, an examination must be passed.
d. Both A and B.

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