1-6 Cost Accounting, 1-2 Cost Accounting, 1-4 Cost Accounting, 1-3 Cost Accounting, 1-1 Cost Accounting

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Analytical thinking 23) A budget can only be used as a planning tool.

: FALSE Explanation: A budget may be used as a planning tool and also as a control tool. Diff: 1 Objective: 4

2) Strategy specifies ________. A) how an organization matches its own capabilities with the opportunities in the marketplace B) standard procedures to ensure quality products C) incremental changes for improved performance D) the demand created for products and services

: A Diff: 2 Objective: 2 AACSB:

Analytical thinking 30) In order, list the five steps in the decision-making process.

: 1. Identify the problem and uncertainties 2. Obtain information 3. Make predictions about the future 4. Make decisions by choosing among alternatives 5. Implement the decision, evaluate performance, and learn Diff: 2 Objective: 4

18) Describe the major differences between management accounting and financial accounting for the following: 1. Primary users 2. Focus and emphasis 3. Rules of measurement and reporting

: 1. The primary users of management accounting information are managers of the organization. The primary users of financial accounting are external users such as investors, banks, regulators, and suppliers. 2. Management accounting is future oriented. Financial accounting is past oriented. 3. Management accounting measurement and reporting does not have to follow GAAP but are based on cost-benefit analysis. Financial accounting measurement and reporting must be prepared in accordance with GAAP and be certified by external, independent auditors. Diff: 3 Objective: 2 AACSB:

Analytical thinking 12) ________ describes the flow of goods, services, and information from the purchase of materials to the delivery of products to consumers, regardless of whether those activities occur in the same organization or with other organizations. A) Supply chain B) Production process C) Quality control D) Customer relationship management

: A Diff: 1 Objective: 3

Analytical thinking 2) R&D, production, and customer service are business functions that are all included as part of ________. A) the value chain B) benchmarking C) customer relationship management D) the supply chain

: A Diff: 1 Objective: 3

Analytical thinking 4) ________ is the generation of, and experimentation with, ideas related to new products, services, or processes. A) Research and development B) Design of products, services, or processes C) Production D) Marketing

: A Diff: 1 Objective: 3

Analytical thinking 6) Which of the following is true of planning? A) It makes predictions about the future. B) It assumes the functional hierarchy of any business is linear. C) It improves the quality of products. D) It evaluates customer feedback

: A Diff: 1 Objective: 4

Analytical thinking 2) Which of the following is true of planning in decision making? A) It helps an organization to select goals and strategies. B) It improves the quality of products. C) It helps in evaluating performance. D) It helps in the analysis of actual performance.

: A Diff: 1 Objective: 4

1) Which of the following is a guideline used by management accountants to assist in strategic and operational decision making? A) employing a cost-benefit approach B) employing a supply chain approach C) employing a six sigma approach D) employing a regression approach

: A Diff: 1 Objective: 5 AACSB:

2) The scenario that resources should be spent if the expected benefits to the company exceed the expected costs describes ________. A) cost-benefit approach B) behavioral and technical considerations C) balanced scorecard D) different costs for different purposes

: A Diff: 1 Objective: 5 AACSB:

11) Long-term financing is an integral part of the ________ function in an organization. A) CFO's B) controller's C) auditor's D) president's

: A Diff: 1 Objective: 6 AACSB:

5) Line management includes ________. A) distribution managers B) human-resource managers C) information-technology managers D) management-accounting managers

: A Diff: 1 Objective: 6 AACSB:

4) Strategy is formulated ________. A) by identifying the most important customers B) by forecasting the composition of adequate fixed assets C) based on the qualified opinion of external auditors D) by eliminating sunk costs

: A Diff: 2 Objective: 2 AACSB:

1) Which of the following statements concerning an organization's strategy is true? A) Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. B) Cost accountants formulate strategy in an organization since they have more inputs about costs. C) A good strategy will always overcome poor implementation. D) Businesses usually follow one of two broad strategies: offering a quality product at a high price, or offering a unique product or service priced lower than the competition.

: A Diff: 2 Objective: 2 AACSB:

16) The treasurer (also called the chief accounting officer) is the financial executive primarily responsible for both management accounting and financial accounting.

: FALSE Diff: 2 Objective: 6 AACSB:

Analytical thinking 8) Which of the following differentiates marketing from customer service? A) Marketing is the process of promoting and selling products or services to customers or prospective customers, whereas customer service is the process of providing after-sales service to customers. B) Marketing is the process of processing orders and shipping products or services to customers, whereas customer service is the process of providing additional information to customers about the product. C) Marketing is the process of detailed planning, engineering, and testing of products and processes, whereas customer service concentrates on existing customers. D) Marketing is the process of processing orders and shipping products or services to customers, whereas customer service is concerned with choosing the right customer for the product.

: A Diff: 2 Objective: 3

Analytical thinking 13) Which of the following statements is true of performance reports? A) The performance report shows actual performance as compared to the budget. B) The performance report depicts the performance of a firm's competitors. C) The performance report compares only the budgeted performance over the years. D) The performance report contains no actual results due to confidentiality.

: A Diff: 2 Objective: 4

Application of knowledge 10) Linking rewards to performance ________. A) helps to motivate managers B) allows companies to charge premium prices C) should only be based on financial information D) enhances agency costs

: A Diff: 2 Objective: 4

5) Technical consideration ________. A) help managers make wise economic decisions by providing them with the desired information B) focus on encouraging individuals to do their jobs better C) focus on compensating the managers for good performance D) emphasize on different costs for different purposes

: A Diff: 2 Objective: 5 AACSB:

3) Which of the following is true of a budgeting system? A) It compels managers to plan ahead. B) It increases agency costs. C) It is easy to measure the exact benefits of a budgeting system. D) It leads to operational inefficiency.

: A Diff: 2 Objective: 5 AACSB:

Objective 1.6 1) Which of the following is true of line management? A) It is directly responsible for achieving the goals of the organization. B) It is responsible of management accounting functions. C) It provides advice, support, and assistance to staff management. D) It only includes the top level management.

: A Diff: 2 Objective: 6 AACSB:

Analytical thinking 33) Explain how a budget can help management implement strategy.

: A budget is a planning tool, a quantitative expression of a plan of action. First, actions are planned and then they are communicated to the entire organization. The budget also helps with coordination. Diff: 1 Objective: 4

Analytical thinking 10) ________ is a strategy that integrates people and technology in all business functions to enhance relationships with customers, partners, and distributors. A) Supply-chain analysis B) Customer relationship management C) Value-chain analysis D) Continuous quality improvement

: B Diff: 1 Objective: 3

Analytical thinking 13) Processing orders and shipping products or providing services to customers is known as ________. A) after-sales services B) distribution C) marketing D) supply chain

: B Diff: 1 Objective: 3

Analytical thinking 5) ________ is the detailed planning and engineering and testing of products, services, or processes. A) Plan of implementation B) Design C) Production D) Research and development

: B Diff: 1 Objective: 3

Analytical thinking 9) ________ is an after-sale support provided to customers. A) Distribution B) Customer service C) Production D) Marketing

: B Diff: 1 Objective: 3

Application of knowledge 9) Which of the following is an example of an intrinsic reward? A) bonuses paid to employees B) recognition of job well done C) promotions based on performance D) salaries paid to employees

: B Diff: 1 Objective: 4

6) Staff management includes ________. A) manufacturing managers B) management accountants C) purchasing managers D) distribution managers

: B Diff: 1 Objective: 6 AACSB: Application of knowledge 7) Which of the following is a responsibility of the CFO? A) preparing financial statements B) managing short-term and long-term financing C) investing in new equipment D) conducting internal audit Answer: B Diff: 2 Objective: 6 AACSB:

5) In designing strategy, a company must match its opportunities in the marketplace with ________. A) environment friendly goals B) its resources and capabilities C) branding opportunities D) the requirements of credit rating agencies

: B Diff: 2 Objective: 2 AACSB:

6) Which of the following statements about customer value is true? A) Customer value is shown in a corporation's balance sheet. B) Creating value for customers is an important part of planning and implementing strategy. C) Customer value is the only focus that helps managers to formulate strategies. D) Customer value is lost with increase in costs of the product.

: B Diff: 2 Objective: 2 AACSB:

Analytical thinking 5) A budget ________. A) is the qualitative expression of a proposed plan of action by management B) is an aid to coordinating what needs to be done to execute a plan C) helps in identifying problems and uncertainties D) promotes production automation

: B Diff: 2 Objective: 4

6) Which of the following statements about the cost-benefit approach is true? A) Resources should be spent if the expected costs exceed the expected benefits of the company. B) In a cost-benefit analysis, both costs and benefits are not easy to measure. C) Resources should be spent if the costs of a decision outweigh the benefits of the decision. D) A cost-benefit approach would not be appropriate for a decision to install a budgeting system.

: B Diff: 2 Objective: 5 AACSB:

4) In a cost-benefit approach, managers should spend resources if the ________. A) marginal costs to the company exceed the marginal benefits B) expected benefits to the company exceed the expected costs C) marginal costs to the company equal the marginal benefits D) expected benefits to the company equal the expected costs

: B Diff: 3 Objective: 5 AACSB:

Analytical thinking 11) Customer relationship management initiatives use technology to coordinate all ________. A) advertising and marketing techniques to attract customers B) research activities C) customer-facing activities D) quality control management activities

: C Diff: 1 Objective: 3

Analytical thinking 8) Which of the following is an example of an extrinsic reward? A) receiving a high rating on customer service B) appreciation mail from a customer C) promotions based on performance D) verbal appreciation from CEO

: C Diff: 1 Objective: 4

3) ________ includes providing financial information for reports to managers and shareholders, and overseeing the overall operations of the accounting system. A) Risk management B) Treasury management C) Controllership D) Strategic planning

: C Diff: 1 Objective: 6 AACSB:

1) Place the four business functions in the order they appear along the value chain: Customer service Design Marketing Production A) Customer Service, Design, Production, Marketing B) Customer Service, Marketing, Production, Design C) Design, Production, Marketing, Customer Service D) Design, Customer Service, Production, Marketing

: C Diff: 2 Objective: 3

Analytical thinking 6) Production is the ________. A) generation of, and experimentation with, ideas related to new products, services, or processes B) processing orders and shipping products or services to customers C) acquisition, coordination, and assembly of resources to produce a product or deliver a service D) detailed planning and engineering of products, services, or processes

: C Diff: 2 Objective: 3

1) Place the five steps in the decision-making process in the correct order: A = Obtain information B = Make decisions by choosing among alternatives C = Identify the problem and uncertainties D = Implement the decision, evaluate performance, and learn E = Make predictions about the future A) C D B E A B) E D A B C C) C A E B D D) A E B D C

: C Diff: 2 Objective: 4

Analytical thinking 14) Management accounting is considered most likely to be successful when it ________. A) helps creditors evaluate the company's performance B) helps investors improve their decisions C) is timely D) is relevant and reported annually

: C Diff: 2 Objective: 4

Analytical thinking 4) A report showing the actual financial results for a period compared to the budgeted financial results for that same period would most likely be called a ________. A) strategic plan B) management forecast C) performance report D) revised plan

: C Diff: 2 Objective: 4

Analytical thinking 7) A budget serves as much as a control tool as a planning tool because ________. A) it aids in the coordination and communication among various business functions B) it helps to evaluate customer needs and feedback C) it is a benchmark against which actual performance can be compared D) it helps.to make predictions about the future

: C Diff: 2 Objective: 4

2) Which of the following is true of staff management? A) It plans income taxes, sales taxes, and international taxes. B) It is directly responsible for achieving the goals of the organization. C) It provides advice, support, and assistance to line management. D) It controls the main business functions such as production and marketing.

: C Diff: 2 Objective: 6 AACSB:

3) Which of the following is not a concern for management accountants in formulating a strategy? A) identifying the most important warehouse location for the distribution of goods B) substituting products that exist in the marketplace C) strategizing compliance with GAAP (Generally Accepted Accounting Principles) D) maintaining adequate fixed assets available to implement the strategy

: C Explanation: C) This is more of a concern of financial accountants than of management accountants. Diff: 2 Objective: 2 AACSB:

4) ________ includes banking and short- and long-term financing, investments, and cash management. A) Risk management B) Strategic planning C) Controllership D) Treasury management

: D Diff: 1 Objective: 6 AACSB:

Analytical thinking 3) The value chain is the sequence of business functions in which ________. A) value is deducted from the products or services of an organization B) producing and delivering the product or service is of prime importance C) products and services are evaluated with respect to their value to the supply chain D) usefulness is added to the products or services of an organization

: D Diff: 2 Objective: 3

Analytical thinking 7) Marketing is the ________. A) generation of, and experimentation with, ideas related to new products, services, or processes B) detailed planning and engineering of products, services, or processes C) acquisition, coordination, and assembly of resources to produce a product or deliver a service D) the manner by which companies promote and sell their products or services to customers or perspective customers

: D Diff: 2 Objective: 3

Analytical thinking 11) Control measures should ________. A) be set and not changed until the next budget cycle B) be set by excluding nonfinancial information C) be kept confidential from employees so that competitors don't have an opportunity to gain a competitive advantage D) be linked by feedback to help future planning

: D Diff: 2 Objective: 4

Analytical thinking 3) The most important planning tool is a ________. A) performance evaluation report B) fishbone diagram C) control chart D) budget

: D Diff: 2 Objective: 4

Analytical thinking 12) A well-conceived plan allows managers the ability to ________. A) not make decisions again until the next planning session B) keep lower-level managers from implementing change C) underestimate costs so that actual operating results will be favorable when comparisons are made D) take advantage of unforeseen opportunities

: D Diff: 2 Objective: 4

8) The ________ is primarily responsible for management accounting and financial accounting. A) COO (Chief Operating Officer) B) CIO (Chief Information Officer) C) treasurer D) controller

: D Diff: 2 Objective: 6 AACSB:

9) Which of the following reports to the CFO? A) external auditor B) distribution manager C) production manager D) treasurer

: D Diff: 2 Objective: 6 AACSB: Application of knowledge 10) Which of the following is a function of a controller? A) operations administration B) controlling the stock price C) communication with the shareholders D) interest-rate risk management Answer: A Diff: 2 Objective: 6 AACSB:

Analytical thinking 16) One of the steps in planning is evaluating the performance and taking corrective measures.

: FALSE Diff: 2 Objective: 4

9) The same cost concept used for external and internal reporting purposes.

: FALSE Diff: 2 Objective: 5 AACSB:

10) Accounting methods for internal reporting purposes are specified by Generally Accepted Accounting Principles (GAAP).

: FALSE Explanation: Accounting methods for internal reporting are not specified by Generally Accepted Accounting principles (GAAP). Diff: 2 Objective: 5 AACSB:

14) Companies can decide on an appropriate strategy based strictly on internally available information.

: FALSE Explanation: Companies must obtain external information as well as internal information to decide on an appropriate strategy. Diff: 2 Objective: 2 AACSB:

Analytical thinking 19) A budget is a qualitative expression of a plan.

: FALSE Explanation: Explanation: A budget is a quantitative expression of a plan. Diff: 1 Objective: 4

Analytical thinking 25) Evaluating a performance helps in the future decision-making process.

: FALSE Explanation: Feedback and learning helps in the future decision-making process. Diff: 1 Objective: 4

Analytical thinking 24) Gathering information before making a decision leads to a wastage of time and is not helpful.

: FALSE Explanation: Gathering information before making a decision helps managers gain a better understanding of uncertainties. Diff: 1 Objective: 4

9) The best-designed strategies are valuable whether or not they are effectively implemented.

: FALSE Explanation: Implementation is essential or the strategy is useless. Diff: 1 Objective: 2 AACSB:

13) Management accountants should have little or no role in deciding on a company's strategy.

: FALSE Explanation: Management accountants should play a significant role in deciding on a company's strategy. Diff: 1 Objective: 2 AACSB:

15) Strategic financial management describes cost management that specifically focuses on strategic issues.

: FALSE Explanation: Strategic cost management describes cost management that specifically focuses on strategic issues. Diff: 2 Objective: 2 AACSB:

8) The technical considerations of budgeting encourage managers and other employees to strive for achieving the goals of the organization.

: FALSE Explanation: The behavioral considerations of budgeting encourage managers and other employees to strive for achieving the goals of the organization. Diff: 2 Objective: 5 AACSB:

Analytical thinking 15) The last step in the decision-making process is to make decisions by choosing among alternatives.

: FALSE Explanation: The last step in the decision-making process is to implement the decision, evaluate performance, and learn. Diff: 1 Objective: 4

11) The key to a company's success is always to be the low cost producer in a particular industry.

: FALSE Explanation: The low cost producer in a particular industry will not necessarily be successful. Diff: 2 Objective: 2 AACSB:

Analytical thinking 18) To take advantage of changing market opportunities, the annual budget should be strictly enforced.

: FALSE Explanation: To take advantage of changing market opportunities, the annual budget should be updated to reflect those changes. Diff: 2 Objective: 4

11) Discuss the cost-benefit approach guideline management accountants use to provide value in strategic decision making.

: Management accountants continually face resource allocation decisions. The cost-benefit approach should be used in making these decisions. Resources should be spent if the expected benefits to the company exceed the expected costs. The expected benefits and costs may not be easy to quantify, but it is a useful approach for making resource allocation decisions. Companies now use budgeting system that compels managers to plan ahead, compare actual to budgeted information, learn, and take corrective action. Diff: 3 Objective: 5 AACSB:

12) Discuss the behavioral considerations that provide value to strategic decision making.

: Management is primarily a human activity that should focus on encouraging individuals to do their jobs better. Budgets have a behavioral effect by motivating and rewarding employees for achieving an organization's goals. So, when workers underperform, for example, behavioral considerations suggest that managers need to discuss ways to improve their performance with them rather than just sending them a report highlighting their underperformance. Diff: 3 Objective: 5 AACSB:

20) Briefly describe the list of items that managers undertake to formulate strategies.

: ONE: Identifying the most important customers, and how the company can be competitive and deliver value to them. TWO: Identifying the substitute products existing in the marketplace, and how do they differ from our product in terms of features, price, cost, and quality. THREE: Identifying most critical capability-whether it is technology, production or marketing. FOUR: Checking the adequacy of cash available to fund the strategy, or will additional funds need to be raised-through issue of debt or equity. Diff: 3 Objective: 2 AACSB:

Application of knowledge 32) Briefly explain the planning and control activities in management accounting. How are these two activities linked to each other?

: Planning business operations relates to designing, producing, and marketing a product or service. This includes preparing budgets and determining the prices and cost of products and services. A company must know the cost of each product and service to decide which products to offer and whether to expand or discontinue product lines. Controlling business operations includes comparing actual results to the budgeted results and taking corrective action when needed. Feedback links planning and control. The control function provides information to assist in better future planning. Diff: 3 Objective: 4

Analytical thinking 34) What is planning in decision making? Explain how budget helps in planning.

: Planning consists of selecting an organization's goals and strategies, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to achieve them to the entire organization. Management accountants serve as business partners in these planning activities because they understand the key success factors and what creates value. The most important planning tool when implementing strategy is a budget. A budget is the quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan. It helps in the production, distribution, and customer-service costs to achieve the company's sales goals; the anticipated cash flows; and the potential financing needs. Diff: 3 Objective: 4

Analytical thinking 31) For each type of report listed below, identify one planning decision and one controlling decision for which the information would be helpful. Assume you are a Walgreen Company store. Item: a. annual financial statements for the past three years b. report detailing sales by department by each hour of the day for the past week c. special study regarding increased road traffic due to the construction of a new shopping mall at a near-by intersection

: Please note that answers will vary, but may include the following: a. Planning: Decision by shareholder about whether to purchase more stock in the company. Control: Decision by bank to determine if financial ratios maintained in the line-of-credit (LOC) agreement warrant increasing the LOC amount. b. Planning: Decisions regarding future staffing needs. Control: Decision regarding whether the recent sales promotion led to an increase in revenue. c. Planning: Decision of the store manager about whether to change the types of retail items carried. Control: Decision of the store manager regarding performance of the analyst that prepared the special study. Diff: 3 Objective: 4

19) What is strategy? Briefly describe the two broad types of strategies that companies may choose to pursue.

: Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. In other words, strategy describes how a company will compete. Companies follow one of two broad strategies. One is provide a quality product or service at low prices. The other is to compete on their ability to offer a unique product or service that is generally offered at a higher price. Diff: 2 Objective: 2 AACSB:

10) The key to a company's success is creating value for customers while differentiating itself from its competitors.

: TRUE Diff: 1 Objective: 2 AACSB:

16) Identifying a company's most important customers helps to formulate a strategy.

: TRUE Diff: 1 Objective: 2 AACSB:

17) The best-designed strategies and the best-developed capabilities are useless unless they are effectively executed.

: TRUE Diff: 1 Objective: 2 AACSB:

8) The two broad strategies that companies follow are cost leadership strategy and product differentiation strategy.

: TRUE Diff: 1 Objective: 2 AACSB:

Analytical thinking 28) A performance report compares actual performance to the amount budgeted.

: TRUE Diff: 1 Objective: 4

Analytical thinking 17) A budget helps to control activities by adhering to the prescribed plan.

: TRUE Diff: 1 Objective: 4

Analytical thinking 20) The process of preparing a budget forces coordination and communication throughout the company.

: TRUE Diff: 1 Objective: 4

Analytical thinking 22) Control comprises taking actions that implement the planning decisions, evaluating past performance, and providing feedback and learning to help future decision making.

: TRUE Diff: 1 Objective: 4

Analytical thinking 29) Management accounting is playing an increasingly important role by helping managers develop and implement strategy.

: TRUE Diff: 1 Objective: 4

7) Management is primarily a human activity that should focus on encouraging individuals to do their jobs better.

: TRUE Diff: 1 Objective: 5 AACSB:

13) Staff management, such as management accountants and information technology and human-resources management, provides advice, support, and assistance to line management.