Chapter 12 Cost accounting

Which of the following statements best relates to the balanced scorecard s learning and growth perspective? A) How will we empower our employees? B) How do we lower costs? C) What processes will increase value to customers? D) How can we obtain greater profits?

A) How will we empower our employees?

________ is a measure of the balanced scorecard s learning and growth perspective. A) Information system availability B) Economic value added C) Cost reductions in key areas D) Customer retention percentage

A) Information system availability

1) Which of the following statements best define strategy? A) It describes how an organization can create value for its customers while differentiating itself from its competitors. B) It is an organization s ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. C) It is an organization s ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors. D) It describes how an organization motivates its employees to work for more hours without any increase in their wages.

A) It describes how an organization can create value for its customers while differentiating itself from its competitors.

________ is a measure of the balanced scorecard s customer perspective. A) Number of client complaints B) Defect rates C) Number of process improvements D) Revenue growth

A) Number of client complaints

_______ is a measure of the balanced scorecard s internal process perspective. A) Service response time B) Customer satisfaction C) Gross profit percentage D) Cost reduction

A) Service response time

uccessful implementation of a product differentiation strategy will result in ________. A) a large favorable growth and price recovery components B) a large favorable price recovery and productivity components C) a large favorable productivity and growth components D) only a large favorable growth component

A) a large favorable growth and price recovery components

The revenue effect of price recovery is calculated by multiplying the difference in selling price (current year minus the previous year) by ________. A) actual units sold in the current year B) budgeted units sold in the previous year C) budgeted units sold in the current year D) actual units sold in the previous year

A) actual units sold in the current year

) When analyzing the change in operating income, the strategy component of productivity will increase when ________. A) capacity is reduced B) quality is enhanced C) selling prices are increased D) more units are produced and sold

A) capacity is reduced

The operating capabilities is an example of the ________ measure of a balanced scorecard. A) internal business process perspective B) customer perspective C) learning and growth perspective D) financial perspective

A) internal business process perspective

The first step to successful balanced scorecard implementation is clarifying the ________. A) organization s vision and strategy B) elements that pertain to value added aspects of the business C) owner s expectations about return on investment D) objectives of all four balanced scorecard measurement perspectives

A) organization s vision and strategy

Stewart Corporation plans to grow by offering a sound system, the SS3000, that is superior and unique from the competition. Stewart believes that putting additional resources into R&D and staying ahead of the competition with technological innovations is critical to implementing its strategy. Stewart s strategy is ________. A) product differentiation B) downsizing C) product leadership D) cost leadership

A) product differentiation

Which component of strategy measures the changes in operating income attributed solely to an increase in the quantity of output between Year 1 and Year 2? A) the growth component B) the price recovery component C) the productivity component D) the cost leadership component

A) the growth component

Managers can reduce capacity based fixed costs by measuring and managing ________. A) unused capacity B) variable costs C) engineered costs D) discretionary costs

A) unused capacity

Which of the following statements is a disadvantage of balanced scorecards? A) Balanced scorecards ignore short run objectives. B) Balanced scorecards may become unwieldy and difficult to understand. C) Balanced scorecards use a lot of nonfinancial measures. D) Balanced scorecards are of little use in influencing managerial behavior.

B) Balanced scorecards may become unwieldy and difficult to understand

____ have no measurable cause and effect relationship between output and resources used. A) Engineered costs B) Discretionary costs C) Marginal costs D) Manufacturing costs

B) Discretionary costs

_______ are the subdivisions of income that management accountants use for the strategic analysis of operating income. A) Growth, price recovery and cost leadership components B) Growth, price recovery and productivity components C) Cost leadership, price recovery and productivity components D) Growth, cost leadership and productivity components

B) Growth, price recovery and productivity components

Which of the following statements best relates to the balanced scorecard s financial perspective? A) How can we obtain greater profits for the current year? B) How can we increase shareholder value? C) How will we obtain continuous improvements? D) How can we secure greater customer satisfaction

B) How can we increase shareholder value?

________ is a measure of the balanced scorecard s internal business process perspective. A) Market share B) Manufacturing downtime C) Return on investment D) Number of customer complaints

B) Manufacturing downtime

_______ is an organization s ability to offer products or services that are perceived by its customers as being superior and unique relative to those of its competitors. A) Strategy B) Product differentiation C) Cost leadership D) The balanced scorecard

B) Product differentiation

Which of the following statements is true of a balanced scorecard? A) The balanced scorecard reduces managers emphasis on long run financial performance. B) The balanced scorecard reduces managers emphasis on short run financial performance. C) The primary goal of using the balanced scorecard is to sustain short run financial performance. D) The primary goal of using the balanced scorecard is to sustain short run nonfinancial performance.

B) The balanced scorecard reduces managers emphasis on short run financial performance.

Which of the following statements is of true engineered costs? A) They arise from periodic (usually annual) decisions regarding the maximum amount to be incurred. B) They have a detailed, physically observable, and repetitive relationship with output. C) They include advertising, executive training, and R&D. D) They have high level of uncertainty.

B) They have a detailed, physically observable, and repetitive relationship with output.

When analyzing the change in operating income, the strategy component of price recovery ________. A) calculations are similar to the efficiency variance calculations B) compares the change in output price with the changes in input prices C) will report a large positive amount when a company has successfully pursued the cost leadership strategy D) isolates the change attributed solely to an increase in production efficiencies

B) compares the change in output price with the changes in input prices

The time taken to fulfill clients requests is an example of the ________ measure of a balanced scorecard. A) internal business process perspective B) customer perspective C) learning and growth perspective D) financial perspective

B) customer perspective

Executive training costs is an example of ________. A) engineered costs B) discretionary costs C) downsizing costs D) rightsizing costs

B) discretionary costs

t is difficult to determine unused capacity for ________. A) direct engineered costs B) discretionary costs C) variable costs D) marginal costs

B) discretionary costs

2) In general, profit potential of an organization decreases with ________. A) lesser competition and stronger potential entrants B) greater competition and stronger potential entrants C) lesser competition and weaker potential entrants D) greater competition and weaker potential entrants

B) greater competition and stronger potential entrants

Conversion costs are an example of ________. A) direct engineered costs B) indirect engineered costs C) discretionary costs D) unused capacity costs

B) indirect engineered costs

An organization that is using the product differentiation approach would ________. A) focus on tight cost control B) use innovative research and development C) provide products that are similar to competitors D) offer products at a lower cost than competitors

B) use innovative research and development

_______ refers to an organization s ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. A) Marketing strategy B) Product differentiation C) Cost leadership D) Competitor differentiation

C) Cost leadership

________ perspective of the balanced scorecard focuses on a company s own operations that create value for customers that, in turn, help achieve financial objectives. A) Financial B) Customer C) Internal business process D) Learning and growth

C) Internal business process

Which of the following statements is true of the internal business process perspective of a balanced scorecard? A) Internal business process perspective is composed of three subprocesses: innovation process; learning and growth process; and postsales service process. B) Internal business process perspective evaluates the profitability of the strategy and the creation of shareholder value. C) Internal business process improvement targets are often determined after benchmarking against an organization s main competitors standards. D) Internal business process perspective is composed of three subprocesses: operations process; learning and growth process; and postsales service process.

C) Internal business process improvement targets are often determined after benchmarking against an organization s main competitors standards.

Which of the following statements is a benefit of measuring environmental and social performance? A) It limits the number of performance measures, identifying only the most critical ones. B) It helps to communicate the strategy to all members of the organization. C) It enhances the identification of cause and effect relationships to evaluate benefits. D) It uses financial measures to serve as leading indicators of future nonfinancial performance.

C) It enhances the identification of cause and effect relationships to evaluate benefits.

_______ is a measure of the balanced scorecard s financial perspective. A) Service response time B) Number of new patents C) Operating income D) Defect rates

C) Operating income

Assuming previous year s production capacity was adequate to produce current year output, the cost effect of growth for fixed costs is calculated by multiplying the difference between ________ by price per unit of capacity in the previous year. A) actual units of capacity in current year and actual units of capacity in previous year B) capacity units required to produce current year output in previous year and the current year capacity units C) actual units of capacity in previous year and actual units of capacity in previous year D) capacity units required to produce previous year output in current year and the previous year capacity units

C) actual units of capacity in previous year and actual units of capacity in previous year

Engineered costs ________. A) possess a high level of uncertainty B) are nonrepetitive C) are from physically observable activities D) have processes that are sketchy or unavailable

C) are from physically observable activities

4) While doing industry analysis on five forces, which of the following is a force that shapes an organization s profit potential? A) previous year profit figures B) current year profit figures C) bargaining power of suppliers D) research and development

C) bargaining power of suppliers

Direct material cost is an example of ________. A) conversion costs B) discretionary costs C) engineered costs D) downsized costs

C) engineered costs

8) An organization that is using the cost leadership approach would ________. A) incur costs for innovative R&D B) provide products at a higher cost than competitors C) focus on productivity through efficiency improvements D) bring products to market rapidly

C) focus on productivity through efficiency improvements

Successful implementation of a cost leadership strategy will result in ________. A) large favorable growth and price recovery components B) large favorable price recovery and productivity components C) large favorable productivity and growth components D) only a large favorable growth component

C) large favorable productivity and growth components

The employee turnover rates is an example of the ________ measure of a balanced scorecard. A) internal business process perspective B) customer perspective C) learning and growth perspective D) financial perspective

C) learning and growth perspective

The fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance, such as cost, quality, service, speed, and customer satisfaction is ________. A) directing B) controlling C) reengineering D) structuring

C) reengineering

When analyzing the change in operating income, the strategy component of price recovery will increase when ________. A) capacity is reduced B) market share is increased C) selling prices are increased D) more units are sold

C) selling prices are increased

When analyzing the change in operating income, the strategy component of productivity ________. A) calculations are similar to the sales volume variance calculations B) compares the change in output price with the changes in input prices C) will report a large positive amount when a company has successfully pursued the cost leadership strategy D) isolates the change attributed solely to an increase in the quantity of units sold

C) will report a large positive amount when a company has successfully pursued the cost leadership strategy

________ translates an organization s mission and strategy into a comprehensive set of performance measures that provide the framework for implementing its strategy. A) Performance scoreboard B) Product differentiation C) Differential report D) Balanced scorecard

D) Balanced scorecard

Which of the following statements best relates to the balanced scorecard s internal business processes perspective? A) How do we lower costs? B) How do we motivate employees? C) How can we obtain greater profits? D) How processes will increase value to customers?

D) How processes will increase value to customers?

3) Which of the following statements best define a product differentiation strategy? A) It describes how an organization can increase customer base by differentiating its product prices from its competitors. B) It is an organization s ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. C) It describes how an organization can decrease product prices by differentiating its raw materials from its competitors. D) It is an organization s ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors.

D) It is an organization s ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors.

Which of the following statements is true of strategic analysis of operating income? A) Management accountants compare budgeted operating performance over two different periods. B) Management accountants compare actual and budgeted operating performance over the same time periods. C) Management accountants compare actual operating performance of one year and budgeted operating performance of another year. D) Management accountants compare actual operating performance over two different periods.

D) Management accountants compare actual operating performance over two different periods.

Which of the following statements is true of successfully implementing a balanced scorecard? A) External auditors should design and implement the balanced scorecard. B) Balanced scorecard should never be communicated to all employees. C) Balanced scorecard should be formed exclusively by top management. D) Management accountants should determine the balanced scorecard measures.

D) Management accountants should determine the balanced scorecard measures.

________ is the fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance such as cost, quality, service, speed, and customer satisfaction. A) Strategy B) Product differentiation C) Product designing D) Reengineering

D) Reengineering

Which of the following statements is true of discretionary costs? A) They arise from day to day operational decisions. B) They include conversion cost, direct material costs. C) They have measurable cause and effect relationship between output and resources used. D) They have high level of uncertainty.

D) They have high level of uncertainty

Which of the following statements is a possible pitfall while implementing a balanced scorecard? A) Managers using cost benefit considerations while designing a balanced scorecard. B) Managers ignoring objective measures as market share, manufacturing yield. C) Managers using subjective measures in the balanced scorecard. D) Top management ignoring nonfinancial measures when evaluating

D) Top management ignoring nonfinancial measures when evaluating

Assuming previous year s production capacity was inadequate to produce current year output, the cost effect of growth for fixed costs is calculated by multiplying the difference between ________ by price per unit of capacity in the previous year. A) capacity units required to produce previous year output in current year and the current year capacity units B) capacity units required to produce current year output in previous year and the current year capacity units C) capacity units required to produce previous year output in current year and the previous year capacity units D) capacity units required to produce current year output in previous year and the previous year capacity units

D) capacity units required to produce current year output in previous year and the previous year capacity units

Terbium Corporation manufactures water toys. It plans to grow by producing high quality water toys that are delivered in a timely manner. There are a number of other manufacturers who produce similar water toys. Terbium believes that continuously improving its manufacturing processes and reengineering processes to downsize and eliminate excess capacity are critical to implementing its strategy. Out of the two basic strategies, Terbium s strategy is ________. A) product differentiation B) product leadership C) cost differentiation D) cost leadership

D) cost leadership

In an effective balanced scorecard, ________. A) net income serves as the best indicator for the hard to measure long run nonfinancial performance B) sales budget serves as one of the leading indicator for the hard to measure short run financial performance C) sales budget serves as a leading indicator for the hard to measure short run nonfinancial performance D) customer satisfaction serves as one of the leading indicator for the hard to measure long run financial performance

D) customer satisfaction serves as one of the leading indicator for the hard to measure long run financial performance

Which of the following is an example of process reengineering measure? A) charging higher prices to increase tax benefit B) decreasing quantity of output produced to increase total factor productivity C) increasing costs of all inputs used to increase total factor productivity D) employing more skilled workers to improve quality

D) employing more skilled workers to improve quality

The gross margin percentage is an example of the ________ measure of a balanced scorecard. A) internal business process perspective B) customer perspective C) learning and growth perspective D) financial perspective

D) financial perspective

Engineered costs ________. A) have a no repetitive relationship with output B) have no measurable cause and effect relationship between output and resources used C) include research and development and human resource costs D) include a high level of certainty

D) include a high level of certainty

Eliminating excess capacity is an initiative to achieve the ________ perspective under a balanced scorecard. A) marketing B) customer C) learning and growth D) internal business process

D) internal business process

When analyzing the change in operating income, the strategy component of growth ________. A) calculations are similar to the selling price variance calculations B) isolates the change attributed solely to an increase in market share C) isolates the change attributed solely to an increase in industry growth D) isolates the change attributed solely to an increase in the quantity of units sold

D) isolates the change attributed solely to an increase in the quantity of units sold

A ________ is a diagram that describes how an organization creates value by connecting strategic objectives in explicit cause and effect relationships with each other in the balanced scorecard perspectives. A) value diagram B) balanced scoreboard C) strategic scorecard D) strategy map

D) strategy map