ACG471 MIDTERM
9) Accountants define a cost as a resource to be sacrificed to achieve a specific objective.
T
29) Management accounting has to strictly follow the rules of generally accepted accounting principles for the purposes of measurement and reporting.
F
7) Costs are accounted for in two basic stages: assignment followed by accumulation.
F
9) The best-designed strategies are valuable whether or not they are effectively implemented.
F
11) The key to a company's success is always to be the low cost producer in a particular industry.
F
12) As part of the Sarbanes-Oxley Act, internal auditors are solely responsible for the fair representation of the business operations in the financial statements.
F
13) Management accountants should have little or no role in deciding on a company's strategy.
F
14) As per IMA statement of ethical professional practice, integrity refers to disclosing all relevant information that could reasonably be expected to influence an intended user's understanding of the reports, analyses, or recommendations is a responsibility.
F
14) Companies can decide on an appropriate strategy based strictly on internally available information.
F
15) Strategic financial management describes cost management that specifically focuses on strategic issues.
F
17) Assigning indirect costs is easier than assigning direct costs.
F
18) When faced with a potential ethical conflict, the managerial accountant should first consult IMA ethics counselor.
F
19) The smaller the amount of a cost the more likely it is economically feasible to trace it to a particular cost object.
F
21) Financial accounting information focuses on internal reporting.
F
22) Cost accounting provides information for both management accounting and financial accounting professionals.
F
24) Management accounting ensures communication of an organization's financial position to investors, banks, and regulators.
F
10) A cost is a resource sacrificed or forgone to achieve a specific objective.
T
10) The key to a company's success is creating value for customers while differentiating itself from its competitors.
T
11) Competence includes maintaining an appropriate level of professional expertise by continually developing knowledge and skills.
T
11) Managers use cost accumulation data to make decisions and implement them.
T
12) Management accountants work closely with managers in various departments to formulate strategies by providing information about the sources of competitive advantage.
T
16) A cost may be direct for one cost object and indirect for another cost object.
T
26) Financial accounting is broader in scope than management accounting
F
13) Management accountants have important ethical responsibilities that are related to competence, confidentiality, integrity, and credibility.
T
15) Performing professional duties in accordance with relevant laws, regulations, and technical standards is a competent responsibility.
T
16) Identifying a company's most important customers helps to formulate a strategy.
T
16) If a managerial accountant suspected his or her immediate superior of unethical behavior, who happens to be a chief executive officer or equivalent, the managerial accountant should request an immediate meeting with the executive committee or the audit committee.
T
17) The Institute of Management Accountants provides a hotline to discuss ethical issues.
T
17) The best-designed strategies and the best-developed capabilities are useless unless they are effectively executed.
T
18) Improvements in information-gathering technologies are making it possible to trace more costs as direct.
T
19) IMA's overarching ethical principles include: Honesty, Fairness, Objectivity, and Responsibility.
T
20) Integrity is to abstain from engaging in or supporting any activity that might discredit the profession.
T
23) Management accounting information and reports do not have to follow set principles or rules such as GAAP.
T
25) The balance sheet, income statement, and statement of cash flows are used for financial accounting, and also for management accounting.
T
27) Cost accounting measures and reports short-term, long-term, financial, and non financial information.
T
28) Cost accounting is the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization.
T
30) For management accounting, internal measurement and reporting are based on cost-benefit analysis.
T
31) An Enterprise Resource Planning (ERP) System is a single database that collects data and feeds into applications that support each of the company's business activities, such as purchases, production, distribution, and sales.
T
32) Financial accounting provides an organization's past-oriented information such as the previous years' financial statements.
T
33) Cost management not only helps reducing costs but also improving customer satisfaction and the quality of a firm's products.
T
6) A cost object is anything for which a cost measurement is desired.
T
7) A company's strategy specifies how an organization matches its capabilities with the opportunities in the marketplace.
T
8) An actual cost is the cost incurred-a historical or past cost.
T
8) The two broad strategies that companies follow are cost leadership strategy and product differentiation strategy
T
1) An actual cost is ________. A) is the cost incurred B) is a predicted or forecasted cost C) is anything for which a cost measurement is desired D) is the collection of cost data in some organized way by means of an accounting system
a
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
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
11) Cost accounting ________. A) measures the costs of acquiring or using resources in an organization B) helps managers to develop, communicate, and implement strategies 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
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
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
3) Cost accumulation is ________. A) the collection of cost data in some organized way by means of an accounting system B) anything for which a cost measurement is desired C) anything for which a profit measurement is desired D) the collection of profit data in some organized way by means of an accounting system
a
3) 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
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
5) A cost system determines the cost of a cost object by ________. A) accumulating and then assigning costs B) accumulating costs C) assigning and then accumulating costs D) assigning costs
a
5) Cost tracing is ________. A) the assignment of direct costs to the chosen cost object B) a function of cost allocation C) the process of tracking both direct and indirect costs associated with a cost object D) the process of determining the actual cost of the cost object
a
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 Answer: A
a
5) 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
7) 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
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
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
34) For each report listed below, identify whether the major purpose of the report is for (1) routine internal reporting, (2) nonroutine internal reporting, or for (3) external reporting to investors and other outside parties. Item: a. study detailing sale information of the top-ten selling products b. weekly report of total sales generated by each store in the metropolitan area c. annual Report sent to shareholders d. monthly report comparing budgeted sales by store to actual sales
a. (2) nonroutine internal reporting b. (1) routine internal reporting c. (3) external reporting to investors and other outside parties d. (1) routine internal reporting
11) Which one of the following items is a direct cost? A) Customer-service costs of a multiproduct firm; Product A is the cost object. B) Printing costs incurred for payroll check processing; payroll check processing is the cost object. C) The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object. D) Utility costs of the administrative offices; the accounting department is the cost object.
b
14) Which of the following statements is true? A) A direct cost of one cost object will always be a direct cost of another cost object. B) Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs. C) All fixed costs are indirect costs. D) All direct costs are variable costs.
b
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
19) An Enterprise Resource Planning System can best be described as ________. A) a collection of programs that use a variety of unconnected databases B) a single database that collects data and feeds it into applications that support each of the company's business activities, such as purchases, production, distribution, and sales C) a database that is primarily used by a purchasing department to determine the correct amount of a particular supply item to purchase D) a sophisticated means of linking two or more companies to facilitate their planning processes
b
2) Comparing budgeted costs to actual costs helps managers to improve ________. A) coordination B) control C) implementation D) planning
b
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
2) The 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
2) The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is ________. A) cost accumulation B) cost assignment C) cost tracing D) conversion costing
b
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
4) Cost assignment ________. A) includes future and arbitrary costs B) encompasses allocating indirect costs to a cost object C) is the same as cost accumulation D) is the difference between budgeted and actual costs
b
4) 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
4) Which of the following statements about the direct/indirect cost classification is true? A) Indirect costs are always traced. B) Indirect costs are always allocated. C) The design of sales target affects the direct/indirect classification. D) The direct/indirect classification depends on the cost control measures.
b
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
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
9) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line is ________. A) beverages provided daily in the plant break room B) monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver C) salaries of the clerical staff that work in the company administrative offices D) overheads incurred in producing both golf and soccer equipment
b
1) 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
10) 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
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
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
15) Which of the following is true of cost accounting? A) It provides financial information about cash-based transactions only. B) It accounts only the financial information of business transactions, not the nonfinancial information. C) It provides financial information regarding the cost of acquiring resources. D) It must be prepared in accordance with GAAP.
c
15) Which of the following statements is true of direct costs? A) A direct cost of one cost object is a true sense of the budgeted costs. B) All variable costs are direct costs. C) A direct cost of one cost object can be an indirect cost of another cost object. D) All fixed costs are direct costs.
c
20) 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
3) Budgeted costs are ________. A) the costs incurred this year B) the costs incurred last year C) planned or forecasted costs D) competitor's costs
c
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
4) The primary user of financial accounting information is a ________. A) factory shift supervisor B) distribution manager C) current shareholder D) department manager
c
6) Cost allocation is ________. A) the process of tracking both direct and indirect costs associated with a cost object B) the process of determining the opportunity cost of a cost object chosen C) the assignment of indirect costs to the chosen cost object D) made based on material acquisition document
c
6) Financial accounting provides the primary source of information for ________. A) decision making in the finishing department B) improving customer service C) preparing the income statement for shareholders D) planning next year's operating budget
c
8) Classifying a cost as either direct or indirect depends upon ________. A) the behavior of the cost in response to volume changes B) whether the cost is expensed in the period in which it is incurred C) whether the cost can be easily traced with the cost object D) whether a cost is fixed or variable
c
1) Which of the following factors affect the direct/indirect classification of a cost? A) the level of budgeted profit for the next year B) the estimation of time required to complete the order C) the ability to execute an order in the most cost-efficient manner D) the design of the operation
d
10) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is the ________. A) material used to make the soccer balls B) labor to shape the leather used to make the soccer ball C) material used to manufacture the soccer studs D) salary paid to plant supervisor
d
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
12) Indirect manufacturing costs ________. A) can be traced to the product that created the costs B) can be easily identified with the cost object C) generally include the cost of material and the cost of labor D) may include both variable and fixed costs
d
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
13) Which of the following is true of indirect costs? A) Indirect costs are always considered sunk costs. B) All indirect costs are included in cost of goods sold. C) Indirect costs always vary in direct proportion to the level of production. D) Indirect costs cannot be traced to a particular cost object in an economically feasible way.
d
6) 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
7) The determination of a cost as either direct or indirect depends upon the ________. A) accounting standards B) tax system chosen C) inventory valuation D) cost object chosen
d
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 co-ordinates product design, production, and marketing decisions.
d
8) 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
9) If there is an ethical conflict concerning your direct supervisor, you may contact ________. A) local media B) IMA Ethics Counselor C) attorney D) board of directors
d