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1-2 Test Bank for Davis & Davis, Managerial Accounting, 4/e
To run a business effectively, managers need information that shows how well
operations are meeting the organization’s strategic goals. For instance, if the
organization’s strategy is to be a low-cost producer, information about product costs
and cost variances will be more useful to managers than information about research
and development.
5. Discuss the importance of ethical behavior in managerial accounting (Unit

1.3)
Ethical behavior means knowing right from wrong and then doing the right thing. Many
companies and most professional organizations have codes of conduct to guide
employees’ actions. Acting unethically can lead to illegal activity and ultimately to the
destruction of the firm. Furthermore, research has shown that a public commitment to
ethical behavior can lead to superior financial performance.
TRUE-FALSE STATEMENTS
1. Management accounting is the generation of relevant information and analysis provided to external
users.
Ans: False – Management accounting is the generation of relevant information and analysis to support managers’ decision-
making activities, LO: 1, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
2. The American Institute of Certified Public Accountants is the leading organization for management
accountants in the United States.
Ans: False – The Institute of Management Accountants (IMA) is the leading organization for management accountants in the
United States, LO: 1, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA:
Business Operations
3. The primary users of managerial accounting information are managers and other internal decision-
makers.
Ans: True, LO: 2, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
4. Managerial accounting provides reports and information for a range of decision makers outside an
organization.
Ans: False – Managerial accounting provides reports and information for a range of decision makers within an organization, LO:
2, Bloom: C, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
5. Managerial accounting differs from financial accounting in that managerial accounting has no
comparable set of rules governing what information must be provided to decision-makers or how
that information is presented.
Ans: True, LO: 2, Bloom: C, Unit: 1-1, Difficulty: Easy Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
6. Managerial accounting uses historical information, often with the purpose of comparing actual
results to budgeted results.
Reporting
7. Decision makers might have a long list of information they would find helpful, and they are generally
not willing to sacrifice accuracy for having the information quickly.
Ans: False – Decision makers might have a long list of information they would find helpful. But sometimes they might need to
sacrifice precision for timeliness, LO: 2, Bloom: C, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA
PC: None, IMA: Business Operations
8. Managerial accounting is designed to assist managers with four general activities: planning,
controlling, evaluating, and decision making.
Business Operations
9. Long-term planning is often referred to as reporting.

Business Operations
10. One purpose of planning activities is to monitor day-to-day operations to ensure that processes are
operating as expected.
Ans: False – One purpose of controlling activities is to monitor day-to-day operations to ensure that processes are operating as
expected, LO: 3, Bloom: C, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA:
Business Operations
11. All other things held equal, the more frequent the controlling activity, the faster an out-of-control
process can be corrected.
Ans: True, LO: 3, Bloom: C, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
12. The task of assessing how well employees have performed relative to expectations is a controlling
activity.
Ans: False – The task of accessing how well employees have performed relative to expectations is considered an evaluation
activity, LO: 3, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
13. Preparers of managerial accounting information are generally not active participants in the decision-
making process.
Ans: False – Preparers of managerial accounting information are no longer solely number crunchers, but active participants in
the decision-making process, LO: 3, Bloom: C, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC:
None, IMA: Business Operations
14. Managerial accounting information is always prepared by the controller or cost accountant.
Ans: False – Managerial accounting information can be provided by a controller, a plant accountant, a cost accountant, a
financial analyst, a budget or cost analyst, a general accountant, or even a chief financial officer, LO: 3, Bloom: C, Unit 1-1,
Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business Operations
15. Managerial accounting information provides feedback about how well the organization is
implementing its strategy and achieving its goals.
Ans: True, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA:
Strategy
16. For the product differentiation strategy, companies will want information on quality, such as defect
rates, percentage of on-time deliveries, and customer satisfaction.
Strategy
17. If a company follows a strategy of product differentiation, it will seek ways to set its products apart
from competitors’ in terms of quality, design or service.
Strategy
18. A company that focuses on product differentiation does not need to monitor product costs because
if the quality is sufficient, customers will pay the price.
Ans: False – A company that focuses on product differentiation must monitor product costs because if too much cost is incurred
for quality, the sales price will be too high to be competitive, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Analytic,
AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
19. The four strategies based on a firm’s approach to market share growth are build, hold, harvest and
divest.
Strategy
20. Under a build strategy, a company aims to increase its market share and competitive position
relative to others in the industry, maximizing its short-term earnings and positive cash flow.
Ans: False – Under a build strategy, a company aims to increase its market share and competitive position relative to others in
the industry, even at the expense of short-term earnings and cash flows, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 1,
AACSB: Analytic AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
21. A harvest strategy focuses on short-term profits and cash, even at the expense of market share.
Strategy
22. A divest strategy is appropriate when a company desires to enter a particular market.
Ans: False – A divest strategy is appropriate when a company desires to exit a particular market, LO: 4, Bloom: K, Unit 1-2,
Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
23. A tool that managerial accountants have developed to assist in monitoring organizational
performance is the balanced scorecard.
Business Operations
24. The balanced scorecard uses only nonfinancial information such as customer satisfaction or
employee turnover to measure performance.
Ans: False – While the balanced scorecard uses some financial performance measures, it places equal emphasis on nonfinancial
performance measures, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC:
None, IMA: Strategy
25. A supply chain is a network of facilities that procure raw materials, transform them into
intermediate goods and then into final products, and deliver the final products to customers
through a distribution system.
Business Operations
26. The supply chain’s goal is to reduce or eliminate defects.

Ans: False – The supply chain’s goal is to get the right product to the right location in the right quantities, at the right time, and
at the right cost, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA:
Business Operations
27. Just-in-time inventory management is an inventory strategy that focuses on reducing waste and
inefficiency by ordering inventory items so that they arrive just when they are needed.
Strategy
28. Just-in-time implementations are simple and take little or no effort to implement and will work for
most companies.
Ans: False – Just-in-time implementations take time and effort to implement and will not work for everyone, LO: 4, Bloom: C,
Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
29. The goal of an ERP system is to integrate all data from the company’s many business processes into
a single information system.
Ans: True, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Technology, AICPA FN: Reporting, AICPA PC: None, IMA:
Technology
30. Ethical behavior is knowing right from wrong and conducting yourself accordingly, so that your
decisions are consistent with your own value system and the values of those affected by your
decisions.
Ans: True, LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethics, IMA: Ethics
31. Ethical business behavior is compliance with the law.

Ans: False – Ethical business behavior is not the same as mere compliance with the law, LO: 5, Bloom: C, Unit 1-3, Difficulty:
Easy, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethics, IMA: Ethics
32. A firm’s code of conduct is based on a set of core values that are meant to guide employees’
behavior.
Ans: True, LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethics, IMA: Ethics
and Values
Answers to True-False Statements

Item Ans. Item Ans. Item Ans. Item Ans.
1. F 9. T 17. T 25. T
2. F 10. F 18. F 26. F
3. T 11. T 19. T 27. T
4. F 12. F 20. F 28. F
5. T 13. F 21. T 29. T
6. T 14. F 22. F 30. T
7. F 15. T 23. T 31. F
8. T 16. T 24. F 32. T
MULTIPLE-CHOICE QUESTIONS
33. The leading professional organization for management accountants is the
a. American Association of Management Accountants.
b. Institute of Management Accountants.
c. National Association of Accountants.
d. Society of Management Accountants.
Ans: B, LO: 1, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
34. In the context of managerial accounting, relevant information

a. is information that will make a difference in the decision.
b. is information that has been provided by the controller.
c. must be provided in quantitative terms.
d. must be reviewed by the chief financial officer before being provided to managers.
Ans: A, LO: 1, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
35. Good managerial accounting information helps

a. creditors decide on good credit risks.
b. managers to do their jobs.
c. stockholders make informed investment decisions.
d. creditors assess liquidity.
Ans: B, LO: 1, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
36. Managerial accounting is used by managers to

a. partner with management decision-making, devise planning and performance management
systems, and provide expertise to assist management in an organization’s strategy.
b. assure accountability for an organization’s resources, and provides information used in planning,
evaluation and controlling functions.
c. provide information used in planning, evaluation and controlling functions, and provide
expertise to assist management in an organization’s strategy.
d. assure appropriate use of an organization’s resources, accountability for an organization’s
resources, and provides information used in planning, evaluation and controlling functions
within an organization.
Ans: A, LO: 1, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
37. Which of the following is not a way managers use managerial accounting?
a. Provide information used in planning, evaluation and controlling functions
b. Partner with management decision-making
c. Assure accountability for an organization’s resources
d. Communicate information to stockholders
Ans: D, LO: 1, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
38. Managerial accounting is used by managers to

a. plan, evaluate, and control financial statements and to assure appropriate use of and
accountability for organizational resources.
b. generate and analyze relevant information to support managers’ strategic decision making.
c. focus on past results to aid in decision-making for managers.
d. decide the long-term direction of a company and comply with GAAP.
Operations
39. The purpose of financial statements contained in annual reports is to

a. aid in monitoring day-to-day decisions of operations to ensure the company’s strategy is
followed.
b. aid external financial users in analyzing product costs for the company’s segments and perform
short-term planning.
c. provide information to external users for decision making.
d. communicate a company’s strategic direction and controlling activities to external users.
Ans: C, LO: 2, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
40. An example of an external user is a

a. company president.
b. plant manager.
c. payroll supervisor.
d. creditor.
Reporting
41. An example of an external user is a

a. managerial accountant.
b. Vice-President of Marketing.
c. potential Investor.
d. Payroll Manager.
Ans: C, LO: 2, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
42. Which of the following is not a correct statement?

a. Managerial accounting benefits internal users.
b. Managerial accounting reports must comply with generally accepted accounting principles.
c. Managerial accounting includes reports and information prepared for a range of decision
makers within the organization.
d. Managerial accounting reports come in a variety of formats.
Ans: B, LO: 2, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
43. Which of the following is a characteristic of managerial accounting reports?

a. Managerial accounting reports are designed to provide the internal decision-makers with the
appropriate information.
b. Managerial accounting reports require compliance with a particular format.
c. Managerial accounting reports are distributed to the general public.
d. Managerial accounting reports are used by investors.
44. The information provided by managerial accountants is not distributed to the general public
because to do so
a. could provide competitors with vital information about corporate strategies and capabilities.
b. would be against the Institute of Management Accountants’ code of conduct.
c. would be against generally accepted accounting principles.
d. would violate federal trade laws.
45. The information provided by managerial accountants is not disseminated to the general public
because
a. to do so would violate federal trade laws.
b. it would be too expensive to distribute the information.
c. to do so would provide competitors with vital information about corporate strategies and
capabilities.
d. external users only need information about a company’s financial position, profitability, and
cash flows.
46. All public companies that are traded on a stock exchange and governed by the Securities and
Exchange Commission must prepare financial statements following
a. accounting principles set by the Federal Trade Commission.
b. generally accepted accounting principles.
c. generally appropriate accounting standards.
d. standards set by the Accounting Principles Board.
47. GAAP “rules” govern how

a. controlling activities are performed.
b. strategic plans should be designed.
c. a company evaluates its operational activities.
d. transactions are valued, recorded, and presented.
Ans: D, LO: 2, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
48. Since external users of financial statements have no way to verify the reported information,
a. they cannot make informed decisions from financial information.
b. FASB provides consequences to companies who distribute false managerial accounting reports
to outsiders.
c. GAAP provides a level of protection or assurance that the reports will follow certain standards.
d. internal reports are provided to them by management.
49. Since internal users have access to all the underlying data used for managerial accounting reports,
a. they can create reports that suit their particular decision-making needs.
b. there is no need to use financial data in making decisions.
c. they can easily incorporate it into financial statements and provide to external users.
d. they should provide it to potential investors when requested.
50. Which of the following statements is not true?

a. A company is unlikely to be successful in the long run without adequate managerial accounting
information to support decision making.
b. Managerial accounting is less detailed than external reporting.
c. Managerial accounting reports are covered by rules comparable to those governing financial
accounting.
d. Internal users have access to all the underlying data in managerial accounting reports.
51. Most managerial decisions are made at which of the following levels?
a. Organization-level
b. Operating-segment level
c. Managerial accounting level
d. Presidential level
Operations
52. The basic financial statements always report on transactions and events
a. that have already occurred.
b. that will occur in the future.
c. that are projected.
d. that have been audited.
Ans: A, LO: 2, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
53. Managerial accounting reports historical information often with the purpose of
a. comparing actual results to budgeted results.
b. helping managers to make decisions that will
c. improve the company’s past performance.
d. providing information about organizational segments, such as divisions, locations, and product
lines.
54. Managerial accounting reports

a. provide future projections and strategic goals to external users.
b. provide information to users to determine the profitability of individual product lines.
c. use information contained only in reports provided to external users.
d. use historical information, compare actual results to budgeted results, and project the results of certain
decisions.
Reporting
55. Which of the following statements is not true?

a. Managerial accounting reports often uses historical information.
b. Managerial accounting does not use estimates in preparing reports.
c. Managerial accountants use historical amounts in developing future projections.
d. Managerial accounting reports attempt to project the results of certain decisions.
Ans: B, LO: 2, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
56. Decision makers sometimes may need to sacrifice precision for timeliness because
a. receiving highly accurate information after the deadline has passed would enhance decision
making for future periods.
b. the nature of many business decisions requires precision in managerial accounting reports.
c. receiving highly accurate information after the deadline has passed would be of no help.
d. the nature of many business decisions focuses on the past rather than the future.
Ans: C, LO: 2, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
57. Managerial accounting is designed to assist managers with which of the following activities?
a. Planning, allocating, and operating
b. Leading, controlling, and planning
c. Evaluating, formulating, and leading
d. Planning, controlling, and evaluating
Ans: D, LO: 3, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
58. Which of the following is not an activity in which managerial accounting is designed to assist
managers?
a. Reporting
b. Controlling
c. Decision-making
d. Evaluation
Ans: A, LO: 3, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
59. Frequent feedback from planning, controlling, evaluating, and decision-making activities creates
which of the following types of decision-making process?
a. Linear
b. Circular
c. Scattered
d. Operational
Operations
60. Long-term planning is often referred to as

a. strategic planning.
b. operational planning.
c. goal-oriented planning.
d. external planning.
Ans: A, LO: 3, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
61. Short-term planning is often referred to as

a. strategic planning.
b. operational planning.
c. goal-oriented planning.
d. external planning.
Operations
62. Operational planning translates strategic planning into a plan to be completed within
a. three months.
b. one year.
c. five years.
d. ten years.
Ans: B, LO: 3, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
63. One of the primary products of the operational planning stage will likely be a
a. projected income statement.
b. pro forma balance sheet.
c. budget.
d. strategic plan.
Ans: C, LO: 3, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
64. One purpose of controlling activities is to

a. monitor day-to-day operations to ensure that processes are operating as expected.
b. translate long-term strategy into a short-term plan.
c. perform variance analysis and prepare performance reports.
d. translate short-term strategy into a long-term plan.
Ans: A, LO: 3, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: business
operations
a. Managers perform controlling activitieswith a frequency such as once a year or every 5 years.
b. in real time as operations are occurring.
c. by analyzing past transactions.
d. by choosing a course of action over the long-term.
Operations
65. All other things held equal, the more frequent the controlling activity,
a. the slower an out-of-control process will be corrected.
b. the faster an out-of-control process can be corrected.
c. the more likely employees may ignore the control.
d. the less likely employees may ignore the control.
Operations
66. To help managers with their evaluations, managerial accountants often perform
a. time tests.
b. spot checks.
c. variance analysis.
d. performance reviews.
Ans: C, LO: 3, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
67. The forefront of managerial activity is

a. planning activities.
b. controlling activities.
c. evaluating activities.
d. decision-making.
Operations
68. One of the planning activities that occupies managers is inventory planning. Which of the following
is not an input into this planning process?
a. Projected sales forecasts
b. Variance analysis of actual versus budgeted inventory
c. Projected supply and prices
d. Anticipated manufacturing capacity
Operations
69. Which of the following is not an input into the monitoring activities relating to production?
a. Actual production rate
b. Actual output
c. Anticipated production rate
d. Anticipation manufacturing capacity
Ans: D, LO: 3, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
70. Managerial accounting information is provided by which of the following individuals within an
organization?
a. An investor
b. A payables accountant
c. A cost accountant
d. A controller or a cost accountant
Reporting
71. Which of the following is not a role of a managerial accountant?

a. Prepare reports for the SEC
b. Analyze and interpret financial data
c. Analyze and interpret operating data
d. Active participant in the decision-making process
Ans: A, LO: 3, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
72. A company that wants to be successful needs to

a. know what it wants to accomplish.
b. know how to increase market share.
c. maintain a high gross profit rate.
d. involve upper level managers in daily operations
Ans: A, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
73. Michael Porter, a management strategy expert, developed a strategic framework in which a firm has
ways to develop a competitive advantage. Which of the following is not one of the ways Porter
suggested a firm use to develop a competitive advantage?
a. Product differentiation
b. Low cost production
c. Contribution differentiation
d. Customer satisfaction
Ans: C, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
74. Michael Porter, a management strategy expert, developed a strategic framework in which a firm has
ways to develop a competitive advantage. Which of the following is one of the ways Porter
suggested a firm use to develop a competitive advantage?
a. Supply chain management
b. Low-cost production
c. Just-in-time management
d. Enterprise Resource Planning
Ans: B, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
75. If a company follows a strategy of product differentiation, it will seek ways to set it products apart in
terms of
a. quality, design, or service.
b. price, demand, or service.
c. design, price, or popularity.
d. quality, demand, or life cycle.
76. If a company chooses a low-cost production strategy, the company will set itself apart from
competitors in terms of
a. quality.
b. lower selling price.
c. demand.
d. high-cost design.
77. In monitoring product differentiation strategy and low-cost production strategy, a difference is that
a. for the product differentiation strategy, information on quality is emphasized, while for low-
cost, production managers are more interested in the production process.
b. for the product differentiation strategy, information on the production process is emphasized,
while for low-cost production managers are more interested in maintaining quality.
c. for the product differentiation strategy, information on design is emphasized, while for low-cost
production, managers are more interested in quality.
d. for the product differentiation strategy, information on quality is emphasized, while for low-cost
production managers are more interested in design.
Ans: A, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
78. Which of the following are managers most likely to monitor, whether using product differentiation
or low-cost production strategy?
a. Customer satisfaction
b. The production process
c. External information such as competitor actions
d. Customer satisfaction and the production process
79. Which of the following are strategies based on a firm’s approach to market share growth?
a. Handle, control, hold, or harvest
b. Build, hold, harvest, or divest
c. Handle, expand, low-cost, or divest
d. Build, expand, hold, or divest
80. When a company approaches market share growth under a build strategy, the company
a. aims to increase its market share in the industry, even at the expense of short-term earnings
and cash flow.
b. seeks to maintain its current market share, while building its return on investment.
c. seeks market share growth by purchasing companies exiting the market.
d. focuses on short-term profits and cash.
81. When a company approaches market share growth under a hold strategy,
a. the company aims to hold its market share in the industry, even at the expense of short-term
earnings and cash flow.
b. the company seeks to maintain its current market share and generate a reasonable return on
investment.
c. the company seeks market share growth by purchasing companies exiting the market.
d. the company focuses on short-term profits and cash.
82. When a company approaches market share growth under a harvest strategy,
a. the company aims to increase its market share in the industry, even at the expense of short-
term earnings and cash flow.
b. the company seeks to maintain its current market share but build its return on investment.
c. the company focuses on short-term profits and cash, even at the expense of market share.
d. the company focuses on long-term profits and return on investment.
Ans: C, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
83. Which of the following is not a tool for monitoring strategic performance?
a. The balanced scorecard
b. Code of conduct
c. Supply chain management
d. Enterprise Resource Planning (ERP) systems
Ans: B, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, Technology, AICPA PC: None,
IMA: Strategy, Technology
84. Which of the following is not a correct statement relating to the balanced scorecard?
a. It was developed in the early 1990s by David Norton and Robert Kaplan.
b. It is a collection of performance measures that track an organization’s progress toward
achieving its goals.
c. The selection of performance measures used is driven by the organization’s network of facilities
used to produce and deliver its product.
d. It uses both financial and non-financial performance measures.
85. Which of the following is not a measure of performance for a balanced scorecard?
a. Stock price
b. Defect rates
c. Customer satisfaction
d. A hold strategy
Ans: D, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
86. Which of the following is not a category for performance measures used for a balanced scorecard?
a. Financial
b. Customer
c. Internal business processes
d. Regulatory
Ans: D, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
87. Which of the following is not a category for performance measures used for a balanced scorecard?
a. Learning and growth
b. Competitive
c. Internal business processes
d. Customer
88. In a survey of global business executives, what percentage did Bain & Company find were using a
balanced scorecard?
a. Almost 50%
b. Almost 70%
c. Almost 75%
d. Almost 25%
89. For which of the following would a balanced scorecard most likely be appropriate?
a. For-profit organizations and investors
b. Governmental units and stockholders
c. Service organizations and investors
d. For non-profit organizations and governmental units
Ans: D, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
90. Which of the following is not a step in the supply chain?

a. Put inventory into production as soon as it arrives
b. Deliver the final products to customers through a distribution system
c. Procure raw materials
d. Transform raw materials into intermediate goods and then into final products
Ans: A, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Operations
91. A supply chain’s goal is to

a. avoid carrying too much inventory.
b. to reduce or eliminate defective goods.
c. to measure performance based on financial and non-financial components.
d. to get the right product to the right location, in the right quantities at the right time, and at the
right cost.
Reporting
92. The supply chain’s goal is to get

a. the right product to the right location.
b. the product in the right quantities at the right time.
c. the product produced at any cost.
d. the right product to the right location and to get the product in the right quantities at the right
time.
Operations
93. Just-in-time inventory management (JIT) is an inventory strategy that focuses on

a. performance measures.
b. reducing waste and inefficiency.
c. getting the right product to the right location at the right price.
d. getting the product produced at any cost.
94. When using just-in-time inventory management, a company puts goods into production
a. in anticipation of customer orders.
b. when inventory levels drop below specified levels.
c. when customer orders are received and goods arrive.
d. when the warehouse has enough space to accommodate additional inventory.
95. Just-in-time inventory can be traced back to

a. Toyota Motor Company.
b. Henry Ford.
c. Microsoft.
d. Wal-Mart.
96. In a traditional inventory system,

a. inventory is accumulated in large amounts.
b. inventory is ordered just in time to be put into production.
c. the marketing manager determines how much inventory should be in stock.
d. the cost of carrying inventory is no more than with a JIT system.
97. Without affecting their ability to meet customer demand using a just-in-time system, some
companies have found they can reduce inventory levels by as much as
a. 5% to 10%.
b. 20% to 25%.
c. 35% to 40%.
d. 50% to 60%.
Ans: D, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
98. Which of the following statements relating to just-in-time inventory is not correct?
a. As soon as goods are completed, they are shipped directly to the customer.
b. Products are generally completed in small batches in response to customer requests.
c. Just-in-time is beneficial to all companies that implement it.
d. No safety stock is kept to protect units found to be defective.
99. A problem with traditional computerization of operations is that

a. functional areas such as marketing and production created systems to meet their own needs
without considering the needs of other areas.
b. they often result in efficient crossover between multiple systems.
c. functional areas such as production created its own system to meet its own needs without
considering the needs of other areas.
d. they often cause companies to stockpile inventory and not focus on the supply chain.
Ans: C, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 2, AACSB: Technology, AICPA FN: Reporting, Technology, AICPA PC:
None, IMA: Technology
100. Which of the following is an example of an enterprise resource planning (ERP) system?
a. JIT
b. Oracle
c. SCOR
d. Balanced scorecard
Ans: C, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 1, AACSB: Technology, AICPA FN: Reporting, Technology, AICPA PC: None,
IMA: Technology
101. The goal of an ERP system is to

a. reduce waste and inefficiency in the production process.
b. integrate all data from the company’s many business processes into a single information
system.
c. establish the direction in which an organization wishes to go.
d. monitor day-to-day operations to ensure that processes are operating as expected.
Ans: B, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 2, AACSB: Technology, AICPA FN: Technology, AICPA PC: None, IMA:
Technology
102. Ethical behavior is

a. always doing what benefits yourself regardless of the consequences to others affected by your
decision.
b. always choosing the behavior that will harm the least number of stakeholders.
c. knowing right from wrong and conducting yourself accordingly so that your decisions are
consistent with your own value system and the values of those affected by your decisions.
d. knowing right from wrong and conducting yourself accordingly so that your decisions are made
to benefit others affected by your decisions rather than yourself.
Ans: C, LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 2, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct, IMA:
Ethics
103. Which of the following is not a test of an ethical business decision as suggested by the Institute of
Business Ethics?
a. Would I want others to do to me what I am doing to them?
b. Do I mind others knowing what I have done?
c. Who does my decision affect or hurt?
d. Would my decision be considered fair by those affected?
Ans: A, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 2, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct , IMA:
Ethics
104. Ethical business behavior

a. is more than compliance with the law.
b. suggests that the spirit of the law is not as important than the letter of the law.
c. suggests that moral values and codes are less important than rules and policies.
d. occurs with compliance with the law.
Ans: A, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 2, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct, IMA:
Ethics
105. Which of the following statements related to ethical behavior is not a correct statement?
a. The spirit of the law is more important than the letter of the law.
b. Moral values and codes are more important than rules and policies.
c. A person is considered to uphold ethical business practices as long as he or she complies with
the law.
d. Ethical business behavior is not solely compliance with the law.
Ans: C, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 2, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct, IMA:
Ethics
106. According to a 2018 Global Business Ethics Survey, what percentage of employers had a written
code of conduct?
a. 26%, up from 17% in 1994
b. 47%, up from 35% in 1994
c. 78%, up from 67% in 1994
d. 82%, up from 35% in 1994
Ethics
107. The Sarbanes-Oxley Act requires that all publicly traded companies disclose whether certain
executives are subject to a corporate code of ethics. Which of the following executive positions
need not be disclosed?
a. Principal executive officer
b. Principal marketing officer
c. Principal financial officer
d. Principal accounting officer
Ans: B, LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 2, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct, IMA:
Ethics
108. The Sarbanes-Oxley Act requires that all publicly traded companies disclose whether certain
executives are subject to a corporate code of ethics. Which of the following executive position
need not be disclosed?
a. Principal production officer
b. Principal financial officer
c. Principal accounting officer
d. Principal executive officer
Ans: A, LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 2, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct, IMA:
Ethics
109. Under the Sarbanes-Oxley Act, which of the following is a requirement of the corporate code of
ethics?
a. Cannot be published in the annual report or on the corporate website, or provided at no
charge upon request
b. Must disclose specific instances in which these codes have been waived for a particular
individual
c. Must disclose all breaches to the code in the annual report
d. Must disclose all changes to the code
Ans: D, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 2, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct, IMA:
Ethics
110. Under the Sarbanes-Oxley Act, which of the following related to the corporate code of ethics is not
required?
a. Must be published in the annual report or on the corporate website or provided at no charge
upon request
b. Must disclose the likelihood of a breach of the code based on the industry and structure of the
corporation
c. Must disclose all instances in which these codes have been waived for a particular individual
d. Must disclose all changes to the code
Ans: B, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 2, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct, IMA:
Ethics
111. The leading professional organization for managerial accountants is

a. The American Institute of Managerial Accountants.
b. The Society of American Management Accountants.
c. The Institute of Management Accountants.
d. The National Society of Management Accountants.
Ethics
112. A key component of a positive ethical environment is

a. legal requirements.
b. regulatory requirements.
c. industry requirement.
d. tone at the top, or management’s commitment to ethical behavior.
Ethics
113. Which of the following is not a type of unethical behavior employees might observe?
a. Abusive or intimidating behavior
b. Lying to employees
c. Misreporting of hours worked
d. Requiring employees to sign an acknowledgement that they must adhere to the corporate
code of conduct.
Ethics
114. Which of the following is not a type of unethical behavior employees might observe?
a. Requiring employees to sign an acknowledgement that they understand and will adhere to the
corporate code of conduct
b. Putting one’s own interest ahead of the organization’s interest
c. Misreporting of hours worked
d. Lying to employees
Ethics
115. Which of the following is a type of unethical behavior employees might observe?
a. Putting one’s own interest in line with the organization’s interest
b. Misreporting of hours worked
c. Posting a journal entry twice in error
d. Misreporting of hours worked and lying to employees
Ethics
116. Which of the following is a not a consequence of unethical behavior?

a. It can lead to illegal activity.
b. It can lead to the destruction of the firm.
c. It can lead to inferior financial performance.
d. It can lead to improved financial performance.
Ethics
117. Which of the following is least likely to be in a company’s code of ethics?

a. Profit margin expected
b. Transparency of information
c. Political activity
d. Commitment to the environment
Ethics

a. Access to information
b. Projected percentage of employees who act unethically
c. Development and fundraising
d. Clarity of information
Ethics

a. Transparency of information
b. Commitment to the environment
c. Maximum amount of bonuses to be paid to executives
d. Discrimination
Ethics
120. Which of the following is not a standard of the IMA statement of ethical professional practice?
a. Competence
b. Integrity
c. Credibility
d. Independence
Ans: D, LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct, IMA:
Ethics
121. Which of the following is not a standard of the IMA statement of ethical professional practice?
a. Competence
b. Integrity
c. Objectivity
d. Confidentiality
Ethics
122. Which of the following is not a duty of a management accountant under the IMA Statement of
Ethical Professional Practice’s competence standard?
a. Maintain an appropriate level of professional expertise by continually developing knowledge
and skills.
b. Provide decision support information and recommendations that are accurate, clear, concise
and timely.
c. Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid
apparent conflicts of interest. Advise all parties of any potential conflicts.
d. Perform professional duties in accordance with relevant laws, regulations, and technical
standards.
Ethics
Ethical Professional Practice’s confidentiality standard?
a. Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
b. Keep information confidential except when disclosure is authorized or legally required.
c. Inform all relevant parties regarding appropriate use of confidential information. Monitor
subordinates’ activities to ensure compliance.
d. Refrain from using confidential information for unethical or illegal advantage.
Ethics
124. The IMA Statement of Ethical Professional Practice includes which of the following components?
a. Overarching principles that express members’ values
b. Penalties assessed for failure to follow ethical standards
c. Types of employee misconduct
d. Procedures to identify ethical integrity
Ethics
a. Overarching principles of reprimand for apparent conflicts of interest
b. Interpretations of principles
c. Guidance for penalties for unethical conduct
d. Internal controls useful in establishing a code of conduct
Ethics
a. Articles that express members’ ethical requirements
b. Standards that guide members’ conduct
c. Laws that support ethical conduct
d. GAAP requirements for ethics
Ethics
Ethical Professional Practice’s credibility standard?
a. Communicate information fairly and objectively.
b. Disclose all relevant information that could reasonably be expected to influence an intended
user’s understanding of the reports, analyses, or recommendations.
c. Disclose delays or deficiencies in information, timeliness, processing, or internal controls in
conformance with organization policy and/or applicable law.
d. Disclose information when only good for financial performance improvements.
Ethics
128. The IMA Statement of Ethical Professional Practice applies to

a. all accountants.
b. all CPAs.
c. all members of the IMA.
d. all those employed by a company with a code of conduct.
Ethics
Ethical Professional Practice’s integrity standard?
a. Mitigate actual conflict of interest.
b. Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
c. Properly exercise authority.
d. Abstain from engaging in or supporting any activity that might discredit the profession.
Ethics
130. Which of the following is not a component of the IMA Statement of Ethical Professional Practice
standards?
a. Reliability
b. Confidentiality
c. Integrity
d. Credibility
Ans: A, LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct, IMA:
Ethics
131. In applying the Standards of Ethical Professional Practice, when faced with ethical issues, you
should
a. follow your organization’s established policies on the resolution of such conflict.
b. hire a professional investigator to resolve the conflict.
c. contact the authorities immediately.
d. ignore the conflict to give it time to resolve itself.
Ethics
Answers to Multiple Choice Questions

Item Ans Item Ans Item Ans Item Ans Item Ans
33. B 53. A 73. A 93. D 113. D
34. A 54. D 74. C 94. B 114. D
35. B 55. B 75. B 95. C 115. A
36. A 56. C 76. A 96. B 116. D
37. D 57. D 77. B 97. A 117. D
38. B 58. A 78. A 98. D 118. A
39. C 59. B 79. C 99. C 119. B
40. D 60. A 80. B 100. C 120. C
41. C 61. B 81. A 101. C 121. D
42. B 62. B 82. B 102. B 122. C
43. A 63. C 83. C 103. C 123. C
44. A 64. A 84. B 104. A 124. A
45. C 65. B 85. C 105. A 125. A
46. B 66. B 86. D 106. C 126. B
47. D 67. C 87. D 107. C 127. B
48. C 68. D 88. B 108. B 128. D
49. A 69. B 89. A 109. A 129. C
50. C 70. D 90. D 110. D 130. C
51. B 71. D 91. A 111. B 131. A
52. A 72. A 92. D 112. C 132. A
MATCHING
132. Match the following terms to the appropriate statement by placing the letter to the left of each
statement.
a. Balanced Scorecard g. Generally Accepted Accounting Principles (GAAP)
b. Code of conduct h. Just-in-time inventory
c. Controlling i. Long-term planning
d. Enterprise Resource Planning (ERP) j. Managerial accounting
e. Ethical behavior k. Short-term planning
f. Evaluating l. Supply chain
____ 1. Based on a set of core values that are meant to guide employees’ behavior.
____ 2. Task managers use to assess how well employees have performed relative to expectations.
____ 3. Rules that govern how transactions are valued and recorded and how information about
them is presented.
____ 4. The generation of relevant information and analysis to support managers’ decision-making
activities.
____ 5. A tool that managerial accountants have developed to assist in monitoring organizational
performance.
____ 6. A system to accumulate data and provide information to decisions makers on a company-
wide basis.
____ 7. Also referred to as strategic planning.
____ 8. A network of facilities that procure raw materials, transform them into intermediate goods
and then into final products, and deliver the final products to customers through a
distributions system.
____ 9. The monitoring of day-to-day operations to identify any problems that require corrective
action.
____ 10. Knowing right from wrong and conducting oneself accordingly.
____ 11. A strategy that focuses on reducing waste and inefficiency by ordering inventory items so
that they arrive just when they are needed.
____ 12. Also referred to as operational planning.
Ans: N/A, LO: 1,2,3,4,5, Bloom: K, Unit 1-1,1-2,1-3, Difficulty: Easy, Min: 5, AACSB: Ethics, AICPA FN: Reporting, AICPA PC:
Ethical Conduct, IMA: Ethics
Solution:
1. B – Code of conduct
2. F – Evaluating
3. G – Generally accepted accounting principles
4. J – Managerial accounting
5. A – Balanced scorecard
6. D – ERP
7. I – Long-term planning
8. L – Supply chain
9. C – Controlling
10. E – Ethical behavior
11. H – Just-in-time inventory
12. K – Short-term planning
BRIEF EXERCISES
134. Indicate which of the following users are classified as internal versus external users.
Internal External
a. Plant superintendent
b. Banker
c. Internal Revenue Service
d. Warehouse manager
e. Potential investor
Ans: N/A, LO: 2, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
Solution:
a Internal
b External
c External
d Internal
e External
135. List four differences in managerial and financial accounting.
Ans: N/A, LO: 2, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 5, AACSB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Solution:
1. Primary users of managerial accounting are internal while primary users of financial accounting
are external users.
2. Managerial accounting does not have mandated rules, while financial accounting must adhere to
GAAP.
3. Managerial accounting reporting units include organizational segments, while financial
accounting reports on the organization as a whole.
4. Managerial accounting uses past results and projects future results, while financial accounting
reports on past results but does not project future results.
5. Managerial accounting reports are prepared on an “as needed” basis, while financial accounting
reports are prepared after the end of an accounting period.
136. Managerial accounting is designed to assist managers with four general activities: planning,
controlling, evaluating and decision making. Give two examples of each type of activity for a
furniture manufacturer.
Ans: N/A, LO: 3, Bloom: C, Unit 1-1, Difficulty: Easy, Min: 6-8, AACSB: None, AICPA FN: Reporting, AICPA PC: None, IMA:
Business Operations
Solution: Answers will vary. Common examples may include the following.
Planning:
Setting and implementing long-term goals, preparing budgets, adopting strategies or implementing
short-term or operational goals.
Controlling:
Monitoring day-to-day operations, monitoring quality of products manufactured, ensuring that
inventory is on hand to manufacture, or monitoring customer satisfaction.
Evaluating:
Correcting problems found during control activities such as evaluating quality of materials used in
production, comparing actual and planned results such as comparing actual output with budgeted
output, or reviewing sales history of sales staff.
Decision-making:
Choosing a course of action such as adding or dropping a product line, increasing or reducing
employee level, purchasing new equipment, or expanding sales territory.
137. Two ways to develop a competitive advantage is through product differentiation and low-cost
production. How does a company set itself apart from competitors under each strategy?
Ans: N/A, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 3-4, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Strategy
Solution:
If a company follows a strategy of product differentiation, it will seek ways to set its products apart
from its competitors in terms of quality, design or service. Under a low-cost production strategy, the
company will set itself apart from competitors in terms of a lower sales price.
138. Two ways to develop a competitive advantage are through product differentiation and low-cost
production. List three examples of managerial accounting information a company might need to
monitor each of these strategies.
Ans: N/A, LO: 4, Bloom: AP, Unit 1-2, Difficulty: Moderate, Min: 12, AACSB: None, AICPA FN: Reporting, AICPA PC: None, IMA:
Strategy
Product Differentiation Low-Cost Production
Defect rates Product process
Percentage of on-time deliveries Product quality
Customer satisfaction Product cost
Competitor actions Competitor actions
Product cost
139. For each statement below, indicate the management tool being implemented.
Management
Supply Chain
Scorecard
Balanced
ERP
JIT
1. A company places equal emphasis on financial and non-financial
performance measures.
2. Goal is to get the right product to the right location, in the right
quantities, at the right time, and at the right cost.
3. Performance measures are grouped into financial, customer,
internal business processes, and learning and growth categories.
4. Focuses on reducing waste and inefficiency.
5. Examples of such a system include SAP and Oracle.
Ans: N/A, LO: 4, Bloom: C, Unit 1-2, Difficulty: Easy, Min: 4, AACSB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
Solution: Management
Supply Chain
Scorecard
Balanced
ERP
JIT
1. A company places equal emphasis on financial and non-financial

performance measures. x
quantities, at the right time, and at the right cost. x
3. Performance measures are grouped into financial, customer,
internal business processes, and learning and growth categories. x
4. Focuses on reducing waste and inefficiency. x
5. Examples of such a system include SAP and Oracle. x
140. For each of the statements below, indicate which approach to market share growth is being used.
Build Hold Harvest Divest

1. With this strategy, a company focuses on short-term profits
and cash, even at the expense of market share.
2. This strategy is appropriate when a company desires to exit
a particular market.
3. Under this strategy, a company seeks to maintain its
current market share and generate a reasonable return on
investment.
4. Under this strategy, a company aims to increase its market
share and competitive position relative to others in the
industry, even at the expense of short-term earnings and
cash flow.
5. To monitor this strategy, managers will want to know about
gross margin and cash sales.
Ans: N/A, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 4-5, AACSB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Strategy
Solution:
Build Hold Harvest Divest
1. With this strategy, a company focuses on short-term profits
and cash, even at the expense of market share. x
2. This strategy is appropriate when a company desires to exit
a particular market. x
3. Under this strategy, a company seeks to maintain its
current market share and generate a reasonable return on
investment. x
4. Under this strategy, a company aims to increase its market
share and competitive position relative to others in the
industry, even at the expense of short-term earnings and
cash flow. x
5. To monitor this strategy, managers will want to know about
gross margin and cash sales. x
141. List the three tests of an ethical business decision posed by the Institute of Business Ethics.
Ans: N/A, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 3, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct, IMA:
Ethics
Solution:
1. Do I mind others knowing what I have done?
2. Who does my decision affect or hurt?
3. Would my decision be considered fair by those affected?
142. List the four standards that guide a management accountant’s conduct as specified by the IMA
Statement of Ethical Professional Practice and give two responsibilities under each standard.
Ans: N/A, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 10, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethical Conduct,
IMA: Ethics
Solution:
1. Competence
a. Maintain an appropriate level of professional expertise by continually developing knowledge
and skills.
b. Perform professional duties in accordance with relevant laws, regulations, and technical
standards.
c. Provide decision support information and recommendations that are accurate, clear,
concise, and timely.
d. Recognize and communicate professional limitations or other constraints that would
preclude responsible judgment or successful performance of an activity.
2. Confidentiality
a. Keep information confidential except when disclosure is authorized or legally required.
b. Inform all relevant parties regarding appropriate use of confidential information. Monitor
c. Refrain from using confidential information for unethical or illegal advantage.
3. Integrity
a. Mitigate actual conflicts of interest. Regularly communicate with business associates to
avoid apparent conflicts of interest. Advise all parties of any potential conflicts.
b. Abstain from engaging in or supporting any activity that might discredit the profession.
4. Credibility
a. Communicate information fairly and objectively.
b. Disclose all relevant information that could reasonably be expected to influence an intended
c. Disclose delays or deficiencies in information, timeliness, processing, or internal controls in
EXERCISES
143. Indicate which of the following users are classified as internal versus external users.
Internal External
1. Purchasing manager
2. Potential investor
3. Internal Revenue Service
4. Inventory control manager
5. Supplier
6. Quality control manager
7. Chief financial officer
8. Banker
9. Warehouse manager
10. Payroll supervisor
Reporting
Solution:
Internal External
1. Purchasing manager X
2. Potential investor X
3. Internal Revenue Service X
4. Inventory control manager X
5. Supplier X
6. Quality control manager X
7. Chief financial officer X
8. Banker X
9. Warehouse manager X
10. Payroll supervisor X
144. Indicate which of the following statements relate to financial accounting versus managerial
accounting.
Managerial
Financial
1. Must adhere to generally accepted accounting principles.
2. Primary users are external.
3. Past results and projected future results.
4. Reports prepared after the end of an accounting period.
5. Financial statements contained in annual reports.
6. Reports benefit internal users.
7. Reports come in a variety of formats, designed for the decision maker.
8. Information not disseminated to the general public.
9. Communicates information about the financial health of the company.
10. Includes information prepared for a range of decision makers within
the organization.
Reporting
Solution:
Managerial
Financial
1. Must adhere to generally accepted accounting principles. X
2. Primary users are external. X
3. Past results and projected future results. X
4. Reports prepared after the end of an accounting period. X
5. Financial statements contained in annual reports. X
6. Reports benefit internal users. X
7. Reports come in a variety of formats, designed for the decision maker. X
8. Information not disseminated to the general public. X
9. Communicates information about the financial health of the company. X
10. Includes information prepared for a range of decision makers within X
the organization.
145. In each of the following situations, identify whether the setting is primarily financial accounting or
managerial accounting.
a. Abba Company purchased a new telephone system costing $132,000 for its sales division. The
new phone system will be depreciated using the straight-line method over a period of five
years and has an estimated salvage value of $5,000.
b. Bandex Company has had several customers who are experiencing negative effects of the
downturn in the economy. As a result, the company believes its allowance for doubtful
accounts should be increased from 1% of credit sales to 1.5% of credit sales.
c. Cortez, Inc. has experienced a decline in net income over the past three years. The engineering
department is considering redesigning a product to eliminate waste and inefficiency in the
production process.
d. The sales manager of Decca Corporation believes one salesman is creating fictitious sales to
inflate his commission. The sales manager has asked the controller for a detailed report of
sales by salesman.
e. Essex, Inc. executives are meeting to analyze the company’s actual results compared to
budgeted amounts.
Ans: N/A, LO: 2, Bloom: AN, Unit 1-1, Difficulty: Moderate, Min: 5-6, AACSB: None, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
Solution:
a. Financial
b. Financial
c. Managerial
d. Managerial
e. Managerial
146. In each of the following situations, identify whether the setting is primarily financial accounting or
managerial accounting.
a. Falcon Company sent its annual report to its stockholders.
b. Genesis, Inc.’s controller sent a report of actual versus budgeted sales figures to the sales
manager.
c. Hurtz Rent-All Company determines that its investments have declined in value and should be
adjusted.
d. Inca, Inc. controller suspects that cash is being stolen by a sales clerk. As a result, she prepares
an analysis to compare each sales clerk’s collections for each day.
e. Jones Company executives are meeting to review the annual report to be submitted to the
SEC.
Reporting
Solution:
a. Financial
b. Managerial
c. Financial
d. Managerial
e. Financial
147. Michael Mounts owns several used bookstores in Cleveland. Identify each of the following actions
he performs as a planning, controlling, evaluating, or decision-making activity:
Controlling
Evaluating
Planning
Decision
Making
1. Michael prepares a budget for the next year.
2. Michael orders shelving to replace some old shelving.
3. Michael reviews his income statement for the month.
4. Michael prepares an annual performance review for his salesclerk.
5. Michael fires an employee who is consistently late.
6. Michael investigates adding an on-line sales division.
7. Michael puts a new 401-K benefit plan into effect for employees.
8. Michael determines how many books he can add when new shelves
are installed.
9. Michael reconciles cash with cash register tapes at the end of each
day.
10. Michael decides to implement a code of conduct for all employees.
Ans: N/A, LO: 3, Bloom: AP, Unit 1-1, Difficulty: Moderate, Min: 5-6, AACSB: None, AICPA FN: Reporting, AICPA PC: None, IMA:
Business Operations
Solution:
Controlling
Evaluating
Planning
Decision
Making
1. Michael prepares a budget for the next year. x
2. Michael orders shelving to replace some old shelving. x
3. Michael reviews his income statement for the month. x
4. Michael prepares an annual performance review for his sales clerk. x
5. Michael fires an employee who is consistently late. x
6. Michael investigates adding an on-line sales division. x
7. Michael puts a new 401-K benefit plan into effect for employees. x
8. Michael determines how many books he can add when new shelves
are installed. x
9. Michael reconciles cash with cash register tapes at the end of each
day. x
10. Michael decides to implement a code of conduct for all employees. x
148. Lilly Grant owns an ice cream shop in Marigold. Identify each of the following actions she performs
as a planning, controlling, evaluating, or decision-making activity:
Controlling
Evaluating
Planning
Decision
Making
1. Lilly meets with her sales staff to discuss long-range planning
strategies.
2. Lilly prepares a mission, values, and vision statement for her
company.
3. Lilly monitors the ice cream machine to make sure it is working
properly.
4. Lilly checks her inventory of toppings to ensure that enough toppings
are in stock.
5. Lilly fires an employee who has been giving her friends banana splits
without charging them.
6. Lilly adjusts the timer on her ice cream machine because the ice
cream has been too soft.
7. Lilly puts a new 401-K benefit plan into effect for her employees.
8. Lilly compares her budgeted sales to her actual sales for the period.
9. Lilly evaluates her employees’ pay rates.
10. Lilly meets with her CPA to discuss a succession plan for when she
retires.
Business Operations
Solution:
Controlling
Evaluating
Planning
Decision
Making
1. Lilly meets with her sales staff to discuss long-range planning
strategies. x
2. Lilly prepares a mission, values, and vision statement for her
company. x
3. Lilly monitors the ice cream machine to make sure it is working
properly. x
4. Lilly checks her inventory of toppings to ensure that enough toppings
are in stock. x
5. Lilly fires an employee who has been giving her friends banana splits
without charging them. x
6. Lilly adjusts the timer on her ice cream machine because the ice
cream has been too soft. x
7. Lilly puts a new 401-K benefit plan into effect for her employees. x
8. Lilly compares her budgeted sales to her actual sales for the period. x
9. Lilly evaluates her employees’ pay rates. x
10. Lilly meets with her CPA to discuss a succession plan for when she
retires. x
149. Kristin West owns a car wash in Clinton. Identify each of the following actions she performs as a
planning, controlling, evaluating, or decision-making activity:
Controlling
Evaluating
Planning
Decision
Making
1. Kristin prepares a budget for the next quarter.
2. Kristin replaces an old vacuum with a more energy efficient model.
3. Kristin looks at her cash flow statement for the last quarter to analyze
her cash receipts and disbursements.
4. Kristin checks the change machine to make sure it is dispensing the
correct change.
5. Kristin fires an employee who has been stealing supplies from the
storeroom.
6. Kristin adjusts the timer on the rinse cycle to save water.
7. Kristin implements a new bonus plan where employees can earn
prizes for cost-saving ideas.
8. Kristin compares her budgeted expenses to her actual expenses for
the period.
9. Kristin works on a code of conduct for the company.
10. Kristin prepares a five-year strategic plan.
Ans: N/A, LO: 3, Bloom: AP, Unit 1-1, Difficulty: Moderate, Min: 5-6, AACSB: None, AICPA FN: Reporting, AICPA PC: None,
IMA: Business Operations
Solution:
Controlling
Evaluating
Planning
Decision
Making
1. Kristin prepares a budget for the next quarter. x
2. Kristin replaces an old vacuum with a more energy efficient model. X
3. Kristin looks at her cash flow statement for the last quarter to analyze
her cash receipts and disbursements. x
4. Kristin checks the change machine to make sure it is dispensing the
correct change. x
5. Kristin fires an employee who has been stealing supplies from the
storeroom. X
6. Kristin adjusts the timer on the rinse cycle to save water. x
7. Kristin implements a new bonus plan where employees can earn
prizes for cost-saving ideas. X
8. Kristin compares her budgeted expenses to her actual expenses for
the period. x
9. Kristin works on a code of conduct for the company. x
10. Kristin prepares a five-year strategic plan. x
150. Managerial accounting information is not just for accountants. All areas within an organization can
use the information to support decision-making. For each of the following positions, list three
decisions the manager might have to make and give an example of a report that would help the
manager in the decision-making process.
a. Plant manager
b. Vice-President of sales
c. Inventory supervisor
Ans: N/A, LO: 3, Bloom: AP, Unit 1-1, Difficulty: Moderate, Min: 8-10, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Business Operations
a. Plant manager
Do we need to replace a piece of production equipment? Report of units by machine showing
number of units produced, number of hours the machine operated, number of breakdowns, and
number of defective units.
Do we need to increase inventory levels? Report of current inventory levels, inventory needs for
orders received but not in production yet, analysis of vacant space in storeroom.
Do we fire an employee suspected of slacking on the job? Report of time logged by employee,
number of days missed, summary of supervisor evaluations.
b. Vice-President of sales
Do we expand territory into another state? Market analysis for new territory, summary of
competitors expected to be in new territory, filing requirement (such as fees, taxes, etc., to state
agencies), analysis of current sales managers’ territories.
Do we need to add a new sales manager for the current territory? Analysis of sales by territory.
Do we need to increase advertising? Analysis of competitor activities, analysis of budgeted
advertising expense.
c. Inventory supervisor
Do we need to increase inventory levels? Analysis of number and type of requisitions for
inventory.
Do we need to purchase a new forklift? Report of repair costs for current forklift.
Do we need to have more security over inventory? Report of inventory write-downs due to
theft, report of possible security measures with costs analysis of each.
151. Managerial accounting information is not just for accountants. All areas within an organization can
use the information to support decision-making. For each of the following positions, list three
decisions the manager might have to make and give an example of a report that would help the
manager in the decision-making process.
a. Human resources manager
b. Purchasing manager
c. Engineering department
Ans: N/A, LO: 3, Bloom: AP, Unit 1-1, Difficulty: Moderate, Min: 5-6, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
a. Human resources manager
Is pay equitable for similar positions? Report of employee salaries by position.
Are the salaries authorized and paid correctly? Report of authorized salaries and gross salaries
by employee.
Are any individuals being paid twice? Report of employees showing social security number,
address, name, date hired, and authorized hiring personnel.
b. Purchasing manager
Have all orders been received? Report of open purchase orders.
Have all requisitioned materials been processed? Report of requisitioned materials.
c. Engineering department
Is quality of material acceptable? Report of defective units
Does engineering software need to be updated? Analysis of cost of software company support
costs.
Does product meet regulatory specifications? Analysis of regulatory requirements.
152. For each statement below, indicate the management tool being described.
Management
Supply Chain
Scorecard
Balanced
ERP
JIT
1. The selection of performance measures is driven by the
organization’s strategy.
quantities, at the right time, and at the right cost.
3. In implementing this system, managers develop a strategy for
managing all the resources needed to meet customer demand.
4. This strategy greatly reduces warehousing costs.
5. Examples of such a system include SAP and Oracle.
6. This strategy focuses on reducing waste and inefficiency by
ordering inventory items so that they arrive just when they are
needed.
7. A collection of performance measures that track an organization’s
progress toward achieving its goals.
8. In the 1950s, this strategy’s roots can be traced back to Henry
Ford.
9. A network of facilities that procure raw materials, transform them
into intermediate goods, and then into final products.
10. Developed in the early 1990s by David Norton and Robert Kaplan.
Business Operations
Solution:
Management
Supply Chain
Scorecard
Balanced
ERP
JIT
1. The selection of performance measures is driven by the
organization’s strategy. x
quantities, at the right time, and at the right cost. x
3. In implementing this system, managers develop a strategy for
managing all the resources needed to meet customer demand. x
4. This strategy greatly reduces warehousing costs. x
5. Examples of such a system include SAP and Oracle. x
6. This strategy focuses on reducing waste and inefficiency by
ordering inventory items so that they arrive just when they are
needed. x
7. A collection of performance measures that track an organization’s
progress toward achieving its goals. x
8. In the 1950s, this strategy’s roots can be traced back to Henry
Ford. x
9. A network of facilities that procure raw materials, transform them
into intermediate goods, and then into final products. x
10. Developed in the early 1990s by David Norton and Robert Kaplan. x
153. For each of the following measures that could be incorporated into a balanced scorecard, identify
which of the four balanced scorecard perspectives to which it would most likely belong.
a. Earnings per share
b. Prototype of redesigned product
c. Addition of athletic facility for employees
d. Number of customer complaints handled
e. Net sales
f. Number of new customers
g. Number of defective units identified in quality control division
h. Day care center on site
i. Professional development seminars conducted for sales staff
j. Recognized by local Chamber of Commerce as Business of the year
Strategy
Solution:
a. Financial f. Customers
b. Internal Business Processes g. Internal Business Processes
c. Learning and Growth h. Learning and Growth
d. Customers i. Learning and Growth
e. Financial j. Internal Business Processes
154. For each of the following measures that could be incorporated into a balanced scorecard, identify
which of the four balanced scorecard perspectives to which it would most likely belong.
a. New employee training session
b. Number of positive responses received from customer surveys
c. Number of customer complaints handled by phone during month
d. Gross profit
e. Number of new products introduced during past year
f. Number of defective units identified in quality control division
g. Training on new equipment purchased
h. Number of deliveries made within proscribed time frame
i. Professional development seminars conducted for sales staff
j. Recognized by major supplier as Customer of the Year
Strategy
Solution:
a. Learning and Growth
b. Customers
c. Customers
d. Financial
e. Internal Business Processes
f. Internal Business Processes
g. Learning and Growth
h. Customers
i. Internal Business Processes
j. Learning and Growth
PROBLEMS
155. Managerial and financial accounting differ in several different ways. Explain these differences by
completing the table below.
Managerial Accounting Financial Accounting

Primary users
Mandated rules
Reporting unit
Time horizon
Timing of information
Ans: N/A, LO: 2, Bloom: K, Unit 1-1, Difficulty: Easy, Min: 8-10, AACSB: None, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
Solution:
Managerial and financial accounting differ in several different ways. Explain these differences by
completing the table below.
Managerial Financial
Accounting Accounting
Internal: Managers and other internal External: Investors and creditors
Primary users
decision makers
None Generally accepted accounting
Mandated rules
principles (GAAP)
Organizational segments such as Organization as a whole
Reporting unit divisions, locations, and product
lines
Past results and projected future Past results
Time horizon
results
As needed, even if information is not After the end of an accounting
Timing of information
exact period
SHORT ANSWER
156. Juan’s Ortiz’s taco stand in Bomfa, California, specializes in fresh, handmade tacos. While Juan’s
business does not yet have a national presence, he does have a strong citywide reputation.
Recently, Juan has been receiving orders from other parts of the country through the company’s
website. He is beginning to think about the potential for growing his out-of-city business.
Required:
a. How can managerial accounting information be useful to Juan as he thinks about growing his
out-of-city business?
b. What decisions might Juan need to make if he decides to grow his out-of-city business?
c. What managerial accounting information might Juan find useful as he decides how to grow his
out-of-city business?
Ans: N/A, LO: 1, 3, 4, Bloom: E, Unit 1-1 , 1-2, Difficulty: Difficult, Min: 10-12, AACSB: Communications, AICPA FN: Reporting,
AICPA PC: Communication, IMA: Reporting
Solution: Answers will vary.

a. Managerial accounting information can be useful when growing a business. The information
obtained can be used in the areas of planning, controlling, evaluating, and ultimately for
decision-making. Juan can use managerial information to predict out-of-city demand,
additional costs to meet this new demand, and the income generated by the new demand.
After sales are made, Juan will be able to assess whether making out-of-city sales is as
profitable as he expected.
b. One important decision that Juan would need to make is the rate at which to grow his
business. In what areas and by how much should he increase capacity of operations? Juan
would need to decide what type of strategy, product differentiation versus low-cost
production, to pursue when growing his business. He will also need to decide how
performance will be evaluated.
c. Budgeting is a useful tool when growing a business and is an important part of the planning
function of managerial accountants. Budget information will provide useful information
about how resources are to be allocated.
157. A relatively new tool that managerial accountants have developed to assist is the balanced
scorecard.
Required:
Explain the purpose of the balanced scorecard. List the various perspectives comprising the
balanced scorecard, and state what each perspective measures.
Communication, IMA: Strategy
Solution:
The balanced scorecard is a collection of performance measures that track an organization’s
progress toward achieving its goals. The balanced scorecard is comprised of the following
perspectives:
a. Financial: uses financial performance measures that are common to most firms, such as EPS
and current ratio.
b. Customer: evaluates a company from the viewpoint of the customer in terms of price, quality,
innovation, customer service, and on-time delivery.
c. Learning and growth: evaluates how well a company trains and retains its employees.
d. Internal business processes: evaluates the value chain to ensure company is operating
effectively and efficiently.
158. As part of their continuing effort to improve business processes to deliver maximum value to their
customers, many businesses have adopted one or more of the following systems:
a. Supply chain management

b. Just-in-time-inventory (JIT)
c. Enterprise resource planning (ERP) systems
Required:
Describe each of the three systems and their goal.
Ans: N/A, LO: 4, Bloom: K, Unit 1-2, Difficulty: Easy, Min: 5-6, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
Solution:
a. A supply chain is a network of facilities that acquire raw materials, transform them into
intermediate goods and then into finished products, and deliver them through a distribution
system. The goal is to get the right product to the right customer, in the right quantities, at the
right time, and for the right cost.
b. Just-in-time inventory is an inventory system that focuses on having raw materials on hand just
in time to complete customers’ orders as they are received. The goal is to reduce the costs
associated with maintaining inventory.
c. Enterprise resource planning systems are electronic systems used to accumulate and provide
information to decision makers on a companywide basis. The goal of ERP systems is to integrate
all data from the company’s many business processes into a single information system.
159. Define managerial accounting and explain how managerial accounting information helps managers
do their jobs.
Solution:
Managerial accounting is defined by the IMA as a profession that involves partnering in
management decision making, devising planning and performance management systems, and
providing expertise in financial reporting and control to assist management in the formulation and
implementation of an organization’s strategy.
Simply put, managerial accounting is the generation of relevant information and analysis to support
managers’ decision-making activities.
Good managerial accounting information helps managers to do their jobs more efficiently and
effectively. A large part of a manager’s job is decision-making. To make the best decisions possible,
managers need a wealth of good information. Much of that information will be the product of a
managerial accounting system.
160. Compare and contrast strategic planning and operational planning.
Ans: N/A, LO: 3, Bloom: AN, Unit 1-1, Difficulty: Moderate, Min: 5-6, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Solution:
Both strategic planning and operational planning are planning activities, one of the four general
activities of managers. Strategic planning relates to long-term planning, while operational planning
is another name for short-term planning. Strategic planning establishes the direction in which an
organization wishes to go. Many organizations prepare a formal strategic plan that provides
direction for a five- to ten-year period. Operational planning translates the long-term strategy into
a short-term plan to be completed within the next year. One of the primary products of operational
planning is likely a budget that specifies how resources will be spent to achieve the organizational
goals.
161. Managerial accounting is designed to assist managers with four general activities. List the activities
and give an example of each.
Planning – Preparing a budget
Controlling – Monitoring day-to-day operations
Evaluating – Assessing how well employees are performing
Decision making – Selecting the best option for an employee health care plan
162. List three reasons why it is important for a company to have a written code of conduct.
Ans: N/A, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 2-3, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Ethics, IMA: Ethics
a. It provides the core values of the company.
b. It guides employees in their behavior.
c. It may be required by the Sarbanes-Oxley Act.
163. What are the requirements of Section 406 of the Sarbanes-Oxley Act regarding publicly traded
company’s code of conduct?
Ans: N/A, LO: 5, Bloom: K, Unit 1-3, Difficulty: Easy, Min: 4-5, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Business Operations
Solution:
a. Companies must disclose whether the “principal executive officer, financial officer, principal
accounting officer or controller, or persons performing similar functions” are subject to a
corporate code of ethics.
b. The code must be published in the annual report or on the corporate website or provided
without charge upon request.
c. Companies must disclose all instances in which these codes have been waived for a particular
individual as well as all changes to the code.
d. A company that does not have a written code of ethics is required to publish a disclosure
explaining why no code has been adopted.
Essay
164. Assume your roommate is a management major and must take this managerial accounting course
next semester. You have explained some of the things you have learned thus far, but your
roommate states, “I don’t know why I would need to know anything about managerial accounting!
I am not an accounting major and will NEVER be preparing any managerial accounting reports. As
long as I make a profit for the company for which I will work, who cares what the accountants’
reports say?” How would you respond?
Solution:
Managerial accounting helps managers in their decision-making activities. Managerial accounting
information helps managers do their jobs more efficiently and effectively. Managerial accounting
reports are not constrained by GAAP and can provide information in various formats and at
whatever detailed level a manager needs. Since internal users have access to all of the underlying
data, they can create reports that suit their particular decision-making needs. Managerial
accounting reports not only provide information to managers from historical information but helps
managers make decisions that will affect the company’s future by projecting the results of certain
decisions.
165. A key component of a positive ethical environment is “tone at the top.” Discuss what this term
means, and why this is a key component.
Ans: N/A, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 3, AACSB: Communication, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Ethics
Tone at the top means management’s commitment to ethical behavior. It is a key component
because, if employees are to act ethically, managers must not only “talk the talk”, but “walk the
walk”. Employees who witness managers engaging in unethical behavior will assume that while the
company may have a corporate code of ethics, it does not really matter.
166. Your boss has asked you to lead a committee to develop a code of conduct for the company. Write
a memo to the committee members to schedule your first meeting. In your memo, list the six
components you believe are most important to be included in the code and explain why.
Ans: N/A, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 12-14, AACSB: Ethics, Communication, AICPA FN: Reporting, AICPA PC:
Ethics, IMA: Ethics
Solution: Answers will vary.
January 15, 20xx
To: Code of Conduct committee members
From: Student Name
Subject: Preparation for first meeting in two weeks
Thank you for agreeing to serve on the committee to develop a code of conduct for our company.
This is a daunting task, but one that will benefit the company and employees. Our first meeting will
be in two weeks. Please be prepared to contribute your thoughts and ideas on what we should
incorporate into the code.
I have listed six items below that many companies include in the document. At our first meeting we
will expand this list to incorporate the elements the committee deems to be appropriate for our
particular needs. I look forward to working with each of you and will be respectful of the time and
effort you are giving to this project.
(Examples of items)
Workplace Harassment
Equal Opportunity
Diversity
Fair Treatment of Employees
Discrimination
Disclosure of Information
Commitment to the Environment
167. The Institute of Management Accountants (IMA) and many other professional organizations have a
code of conduct to direct the membership’s ethical behavior. Discuss the standards that guide the
conduct of members of the IMA.
Ans: N/A, LO: 5, Bloom: C, Unit 1-3, Difficulty: Easy, Min: 15-20, AACSB: Ethics, AICPA FN: Reporting, AICPA PC: Communication,
Ethics, IMA: Ethics
Solution:
Competence
Maintain an appropriate level of professional expertise by continually developing knowledge
and skills.
Perform professional duties in accordance with relevant laws, regulations, and technical
standards.
Provide decision support information and recommendations that are accurate, clear,
concise, and timely.
Recognize and communicate professional limitations or other constraints that would
preclude responsible judgment or successful performance of an activity.
Confidentiality
Keep information confidential except when disclosure is authorized or legally required.
Inform all relevant parties regarding appropriate use of confidential information. Monitor
Refrain from using confidential information for unethical or illegal advantage.
Integrity
Mitigate actual conflicts of interest. Regularly communicate with business associates to
avoid apparent conflicts of interest. Advise all parties of any potential conflicts.
Abstain from engaging in or supporting any activity that might discredit the profession.
Credibility
Communicate information fairly and objectively.
Disclose all relevant information that could reasonably be expected to influence an intended
Disclose delays or deficiencies in information, timeliness, processing, or internal controls in
168. The Institute of Management Accountants (IMA) and many other professional organizations have a
code of conduct to direct the membership’s ethical behavior. The IMA standards include
competence, confidentiality, integrity, and credibility. For each standard, give a situation in which
the code of conduct will help a management accounting in his or her decision making.
Ans: N/A, LO: 5, Bloom: AN, Unit 1-3, Difficulty: Moderate, Min: 10-12, AACSB: Ethics, AICPA FN: Reporting, AICPA PC:
Communication, Ethics, IMA: Ethics
Competence
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three miles off; called Gurglepool? It seems from his
description to be an odd and mysterious hole in the earth,
and I cannot recall hearing the name before, though the
girls have evidently been aware of Its existence.
"There are two holes," Nona said, "one big and one
little. Eustace told us about them."
I suggested an excursion to the place to-morrow, and

Thyrza seconded me.
Maggie immediately protested. She said that "she and

the rest" had settled to drive up the Dale in the waggonette.
They wanted to see the road to the station by daylight.
"Very well," I replied. "One day is as good as another

for Gurglepool."
I noted a gleam of quiet intelligence in Mr. Stockmoor's

eyes, and five minutes later, as we were departing, he
offered to bring "t' trap" on the morrow to "t' hoose," that I
and one or two others might still carry out my project.
As the waggonette could not contain all our party, and I

should, of course, be the one left out, I felt no scruple about
accepting the offer, with thanks.
But are the Denhams really proposing to stay near us?

And if so, is it on our account or on their own? Thyrza thinks
their coming very probable.
"And I don't care, for my part, whether they do or

don't," she added. "I get so tired of the talk about Sir
Keith's virtues. Only I do wish somebody could keep Maggie
from behaving like an utter goose! It is all Millie's fault. If
you knew the nonsense she talks to Maggie!"
"Better, perhaps, that I should not know, since I cannot
check it," I said gravely. "And, my dear, I don't think you
have to judge Maggie."
She looked up at me, with tears in her eyes.
"If only they would not treat you so!" she said. "I
shouldn't mind anything else so much."
Her sympathy does comfort me. I cannot help feeling

that.
August 8. Saturday.—We had our drive in the dog-cart

yesterday, Thyrza and I,—not only to Gurglepool and back,
but quite a long round, through the wildest country, all
dales and mountains, tea-coloured golden-bedded torrents,
trees, grass and rocks, blue sky and sunshine, with nothing
to mar the complete enjoyment, except recollections which
could not be utterly put aside.
No one but Thyrza would come with me. I think

Denham wished it, and had not resolution to stand out
against the conclave of sisters.
Elfie looked unhappy all the morning, and shunned me

persistently. I hardly like to allow to myself how keenly I am
pained by this change of manner. I begged Maggie and
Nona to take care that she was not overdone, and this was
all that I could do, for they were bent on taking her, and I
knew that the waggonette would be full without Thyrza and
myself.
The next Dale, running parallel with Beckdale, quite

different in character, hardly so lovely, I thought, yet with
its own distinctive beauty. The hills are lower, more bare
and bleak, and the inevitable river which drains it flows
often underground, entirely disappearing for a while
beneath the dry and stony bed which marks its course, and
later on reappearing. In times of flood, the dry bed is filled
with a rushing stream.
Far up the Dale we entered a pretty and picturesque

little side-valley, branching off at right angles, and well filled
with trees. By-the-bye, when I spoke of Gurglepool as
about three miles off, I did not understand that that was
only the short-cut walking distance. It is a long drive.
At the entrance of this small valley, Mr. Stockmoor bade

us dismount, and gave us full leave to remain as long as we
liked. He had to stay in charge of the horse, while we
explored; but we were not to be in any haste. If the
directions given by himself failed to be sufficient, a woman
from a cottage at the upper end would act as our guide.
"Don't let us have a guide. Much better fun to hunt out

things for ourselves," Thyrza said, and we plunged into the
wooded ravine.
There was a lesser hole, as well as the greater

Gurglepool, Mr. Stockmoor said, his description therein
agreeing with Nona's. We came upon this lesser hole first,—
a mysterious cleft in the earth, slanting downward to
unknown black regions, paved with loose stones which
doubtless act often as the bed of a watercourse. They
looked only damp yesterday. Rocks rose high around the
sloping mouth, and shrubs grew thickly thereupon. Thyrza
and I climbed to a good position for kneeling on the edge
and peering over. The sight was altogether weird. I flung a
stone down, and it rattled onward in a slow descent, quite
two or three seconds after disappearing from sight.
Whether it then reached the bottom, or whether sound
merely ceased because deadened by distance, we could not
tell.
"Looks like a pathway that might lead to the centre of

the earth," Thyrza said. "Or like the entrance to some
underground giant castle. Miss Con, haven't you had
enough? Come and see if Gurglepool itself is different."
I had not had enough, but Mr. Stockmoor was waiting.

So we went on through the wild little valley, presently
mounting one of its grassy sides, till we reached Gurglepool.
Neither of us said anything at first. We only stood still

near the edge, gazing. Thyrza slipped one arm through
mine, and I felt her give a shudder.
Gurglepool is really a circular hole,—of what diameter I

do not know, but I should guess it to be about thirty feet
across: and I am told that it is sixty or seventy feet in
depth, not counting the dark still pool of water at the
bottom, usually some twenty-five feet deep. An
underground stream flows in and out of that pool, not
visibly stirring its surface. So, of all awful places to fall into
—! I could not help this thought arising, as I looked.
The sides of the hole are rocky, and precipitously steep,

except on one side, where a path descends sharply to the
margin of earth beside the pool: not a very inviting path,
albeit rendered fairly safe by a rough wooden hand-rail,
reaching from above to below.
The woman from the cottage, spoken of by Mr.

Stockmoor, came up, and told us more about the strange
place. Sheep wandering round have often fallen in and been
drowned. She spoke of it with dread for her own children,
living so near. There has been talk of putting a wall or fence
round the opening. This would, I suppose, somewhat spoil
the general appearance, but it would be safer. I thought of
Denham and the girls, and wished the precaution had been
taken.
In very wet weather the water in the pool rises higher

and higher, rushing often round and round, like liquid in a
pot stirred by a spoon, and sometimes boiling over, so to
speak, upon the surrounding grass. It must be a strange
sight then. But when the girls come, I shall come too. That I
am determined on.
It is no place for a number of giddy young people,

under no authority.
The woman made nothing of going down the path to the

water's edge; and after some hesitation, I followed her.
Thyrza did not seem inclined to do the same. She said she
would wait till another time.
We did not like to keep kind Mr. Stockmoor too long,

and soon we were driving homeward, full of new interest in
this extraordinary corner of quiet old England.
The waggonette party had not returned when we

reached Beckdale House. Too long a trip for Elfie, of course,
but how could I help it? Needless struggles must be as far
as possible avoided. I have to reserve all my authority for
real emergencies.
Thyrza and I sat down in the garden, she with a book, I

with my work. Presently I saw her to be deep in thought,—
not reading or pretending to read. At first I fancied her to
be thinking of Gurglepool,—then of the waterfall across the
valley, already much attenuated by two fine days. But no,—
something more serious gave the very intent look to her
dark eyes. She sat perfectly still, as is her wont at such
times, in an upright posture, half-rigid, half-careless, and
quite unconscious. I love to study Thyrza's face, when she
is trying to unravel some perplexity, or has gained a
glimpse of some new idea.
"What is it all about?" I asked, after a while.
She turned to me, with an unwonted quickness of

response.
"I am thinking—" she said. "Miss Con, don't you very

often wish you could be sure of things?"
Though she gave no clue to the previous train of ideas,

I understood enough to answer—"I am quite sure of some
things."
"But you know what I mean? People think and explain

so differently,—and I suppose it isn't always one's own
people that must be in the right."
"Not necessarily, Thyrza. That would bring one into an

awkward predicament as to 'the right' in different houses."
"Yes, I mean that, exactly." A pause followed, and she

knitted her brows. "Father doesn't always put things exactly
as you do, Miss Con. And I know Sir Keith doesn't agree
with Mr. Hepburn in a great many of his opinions,—or with
father."
"Possibly. But you need not feel sure that the different
ways of 'putting' a doctrine or belief must always mean
error on the one side or the other."
"Mustn't it?"
"Not always. Very often of course both are wrong and
very often perhaps both are right. Mr. Hepburn may be
looking only on the silver side of the shield, and Sir Keith
only on the golden."
"I should think Sir Keith would look on both sides," she
said hastily, as if defending him.
I was amused, remembering her many professions of

dislike.
"Yes, to the best of his power: but human powers are

limited. If you and I were describing The Fell, we could only
describe this side that we have seen. Somebody else, living
beyond, might give so different a version of its look, that a
listener would not recognise the mountain to be the same.
That would be no reason why you and I should declare the
other's account to be untrue,—merely because we had not
had the same view."
"No. I see," Thyrza answered. "I suppose the right thing

would be to get round to the other side, if one could." Then
she reverted to her first thought. "Still, it does seem as if
one could be sure of so little," she went on. "There are so
many questions that no two people think exactly the same
about."
"Rather an extreme manner of expressing it, my dear," I

said. "You may be sure of much, though not of everything."
She looked at me questioningly.
"For instance,—I am quite sure, at this moment, of the

blue sky overhead, of the sunshine, of the mountains, of
the singing birds. I am quite sure of the river flowing down
below, though I can't see it. But I don't feel sure about the
exact height of each separate mountain; and I should not
like to declare which particular geological theory, as to the
manner of their formation, is most correct. Nor do I know
all about the precise nature of sunshine, though science has
a good deal to say on that matter. And for some minutes
past, I have been puzzling myself about those white spots
on the hillside, far up the Dale."
"Those stones?"
"Are they stones? I had just come to the conclusion that

they were sheep. Somebody else might take them for
clothes hung out to dry. One would be the right explanation,
and the others would be wrong. But the question would
hardly be worth a quarrel. Better for all three observers to
allow the fact of limited eyesight, and to leave it in
abeyance. We can all agree about the blue sky and the
sunshine."
Thyrza's face was brightening. "Agree about the nature

of sunshine!" she asked.
"Yes,—in so far that it is warmth-giving, light-giving,

health-giving, and that we could not live without it. Not
about all theories as to the nature of light-waves."
She pondered seriously.
"Think of our first drive here from the station," I said.

"It was getting dark, and we were in a strange part of the
country. I don't know whether you were struck, as I was, by
the bewildering uncertainties of the landscape."
She said, "Yes,"—quickly.
"I found myself mistaking mountains for clouds, and

clouds for mountains. Trees seemed to rear themselves up
like giants, coming to meet us; and a big dog gave me quite
a start, he loomed out so suddenly, like a wild beast. Then
the white foam of the waterfalls was very weird,—one might
have conjured up any amount of imaginations as to
threatening dangers. You and I could have argued all the
way, if we had chosen, about our differing 'views' of this or
that object. Of course we knew that full daylight a few
hours later would clear away all perplexities: and we could
afford to wait. But we know the same now in things
spiritual; yet few of us realise that we can afford to wait."
"To wait in uncertainty!" she said. "Not making up one's

mind."
"In uncertainty on many lesser points. There was plenty

that we could be quite sure about. For instance,—we were
sure of being on the right road, because we were sure of
our guide; and we were sure of the home to which we were
going."
Thyrza's eyes shone.
"And we are sure now of—?" she said in a questioning

tone.
"Of our Father's love. Of Christ, our Crucified and Risen

Lord. Of the Holy Spirit, promised to us. Of the Home which
Christ is preparing. Of the Guide who leads us. Of the
Pathway He points out. Of the Means of Grace provided . . .
My dear, think for yourself of all that we do or may know
with a certain knowledge. Don't be distressed to find a
hundred lesser questions about which we cannot be sure,
and about which the best men must differ, because we have
not, any of us, full daylight in which to make out all details."
"But if Christ is our Light—" she said.

"He is our Light; but the dawn comes to each one
gradually,—sometimes very slowly indeed. I suppose the
Light vouchsafed is often so dim because we don't really
care to have it more fully. And there is the question too of
our own defective eyesight. That has to be cured—
gradually."
Thyrza pondered again.
"About the Means of Grace,—" she said. "Can one be

sure there? People do think so differently."
"People think very differently about the scientific nature

of sunshine," I said, "yet we all agree on the need that man
should use it. The make of sunshine is practically a lesser
question to us."
She only looked at me, as if waiting for more.
"It is one thing to use any medium of help provided,—

and quite another thing to be able to define very exactly its
nature," I said. "I do think that if the Means of Grace were
more ardently used, and less feverishly discussed, we might
make better advance in the spiritual life."
"I was thinking about the highest,—about Holy

Communion," she said in a low voice. "People differ so—"
"Yes,—I saw you were. But, my dear, you have not to

settle other people's differences. The less of definition the
better sometimes. I always think that the Evil One has no
more subtle method of fighting, than by setting Christians
to wrangle over their definitions of spiritual things."
"Then one need not understand exactly?" she said.

"You must understand that God is offering you, through
a certain channel, help, food, sustenance,—that you have to
use the channel, and to accept what He gives. But more is
not needed. Many a poor man drinks from the river below,
without the least idea of what the water is composed of, or
how it came there. And a little child doesn't refuse the food
his mother gives him, until he shall have analysed its
nature, and tested the make of the vessels which hold it. He
doesn't think about that at all, but trusts his mother's love
and wisdom,—eats and drinks,—is satisfied and thankful."
Thyrza drew a long breath. "Yes,—I see," she said.
"It seems to me so melancholy," I added, "that when

God says, 'Open thy mouth wide, and I will fill it,' we turn
away from Him, to wrangle with one another about the kind
of food He means to give, and the way in which He will give
it. Better do simply as our Church bids us,—'Take and eat
this . . . with thanksgiving!' 'Drink this . . . and be thankful.'
And then we may be sure that Christ will do the rest."
Little more passed between us, for the waggonette

party returned. But I do hope I may have helped that dear
girl just a little. I have a very strong feeling of sympathy for
thoughtful girls like her, in this difficult age, when every
statement of every truth is subjected alike to careless
handling and to microscopic inspection. The microscopic
inspection, if honest and impartial, works no harm. The
careless handling does do harm,—not to Truth, but to those
who indulge in it.
CHAPTER XXIII.
"INDEED!"
GLADYS HEPBURN'S JOURNAL.
August 12. Wednesday.
SCARCELY more than a fortnight since the Romillys

went away: and I am sure it seems an age.
Poor Mrs. Romilly has been so dreadfully ill. Nobody

seems exactly to understand how she was hurt, except
about the collar-bone, which doesn't explain her being so
very ill. Mother believes that it was "a bad jar to her
nervous system;" and I shouldn't wonder, for she and her
little husband in their different ways seem to be made up of
nothing but nerves,—as if all the bones and muscles had
been left out. The wonder is that all the girls are not mere
packets of nerves too! But I don't think they are,—except
Elfie!
Mr. Romilly is out there still with Eustace, and there isn't
the least talk of their coming back to England. Mrs. Romilly
is better and out of danger. But now that Mr. Romilly has
actually reached Cologne, he is settling down quite
comfortably. Uncle Tom declares he "won't budge" for six
months at least. And Ramsay says—"Sixteen."
Miss Con is at Beckdale, in charge of all those girls.

Mother and I do pity her. She has written once to me,—a
kind cheerful letter, all about the scenery of Yorkshire.
Proofs of my book are coming in fast. Correcting them

is most delightful. A story looks so much nicer in proof than
in MS. I wonder why.
August 14. Friday.—Mother and I went to afternoon tea

at The Park to-day, to meet a few people. There was
somebody whom I have never seen before, though I have
heard of him,—a Captain Lenox. The Denhams met him
lately at Bath, and asked him here for two or three nights.
He looks younger than Sir Keith, and he is very upright

and slight and soldierly. I do like soldierly men. He reminds
me just a little of the picture of my Father when he was
young, the one hanging over Mother's bedroom
mantelpiece. I don't generally admire fair men, and Captain
Lenox is rather fair, but it isn't a hay-coloured wishy-washy
fairness. He has deep-blue eyes, and light-brown hair, and a
tanned complexion. And he looks as if he had an immense
amount of character and firmness.
Besides, he is so polite. He was talking to Annie

Wilmington and quite enjoying himself, one could see, and
all at once that queer little old Miss Pursey came poking
about, looking for a seat. And he was up like a shot,
offering her his, though he lost the rest of his talk with
Annie, and though Miss Pursey isn't the sort of person that
some young men take pains to be polite to. Of course they
ought, but they don't.
I should not trouble myself to write all this about a

stranger, if he were a mere stranger. But he isn't. I do feel a
very particular interest in this Captain Arthur Lenox,—for
Miss Con's sake.
He must, I suppose, be the same that Sir Keith met at

Rouen: and Maggie is sure that he and Miss Con have been
friends some time or other, and that she—I don't quite know
how to say it—that perhaps she has—well, has liked him a
good deal. If Maggie had only said so much, I shouldn't
have minded, I dare say. One person must like another,
sometimes. I mean—things do begin in that way.
But when Maggie told Mother and me about Captain

Lenox' name coming up, and about Miss Con turning pale,
she actually laughed, and said, "Millie declares that Miss
Con is desperately in love with him. And I was so angry, I
could have given Maggie a good shaking. I am sure I should
have said something I ought not: but Mother took it up,
only saying a few words, and those exactly the right ones,
about its being no business of Miss Millington's, and about
Miss Millington being very wrong to speak so about Miss
Con to Maggie or any of them."
"It is exceedingly bad taste," Mother said. "I hope you

will take care that it does not go farther, Maggie dear."
Maggie did turn so red, and she said nothing.
But I cannot, of course, forget all this, and I am very

glad to find the sort of man that Captain Lenox is,—not
empty-headed, and able only to talk nonsense, but sensible
and pleasant. He was rather silent part of the afternoon, but
watchful and polite all the while, and when anything
interested him, he brightened up and looked quite
handsome. Lady Denham told Mother that he seemed to be
a man of such very high principle, and that he is immensely
respected in his regiment. And Mother thinks him really and
truly a good man. She had such a pleasant little talk with
him.
So I do believe he might be good enough for even dear

Miss Conway,—if that should ever come to anything. But
very likely it was only a fancy of Maggie's, and of that
tiresome absurd Miss Millington.
I am afraid I was wrong in one thing that I did. Lady

Denham put him by me for a talk, and I got on with him
much better than I do with Sir Keith. He didn't make me
half so shy.
Something made me speak of the Romillys. I said where

they were gone, and we talked about Yorkshire, and all at
once it came into my head to mention Miss Conway, and to
notice how he looked. And I did it, without stopping to
think. That is the worst of me! I am always saying things
without thinking, and having to be sorry afterwards. I do
wish I could get over it.
He made no answer, but listened. I quoted something

she had said about Yorkshire dales, and then I said how
delightful she was, and that I didn't think I had ever seen
anybody like her anywhere else. There would have been no
harm, if I had said it all quite naturally, and with no thought
behind of how he was feeling,—but I had the thought
behind, so I could not depend on myself to be perfectly
natural.
He heard me, exactly as if I had been speaking of a

stranger, and as if he didn't care the very least. When I
stopped, he said, "Indeed!" as coldly as possible: and I was
so disappointed, I felt myself turn crimson. He gave me a
glance, and I grew hotter still, and he turned his eyes away,
and made some careless remark about the weather. Then
somebody on his other side began to talk to him: and I was
very uncomfortable. I couldn't think what he must have
thought.
I have told Mother all this, and she says it is far wiser to
leave things alone, and not to interfere. One is so apt to
blunder. So I shall take very great care in the future, and
never speak of anything of that sort, unless somebody else
begins it.
Mother is not so sure as I was at first that his looking

cold and grave, when he heard her name, proves him not to
care at all. She says we can't possibly judge, as we don't in
the least know the real facts of the case.
August 15. Saturday.—Only think!—We had quite a long

call from Captain Lenox this afternoon. I felt shy at seeing
him again, but he seemed to have for all about my
awkwardness. So I hope it didn't look so bad as it felt.
He said he had found that Mother once knew an uncle of

his, so he thought he might call. But I don't believe that
was his real reason. For the uncle was not talked about at
all, after the first moment. He is staying at The Park till
Monday, and then he goes north for the rest of his furlough,
—into Yorkshire. I don't know what part. It seems that Lady
Denham and Sir Keith may go there soon, and they have
actually secured some lodgings, and are paying for them.
And Captain Lenox is to use these lodgings for as long as he
likes.
Mother and I wonder where the lodgings are, for he did

not tell us. But we asked no questions, and, as Mother says,
we must not ask the Denhams. For it is not our business;
and as they said nothing yesterday, they most likely don't
wish us to know.
I had made up my mind not to say one word about Miss
Conway; and then, just out of sheer nervousness and
shyness, I found myself letting slip something about her, at
least three times. I was so provoked; and Mother says I
really must learn to have myself better in hand. Not that
any harm was done; but one never ought to be drawn into
saying a thing which one has resolved not to say.
I noticed that each time I said "Miss Conway," Captain

Lenox turned half towards me, and then looked at Mother in
a quiet polite way, as if he were asking about her. But
nobody could have guessed from his manner whether he
felt anything more than just a passing interest in a stranger.
And he scarcely said a word himself, when her name came
up. He only seemed to expect Mother to say something.
Mother managed beautifully,—so much better than I

could. She didn't blush or look conscious, but she spoke of
Miss Conway as a friend of Mrs. Romilly's and of ours too.
We found that he had once seen Mrs. Romilly for five
minutes,—he didn't say where or when,—and that he
thought her "a beautiful woman." I am sure I don't think
her so. But then Miss Conway does; and to my surprise
Mother said so. And I had to slide my chair back, for fear
Captain Lenox should see what I was thinking.
He didn't look the least conscious, but asked if we had a

photograph of Mrs. Romilly. Mother opened my book, which
was on the little table close at hand, and showed him all the
likenesses of the Romillys that I have. And presently I heard
Mother say—
"That is Miss Conway, whom we mentioned just now."
He certainly did look at that photo longer than at any of

the rest; and he made one remark—
"Rather a fine face."
"Very good-looking," Mother said; and I could not help

exclaiming—
"Oh, Miss Conway is much more really beautiful than

Mrs. Romilly!"
Captain Lenox said, "Ah!" and gave a little pull to each

side of his moustache, as if it wanted arranging.
"That may be a matter of opinion," Mother said, and I

saw him making believe to examine the photo of Nellie on
the opposite page, and giving little glances at Miss Con
every other moment.
"Taken recently, I suppose," he said, as if it didn't

signify at all, only he had to say something.
"Not Nellie Romilly," Mother answered. "I believe Miss

Conway was taken some months ago,—before she came to
Glynde."
Captain Lenox shut the album, and put it aside. Then he

and Mother talked about all sorts of things for half-an-hour.
I do think he must be a really and truly good man,—if only
one could be quite sure that he has treated Miss Conway
rightly. But that is the puzzle!
August 18. Tuesday.—A letter from Maggie to-day. She

says they find that Lady Denham and Sir Keith have taken
rooms in a farm-house, quite near Beckdale House.
Then that must be where Captain Lenox is going!

Does Captain Lenox know? And does Miss Con know?
And would either of them care?
Maggie doesn't write a word about Captain Lenox. She

only speaks of the Denhams: and she seems to be in such a
state of excitement about Sir Keith and his mother going.
How odd Maggie is!
Miss Pursey said last week to me that everybody in

Glynde expected Sir Keith to marry Nellie some day. And
she seemed to think that he only had to ask Nellie, and
Nellie would be sure to say "Yes." That vexed me; and
besides I don't believe there is the least chance of such a
thing.
Of course if it were for Nellie's happiness, I should be

very glad,—only not for my own sake. For if she had a
husband, I could not write to her comfortably about
everything, as I do now. I should always fancy him peeping
over her shoulder at my letters while she read them. Still I
would not be so selfish as to think of that: only I don't
believe Nellie admires Sir Keith particularly.
Mother says we must be very careful not to make

mischief about Captain Lenox going to Yorkshire. So we do
not mean to whisper one word about it to anybody, least of
all to any of the Romillys.
Part of Maggie's letter is filled up with particulars of a

new story she has in hand. She says she has "written to two
well-known authoresses," asking them how she is to get it
into print.
I don't quite see what the authoresses are to do. If the

story is worth printing, some publisher would be almost
sure to take it: and if not, the authoresses can't make it so.
But perhaps they might give her some useful hints.
CHAPTER XXIV.
UNPALATABLE ADVICE.
CONSTANCE CONWAY'S JOURNAL.
August 15. Saturday.
WE glide on from day to day, hardly aware, perhaps,

how time is flitting. Better accounts of Mrs. Romilly reach
us, but no word is spoken of Mr. Romilly's return to England.
The holidays once over, I think life may become easier.

At present it is not easy. Often when I get up in the morning
the weight of the hours ahead seems almost more than I
can bear. Perhaps the strain of responsibility has somewhat
told upon me lately.
I do not think I am fanciful, or disposed to the foolish

magnifying of small affronts. But one cannot entirely shut
one's eyes to what lies just ahead.
The constant and fretting opposition has increased

steadily. Whatever I suggest, the conclave, headed by Miss
Millington, at once resist. Whatever I arrange, the conclave,
headed by Miss Millington, at once turn into a grievance.
So far as possible, I appeal to Maggie for her wishes

before deciding on any plan: and Maggie of course appeals

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Test Bank for Managerial Accounting,

4th Edition Charles E. Davis Elizabeth

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5. Discuss the importance of ethical behavior in managerial accounting (Unit

9. Long-term planning is often referred to as reporting.

26. The supply chain’s goal is to reduce or eliminate defects.

31. Ethical business behavior is compliance with the law.

Answers to True-False Statements

34. In the context of managerial accounting, relevant information

35. Good managerial accounting information helps

36. Managerial accounting is used by managers to

38. Managerial accounting is used by managers to

39. The purpose of financial statements contained in annual reports is to

40. An example of an external user is a

41. An example of an external user is a

42. Which of the following is not a correct statement?

43. Which of the following is a characteristic of managerial accounting reports?

47. GAAP “rules” govern how

50. Which of the following statements is not true?

54. Managerial accounting reports

55. Which of the following statements is not true?

60. Long-term planning is often referred to as

61. Short-term planning is often referred to as

64. One purpose of controlling activities is to

67. The forefront of managerial activity is

71. Which of the following is not a role of a managerial accountant?

72. A company that wants to be successful needs to

90. Which of the following is not a step in the supply chain?

91. A supply chain’s goal is to

92. The supply chain’s goal is to get

93. Just-in-time inventory management (JIT) is an inventory strategy that focuses on

95. Just-in-time inventory can be traced back to

96. In a traditional inventory system,

99. A problem with traditional computerization of operations is that

101. The goal of an ERP system is to

102. Ethical behavior is

104. Ethical business behavior

111. The leading professional organization for managerial accountants is

112. A key component of a positive ethical environment is

116. Which of the following is a not a consequence of unethical behavior?

117. Which of the following is least likely to be in a company’s code of ethics?

118. Which of the following is least likely to be in a company’s code of ethics?

119. Which of the following is least likely to be in a company’s code of ethics?

128. The IMA Statement of Ethical Professional Practice applies to

Answers to Multiple Choice Questions

135. List four differences in managerial and financial accounting.

1. A company places equal emphasis on financial and non-financial

Build Hold Harvest Divest

a. Human resources manager

Managerial Accounting Financial Accounting

Solution: Answers will vary.

a. Supply chain management

Describe each of the three systems and their goal.

160. Compare and contrast strategic planning and operational planning.

Solution: Answers will vary.

January 15, 20xx

To: Code of Conduct committee members