Deck 1: The Role of Accounting Information in Management Decision Making

Question 1

Diagnostic systems set budget goals to constrain behavior.

Answer 1

False

Question 2

Accounting information is the only thing managers need to make financial decisions.

Answer 2

False

Question 3

The cost of your old automobile is relevant in the decision to purchase a new automobile.

Answer 3

False

Question 4

Accounting information is used to monitor operations by comparing actual results to planned results.

Question 5

Belief systems encourage employees to be inspired by the vision of the company

Question 6

Incremental cash flows are relevant for decision making.

Question 7

Business risk is the risk that business will be altered or interrupted in some way.

Question 8

Business risk should be monitored regularly

Question 9

Most managers follow a standard template and format when writing a vision statement.

Question 10

Cost accounting information, such as the valuation of ending inventory, is shown on external financial statements.

Question 11

Risk management can eliminate business risk

Question 12

A vision statement helps employees understand how to deal with various stakeholder groups.

Question 13

A vision statement is one way to clarify an organization's basic purpose and ideology.

Question 14

Relevant information for decisions can focus both on learning from the past and anticipating the future.

Question 15

Cost accounting information is used for both external reporting and internal decision making.

Question 16

Interactive systems should be examined only when a problem exists.

Question 17

Boundary systems set budget goals to constrain behavior.

Question 18

Organizational core competencies are the tactics that managers use to take advantage of the vision.

Question 19

Accounting information cannot be used to motivate employee behavior.

Question 20

Incremental cash flows are the same as unavoidable cash flows.

Question 21

Because we can never completely remove biases and business risk from decision making, higher quality decision processes are often ineffective.

Question 22

Biases do not affect external financial reports, because they are based on objective standards.

Question 23

Belief systems are an important part of what framework?

A) Levers of information
B) Levers of control
C) Levers of belief
D) Control systems

Question 24

Which of the following influences organizational strategies?

A) Organizational vision
B) Financial statement results
C) Computer software
D) Number of employees

Question 25

Using prior year, historical information can eliminate business risk.

Question 26

Which of the following statements regarding organizational vision is false?

A) Organizational vision means the same as core competencies
B) Organizational vision is one tool for expressing an organization's main purpose
C) Organizational vision should be communicated to all employees
D) Managers sometimes divide the organizational vision into one or more written statements

Question 27

Which of the following is an element of an operating plan?

A) Developing an organizational mission
B) Preparing financial statements
C) Defining core values
D) Budgeting employee costs

Question 28

Employees will always make ethical decisions if they act in the best interests of shareholders.

Question 29

Which of the following statements is true for Maude's business regarding measuring and monitoring performance?

A) Maude does not need a system to measure and monitor performance because her company is a sole proprietorship
B) Maude needs audited financial statements every year
C) Maude can track cash flows on a monthly basis
D) Maude only needs to reconcile her accounts every few years

Question 30

How are organizational strategies related to core competencies?

A) Competencies are the tactics managers use to take advantage of strategies
B) Competencies and strategies are an integral part of organizational vision
C) Strategies help managers exploit competencies
D) Strategies and competencies are actually two ways of expressing the same idea

Question 31

Higher quality decisions result from higher quality information, reports, and decision making processes.

Question 32

When learning cost accounting, it is sufficient to learn the mechanics of applying cost accounting methods.

Question 33

Few management decisions can be made with absolute certainty.

Question 34

Organizational core competencies can include

A) A mission statement
B) Patents, copyrights and special legal protections
C) A code of conduct
D) An operating plan

Question 35

Open-ended problems are not often seen in business.

Question 36

Biases reduce decision quality.

Question 37

Because accounting information is highly objective and quantitative in nature, it is not subject to management bias.

Question 38

Ethical behavior is an individual obligation, but not an organizational obligation.

Question 39

Organizational strategies

A) Are reconsidered on a daily basis
B) Should never be reconsidered once they are determined
C) Are reconsidered quarterly
D) Are reconsidered periodically in response to changes in the organization or environment

Question 40

An organizational vision is sometimes broken down into I. Mission statement
II) Core values statement
III) Code of conduct

A) I only
B) I and II only
C) I, II, and III
D) II and III only

Question 41

Business Risks

A) Are issues about which managers have doubts
B) Do not impact accounting information, which is highly objective and reliable
C) Are preconceived notions developed without careful thought
D) Are rarely a problem in business decision making

Question 42

Whether a given type of information is relevant or irrelevant depends on

A) Its accuracy
B) Its objectivity
C) Its relation to the decision to be made
D) Whether it is cash-basis or accrual-basis

Question 43

Relevant cash flows are

A) Avoidable
B) Incremental
C) Both of the above
D) None of the above

Question 44

Accounting information I. Can be used to guide organizational vision
II) Is a core competency for most companies
III) Can be used to motivate performance

A) I only
B) I and II only
C) I, II, and III
D) I and III only

Question 45

Which of the following is least likely to be an external report?

A) Credit report
B) Supplier's inventory report
C) Tax return
D) Analysis of supplier quality

Question 46

Alaska Airlines flies several non-stop flights daily between Los Angeles and Vancouver. Which of the following is a business risk associated with this operation?

A) The exact number of flights flown the previous day
B) The average number of passengers on each flight the previous week
C) The average number of empty seats for flights next month
D) The number of ticket agents scheduled for each shift for the next day

Question 47

Frank is considering transportation modes to a client's office. He can drive his own car, at an incremental cost of $0.55 per mile, or take a company car. If he takes his own car, he can be reimbursed $0.45 per mile. If Frank makes his decision strictly from his personal economic point of view, what is the relevant net cost associated with driving his own car?

A) $0.10
B) $0.45
C) $0.55
D) Some other amount

Question 48

Business risk may hinder a manager's ability to: I. Adequately define a problem
II) Identify all potential solution options
III) Predict the outcome of various solution options

A) I and III only
B) II and III only
C) I, II, and III
D) II only

Question 49

Information gathered outside the organization includes

A) Customer preferences
B) Product design specifications
C) Taxable income
D) Number of employees hired

Question 50

Which of the following is not true about information in an organization's databases?

A) Information may be collected formally or informally
B) Access to database information is often restricted to specific individuals
C) Intellectual capital is usually captured in database information
D) The benefits of generating information should exceed the costs

Question 51

Irrelevant information may be I. Useful in decision making
II) Internally-generated
III) Accurate

A) I only
B) I and II only
C) II and III only
D) I, II, and III

Question 52

Relevant cash flows are

A) Past cash flows
B) Future cash flows
C) Incremental cash flows
D) Unavoidable cash flows

Question 53

How does the use of sophisticated information systems affect strategic management?

A) Sophisticated information systems always improve strategic management
B) Sophisticated information systems always provide better information
C) Managers may overlook potential uncertainties and bias in their information
D) The cost of sophisticated information systems may exceed their benefit

Question 54

The code of conduct of a firm would likely be considered

A) Belief system
B) Boundary system
C) Diagnostic control system
D) Interactive control system

Question 55

Which of the following is a type of external report produced by an organization's information system?

A) Cash flow plan
B) Analysis of potential acquisition
C) News release
D) Bonus computations

Question 56

Financial statements are

A) External reports produced from an organization's information system
B) Never used for internal decision making
C) Only true when they are audited
D) Unimportant reports for most organizations

Question 57

In a decision to lease or borrow money and build office space, which of the following is relevant?

A) The current cost of office space
B) The architect's fee for drawing the building
C) The number of employees currently working for the company
D) The personal preferences of the decision maker

Question 58

Which of the following is the best example of an internal report that might come from an organization's information system?

A) Environmental Protection Agency regulatory report
B) Operating budget
C) Income tax returns
D) Medicare cost report

Question 59

Cost accounting information is used for

A) Financial reporting only
B) Management reporting only
C) Both financial and management reporting
D) Neither financial nor management reporting

Question 60

Irrelevant cash flows are

A) Avoidable
B) Unavoidable
C) Objective
D) Subjective

Question 61

Choosing and implementing a solution to a business problem includes I. Making trade-offs among alternatives
II) Considering the organization's strategies
III) Motivating performance within the organization

A) I only
B) I and II only
C) II and III only
D) I, II, and III

Question 62

Higher quality reports are more I. Relevant
II) Understandable
III) Available

A) I and II only
B) I and III only
C) II and III only
D) I, II, and III

Question 63

Which of the following statements about open-ended problems is true?

A) Open-ended problems cannot be solved with absolute certainty
B) It is not possible to find the best solution to an open-ended problem
C) Only one possible solution is possible for an open-ended problem
D) The best solution to an open-ended problem ensures the most favorable outcome

Question 64

Which of the following is least likely to be an open-ended problem?

A) How to contribute as a team member
B) Choice of career
C) How to study for a course
D) Identification of required courses for a college degree

Question 65

When is the most appropriate time to identify ethical problems in organizations?

A) When they are discovered by legal authorities
B) As they arise
C) After they arise
D) When they are discovered by shareholders

Question 66

Conflicts of interest often compromise managers' ability to make ethical decisions. Which of the following situations most likely includes a conflict of interest?

A) Selling goods and services at discounted prices to some clients based on historical volumes
B) Offering sales on credit only to creditworthy clients
C) Paying dividends to shareholders rather than investing in an environmental project
D) Using LIFO to report the cost of ending inventory on the balance sheet

Question 67

Higher quality decision making processes are less

A) Biased
B) Certain
C) Creative
D) Focused

Question 68

The process of making higher quality business decisions requires each of the following except

A) Distinguishing between relevant and irrelevant information
B) Recognizing and evaluating assumptions
C) Considering organizational values and core competencies
D) Relying on preconceived notions to make decisions more quickly

Question 69

Pet Snacks Company has 500 pounds of liver-flavored dog biscuits that are not selling well. The selling price of the biscuits could be reduced from $3.00 to $2.50 per pound. Or, they could be cheese-coated and sold for $4.00 per pound; the additional processing cost would be $0.50 per pound. Cheese-coated biscuits sell very well. Which alternative probably has less uncertainty concerning volume of sales?

A) Reduce the price of liver-flavored biscuits
B) Proceed with the cheese coating
C) Both alternatives are equally uncertain
D) Uncertainty does not affect this decision

Question 70

Marriott Corporation operates hotels all over the world. Which of the following is the best example of a potential bias associated with its operations?

A) Managers assume that most travelers are interested in conducting business, rather than vacationing
B) Managers learn that guests rarely stay longer than a week
C) Managers find that last year's profits were below the industry average
D) Managers are concerned because employee turnover increased during the last year

Question 71

Which of the following statement about biases is true?

A) Biases can affect management accounting information, but not financial accounting information
B) Managers cannot work toward eliminating their biases
C) Biases reduce the quality of decisions
D) Biased managers are more likely to explore alternatives before making a decision

Question 72

Why is it necessary to identify whether a problem is open-ended?

A) Open-ended problems require less decision making effort than other types of problems
B) Decision maker biases are not important when addressing open-ended problems
C) More than one potential solution must be explored for open-ended problems
D) Few management decisions are open-ended

Question 73

As an accountant, you are responsible for I. Your own behavior
II) The behavior of any organizations you manage
III) The behavior of outside vendors with whom you interact

A) I only
B) I and II only
C) I and III only
D) I, II, and III

Question 74

John is creating next year's budget for PDC Corporation. He estimates that next year's sales volume will be 5% higher than this year and that the selling price per unit will remain at $75 per unit. He estimates that cost of goods sold will be $40 per unit, based on a purchase agreement the company has signed with its supplier. The company has done business with the supplier for many years. In creating the budget, which of the following tasks is most likely to be open-ended?

A) Calculating budgeted sales volume
B) Determining that sales volume will grow by 5%
C) Calculating budgeted cost of goods sold
D) Determining that cost of goods sold per unit will be $75 per unit

Question 75

Analyzing the strengths and weaknesses of different alternatives includes all of the following except

A) Recognizing and evaluating assumptions
B) Drawing a conclusion about which alternative is best overall
C) Gauging the quality of information
D) Considering different viewpoints

Question 76

Biases can affect I. Organizational vision
II) Core competencies
III) Operating plans

A) I only
B) II only
C) I and III only
D) I, II, and III

Question 77

Managers can make higher-quality decisions by relying on all of the following except

A) More complete information
B) Better decision-making processes
C) Irrelevant information
D) Information having less uncertainty

Question 78

Which of the following adjectives describes higher quality information? I. Complete
II) Costly to develop
III) Relevant

A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question 79

Management decisions require monitoring over time for all of the following reasons except

A) The economic environment may change
B) New opportunities may become available
C) To motivate employees to follow plans exactly, even if the plan results in poor performance
D) Unforeseen threats may arise

Question 80

Which of the following often prevents managers from adequately exploring information before making a decision?

A) The existence of many uncertainties
B) The need to distinguish between relevant and irrelevant information
C) The managers' biases
D) The organization's values