Question 1

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

Accepted Answer

Activity-based costing (ABC) is an accounting system that identifies and collects financial and operating data based on the specific activities that create costs. It analyzes the underlying nature and extent of cost drivers, assigning costs to specific products, services, or activities. Full absorption costing and variable costing are other methods of costing, but they do not collect data based on cost drivers. Benchmarking is a process of comparing performance metrics with industry standards and best practices, which is different from accounting systems that collect data on cost drivers.

Question 2

Which of the following is a nonvalue-added activity?

Accepted Answer

Rework of defective items is a nonvalue-added activity as it involves fixing errors or mistakes that should have been prevented in the first place, rather than adding value to the product or service. The other options (product design, customer service, research and development) are all considered value-added activities as they contribute directly to the improvement or creation of the product or service.

Question 3

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.

Accepted Answer

A value chain is not about subassemblies but rather a series of activities that add value to a product or service from conception to delivery to the end user.

Question 4

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

Accepted Answer

Accounting is necessary for running a business, but it is not a direct value-added activity that directly contributes to the creation or delivery of a product or service. Production, marketing, and distribution are all activities that can add value to a product or service for the customer.

Question 5

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

Accepted Answer

The process of creating a formal plan and translating goals into a quantitative format refers to budgeting where a company make plans for their revenues, expenses and the resulting profits for a particular period of time. Benchmarking refers to comparing performance with a key competitors or industry standards, cost-benefit analysis refers to evaluating the expected benefits and costs of a project or decision, and value-added analysis refers to assessing the value added to a product or service during production.

Question 6

The set of activities that transforms raw resources into the goods and services of an organization is called:

Accepted Answer

The value chain is a set of activities that an organization performs to create and deliver value to its customers. This includes activities starting from the acquisition of raw materials to the delivery of the final product to the end customer. It involves both primary activities such as inbound and outbound logistics, operations, marketing, etc. and support activities such as procurement, technology development, human resource management, etc. Supply chain refers specifically to the activities involved in the procurement of raw materials and their delivery to the organization, while demand chain involves the activities related to the marketing and sales of the products. Cost-benefit analysis is a technique used to evaluate the costs and benefits of a project or decision.

Question 7

(CMA adapted)Cost drivers are

Accepted Answer

Cost drivers are activities that cause costs to increase as the activity increases. This means that the more of a certain activity that is performed, the more costs will be incurred. Cost drivers can include things like labor hours, machine usage, or materials used. Accounting techniques and practices, accounting reimbursements, and mechanical bases used to assign costs to activities are not considered cost drivers.

Question 8

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

Accepted Answer

Financial accounting receives information from various sources, including cost accounting, sales, purchases, and other financial transactions within an organization.

Question 9

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

Accepted Answer

To calculate the increase in operating profits, we need to subtract the increased food costs from the increased sales revenues and then subtract that result from the 2013 operating profit.

Increase in operating profit = 2013 operating profit + (increase in sales revenues - increase in food costs)

= $800,000 - $600,000 + ($100,000 - $40,000)

= $60,000

Therefore, the increase in operating profits for 2013 is $60,000. Therefore, the best choice is C.

Question 10

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.

Accepted Answer

The lean thinking model primarily focuses on eliminating waste and improving efficiency in processes, rather than specifically targeting defect reduction. Reducing defects is more closely associated with Six Sigma methodology.

Question 11

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

Accepted Answer

Cost accounting includes the calculation and analysis of various costs and expenses of a company or a particular product, whereas financial accounting focuses on the preparation of financial statements and reports for external users. Therefore, cost accounting has a broader scope than financial accounting.

Question 12

Which field of accounting emphasizes relevancy over comparability?

Accepted Answer

Cost accounting emphasizes relevancy over comparability as it focuses on providing information that is useful for internal decision-making, often tailored to the specific needs of the organization.

Question 13

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.

Accepted Answer

The answer of The Value chain is comprised of the...

Question 14

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.

Accepted Answer

The answer of Financial accounting provides financial and nonfinancial information...

Question 15

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

Accepted Answer

Cost accounting provides crucial information about the cost of production, the cost of goods sold, and other expenses that are used to make management decisions. It helps managers in assessing the profitability of a business, controlling costs, and determining the prices of products or services. Therefore, cost accounting plays a significant role in management decision making.

Question 16

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.

Accepted Answer

Cost accounting is not limited to cost accounting purposes only. Its information is often used in various business decisions as well as for financial reporting purposes.

Question 17

Managers do not make decisions about future events based on:

Accepted Answer

It is impossible for managers to have perfect information about future events, as there are too many variables and uncertainties at play. Managers must base their decisions on estimated and actual information, as well as financial information.

Question 18

Which of the following statements is false?

Accepted Answer

The answer of Which of the following statements is false?
...

Question 19

The field of accounting that depends on generally accepted accounting principles (GAAP)is called

Accepted Answer

Financial accounting is the field of accounting that is concerned with the preparation of financial statements for external users in accordance with GAAP. Cost accounting is concerned with identifying, measuring, analyzing, and interpreting costs for internal management purposes. Managerial accounting involves obtaining and using financial information to make decisions within a company. Responsibility accounting is a system that involves the allocation of responsibility for financial results to various levels of management within an organization.

Question 20

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

Accepted Answer

The JIT method of production aims to reduce inventories by producing only what is needed, when it is needed, and in the exact quantity required. This helps to minimize storage costs and reduce waste, leading to lower operating expenses. While improved customer service may be a benefit of JIT, it is not the primary focus. Increasing sales revenue may be a goal of the company, but it is not directly related to the JIT method.

Quiz 1: Cost Accounting: Information for Decision Making

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