1-2 Cost Accounting

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

12) Management accountants work closely with managers in various departments to formulate strategies by providing information about the sources of competitive advantage.

: TRUE Diff: 2 Objective: 2 AACSB:

7) A company's strategy specifies how an organization matches its capabilities with the opportunities in the marketplace.

: TRUE Diff: 2 Objective: 2 AACSB:

21) Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition. Assume you are opening a small food outlet across the street from your campus. How might that business be operated under each of the two broad strategies? Consider the following specific operational areas: a. target customers b. products offered c. product pricing d. location choice e. advertising content f. advertising media

: The purpose of this question is to explore some of the differences in business operations as a result of a broad strategic choice. Answers will differ from student to student, but you should see some specific themes.