Question 1

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

Accepted Answer

A responsibility center can include subsidiaries, as they can be held accountable for their financial performance and operational outcomes, similar to departments, divisions, or segments.

Question 2

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

Accepted Answer

Budgeting is primarily used for planning and controlling financial resources, setting financial goals, and ensuring efficient allocation of resources, not specifically for determining year-end bonuses.

Question 3

Cost accounting information is commonly used in developing financial accounting information.

Accepted Answer

Cost accounting provides detailed cost data that can be used to prepare financial statements, aiding in the accurate reporting of expenses and inventory valuation.

Question 4

Financial accounting information is sufficient for making operational decisions.

Accepted Answer

Financial accounting information provides a broad overview of a company's financial status but lacks the detailed, real-time data needed for specific operational decisions.

Question 5

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

Accepted Answer

Financial accounting information is primarily intended for external users, such as investors and creditors, who need to be able to compare the financial performance of different firms. Managerial decision-making, on the other hand, requires information that is specific to the firm and its unique circumstances.

Question 6

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

Accepted Answer

Financial accounting information is primarily designed for external decision-makers, such as investors, creditors, and regulators, rather than those involved in daily management, who rely on managerial accounting.

Question 7

A cost can be considered a differential cost for one particular course of action but not for another course of action.

Accepted Answer

A differential cost is the difference in total cost between two alternatives. It can vary depending on the specific alternatives being compared.

Question 8

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).

Accepted Answer

Cost accounting information for internal decision-making does not need to comply with GAAP or IFRS, as these standards are primarily for external financial reporting.

Question 9

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

Accepted Answer

Holding a manager accountable ensures that they are responsible for the performance and outcomes of the responsibility center, promoting effective management and decision-making.

Question 10

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

Accepted Answer

Benchmarking involves regularly comparing a company's performance metrics with those of competitors to identify areas for improvement and maintain competitiveness.

Question 11

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.

Accepted Answer

Managers are typically responsible for both generating the revenues and managing the resources consumed to achieve the targets set during the budgeting process.

Question 12

If a poor facility layout exists and work-in-process inventory must be moved during the production process, the company is likely to be performing value-added activities.

Accepted Answer

Moving work-in-process inventory due to poor facility layout is considered a non-value-added activity as it does not directly contribute to the final product's value.

Question 13

In general, if activities that do not add value to the company can be eliminated, then costs associated with them will also be eliminated.

Accepted Answer

Eliminating non-value-adding activities typically removes the costs associated with them, as these activities do not contribute to the company's value or efficiency.

Question 14

Administrative functions are not

Accepted Answer

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

Question 15

Accounting systems are important because they are a primary source of information for managers.

Accepted Answer

Accounting systems provide essential financial data and reports that help managers make informed decisions regarding budgeting, forecasting, and strategic planning.

Question 16

The value chain is comprised of the activities that take place only during the production process.

Accepted Answer

The value chain includes all activities from product conception to delivery and beyond, not just during production.

Question 17

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.

Accepted Answer

The value chain includes all activities from research and development through production to distribution and after-sales services.

Question 18

Cost information itself is a product with its own customers.

Accepted Answer

Cost information is used by various stakeholders such as managers, investors, and analysts to make informed decisions, making it a product with its own set of users or "customers."

Question 19

Under the value chain concept, value-added activities are those that firms perform and that customers perceive as adding utility to the goods they purchase.

Accepted Answer

Value-added activities in the value chain are those that enhance the product's value in the eyes of the customer, thereby increasing its utility and desirability.

Question 20

A cost driver is a factor that causes costs.

Accepted Answer

A cost driver is indeed a factor that causes a change in the cost of an activity, influencing the total cost incurred.

Quiz 1: Cost Accounting: Information for Decision Making