Deck 1: Cost Accounting: Information for Decision Making

Question 1

Under the value chain concept,instead of perceiving whether individual activities in the chain add value,customers only consider the overall utility of the goods or services they purchase.Under the value chain concept,the value-added activities are those that the customer perceives as adding utility to the goods or services they purchase.

Answer 1

False

Question 2

Cost accounting information can be used by managers to defraud customers,creditors,and owners.The design of the cost accounting system has the potential to be misused to defraud customers,employees,or shareholders.

Answer 2

True

Question 3

Cost data can be used for one managerial decision but not for another managerial decision.One principle of cost accounting is that different decisions often require different cost data.

Answer 3

True

Question 4

Cost accounting information developed for managers to use in making decisions must comply with generally accepted accounting principles (GAAP)and international financial reporting standards (IFRS).In contrast to cost data for financial reporting to shareholders,cost data for managerial use (that is,within the organization)need not comply with GAAP or IFRS.

Question 5

Budgeting is primarily used to determine year-end bonuses based on managerial and organizational performance.Budgeting is used primarily for planning.A budget is a financial plan of the revenues and resources needed to carry out activities and meet financial goals.Budgeting helps managers decide whether their goals can be achieved and,if not,what modifications are necessary.

Question 6

Managers face ethical situations on a daily basis,while accountants face them infrequently.Professional accountants,managers,and business owners face ethical situations on an everyday basis.

Question 7

It is important that the manager assigned to lead a responsibility center be held accountable for its operations.Responsibility does not work without accountability.

Question 8

Activity-based costing (ABC)is a management tool that focuses on the continuous improvement of all dimensions of a business.ABC is a costing method that assigns costs to activities and then assigns them to products based on the products' consumption of activities.

Question 9

It is more important for financial accounting information to be comparable between firms than to be useful for managerial decision-making.Important criteria for financial accounting include comparability and decision relevance;decision relevance and timeliness are the important criteria for cost accounting.

Question 10

A person who makes unethical decisions in their personal life is likely to make unethical decisions in their professional life.Ethics are a result of an internal moral compass.

Question 11

A responsibility center can be a department,division,or segment,but not a subsidiary of the parent company.This statement is false.A responsibility center is a specific unit of an organization assigned to a manager who is held accountable for its operations and resources.As such,a department,division,segment,or subsidiary could be considered a responsibility center.

Question 12

Benchmarking is a continuous process of measuring a company's products,services,or activities against competitors' performance.This is the definition of benchmarking.

Question 13

Ethical behavior depends more on a firm's code of conduct than the individual's personal beliefs.Codes of conduct look good on paper,but ultimately much of ethical behavior comes from an individual's personal beliefs.

Question 14

Customer satisfaction is an example of a non-financial performance measure.Very few customer satisfaction measures are financial in nature.

Question 15

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.Distribution is included in the value chain.

Question 16

Managers are usually responsible for the revenues needed to achieve the targets set during the budgeting process,but not the resources consumed to achieve those targets.Usually,managers are responsible for both the revenues and resources needed to carry out activities and meet financial goals.

Question 17

Administrative functions are not included as part of the value chain because they are implicitly included in every business function.Administrative expenses are not included as part of the value chain because they are included instead in every business function of the value chain.

Question 18

A cost driver is a factor that causes costs.A cost driver is a factor that causes costs.

Question 19

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

Question 20

A cost can be considered a differential cost for one particular course of action but not for another course of action.A differential cost is a cost that changes in response to a particular course of action.A cost may change in response to one course of action but not in response to a different course of action.

Question 21

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

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

Question 22

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 23

A value chain consists of the major subassemblies that add value to a product.A value chain is a set of activities that transforms raw resources into the goods and services end users purchase and consume.

Question 24

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

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

Question 25

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

A)budgeting.
B)benchmarking.
C)cost-benefit analysis.
D)value-added analysis.

Question 26

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.

Question 27

(CMA adapted)Cost drivers are

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 28

Financial accounting receives information only from cost accounting activity.Financial accounting receives information from other areas as well as from cost accounting activity.

Question 29

During 2013,the JKL Restaurant had sales revenues and food costs of $800,000 and $600,000,respectively.During 2014,JKL plans to introduce a new menu item that is expected to increase sales revenues by $100,000 and food costs by $40,000.Assuming no changes are expected for the other food items,operating profits for 2013 are expected to increase by

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

Question 30

The lean thinking model focuses on reducing defects to as close to zero as possible.Lean is about making cost-effective changes to products and services along the value chain.

Question 31

Cost accounting is broader in scope than financial accounting.Cost accounting is broader in scope than financial accounting.

Question 32

Which field of accounting emphasizes relevancy over comparability?

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

Question 33

The Value chain is comprised of the activities that take place during the production process.The Value chain comprises activities from research and development through the production process to customer service.

Question 34

Financial accounting provides financial and nonfinancial information that helps managers in the decision making process.Cost accounting provides financial and nonfinancial information that helps managers in the decision making process.

Question 35

Cost accounting plays a significant role in management decision making.Cost accounting provides the primary information from which to make decisions.

Question 36

Cost accounting provides information only for cost accounting purposes.Although it is designed for decision makers,cost accounting is commonly used in financial accounting information.

Question 37

Managers do not make decisions about future events based on:

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

Question 38

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 39

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.

Question 40

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

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

Question 41

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.

Question 42

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 43

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.

Question 44

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

Question 45

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

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

Question 46

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.

Question 47

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

Question 48

In 2013,the Turnkey Company had consulting revenues of $1,000,000 while costs were $750,000.In 2014,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,operating profits are expected to increase by

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

Question 49

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

A)Research and development
B)Purchasing
C)Administration
D)Distribution

Question 50

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 51

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 52

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 53

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 54

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.

Question 55

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.

Question 56

In 2013,the MoreForLess Company had revenues of $2,000,000 and costs of $1,500,000.During 2014,MoreForLess will be introducing a new product line that is expected to increase sales revenue by $200,000 and costs by $160,000.Assuming no changes are expected for the other products,the operating profits are expected to increase by

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

Question 57

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

A)reduced delivery time.
B)reduced delivery charges.
C)greater customer satisfaction.
D)greater employee participation.

Question 58

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.

Question 59

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.

Question 60

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 61

Surf Boards,Inc.had the following summarized results for the month ending July 30: As the cost accountant,which single note to the above financial results is most appropriate in the report to management?

A)The departmental manager is performing to expectations because budgeted income equals actual income.
B)Revenues are above budget and a bonus based on this increase should be considered.
C)Costs as a percentage of revenues are above budget and a further scrutiny of the results might be appropriate.
D)Costs are 17.5% above budget and the department manager's position should be critically evaluated by senior management.

Question 62

Which of the following activities would not be included in the value chain of a manufacturing company?

A)Research and Development
B)Customer Service
C)Design
D)Accounting

Question 63

The financial accounting system is the primary source of information for

A)decision making on the factory floor.
B)improving the performance level of customer service.
C)planning the budget for next year.
D)preparing the income statement for stockholders.

Question 64

Which of the following statements concerning the value chain is false?

A)The goal of a value chain is to find areas where a company can either add value or reduce cost.
B)The value chain focuses on the entire production process,as well as the sale of the product and service after the sale.
C)If a company cannot compete in a specific area of the value chain,it might outsource that portion of the value chain to another entity which can perform it better.
D)Successful firms are ones that operate within the entire value chain,thereby overseeing every aspect of the value chain for the customer.

Question 65

The extended value chain:

A)is a set of consecutive operations or processes that begins with purchasing resources and ends with providing products or services that customers value.
B)is a related set of tasks,manual or automated,that transforms inputs into identifiable outputs.
C)incorporates how companies obtain their resources and distribute their products and services,using the services of other organizations.
D)is a technique for identifying opportunities for improvement and measuring the effects of proposed improvements by comparing both the costs and benefits of a proposal.

Question 66

The individual who would most likely use only financial accounting information in making decisions is a

A)vice president of marketing.
B)factory supervisor.
C)department manager.
D)company stockholder.

Question 67

The delivery of products or services to customers is an example of which element in the value chain?

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

Question 68

Which of the following types of organizations can most benefit from the implementation of value chain?

A)Service firms
B)Not-for-profit organizations
C)Manufacturing firm.
D)All types of organizations can benefit from the implementation of value chain

Question 69

Cost accounting provides all of the following with the exception of

A)pricing information from marketing studies.
B)nonfinancial information regarding the cost of operational efficiencies.
C)financial information on the cost of acquiring resources.
D)information for managerial accounting and financial accounting.

Question 70

Cost accounting

A)provides information on material usage.
B)provides information on the profitability of customer orders.
C)provides information on the efficiency of service department labor.
D)All of these.

Question 71

Financial accounting provides a historical perspective,while cost accounting emphasizes

A)reporting to stockholders.
B)a current perspective.
C)the future.
D)past transactions.

Question 72

Financial accounting

A)focuses on the future.
B)must comply with GAAP (generally accepted accounting principles).
C)reports include detailed information on the various operating segments of the business.
D)is prepared for the use of management.

Question 73

The value chain is the order of business components in which:

A)value is deducted from the products or services of a business.
B)value is proportionally added to the products or services of a business.
C)products or services are evaluated according to their value to the distribution chain.
D)utility is added to the products or services of an organization.

Question 74

A firm's replies to customers' questions via email would be an example of which element of the value chain?

A)Customer Service
B)Marketing
C)Design
D)Supply

Question 75

During which step of the value chain process will a manufacturing company determine whether or not it has added utility?

A)The Design component
B)The Purchasing process
C)The Production activity
D)Added utility occurs in all steps.

Question 76

Which of the following could be considered part of the value chain in a service firm?

A)Inspection of product
B)Advertising
C)Raw materials
D)Distribution

Question 77

Which of the following does not represent a main focus of cost management information?

A)Internal auditing and control
B)Performance measurement
C)Planning and decision making
D)Preparation of financial statements

Question 78

Place the four components in the order they appear along the value chain: A = Customer service;B = Design;C = Distribution;and D = Production.

A)ABDC
B)ACDB
C)BDCA
D)BADC

Question 79

The primary objective of financial accounting is

A)profitability analysis.
B)providing information for management decision making.
C)cost planning and cost controls.
D)reporting to investors,creditors,and government authorities.

Question 80

Manufacturing firms use the value chain to take steps to improve the overall profitability of the firm by:

A)placing greater emphasis on the value chain.
B)moving to an emphasis on upstream activities in the value chain.
C)moving to an emphasis on downstream activities in the value chain.
D)finding low-cost manufacturing locations.