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Questions and Answers

What distinguishes managerial accounting from financial accounting?

The type of data it works with

The audience it addresses (correct)

The use of accounting principles

The level of detail in information provided

Who is the primary audience for managerial accounting information?

Government regulatory agencies

Financial analysts

External investors

The management of the organization (correct)

What type of information does managerial accounting provide?

Quantitative information for internal use (correct)

Quantitative information for external use

Qualitative information for external use

Qualitative information for internal use

How does the level of detail in managerial accounting information compare to financial accounting?

Less detailed, with aggregate measures Signup and view all the answers

What distinguishes the format of information in managerial accounting from financial accounting?

It has free formats with no accounting principles Signup and view all the answers

What is the primary focus of managerial accounting?

Internal decision-making Signup and view all the answers

What is the main difference between financial accounting and managerial accounting?

Financial accounting serves external parties, while managerial accounting provides information to internal managers. Signup and view all the answers

What are direct costs easily traced to?

A unit of product or cost object Signup and view all the answers

What do indirect costs include?

Manufacturing overhead Signup and view all the answers

What do product costs include?

Direct materials, direct labor, and manufacturing overhead Signup and view all the answers

When do product costs attach to a unit of product?

As it's purchased or manufactured and remain attached to each unit in inventory until sold Signup and view all the answers

What happens to direct materials costs in manufacturing companies?

Transferred from raw materials to work in process when used in production Signup and view all the answers

Which costs are added to work in process for converting direct materials into finished goods?

Direct labor and manufacturing overhead costs Signup and view all the answers

When are the costs of completed units of product transferred from work in process to finished goods?

Once units of product are completed Signup and view all the answers

Where are the costs transferred when a manufacturer sells its finished goods to customers?

From finished goods to cost of goods sold Signup and view all the answers

Which costs are included in period costs?

All selling and administrative costs Signup and view all the answers

Where do product costs show up according to managerial accounting concepts?

In the income statement through cost of goods sold and in the balance sheet as cost of inventory Signup and view all the answers

What is the characteristic of variable costs in relation to changes in the level of activity?

They vary in direct proportion to changes in the level of activity Signup and view all the answers

What is the formula for determining break-even quantity in cost-volume-profit analysis?

$rac{Fixed ext{ }Costs}{Selling ext{ }Price - Variable ext{ }Cost ext{ }Per ext{ }Unit}$ Signup and view all the answers

What does the degree of operating leverage (DOL) measure in cost-volume-profit analysis?

Percentage change in profit associated with a change in volume or sales Signup and view all the answers

What does the contribution margin represent in cost-volume-profit analysis?

The amount remaining from sales revenue after variable expenses have been deducted Signup and view all the answers

What does the contribution format income statement help managers assess in cost-volume-profit analysis?

The impact on profits of changes in selling price, cost, or volume Signup and view all the answers

What is the main assumption managers make for cost-volume-profit (CVP) calculations?

Constant selling price, linear costs, and constant product mix Signup and view all the answers

How can the margin of safety be defined in cost-volume-profit analysis?

The difference between the break-even point and the actual sales volume Signup and view all the answers

What is the primary focus of financial accounting?

Providing companywide reports and following GAAP/IFRS Signup and view all the answers

What is a key requirement to become a Certified Management Accountant (CMA)?

Membership in the Institute of Management Accountants and passage of the CMA exam Signup and view all the answers

What does the Chartered Global Management Accountant (CGMA) designation require?

A bachelor's degree in accounting, passage of the CPA exam, membership in the AICPA, and three years of relevant management accounting work experience Signup and view all the answers

What is a focus of managerial accounting?

Planning, controlling, and decision-making activities Signup and view all the answers

What does the Institute of Management Accountants (IMA) estimate about professional accountants in the U.S.?

Over 80% work in non-public accounting environments Signup and view all the answers

What do employers expect accounting majors to have?

Strong financial accounting skills and planning, controlling, and decision-making skills Signup and view all the answers

Study Notes

Financial and Managerial Accounting: Key Differences and Professional Opportunities

Financial accounting is focused on external persons making financial decisions, with a historical perspective and emphasis on objectivity and verifiability.
Managerial accounting is concerned with managers planning for and controlling an organization, with a future emphasis and focus on relevance, precision, and timeliness.
Financial accounting has a primary focus on companywide reports, must follow GAAP/IFRS and prescribed formats, and is mandatory for external reports.
Managerial accounting focuses on segment reports, is not bound by GAAP/IFRS or any prescribed format, and is not mandatory.
Managerial accounting involves planning, controlling, and decision-making activities, such as establishing goals, developing budgets, and making selections among competing alternatives.
Different majors, such as marketing, supply chain management, and human resource management, have specific planning, controlling, and decision-making considerations within managerial accounting.
The Institute of Management Accountants (IMA) estimates that over 80% of professional accountants in the U.S. work in non-public accounting environments.
Employers expect accounting majors to have strong financial accounting skills, as well as the planning, controlling, and decision-making skills foundational to managerial accounting.
To become a Certified Management Accountant (CMA), membership in the Institute of Management Accountants, a bachelor's degree, two years of relevant professional experience, and passage of the CMA exam are required.
The CMA exam content specifications cover topics such as financial reporting, planning, performance, and control, as well as financial decision-making, risk management, and professional ethics.
The Chartered Global Management Accountant (CGMA) designation, co-sponsored by the AICPA and CIMA, requires a bachelor's degree in accounting, passage of the CPA exam, membership in the AICPA, three years of relevant management accounting work experience, and passage of the CGMA exam.
Managerial accounting courses aim to teach measurement skills that managers use to support planning, controlling, and decision-making activities, and focus on cost concepts.

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Description

Test your knowledge of financial and managerial accounting with this quiz. Explore the key differences between the two disciplines and discover professional opportunities in the field of management accounting, including certifications and career paths.