Question 1

Which of the following statements about cost accounting systems is FALSE?

Accepted Answer

All types of organizations need cost accounting systems to make informed decisions about pricing, production, and profitability.

Question 2

Investors need more detailed information about products or services than managers.

Accepted Answer

Managers require more detailed information about products or services to make informed decisions regarding operations, strategy, and overall management, whereas investors might focus more on financial performance and broader company prospects.

Question 3

The process of collecting costs by some natural classification is called ________.

Accepted Answer

Cost accumulation refers to the process of collecting costs by some natural classification, such as department, process, or product. Cost accounting refers to the overall process of recording, classifying, and summarizing costs for a business entity. Cost allocation refers to the process of assigning indirect costs to cost objects. Cost assignment refers to the process of assigning direct and indirect costs to cost objects.

Question 4

To support managers' decisions,accountants develop cost management systems that are ________.

Accepted Answer

Cost management systems developed by accountants are a collection of tools and techniques that identify how decisions affect costs, which helps managers make informed decisions. These systems are not computer programs with specialized accounting language and do not necessarily have a specific number of cost pools. While external users such as investors and lenders may use some of the information provided by cost management systems, their primary purpose is to support managers' decisions.

Question 5

To determine the cost of serving a specific type of customer,such as the retail customer,which of the following are followed?

Accepted Answer

The correct process for determining the cost of serving a specific type of customer involves first accumulating all costs associated with serving that customer type (cost accumulation) and then assigning those accumulated costs to the specific customer or customer group (cost assignment).

Question 6

What is an example of a tool or technique that is used in a cost management system?

Accepted Answer

Cost-volume-profit analysis is a tool used in cost management systems to help managers understand the relationship between sales volume, costs, and profits. It can be used to determine the break-even point for a product or service and to identify opportunities to increase profits by reducing costs or increasing sales. The other choices (A, B, and C) are accounting principles and methods, but they do not directly relate to cost management systems.

Question 7

A cost management system provides ________.

Accepted Answer

A cost management system provides measures for financial reporting (option A), cost information for strategic decisions (option B), and cost information for operational control (option C). Therefore, option D, "all of the above," is the correct choice.

Question 8

Which of the following statements is FALSE?

Accepted Answer

Cost accounting is useful in all types of organizations, not just manufacturing firms.

Question 9

External users of financial reports need ________ measures of inventory and cost of goods sold.Internal users of financial reports need ________ cost information about products.

Accepted Answer

External users, such as investors and creditors, require aggregate measures of inventory and cost of goods sold to assess the overall financial health of a company. Internal users, such as managers, need detailed cost information about products to make operational decisions, manage costs, and improve efficiency.

Question 10

Which of the following is an example of a strategic management decision that uses cost information?

Accepted Answer

Determining the product mix is a strategic management decision that uses cost information, as it involves analyzing the costs and revenues of different products to determine the most profitable combination. The other options are more related to financial reporting and traditional accounting functions.

Question 11

A cost management system provides information for strategic management decisions and financial reporting.

Accepted Answer

A cost management system is designed to collect, analyze, and report information related to the costs of production, operations, and other business activities. This information is used by managers to make strategic decisions related to pricing, product mix, resource allocation, and more. In addition, cost management systems are also used for financial reporting purposes, providing data on the costs of sales, inventory, and other expenses that affect the company's bottom line.

Question 12

An example of a strategic management decision is the establishment of a pricing policy for a new product.

Accepted Answer

Establishing a pricing policy is a key strategic management decision that can impact the success of a new product. It involves considering factors such as production costs, competition, and perceived value in order to set a price that will maximize profits and meet company objectives.

Question 13

A product such as Sure-Fine Graham Crackers,and a customer such as an Internet customer,are both examples of ________.

Accepted Answer

Both Sure-Fine Graham Crackers and an Internet customer can be considered cost objects as they both incur costs within a company's accounting system. Cost objects are any items, actions, or processes for which costs are measured and recorded.

Question 14

An example of a strategic management decision is the decision to outsource a particular value-chain function.

Accepted Answer

Outsourcing a particular value-chain function is a strategic management decision as it involves identifying which functions can be outsourced to improve efficiency and reduce costs, thus impacting the overall strategy of the organization.

Question 15

Which of the following types of organizations need cost accounting?

Accepted Answer

All types of organizations need cost accounting as it helps in determining the cost of products or services offered by the organization and improves decision-making processes. Cost accounting is essential for both manufacturing and service organizations as well as for nonprofit organizations. Nonprofit organizations also need to keep track of their costs in order to ensure efficient use of their limited resources. Therefore, all types of organizations need cost accounting.

Question 16

Which of the following is an example of a strategic management decision that uses cost information?

Accepted Answer

Identifying a value-chain function to outsource involves analyzing the costs associated with that function and comparing them to the potential cost savings from outsourcing. This is a strategic management decision that uses cost information. The determination of Cost of Goods Sold for the income statement is an accounting decision, evaluating operational cost control program is an operational decision, and assessment of process improvement efforts in quality control is a quality control decision.

Question 17

If the Machining Department is the cost object,attaching costs to the Machining Department is called ________.

Accepted Answer

Cost assignment is the process of attaching costs to a cost object, which in this case is the Machining Department. Cost pooling involves combining costs from multiple cost objects, cost accumulation is the process of collecting costs, and applying a cost driver involves identifying the activity or factor that causes costs to be incurred. None of these options fully describe the process of attaching costs to a specific cost object like the Machining Department. Therefore, the best answer is C) cost assignment.

Question 18

To determine the cost of a product,which of the following are followed?

Accepted Answer

The process of determining the cost of a product involves first accumulating all the costs associated with its production and then assigning those costs to the product. Therefore, the first step is cost accumulation and the second step is cost assignment. Option A is incorrect as cost allocation and cost assignment are the same thing. Option C is incorrect as cost apportionment involves dividing costs among different departments or products based on a predetermined formula, whereas cost assignment involves identifying and assigning costs to a specific product. Option D is incorrect as cost attribution is not a commonly used term in cost accounting.

Question 19

An example of a strategic management decision is the selection of the product mix that maximizes profits.

Accepted Answer

Strategic management decisions are those that determine the direction and scope of an organization over the long term, with the aim of achieving its objectives. Choosing the optimal product mix is a key strategic decision as it has a significant impact on profitability.

Question 20

Which of the following is an example of using cost information for operational control?

Accepted Answer

The evaluation of process improvement efforts in a manufacturing process involves using cost information for operational control, as it helps in identifying areas where costs can be reduced, and efficiency can be improved. The other options do not involve using cost information for operational control.

Quiz 4: Cost Management Systems and Activity-Based Costing

Which of the following statements about cost accounting systems is FALSE?

Investors need more detailed information about products or services than managers.

The process of collecting costs by some natural classification is called ________.

To support managers' decisions,accountants develop cost management systems that are ________.

To determine the cost of serving a specific type of customer,such as the retail customer,which of the following are followed?

What is an example of a tool or technique that is used in a cost management system?

A cost management system provides ________.

Which of the following statements is FALSE?

External users of financial reports need measures of inventory and cost of goods sold.Internal users of financial reports need cost information about products.

Which of the following is an example of a strategic management decision that uses cost information?

A cost management system provides information for strategic management decisions and financial reporting.

An example of a strategic management decision is the establishment of a pricing policy for a new product.

A product such as Sure-Fine Graham Crackers,and a customer such as an Internet customer,are both examples of ________.

An example of a strategic management decision is the decision to outsource a particular value-chain function.

Which of the following types of organizations need cost accounting?

Which of the following is an example of a strategic management decision that uses cost information?

If the Machining Department is the cost object,attaching costs to the Machining Department is called ________.

To determine the cost of a product,which of the following are followed?

An example of a strategic management decision is the selection of the product mix that maximizes profits.

Which of the following is an example of using cost information for operational control?