Deck 1: How Management Accounting Information Supports Decision Making

Question 1

Management accounting information is primarily oriented to external stakeholders,such as investors,creditors,regulators,and tax authorities.

Answer 1

False

Question 2

A good management accounting system can become a source of competitive advantage for a company.

Answer 2

True

Question 3

Financial accounting:

A)focuses on the future and includes activities such as preparing next year's operating budget.
B)does not need to comply with GAAP (generally accepted accounting principles).
C)is primarily oriented to external stakeholders, such as investors, creditors, regulators and tax authorities.
D)is prepared for the use of department heads and other employees.

Answer 3

is primarily oriented to external stakeholders, such as investors, creditors, regulators and tax authorities.

Question 4

The Federal Accounting Standards Advisory Board sets cost accounting standards for all federal government activities.

Question 5

Management accounting information can be used for all of the following except:

A)calculate the cost of a product or service.
B)evaluate the performance of a company.
C)project materials needs.
D)evaluate the market price of the stock.

Question 6

Management accounting is subject to the rules formulated by standard setters such as the Financial Accounting Standards Board (FASB).

Question 7

Management accounting information includes all of the following except:

A)tabulated results of customer satisfaction surveys.
B)the cost of producing a product.
C)the percentage of units produced that is defective.
D)market price of the stock.

Question 8

Information about customer satisfaction is an example of financial information.

Question 9

Management accounting has no prescribed rules about its content,how the content is to be developed,and how the content is to be presented.

Question 10

Management accounting information is sometimes predictive and forward looking.

Question 11

Management accounting:

A)is both retrospective, providing feedback about past operations, and also prospective, incorporating forecasts and estimates about future events.
B)is primarily oriented to external stakeholders.
C)must be consistent with rules formulated by the Financial Accounting Standards Board (FASB).
D)provides information that is generally available only on a quarterly or annual basis.

Question 12

The International Accounting Standards Board sets the guidelines used for management accounting.

Question 13

Which of the following would be considered management accounting information?

A)Budgeted production for the year 2011.
B)Budgeted Balance Sheet.
C)Analysis of trend in stock prices.
D)Both budgeted production for the year of 2011,and the budgeted balance sheet.

Question 14

Management accounting measures can provide advance warnings of problems.

Question 15

Management accounting reports might include information about:

A)customer complaints.
B)net income for the year on budgeted income statement.
C)total assets on budgeted balance sheet.
D)All of the above are correct.

Question 16

The person MOST likely to use ONLY financial accounting information is a:

A)factory shift supervisor.
B)vice president of operations.
C)current shareholder.
D)department manager.

Question 17

The person MOST likely to use management accounting information is a(n):

A)banker evaluating a credit application.
B)shareholder evaluating a stock investment.
C)governmental taxing authority.
D)assembly department supervisor.

Question 18

Which of the following types of information are used in management accounting?

A)financial information
B)nonfinancial information
C)information focused on the long term
D)All of the above are correct.

Question 19

Which of the following descriptors refer to management accounting information?

A)It is only retrospective, reporting and summarizing in financial terms the results of past decisions and transactions.
B)It is driven by rules.
C)It is prepared for shareholders.
D)It is oriented to meeting the decision making needs of employees and managers inside the organization.

Question 20

Which of the following is NOT a function of a management accounting system?

A)strategic development
B)financial reporting
C)control
D)product costing

Question 21

In general,it was not until the 1970s that management accounting systems:

A)were improved because of demands by the FASB and the SEC.
B)stagnated and proved inadequate.
C)started to develop innovations in costing and performance-measurement systems due to intense pressure from overseas competitors.
D)started to address the decision-making needs of managers.

Question 22

_______ helped develop the Plan-Do-Check-Act (PDCA)cycle.

A)Hawthorne
B)Deming.
C)Carnegie
D)Ford

Question 23

Historically,service companies have:

A)operated in less competitive environments than manufacturing companies.
B)enjoyed global customer demand.
C)used management accounting information in much the same way as manufacturing companies.
D)competed by managing costs to provide the best service at the lowest price.

Question 24

The Hawthorne study revealed that:

A)individuals alter their behavior when they know they are being studied.
B)groups alter their behavior when they know they are being studied.
C)People react when they are being measured.
D)All of the above are correct.

Question 25

The regulatory authority responsible for formulating rules of United States GAAP is:

A)the Financial Accounting Standards Board.
B)the Cost Accounting Standards Board.
C)the Federal Accounting Standards Advisory Board.
D)the International Accounting Standards Board.

Question 26

Government and nonprofit organizations,as well as profit-seeking enterprises,are feeling the pressures for improved performance.

Question 27

What is the purpose of management accounting?

Question 28

Management accounting information is BEST described as:

A)providing a signal that something is wrong.
B)identifying and helping to explain what is wrong.
C)simply summarizing information, but giving no indication that anything is wrong.
D)measuring overall organizational performance.

Question 29

Compare and contrast the users and uses of management accounting and financial accounting.

Question 30

Management accounting innovations are usually developed by academics.

Question 31

At the highest level strategic planning involves choosing a strategy that provides the best fit between the organization's environment and its internal resources in order to achieve the organization's objectives.

Question 32

Quality is the degree of conformance between what the customer is promised and what the customer receives.

Question 33

The first modern industry to develop and use large quantities of financial statistics to assess and monitor organizational performance was:

A)steel companies.
B)lumber companies.
C)the railroads.
D)automobile companies.

Question 34

During the history of management accounting,innovations were developed to address the decision-making needs of managers.

Question 35

Financial accounting information:

A)provides a signal that something is wrong.
B)identifies what is wrong.
C)explains what is wrong.
D)simply summarizes information but gives no indication that anything is wrong.

Question 36

Which of the following companies is a service company?

A)Lands' End
B)Schwinn Bicycles
C)Orkin Pest Control
D)British Petroleum

Question 37

Describe the steps in the PDCA cycle.

Question 38

A key element in any organization's strategy is to identify its target customers and to deliver what those target customers want.

Question 39

Historically,management accounting innovations have been developed by:

A)the International Accounting Standards Board.
B)the Cost Accounting Standards Board.
C)Academic accountants.
D)Managers.

Question 40

What role has the increasingly competitive business environment played in the development of management accounting?

Question 41

Which of the following best represents the Check step in the Plan-Do-Check-Act (PDCA)cycle?

A)Take actions to lower costs, change resource allocations, improve the quality, cycle time and flexibility of processes, modify the product mix, change customer relationships, and redesign and introduce new products.
B)Measure and monitor ongoing performance and take short-term actions based on the measured performance.
C)Define the organization's purpose and select the focus and scope of its strategy.
D)Implement the chosen course of action.

Question 42

Quality expert,W.Edwards Deming,helped develop and disseminate the plan-do-check-act (PDCA)cycle.

Question 43

A weekly report comparing machine time used to available machine time is information LEAST useful to:

A)a front-line employee.
B)the manager of operations.
C)the chief executive officer.
D)the accounting department.

Question 44

Which of the following best represents the Act step in the Plan-Do-Check-Act (PDCA)cycle?

A)Take actions to lower costs, change resource allocations, improve the quality, cycle time and flexibility of processes, modify the product mix, change customer relationships, and redesign and introduce new products.
B)Measure and monitor ongoing performance and take short-term actions based on the measured performance.
C)Define the organization's purpose and select the focus and scope of its strategy.
D)Implement the chosen course of action.

Question 45

A national company manufactures a line of modern furniture.Information MOST useful to the employee who assembles the furniture includes:

A)a daily report comparing the actual time it took to assemble a piece of furniture to the standard time allowed.
B)a monthly report on the proportion of furniture pieces assembled with defects.
C)the number of furniture pieces sold this month.
D)revenue per employee.

Question 46

Which of the following best represents the Plan step in the Plan-Do-Check-Act (PDCA)cycle?

A)Take actions to lower costs, change resource allocations, improve the quality, cycle time and flexibility of processes, modify the product mix, change customer relationships, and redesign and introduce new products..
B)Measure and monitor ongoing performance and take short-term actions based on the measured performance.
C)Define the organization's purpose and select the focus and scope of its strategy. .
D)Implement the chosen course of action.

Question 47

The most important factor in successful organizations is:

A)weaknesses.
B)competition.
C)strategy.
D)definition of quality.

Question 48

Operating profit is an example of nonfinancial information.

Question 49

Planning activities include all of the following except:

A)estimate the cost and profit consequences from a course of action.
B)evaluating the quality of the service provided.
C)projecting labor requirements.
D)budgeting.

Question 50

A key element of any organization's strategy is identifying:

A)its potential shareholders.
B)its target customers.
C)competitor's products.
D)employee needs.

Question 51

Explain the role of management accounting in helping an enterprise develop and implement its strategy.

Question 52

How the customer is treated at the time of the purchase is an example of the __________ element of the value proposition.

A)functionality and features
B)industry standards
C)quality
D)service

Question 53

Many organizations start the planning stage by re-affirming or updating its mission statement.

Question 54

Which of the following best represents the Do step in the Plan-Do-Check-Act (PDCA)cycle?.

A)Take actions to lower costs, change resource allocations, improve the quality, cycle time and flexibility of processes, modify the product mix, change customer relationships, and redesign and introduce new products.
B)Measure and monitor ongoing performance and take short-term actions based on the measured performance.
C)Define the organization's purpose and select the focus and scope of its strategy.
D)Implement the chosen course of action.

Question 55

A national company manufactures a line of modern furniture.Information MOST useful to the top executive includes:

A)individual job summaries of materials used.
B)monthly financial reports on the company's profitability by product line.
C)time reports submitted by each employee.
D)scheduled downtime for routine maintenance on machines.

Question 56

A quarterly report disclosing declining market share information is MOST useful to:

A)a front-line employee.
B)the manager of operations.
C)the chief executive officer.
D)the accounting department.

Question 57

Management accounting information allows managers to compare actual and planned costs and to identify areas and opportunities for process improvement.

Question 58

The check step in the PDCA cycle includes two components - measuring and monitoring ongoing performance and taking short-term actions based on the measured performance.

Question 59

Management accounting can provide information on customer satisfaction.

Question 60

Managers of service departments need all of the following information EXCEPT:

A)efficiency data on work performance.
B)quality data on work performance.
C)profitability data of the whole company.
D)profitability data of the service department.

Question 61

Fostering a culture of high ethical standards includes all of the following EXCEPT:

A)following the good example set by senior management.
B)communicating to employees a belief system that inspires and promotes commitment to the organization's core values.
C)following the general examples set by front-line employees.
D)communicating to all employees a boundary system that states what actions will not be tolerated.

Question 62

Which of the following would be MOST helpful for a top manager of a company?

A)profitability report of the company
B)information to monitor hourly and daily operations
C)number of customer complaints
D)operating expense summary reported by department

Question 63

Is financial accounting or management accounting more useful to an operations manager? Why?

Question 64

Management accounting can play a critical role in the service industry because of all the following reasons EXCEPT:

A)firms must be especially sensitive to the timeliness and quality of customer service.
B)many employees have very little contact with customers.
C)customers immediately notice defects and a delay in service.
D)dissatisfied customers may never return.

Question 65

A daily report on the number of quality units assembled by each employee is information MOST useful to:

A)a front-line assembly worker.
B)the accounting department.
C)the chief executive officer.
D)the personnel department.

Question 66

The following information pertains to three divisions of Marine Industrial Coatings, Inc. (amounts in millions):

What is the return on investment for the Chemical Division?

A)1.25%
B)2.25%
C)25.0%
D)50.00%

Question 67

Which statement below is FALSE?

A)"What gets measured gets managed."
B)People react to measurements.
C)Employees spend more attention on those variables that are not getting measured.
D)"If I can't measure it,I can't manage it."

Question 68

The design and introduction of new measurements and systems must be accompanied by an analysis of the behavioral and organizational reactions to the measurements.

Question 69

When a change is introduced,employees tend to:

A)embrace the change.
B)be indifferent to the change.
C)exhibit no change in behavior.
D)resist the change.

Question 70

The introduction of a new management accounting system is MOST likely to motivate UNWANTED employee behavior when it is used for:

A)evaluation.
B)planning.
C)decision making.
D)coordinating individual efforts.

Question 71

For improving operational efficiencies and customer satisfaction,nonfinancial information is:

A)critical.
B)moderate.
C)infrequently used.
D)unnecessary.

Question 72

The following information pertains to three divisions of Marine Industrial Coatings, Inc. (amounts in millions):

Which division is more profitable based on ROI?

A)Chemical
B)Retail paint
C)Industrial
D)Both Chemical and Retail paint are more profitable than Industrial.

Question 73

Give two examples of financial information and nonfinancial information.

Question 74

The following information pertains to three divisions of Marine Industrial Coatings, Inc. (amounts in millions):

What is the Return on Sales for the Retail paint division?

A)2%
B)4.5%
C)20%
D)45%

Question 75

Management accountants are MOST likely to feel outside pressure to influence the numbers favorably when the information is used for:

A)budgeting.
B)compensation and promotions.
C)continuous improvement.
D)product costing.

Question 76

A law firm would use management accounting information for all of the following decisions except:

A)staffing needs.
B)performance evaluation of staff.
C)budgeted purchases of supplies.
D)location of annual holiday party.

Question 77

The act of simply measuring and reporting information on certain processes:

A)focuses the attention of employees on those processes that are being measured.
B)diverts the employee's attention to other activities that are not being measured.
C)disproves the saying "What gets measured gets managed."
D)has no effect on employee behavior.

Question 78

Information is never neutral; just the act of measuring and reporting information affects the individuals involved.

Question 79

People react when they are being measured,and they react to the measurements..

Question 80

Nonfinancial information might be used for all of the following except:

A)improve product quality.
B)reduce cycle times.
C)satisfy customers' needs.
D)All of the above are used.