Deck 12: Introduction to Cost Management Systems

Question 1

It is not necessary to be familiar with an organization's mission when designing a cost management system.

Answer 1

False

Question 2

Feedback is another name for an effector.

Answer 2

True

Question 3

A short-run challenge for a business is maintaining a competitive position.

Answer 3

False

Question 4

A cost management system should use cost driver information to trace costs to products and services.

Question 5

The life-cycle stage of a business is an important determinant of an organization's activities.

Question 6

A measuring device that identifies what is actually happening in the process being controlled is a detector.

Question 7

Most smaller businesses are organized as corporations.

Question 8

A management information system is a part of a management control system.

Question 9

The operation of a management control system is readily observable.

Question 10

Cost structure is related to an organization's proportions of fixed and variable costs.

Question 11

A measuring device that identifies what is actually happening in the process being controlled is an assessor.

Question 12

A long-run challenge for a business is achieving profitability.

Question 13

Increasing automation generally results in cost management becoming more long-term in nature.

Question 14

A long-run challenge for a business is maintaining a competitive position.

Question 15

A short-run challenge for a business is achieving profitability.

Question 16

An important function of a cost management system is to relate resource consumption and cost to alternative product and process design.

Question 17

Information provided by financial reporting systems provides the most useful information to cost managers.

Question 18

A profit sharing plan is an example of a motivational element.

Question 19

Automated technology makes cost control less difficult for a firm.

Question 20

Motivational elements may be quantitative or non-quantitative in nature.

Question 21

A measuring device that identifies what is happening in a process being controlled is referred to as a(n)____________________.
or

Question 22

A set of formal methods used to plan and control the cost-generating activities of an organization is referred to as a(n)________________________________________.

Question 23

In order for cost information to be effective,a meaningful baseline performance measure should be available for comparison.

Question 24

Performance measures must be quantitative to be useful.

Question 25

Three groups of elements affecting the design of a cost management system are ____________________,____________________,and ____________________.

Question 26

An enterprise resource planning system is composed of numerous software modules.

Question 27

Customer satisfaction is an example of a qualitative performance measure.

Question 28

A management information system should emphasize satisfying

A)external demands for information.
B)external and internal demands for information.
C)internal demands for information.
D)the Accounting Department's demands for information.

Question 29

A packaged business software system that allows an organization to improve the quality and timeliness of information as well as integrate and standardize information is referred to as a(n)_____________________________________________.
or

Question 30

Customer satisfaction is an example of a quantitative performance measure.

Question 31

The underlying set of assumptions about an organization and the goals,processes,and values that its members share is referred to as ______________________________.

Question 32

An effective reporting system is increasingly important in a decentralized organization.

Question 33

How costs change relative to changes in production or sales volume is referred to as ______________________________.

Question 34

A device for determining what is happening in a process being controlled is referred to as a(n)____________________.

Question 35

A device that alters behavior if the control system indicates a need to do so is referred to as ____________________.

Question 36

Gap analysis is a beneficial tool in implementing a cost management system.

Question 37

A structure of interrelated elements that enables management to plan,control,and evaluate performance is referred to as a _____________________________________________.

Question 38

An operation whose exact nature cannot be observed is referred to as a(n)_________________________.

Question 39

The study of the differences between a current and a proposed cost management system is referred to as _________________________.

Question 40

A management information system should do which of the following?

A)yes no yes
B)yes yes no
C)no no yes
D)yes yes yes

Question 41

Information about the life-cycle performance of a product or service should be provided in the

A)yes yes
B)yes no
C)no yes
D)no no

Question 42

Which of the following statements is true?

A)A good cost management system is a key consideration in determining an organization's mission.
B)The organization's mission is a critical success factor in assessing how to react to competition.
C)Knowledge of an organization's critical success factors help to clarify organizational mission and develop a cost management system.
D)An organization must establish a position of cost leadership to compete in a global business environment.

Question 43

The costs generated by the cost management system are used to

A)assess product/service profitability.
B)establish prices for products with significant competition.
C)determine underlying reasons for variations from standards.
D)all of the above.

Question 44

Which of the following statements is false concerning a management control system?

A)A management control system may be referred to as a black box.
B)A management control system should serve as a guide to organizations.
C)A management control system should help implement strategies.
D)A management control system is separate from a cost management system.

Question 45

A cost management system

A)is finalized when the information currently being produced is the same as the information currently desired.
B)can be generically designed to fit the information needs of the majority of domestic (but not global)organizations.
C)must be continuously improved to adapt to changes in an organization's internal and external environment.
D)that has been appropriately designed from gap analysis,does not need to be changed unless there is a change in organizational management or culture.

Question 46

A cost management system should

A)identify and evaluate new activities.
B)determine whether the organization is effective and efficient.
C)identify the cost of consumed resources within the organization.
D)all of the above.

Question 47

Reducing the time-to-market for a new product

A)is only possible if a company has formed strategic alliances with its suppliers.
B)generally increases long-run product costs because of the need to develop new production processes.
C)results in the ability of a firm to pursue a cost leadership competitive strategy.
D)may result in design flaws,a need for engineering change orders,and customer "bad will."

Question 48

Which of the following would be considered a detector?

A)computer program
B)source document
C)variance report
D)all of the above

Question 49

Which of the following is not a primary goal of a cost management system?

A)use cost drivers to develop product costs
B)improve understanding of activities
C)develop organizational strategies
D)measure performance

Question 50

A cost management system should provide the means to develop

A)the most accurate product or service costs.
B)a reasonably accurate product or service cost given cost-benefit considerations.
C)a product or service cost that does not include any non-value-added overhead.
D)a costing system that traces all costs directly to individual products or services.

Question 51

Which of the following organizational characteristics critically affect the design of a cost management system?

A)yes yes yes yes
B)yes no yes no
C)no yes no yes
D)no yes yes no

Question 52

Feedback is reflected in which component of a management control system?

A)sensor
B)assessor
C)effector
D)detector

Question 53

Cost control is an important function of the

A)no no yes
B)yes yes no
C)no yes yes
D)yes yes no

Question 54

Reactions to information provided by the management control system are

A)formulated in the organization's strategic plan.
B)judgmental,and are based on interpretations and circumstances.
C)assessed by the communications network of the MCS.
D)determined as those activities that will be most efficient and effective given the organization's available technology.

Question 55

Which of the following groups are external users of data gathered by a management information system?

A)yes no yes
B)no no no
C)no yes yes
D)yes yes yes

Question 56

A cost management system should provide information to

A)all functional areas of the organization.
B)only the accounting area of the organization.
C)only the production area of the organization.
D)organizational managers,but not to staff personnel.

Question 57

Which of the following is not a primary component of a control system?

A)operator
B)communications network
C)effector
D)assessor

Question 58

A cost management system would be an integral part of implementing which of the following?

A)no yes yes
B)no no no
C)yes no yes
D)yes yes no

Question 59

In a highly regulated,monopolistic industry,such as the electrical utility or TV cable,a cost management system is

A)of limited need because costs are typically passed along to customers via the rate structure.
B)essential because of the need to provide the highest degree of cost efficiency possible for customers.
C)critical to the needs of empowered employees making decisions at various levels of the organizational hierarchy.
D)of no use because there is no attempt by management to control costs.

Question 60

Which of the following indicates the mission being pursued by a subunit that is

A)save harvest
B)build save
C)harvest build
D)build harvest

Question 61

The reward system for subunit managers of mature businesses should emphasize

A)long-term competitive prospects.
B)near-term profit and cash flow.
C)success in product design and development.
D)exceeding last year's subunit profit.

Question 62

Organizational form directly affects which of the following?

A)no yes yes yes
B)yes yes yes no
C)no yes no yes
D)yes yes no no

Question 63

Relating resource consumption and cost to alternative product and process designs can be achieved through

A)kaizen costing.
B)reverse engineering.
C)computer simulation.
D)all of the above.

Question 64

Which of the following is considered a "feeder" system to the cost management system?

A)yes no yes
B)yes yes yes
C)no no no
D)yes yes no

Question 65

Which of the following is a primary element of a cost management system?

A)yes yes yes yes
B)no yes yes no
C)yes no no yes
D)yes yes yes no

Question 66

The accounting function in an organization is expected to support managers in which of the following functions?

A)yes yes no
B)no yes no
C)no no yes
D)yes yes yes

Question 67

____ refers to avoiding competition in making a product distinct from that of competitors by adding value or features for which consumers are willing to pay more.

A)Kaizen
B)Differentiation
C)Confrontation
D)Cost leadership

Question 68

Engaging in product design for manufacturability reduces

A)yes yes yes
B)no yes yes
C)yes no yes
D)no no no

Question 69

In a decentralized organization,

A)all functions are delegated to subunit managers who are closest to the information.
B)subunits under the control of a single manager are normally grouped by organizational structure.
C)it would be difficult to group geographically related subunits pursuing different missions under the same manager.
D)functions such as financing and product/service pricing are typically retained by top management.

Question 70

The performance measurement system should encourage each manager to act in a manner that

A)makes the manager's units profits as high as possible.
B)most positively supports the organization's mission and competitive strategies.
C)increases his/her performance reward in the form of profit sharing.
D)reduces the need for informational elements in support of the manager's planning function.

Question 71

An increase in the use of technology has caused

A)fewer costs to be susceptible to short-run control.
B)companies to be more flexible in responding to changing short-term conditions.
C)managers to be less concerned about capacity utilization because of the increased ability to produce in large quantities.
D)a decline in the amount of fixed costs in an organization.

Question 72

A commonly recognized critical success factor for most organizations is

A)yes yes yes no
B)yes no yes yes
C)no yes no yes
D)no no yes no

Question 73

Which of the following competitive strategies is least profitable?

A)differentiation
B)cost leadership
C)confrontation
D)price fixing

Question 74

Distinguishing a product by adding additional features or value is part of which of the following competitive strategies?

A)yes no yes
B)yes yes yes
C)yes no no
D)no yes yes

Question 75

Substantial reductions in product cost can be obtained by

A)decreasing capacity utilization.
B)using focused factory arrangements.
C)using tried and true manufacturing techniques.
D)using product life cycle accounting.

Question 76

A cost leadership strategy emphasizes

A)product features.
B)low prices.
C)just-in-time production capabilities.
D)short-run opportunities for cost minimization.

Question 77

As part of its control function,a cost management system is useful for

A)yes yes yes
B)no yes yes
C)yes no no
D)yes yes no

Question 78

The life cycles of many products are becoming shorter

A)causing companies to recognize that it may be more advantageous to confront,rather than compete with,the competition.
B)making products in the maturity stage of their life cycle the basis on which firms expect growth to be generated.
C)so companies spend less and less on product design and development because products will not last as long as previously.
D)meaning that tools such as benchmarking and target costing become less important in adapting to the competitive environment.

Question 79

As an organization moves to decentralize its operations,an effective reporting system will have ____ when the organization was centralized.

A)about the same importance as
B)less importance than
C)more importance than
D)a level of importance that depends on organizational size as compared to

Question 80

Performance reports are useful only to the extent that performance is measured against

A)a meaningful benchmark.
B)the performance of all other units or managers.
C)the budget as adopted for the period.
D)competitors' achievements.