Deck 1: Cost Accounting: Information for Decision Making

Question 1

The set of activities that transforms raw resources into the goods and services of an organization is called:

A)Value chain.
B)Supply chain.
C)Demand chain.
D)Cost-benefit analysis.

Answer 1

A

Question 2

Financial accounting information is designed for decision-makers who are directly involved in the daily management of the firm.

Answer 2

False

Question 3

It is more important for financial accounting information to be comparable between firms than to be useful for managerial decision-making.

Answer 3

True

Question 4

It is important that the manager assigned to lead a responsibility center be held accountable for its operations.

Question 5

Budgeting is primarily used to determine year-end bonuses based on managerial and organizational performance.

Question 6

A responsibility center can be a department,division,or segment,but not a subsidiary of the parent company.

Question 7

A cost driver is a variable that causes costs.

Question 8

The value chain comprises activities from research and development through the production process,but does not include activities related to the distribution of products or services.

Question 9

Customer satisfaction is an example of a non-financial performance measure.

Question 10

Cost accounting information developed for managers to use in making decisions must comply with generally accepted accounting principles (GAAP).

Question 11

Ethical behavior depends more on a firm's code of conduct than the individual's personal beliefs.

Question 12

Cost accounting information can be used by managers to defraud customers,creditors,and owners.

Question 13

Benchmarking is an on-going process that compares a company's products or services with the best levels of performance from other firms.

Question 14

All nonvalue-added activities can be eliminated,once they are identified.

Question 15

Cost information used for one managerial decision could be irrelevant for another managerial decision.

Question 16

A cost can be differential for one particular course of action and non-differential for another course of action.

Question 17

Managers face ethical situations on a daily basis,while accountants face them infrequently.

Question 18

Activity-based costing (ABC)is a management tool that focuses on the continuous improvement of all dimensions of a business.

Question 19

Administrative functions are not included in the value chain because they are implicitly included in every business function.

Question 20

Managers are responsible for the costs incurred to achieve the targets set during the budgeting process,but not the resources consumed to achieve those targets.

Question 21

An accounting system that collects financial and operating data on the basis of the underlying nature and extent of cost drivers is (CMA adapted)

A)full-absorption costing.
B)activity-based costing.
C)variable costing.
D)benchmarking.

Question 22

Continual process of measuring a company's own products,services or activities against competitors' performance is

A)performance measure
B)benchmarking
C)budgeting
D)responsibility center
E)lean accounting

Question 23

The JKL Restaurant had sales revenues and food costs in 2009 of $800,000 and $600,000,respectively.In 2010,JKL will be introducing a new menu item that will generate $100,000 in sales revenues and $40,000 in food costs.Assuming no changes are expected for the other food items,the differential operating profit for 2010 is

A)$260,000.
B)$100,000.
C)$60,000.
D)$40,000.

Question 24

Which of the following is a nonvalue-added activity?

A)Product design
B)Customer service
C)Research and development
D)Rework of defective items

Question 25

The primary reason for adopting total quality management (TQM)is to achieve (CIA adapted)

A)reduced delivery time.
B)reduced delivery charges.
C)greater customer satisfaction.
D)greater employee participation.
E)better managerial decisions.

Question 26

The process of creating a formal plan and translating goals into a quantitative format is (CMA adapted)

A)budgeting.
B)benchmarking.
C)cost-benefit analysis.
D)value-added analysis.
E)activity-based costing.

Question 27

The cost accounting system that minimizes wasteful or unnecessary transaction processes is

A)performance measure
B)benchmarking
C)budgeting
D)responsibility center
E)lean accounting

Question 28

The financial plan of the revenues and resources needed to carry out activities and meet financial goals is called

A)performance measure
B)benchmarking
C)budgeting
D)responsibility center
E)lean accounting

Question 29

Cost drivers are (CMA adapted)

A)activities that cause costs to increase as the activity increases.
B)accounting techniques and practices used to control costs.
C)accounting reimbursements used to evaluate whether performance is proceeding according to plan.
D)a mechanical basis,such as machine hours,computer time,or factory square footage,used to assign costs to activities.

Question 30

According to the Institute of Management Accountants (IMA),the first step in resolving an ethical dilemma is to

A)resign from the organization.
B)call the IMA's ethics hotline.
C)report the circumstances to a local newspaper.
D)consult with an objective,independent advisor.
E)discuss the situation with an immediate supervisor.

Question 31

Which field of accounting emphasizes relevancy over comparability?

A)Cost accounting.
B)Financial accounting.
C)Responsibility accounting.
D)International accounting.

Question 32

The field of accounting that depends on generally accepted accounting principles (GAAP)is called

A)cost accounting.
B)financial accounting.
C)managerial accounting.
D)responsibility accounting.
E)international accounting.

Question 33

Which of the following statements is false?

A)In essence,the value chain and the supply chain are similar; each creates something for which the customer is willing to pay.
B)Accounting systems are important because they provide all the information for decisions commonly made by managers.
C)The supply or distribution chain is a linked set of organizations that exchange goods and services in combination to provide a final product or service to the customer.
D)Eliminating nonvalue-added activities always reduces costs without affecting the value of the product to customers.

Question 34

The just-in-time (JIT)methods of production focuses on

A)increasing sales revenue.
B)reducing inventories.
C)increasing customer service.
D)reducing operating expenses.
E)increasing product quality.

Question 35

According to the Institute of Management Accountants (IMA),the final step in resolving an ethical dilemma is to

A)resign from the organization.
B)call the IMA's ethics hotline.
C)report the circumstances to a local newspaper.
D)consult with an objective,independent advisor.
E)discuss the situation with an immediate supervisor.

Question 36

Which of the following is not one of the basic standards of the Institute of Management Accountants (IMA)Code of Ethics?

A)Competence
B)Confidentiality
C)Honesty
D)Integrity
E)Credibility

Question 37

Which of the following is not one of the overarching ethical principles of the Institute of Management Accountants (IMA)Code of Ethics?

A)Competence
B)Responsibility
C)Honesty
D)Objectivity
E)Fairness

Question 38

The costing method that first assigns costs to activities and then assigns them to products based on the products' consumption of activities is called

A)lean accounting
B)responsibility centers
C)activity-based costing
D)budgeting
E)outsourcing

Question 39

Which of the following activities would not be considered a value-added activity?

A)Production
B)Marketing
C)Accounting
D)Distribution

Question 40

Managers do not make decisions about future events based on:

A)Perfect information.
B)Estimated information.
C)Actual information.
D)Financial information.
E)Cost information.

Question 41

Which of the following is not a key financial manager in an organization?

A)Chief financial officer
B)Treasurer
C)External auditor
D)Controller
E)Cost accountant

Question 42

The system that identifies the costs of producing low-quality items is called

A)customer relationship management
B)distribution chain
C)total quality management
D)cost of quality
E)enterprise resource planning

Question 43

Cindy's Limo Service provides transportation services in and around Middleville.Its profits have been declining,and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year.The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year.The present manager will continue to supervise all services.Due to expansion,however,the labor costs and utilities would increase by 40%.Rent and other costs will increase by 15%.
Required:
Prepare a report of the differential costs and revenues if the delivery service is added.Should management start up the delivery service? Explain your answer.

Question 44

Moving of inventory is an example of a(n)

A)cost-benefit analysis
B)value-added activity
C)activity-based cost
D)nonvalue-added activity

Question 45

A management method by which the organization seeks to excel on all dimensions of quality is called

A)customer relationship management
B)distribution chain
C)total quality management
D)cost of quality
E)enterprise resource planning

Question 46

Northern King is an integrated provider of genetically engineered corn.Many types of costs are incurred in its operations.
Required: For each cost in the following table,identify the stage in the value chain where the cost is incurred.

Question 47

Which of the following is not normally considered part of the value chain?

A)Research and development
B)Purchasing
C)Administration
D)Distribution
E)Customer service

Question 48

Information technology that links the various processes of the company into a single comprehensive information system is called

A)customer relationship management
B)distribution chain
C)total quality management
D)cost of quality
E)enterprise resource planning

Question 49

The system that allows firms to target profitable customers by assessing customer revenue and costs is called

A)customer relationship management
B)distribution chain
C)total quality management
D)cost of quality
E)enterprise resource planning

Question 50

Having one or more of the firms' activities performed by another firm or individual in the supply or distribution chain is called

A)lean accounting
B)responsibility centers
C)activity-based costing
D)budgeting
E)outsourcing

Question 51

Compare financial accounting and cost accounting using the following concepts: users of the information; important criteria; who establishes or defines the system; and how to determine an accounting treatment.

Question 52

The IMA Code of Ethics describes three basic steps a cost accountant should take when faced with an ethical conflict: Discuss,clarify,consult.Describe each of these three steps.

Question 53

Honda incurs many types of costs in its operations.
Required: For each cost in the following table,identify the stage in the value chain where the cost is incurred.

Question 54

Costs that change in response to a particular course of action are

A)differential costs
B)cost-benefit analysis
C)activity-based costs
D)cost drivers

Question 55

Respond to this comment: "Since cost accountants just prepare accounting data for internal management,cost accountants do not need to be concerned with GAAP or IFRS."

Question 56

In 2010,the MoreForLess Company had revenues of $2,000,000 while costs were $1,500,000.In 2011,MoreForLess will be introducing a new product line that will generate $200,000 in sales revenues and $160,000 in costs.Assuming no changes are expected for the other products,the differential operating profit for 2011 is

A)$540,000.
B)$200,000.
C)$160,000.
D)$40,000.

Question 57

In 2010,the Turnkey Company had consulting revenues of $1,000,000 while costs were $750,000.In 2011,Turnkey will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in costs.Assuming no changes are expected for the other services,the differential operating profit for 2011 is

A)$250,000.
B)$150,000.
C)$90,000.
D)$60,000.