Chapter 1 The Manager and Management Accounting MC

Arrangement of 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) CFO's

When managers determine whether it is less expensive to buy products from a vendor or make them in house they are performing ________. A) Cost-benefit analysis B) Supply-chain analysis C) Value-chain analysis D) Research and development

A) Cost-benefit analysis

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) It compels managers to plan ahead.

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) It helps an organization to select goals and strategies.

________ 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) Research and development

________ 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) Customer relationship management

The ________ function supports the six functions of value-chain analysis. A) controlling B) administration C) planning D) direction

B) administration

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

B) management accountants

Which of the following is an area that customers want to see improved levels of performance? A) higher sales margin B) quality of the product C) lower marginal costs D) profit margins

B) quality of the product

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) performance report

_____ management exists to provide advice and assistance to those responsible for attaining the objectives of the organization. A. Line B. Functional C. Staff D. Risk

C. Staff

10) Management accounting information typically includes ________. A) tabulated results of customer satisfaction surveys B) the cost of producing a product C) the percentage of units produced that are defective D) All of these answers are correct.

D) All of these answers are correct.

That part of the value chain that includes ordering and shipping the product to retail outlets is ________. A) Customer service B) Production C) Marketing D) Distribution

D) Distribution

If there is an ethical conflict concerning your direct supervisor, you should first contact ________. A) the local media B) an IMA Ethics Counselor C) an attorney D) the board of directors

D) the board of directors

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

D) treasurer

Why do most companies adhere to GAAP for their basic internal financial statements? A. GAAP is required by law for publicly held companies. B. To use GAAP and another system of reporting would be too costly for most companies. C. Accountants are required by their code of ethics to use GAAP accounting. D. Accrual accounting provides a uniform method to measure an organization's financial performance.

D. Accrual accounting provides a uniform method to measure an organization's financial performance.

The Institute of Management Accountants issues which certification? a. CPA b. CIA c. CFE d. CMA

d. CMA

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) It is directly responsible for achieving the goals of the organization.

Which item is an indication of competence under the Standards of Ethical Conduct? A) Maintain an appropriate level of professional expertise by continually developing knowledge and skills. B) Keep information confidential except when disclosure is authorized or legally required. C) Abstain from engaging in or supporting any activity that might discredit the profession. D) Refrain from engaging in any conduct that would prejudice carrying out duties ethically.

A) Maintain an appropriate level of professional expertise by continually developing knowledge and skills.

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) 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.

Which item is an indication of integrity under the Standards of Ethical Conduct? A) Refrain from engaging in any conduct that would prejudice carrying out duties ethically. B) Communicate information fairly and objectively. C) Keep information confidential except when disclosure is authorized or legally required. D) Recognize and communicate professional limitations or other constraints that would preclude responsible judgment or successful performance of an activity.

A) Refrain from engaging in any conduct that would prejudice carrying out duties ethically.

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) Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.

________ 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) Supply chain

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) The performance report shows actual performance as compared to the budget.

8) Which of the following statements refers to management accounting information? A) There are no regulations governing the reports. B) The reports are generally delayed and historical. C) The audience tends to be stockholders, creditors, and tax authorities. D) It primarily measures manager's compensation on reported financial results.

A) There are no regulations governing the reports.

________ aims to improve operations throughout the value chain and to deliver products and services that exceed customer expectations. A) Total Quality Management B) Innovation C) Customer response time D) Cost and efficiency

A) Total Quality Management

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) by identifying the most important customers

The scenario that says 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) cost-benefit approach

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

A) distribution managers

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) employing a cost-benefit approach

17) Financial accounting is concerned primarily with ________. A) external reporting to investors, creditors, and government authorities B) cost planning and cost controls C) product design and marketing strategies D) providing information for strategic and tactical decisions

A) external reporting to investors, creditors, and government authorities

1) Management accounting ________. A) focuses on estimating future revenues, costs, and other measures to forecast activities and their results B) provides information about the company as a whole C) reports information that has occurred in the past that is verifiable and reliable D) provides information that is generally available only on a quarterly or annual basis

A) focuses on estimating future revenues, costs, and other measures to forecast activities and their results

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

A) help managers make wise economic decisions by providing them with the desired information

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) helps to motivate managers

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) how an organization matches its own capabilities with the opportunities in the marketplace

11) Cost accounting ________. A) measures the costs of acquiring or using resources in an organization B) measures the financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization C) coordinates product design, production, and marketing decisions and evaluate a company's performance D) communicates information to investors, banks, regulators, and other outside parties

A) measures the costs of acquiring or using resources in an organization

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

A) operations administration

9) Which of the following groups would be least likely to receive detailed management accounting reports? A) stockholders B) sales managers C) production supervisors D) distribution managers

A) stockholders

Management accountants serve as key business partners in the planning process because they understand the key ________ factors that create ________. A) success ... value B) accounting .... profits C) financial ... value. D) success ..... income

A) success ... value

5) The primary user of management accounting information is a(n) ________. A) the controller B) a shareholder evaluating a stock investment C) bondholder D) external regulator

A) the controller

18) Financial accounting provides a historical perspective, whereas management accounting emphasizes ________. A) the future B) past transactions C) a current perspective D) reports to shareholders

A) the future

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) the value chain

Ethical challenges for management accountants include ________. A) whether to accept gifts from suppliers, knowing it is an effort to indirectly influence decisions B) adhering to the principles of accounting C) whether to file a tax return this year D) whether to accept gifts higher incentives from the company for their performance

A) whether to accept gifts from suppliers, knowing it is an effort to indirectly influence decisions

Which of the following is not one of the ethical responsibilities of a management accountant? A. Compliance B. Confidentiality C. Integrity D. Objectivity

A. Compliance

The five-step decision process A. includes planning and control activities. B. is performed exclusively by management accountants. C. is not often used, as the costs exceed the benefits. D. must be performed following GAAP guidelines.

A. includes planning and control activities.

Which of the following differentiates confidentiality and credibility under the Standards of Ethical Conduct? A) Credibility deals with refraining from activities that would prejudice carrying duties ethically, while confidentiality deals with communicating information fairly and objectively. B) Confidentiality deals with refraining from the usage of critical information for unethical or illegal advantage, while credibility ensures disclosing the relevant information that would help the intended user's understanding. C) Credibility deals with refraining from the usage of critical information for unethical or illegal advantage, while confidentiality ensures disclosing the relevant information that would help the user's understanding. D) Credibility ensures appropriate level of professional expertise by continually developing knowledge and skills, while confidentiality encourages mitigation of actual conflicts of interest.

B) Confidentiality deals with refraining from the usage of critical information for unethical or illegal advantage, while credibility ensures disclosing the relevant information that would help the intended user's understanding.

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) Creating value for customers is an important part of planning and implementing strategy.

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

B) Customer service

________ 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) Design

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) In a cost-benefit analysis, both costs and benefits are not easy to measure.

2) Managers use management accounting information to ________. A) help external users such as investors, banks, regulators, and suppliers B) communicate, develop, and implement strategies C) communicate a firm's financial position to investors, banks, regulators, and other outside parties D) ensure that financial statements are consistent with the SEC rules

B) communicate, develop, and implement strategies

he Standards of Ethical Conduct for management accountants include concepts related to ________. A) competence, performance, diligence, and reporting B) competence, confidentiality, integrity, and credibility C) experience, diligence, reporting, and objectivity D) diligence, objectivity, conflicts of interest, and credibility

B) competence, confidentiality, integrity, and credibility

16) Which of the following deals with management accounting? A) identifying the costs of acquiring the resources of the company B) developing budgets C) preparing the income statement D) preparing the statement of cash flows

B) developing budgets

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) distribution

19) Rules for measurement and reporting for management accounting ________. A) state that information must only be useful to management. B) do not need to follow GAAP but must meet the cost-benefit test. C) must follow GAAP. D) must follow GAAP, IRS rules or government standards.

B) do not need to follow GAAP but must meet the cost-benefit test.

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) expected benefits to the company exceed the expected costs

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

B) is an aid for coordinating what needs to be done to execute a plan

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

B) its resources and capabilities

Which of the following is a responsibility of the CFO? A) budget funds for a plant upgrade B) managing short-term and long-term financing C) investing in new equipment D) conducting internal audit

B) managing short-term and long-term financing

3) Financial accounting ________. A) focuses on the future and includes activities such as preparing next year's operating budget B) must comply with GAAP (generally accepted accounting principles) C) is the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization D) is prepared for the use of department heads and other employees

B) must comply with GAAP (generally accepted accounting principles)

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) recognition of job well done

Customer response time involves ________. A) the speed it takes a customer to respond to an advertisement and place an order B) the speed at which an organization responds to customer requests C) the speed it takes to develop a new product D) the speed it takes an organization to develop a Total Quality Management (TQM) program

B) the speed at which an organization responds to customer requests

In supporting managers, management accountants have three guidelines. These guidelines are: A. Cost-benefit analysis, performance reporting, behavioral considerations, and technical considerations. B. Cost-benefit analysis, behavioral considerations and technical considerations, and different costs for different purposes. C. Financial statement preparation, technical considerations, strategic direction, and budgeting. D. Following functional lines of authority, cost-benefit analysis, behavioral considerations, and use of the value chain.

B. Cost-benefit analysis, behavioral considerations and technical considerations, and different costs for different purposes.

. Which of the following is not true about strategy? A. It involves matching its capabilities with the opportunities in the marketplace to accomplish its objective. B. It has a short-term focus. C. It can be implemented through price competition or product differentiation. D. It involves the use of strategic cost management.

B. It has a short-term focus.

The value chain A. involves external companies as well as internal activities. B. is the sequence of business functions in which customer usefulness is added to products or services. C. applies only to manufacturing companies. D. is not relevant in today's cost accounting environment.

B. is the sequence of business functions in which customer usefulness is added to products or services.

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) C A E B D

________ 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) Controllership

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) Design, Production, Marketing, Customer Service

13) Which of the following is true of financial accounting information? A) It is prepared based on cost-benefit analysis. B) It is primarily used by managers to make internal business decisions. C) It focuses on the past-oriented financial performance of a company. D) It only measures the cash transactions of a company.

C) It focuses on the past-oriented financial performance of a company.

15) Which of the following is true of cost accounting? A) It is a subset of management accounting and therefore its information is used only to meet the needs of managers. B) It is used only by manufacturers. C) It is part of both management and financial accounting systems. D) The distinction between management accounting and cost accounting is clear-cut.

C) It is part of both management and financial accounting systems.

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) It provides advice, support, and assistance to line management.

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) acquisition, coordination, and assembly of resources to produce a product or deliver a service

The approaches and activities of managers in short-run and long-run planning and control decisions that increase value for customers and lower costs of products and services are known as ________. A) value chain management B) enterprise resource planning C) cost management D) customer value management

C) cost management

New-product development time is the time taken to ________. A) test the prototype and start the large scale production of a product B) design and develop the prototype product C) create new products and bring them to market D) improvise existing products and re-launch them to market

C) create new products and bring them to market

4) Which of the following would most likely be the user of financial accounting information? A) factory shift supervisor B) distribution manager C) current shareholder D) department manager

C) current shareholder

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) customer-facing activities

Which of the following issues is addressed by the Sarbanes-Oxley legislation? A) safety aspects of products B) environmental damages caused by industries C) disclosure practices of public corporations D) disclosure practices of private companies

C) disclosure practices of public corporations

Sustainability is a strategy to achieve long term ________. A) cost reductions and efficiency objectives. B) financial and quality goals. C) financial, social, and environmental goals. D) innovation and technology goals.

C) financial, social, and environmental goals.

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) it is a benchmark against which actual performance can be compared

Examining past performance and exploring alternative ways to make better informed decisions in the future is ________. A) control B) planning C) learning D) implementation

C) learning

6) Financial accounting provides the primary source of information for ________. A) decision making in the assembly and finishing department B) improving distribution and customer service C) preparing the income statement for shareholders and other external parties D) planning next year's plans and specifically; the operating budget

C) preparing the income statement for shareholders and other external parties

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) promotions based on performance

14) A data warehouse or infobarn ________. A) is reserved for exclusive use by the CFO B) is primarily used for financial reporting purposes C) stores information used by different managers for multiple purposes D) gathers only nonfinancial information

C) stores information used by different managers for multiple purposes

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) strategizing compliance with GAAP (Generally Accepted Accounting Principles)

If there is an ethical conflict concerning your direct supervisor, when is it appropriate to contact authorities or individuals not employed by the organization? A) when there is a personal conflict B) when your supervisor is about to be promoted C) when there is a clear violation of the law D) when you face injustice from your supervisor

C) when there is a clear violation of the law

12) Which of the following differentiates cost accounting and financial accounting? A) The primary users of cost accounting are the investors, whereas the primary users of financial accounting are the managers. B) Cost accounting deals with product design, production, and marketing strategies, whereas financial accounting deals mainly with pricing of the products. C) Cost accounting measures only the financial information related to the costs of acquiring fixed assets in an organization, whereas financial accounting measures financial and nonfinancial information of a company's business transactions. D) Cost accounting measures information related to the costs of acquiring or using resources in an organization, whereas financial accounting measures a financial position of a company to investors, banks, and external parties.

D) Cost accounting measures information related to the costs of acquiring or using resources in an organization, whereas financial accounting measures a financial position of a company to investors, banks, and external parties.

Which item is an indication of credibility under the Standards of Ethical Conduct? A) Maintain an appropriate level of professional expertise by continually developing knowledge and skills. B) Refrain from using confidential information for unethical or illegal advantage. C) Abstain from engaging in or supporting any activity that might discredit the profession. D) Disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law.

D) Disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law

Which of the following actions should a management accountant take first in confronting a potential ethical conflict concerning your direct supervisor? A) Inform the Board of Directors of the existence of a potential conflict. B) Clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethics Counselor. C) Consult the attorney as to legal obligations and rights concerning the ethical conflict. D) Follow the organization's procedures concerning resolution of such a conflict.

D) Follow the organization's procedures concerning resolution of such a conflict.

7) Which of the following is true of management accounting information? A) It focuses on documenting past business actions of a firm. B) It is prepared based on SEC rules and FASB accounting principles. C) It is prepared for shareholders. D) It helps with the coordination of elements of the value chain.

D) It helps with the coordination of elements of the value chain.

Which of the following statements about a company's supply chain is true? A) A company's supply chain is always internal to a firm. B) A company's supply chain is always external to a firm. C) A company's supply chain is the same thing as a company's value chain. D) Management accountants provide information to enhance a company's supply chain.

D) Management accountants provide information to enhance a company's supply chain.

________ is a philosophy in which management improves operations throughout the value chain to deliver products and services that exceed customer expectations. A) Cost-benefit approach B) Customer focus C) Customer relationship management D) Total quality management

D) Total quality management

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

D) Treasury management

Control measures should ________. A) be set and not changed until the next budget cycle so as to provide an effective benchmark 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 learning and future planning

D) be linked by feedback to help learning and future planning

Which of the tools shown below would be the most effective planning tool? A) performance evaluation report B) fishbone diagram C) control chart D) budget

D) budget

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) controller

A well-conceived plan allows managers the ability to ________. A) set static goals and still be flexible B) control lower-level managers from implementing change C) conservatively estimate costs so that actual operating results will be favorable when comparisons are made D) take advantage of unforeseen opportunities

D) take advantage of unforeseen opportunities

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) usefulness is added to the products or services of an organization

The Treasurer a. is the executive responsible for overseeing the financial operations of an organization. b. undertakes banking, financing, investments, and cash management duties. c. provides financial information to managers and shareholders and oversees the overall operations of the accounting system. d. is a different title for the Controller.

b. undertakes banking, financing, investments, and cash management duties.

Which of the following is not a key success factor in a company's effort to deliver increased levels of performance to the customer? a. Time b. Innovation c. Quality d. Price reduction

d. Price reduction