COST ACCOUNTING CHAPTER 1 Chapter 1: The Manager and Management Accounting: 4 Important Questions: 1) Management accounting: ‘A) Focuses on estimating future revenues, costs, and other measures to forecastactivities and their results B) Provides information about the company as a whole C) Reports information that has occurred in the past that is verifiable and reliable D) Provides information that is generally available only ona quarterly or annual basis ‘Answer: A 2) Managers use management accounting information to____ strategy. A) Choose B) Communicate C) Implement D) All of these answers are correct. ‘Answer: D 3) Financial accounting: A) Focuses on the future and includes activities such as preparing next year's operating budget B) Must comply with GAAP (generally accepted accounting principles) C) Reports include detailed information on the various operating segments of the business such as product lines or departments D) is prepared for the use of department heads and other employees Answer: B Mr. Amir Rabie 1COST ACCOUNTING CHAPTER 1 4) The person most likely to use ONLY financial accounting information is a: A) Factory shift supervisor B) Vice president of operations C) Current shareholder D) Department manager Answer: C 5) Which of the following people is LEAST likely to use management accounting information? A) The controller B) A shareholder evaluating a stock investment C) The treasurer D) An assembly department supervisor Answer: B 6) Financial accounting provides the primary source of information for: A) Decision making in the finishing department B) Improving customer service ) Preparing the income statement for shareholders D) Planning next year's operating budget Answer: C 7) Which of the following descriptors refers to management accounting information? A) It is verifiable and reliable. B) It is driven by rules. C) It is prepared for shareholders. D) It provides reasonable and timely estimates. Answer: D [Mr Amir Rabie] zCOST ACCOUNTING CHAPTER 1 8) Which of the following statements refers to management accounting information? ‘A) There are no regulations governing the reports. B) The reports are generally delayed and historical. C) The audience tends to be stockholders, creditors, and tax authorities. D) It primarily measures and records business transactions. ‘Answer: A 9) Which of the following groups would be LEAST likely to receive detailed management accounting reports? A) Stockholders B) Sales representatives C) Production supervisors D) Managers Answer: A 10) Management accounting information includes: A) Tabulated results of customer satisfaction surveys B) The cost of producing a product C) The percentage of units produced that are defective D) All of these answers are correct. Answer: D 11) Cost accounting: A) Provides information on the efficiency of factory labor B) Provides information on the cost of servicing commercial customers C) Provides information on the performance of an operating division D) All of these answers are correct. Answer: D [Mr Amir Rabie] 3COST ACCOUNTING CHAPTER 1 12) Which of the following types of information are used in management accounting? A) Financial information B) Nonfinancial information C) Information focused on the long term D) All of these answers are correct. ‘Answer: D 13) Modern cost accounting plays a role in: A) Planning new products B) Evaluating operational processes C) Controlling costs D) All of these answers are correct. Answer: D 14) Cost accounting provides all of the following EXCEPT: A) Information for management accounting and financial accounting B) Pricing information from marketing studies C) Financial information regarding the cost of acquiring resources D) Nonfinancial information regarding the cost of operational efficiencies Answer: B 15) Management accounting includes all of the following EXCEPT A) Implementing strategies B) Developing budgets C) Preparing, special studies and forecasts D) Preparing the statement of cash flows Answer: D Mr. Amir Rabie 4COST ACCOUNTING CHAPTER 1 16) Financial accounting is concerned primarily with: ‘A) External reporting to investors, creditors, and government authorities B) Costplanning and cost controls C) Profitability analysis D) Providing information for strategic and tactical decisions ‘Answer: A 17) Financial accounting provides a historical perspective, whereas management accounting emphasizes: A) The future B) Past transactions C)A current perspective D) Reports to shareholders Answer: A 18) The approaches and activities of managers in short-run and long-run planning and control decisions that increase value for customers and lower costs of products and services are knownas: A) Value chain management B) Enterprise resource planning C) Cost management D) Customer value management ‘Answer: C 19) Management accounting information focuses on external reporting. Answer: FALSE 20) Cost management is narrowly focused on a continuous reduction of costs. Answer: FALSE Mr. Amir Rabie 5COST ACCOUNTING CHAPTER 1 21) Managers always require the information in an accounting system to be presented in the same format. Answer: FALSE. 22) Modern cost accounting takes the perspective that collecting cost information is a function of the management decisions being made. Answer: TRUE 23) The balance sheet, income statement, and statement of cash flows are used for financial accounting, and also for management accounting. Answer: TRUE 24) Financial accounting is broader in scope than managementaccounting. ‘Answer: FALSE 25) Cost accounting measures and reports short-term, long-term, financial, and non- financial information. ‘Answer: TRUE 26) Cost management provides information that helps increase value for customers. Answer: TRUE 27) Management accounting has to strictly follow the rules of generally accepted accounting principles for the purposes of measurement and reporting. Answer: FALSE 28) An ideal database should store information in a way that allows different managers to access the information they need. Answer: TRUE 29) Cost accounting provides information only for management accounting purposes. ‘Answer: FALSE 30) Cost management involves long-term and short-term decisions that attempt to increase value for customers and lower costs of products or services. Answer: TRUE Mr. Amir Rabie] $COST ACCOUNTING CHAPTER 1 31) which item is NOT a guideline used by management accountants to assist in strategic and operational decision making? A) cost-benefit approach B) Behavioral and technical considerations C) Different costs for different purposes D) Balanced scorecard Answer: D 32) Strategy specifies: A) How an organization matches its own capabilities with the opportunities in the marketplace B) Standard procedures to ensure quality products C) Incremental changes for improved performance D) The demand created for products and services ‘Answer: A 33) Which of the following is NOT one of the questions management accountants might attempt to help answer in the formulation of strategy? A) Who are our most important customers? B) What substitute products exist in the marketplace? C) Does the strategy comply with GAAP (Generally Accepted Accounting Principles)? D) Will adequate cash be available to implement the strategy? Answer: C 34) Strategy is formulated by answering all of the following EXCEPT: A) Who are our most important customers? B) Is industry demand growing or shrinking? C) Will our external auditors certify our strategy? D) How sensitive are purchasers to price, quality, and service? Answer: C [Mr. Amir Rabie] 7COST ACCOUNTING CHAPTER 1 35) In designing strategy, a company must match the opportunities and threats in the marketplace wit A) Those of the CFO (Chief Financial Officer) B) Its resources and capabilities C) Branding opportunities D) Capabilities of current suppliers Answer: B 36) Which of the following statements about customer value is NOT true? A) Customer value is shown in a corporation's balance sheet. B) Creating value for customers is an important part of planning and implementing strategy. C) How our product delivers customer value should be determined as part of a company's strategy formulation. D) It is possibleto simultaneously lower costand increase customer value. Answer: A. 37) Strategy does NOT specify how an organization matches its capabilities with the opportunities in the marketplace. Answer: FALSE 38) Southwest Airlines is an example ofa company that pursues a product differentiation strategy. Answer: FALSE 39) The best-designed strategies are valuable whether or not they are effectively implemented. Answer: FALSE 40) The key to a company’s suecessis creating value for customers while differentiating itself from its competitors. Answer: TRUE Mr. Amir Rabie 8COST ACCOUNTING CHAPTER 1 41) The key to a company's success is always to be the low cost producer in a particular industry. Answer: FALSE 42) Companies generally follow one of two basic strategies: 1) providing a quality product or service at low prices, or 2) offering a unique product or service often priced higher than competing products. Answer: TRUE 43) Management accountants should have little or no role in deciding on a company's strategy. Answer: FALSE 45) Strategic cost management describes cost management that specifically focuses on strategic issues. ‘Answer: TRUE 46) Identifying a company's most important customers does NOT help formulate strategy. Answer: FALSE 47) The best-designed strategies and the best-deyeloped capabilities are useless unless they are effectively executed. Answer: TRUE 48) Place the four business functions in the order they appearalong the value chain: Customerservice Design Marketing Production A) Customer Service, Design, Production, Marketing B) Customer Service, Marketing, Production, Design C) Design, Production, Marketing, Customer Service D) Design, Customer Service, Production, Marketing [Mr Amir Rabie] >COST ACCOUNTING CHAPTER 1 Answer: C 49) R&D, production, and customer service are business functions that are all included as part of: A) The value chain B) Benchmarking C) Marketing D) The supply chain Answer: A 50) The value chain is the sequence of business functions in Which: A) Value is deducted from the products or services of an organization B) Value is proportionately added to the products or services of an organization C) Products and services are evaluated with respect to their value to the supply chain D) Usefulness is added to the products or services of an organization ‘Answer: D 51)___ is the generation of, and experimentation with, ideas related to new products, services, or processes. A) Research and development B) Design of products, services, or processes C) Production D) Marketing ‘Answer: A 52)___is the detailed planning and engineering of products, services, or processes. A) Distribution B) Design of products, services, or processes C) Production D) Marketing, [Mr Amir Rabie] 10COST ACCOUNTING CHAPTER 1 Answer: B 53)____ is the acquisition, coordination, and assembly of resources to produce a product or deliver a service. A) Research and development B) Customer service C) Production D) Marketing Answer: C 54) __ is the manner by which companies promote and sell their products or services to customers or perspective customers. A) Distribution B) Customer service C) Research and development D) Marketing Answer: D 54) __is the delivery of products or services to customers. A) Distribution B) Customer service C) Production D) Design of products, services, or processes ‘Answer: A 55)___ is the after-sale support provided to customers. A) Distribution B) Customer service C) Production D) Marketing, [Mr Amir Rabie] iCOST ACCOUNTING CHAPTER 1 Answer: B 56)___isa strategy that integrates people and technology in all business functions to enhance relationships with customers, partners, and distributors. ‘A) Supply-chain analysis B) Customer relationship management C) Value-chain analysis D) Continuous quality improvement Answer: B 57) Customer relationship management i es use technology to coordinate all: A) Production activities B) Research activities C) customer-facing activities D) Inventory management activities Answer: C 58)____describe(s) the flow of goods, services, and information from the purchase of materials to the delivery of products to consumers, regardless of whether those acti occurin the same organization or with other organizations. ‘A) Supply chain B) Key success factors C) Continuous improvement D) Customer focus Answer: A. Mr. Amir Rabie 12COST ACCOUNTING CHAPTER 1 59) Processing orders and shipping products or services to customers (also called outbound logistics) is also known as A) Customer focus B) Distribution C) Marketing D) Supply chain Answer: B 60) __isa philosophy in which management improves operations throughout the value chain to deliver products and services that exceed customer expectations. A) Cost-benefit approach B) Customer focus C) Customer relationship management D) Total quality management Answer: D 61) Which item is NOT an area that customers want to see improved levels of performance in? A) Innovation B) Quality c stand efficiency D) Profit Answer: D 61) Which of the following statements about a company's supply chain is true? A) A company's supply chain is always internal to a firm. B) A company's supply chain is always external to a firm. C) A company's supply chain is the same thing as a company's value chain. D) Management accountants provide information to enhance a company's supply chain. [Mr Amir Rabie] BCOST ACCOUNTING CHAPTER 1 Answer: D 62)___ describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations. ‘A) The value chain B) The supply chain C) Product differentiation D) Distribution ‘Answer: B 63) Whose perceptions of the company's products or services are the most important to the manager? A) Board of directors' perception B) Customers' perception C) president's perception D) Stockholders’ perception Answer: B 64)___aims to improve operations throughout the value chain and to deliver products and services that exceed customer expectations. A) Total Quality Management B) Innovation C) Customer response time D) Costand efficiency Answer: A Mr. Amir Rabie 14COST ACCOUNTING CHAPTER 1 65) Customers are demanding improved performance related to: A) Reduced costs B) Both reduced costs and increased quality C) Lower costs, improved quality, and improved customer service D) Alll of these answers are correct. Answer: D 66) Customer response time involves: A) The speed it takes a customer to respond to an advertisement and place an order B) The speed at which an organization responds to customer requests C) The speed it takes to develop a new product D) The speed it takes an organization to develop a Total Quality Management (TQM) program Answer: B 67) Which of the following is NOT a way for a company to improve customer response time? A) Increase capacity of bottleneck operations. B) Purchase material in larger quantities. C) Use faster delivery procedures. D) Produce the product more quickly. Answer: B 68) The supply chain refers to the sequence of business functions in which customer usefulne: added to products or services. ‘Answer: FALSE 69) An effective way to cut costs is to eliminate activities that do NOT improve the product attributes that customers value. Answer: TRUE Mr. Amir Rabie 15COST ACCOUNTING CHAPTER 1 70) For best results, cost management emphasizes independently coordinating supply cbain activities within your company and with other companies that actas suppliers and customers. Answer: TRUE 27) Technological innovation has led to longer product-life cycles and lessened the need to bring new products to market more rapidly. ‘Answer: FALSE 71) Key success factors include cost, quality, timeliness, and innovation. Answer: TRUE 72) Customers are demanding increased levels of performance in all aspects of the value chain and the supply chain. Answer: TRUE 73) The supply chain describes the flow of goods, services, and information from the sources of materials and services to the delivery of products to consumers. Answer: FALSE 74) The supply chain always occurs within a single organization. ‘Answer: FALSE 75) Distribution refers to promoting and selling products or services to customers or prospective customers. Answer: FALSE 76) The production component of the value chain refers detailed planning, engineering, and testing of products and processes. Answer: FALSE 77) Management accountants might provide information on decisions on whether to buy a product from outside or manufacture it in-house. Answer: TRUE 78) Key success factors are geared to improving customer satisfaction. Answer: TRUE [Mr. Amir Rabie] 16COST ACCOUNTING CHAPTER 1 79) Value chain refers to its value to the employee. ‘Answer: FALSE 80) Companies have to follow strict guidelines when designing a management accounting system. ‘Answer: FALSE. 81) Place the five steps in the decision-making process in the correct order: A= Obtain information B = Make decisions by choosing among alternatives C= Identify the problem and uncertainties D=Implement the decision E = Make predictions about the future A)CDBEA B)EDABC C)CAEBD D)AEBDC Answer: C 82) Planning consists of all of these areas EXt A) Selecting organizational goals B) Deciding how to attain the desired goals C) Evaluating performance D) Predicting results under various alternatives Answer: C Mr. Amir Rabie 17COST ACCOUNTING CHAPTER 1 83) the most important planning toolisa___. A) Performance evaluation report B) Balanced scorecard C) Goal D) Budget Answer: D 84) A report showing the actual financial results for a period compared to the budgeted financial results for that same period would most likely be calleda: A) Strategic plan B) Management forecast C) Performance report D) Revised plan ‘Answer: C 85) The process of preparing a budget: A) Forces coordination and communication across business functions B) increases accounting efficiencies C) Reduces overcapacity D) Promotes production automation ‘Answer: A 86) Planning includes all of the following EXCEPT A) Identifying the problem and uncertainties. B) Obtaining information C) Providing feedback to help with future decision making D) Making predictions about the future. ‘Answer: C [Mr Amir Rabie] 8COST ACCOUNTING CHAPTER 1 87) A budget: A) Is a quantitative expression of a proposed management plan B) Helps translate strategy into actions C) Aids in the coordination and communication among various business functions D) Alll of these answers are correct. Answer: D 88) A budget can serve as: A)a planning tool B) a control tool C)a basis for preparing financial statements D) a planning and control tool Answer: D 89)Employees___ how their performance is measured. ‘A) Pay close attention to B) Pay no attention to C) Rarely know D) None of the above are correct. Answer: A 90) Linking rewards to performance: ‘A) Helps to motivate managers B) Allows companies to charge premium prices C) Should only be based on financial information D) Alll of these answers are correct. Answer: A Mr. Amir Rabie 19COST ACCOUNTING CHAPTER 1 91) Control measures should: ‘A) be set and not changed until the next budget cycle B) be flexible to allow for employees who are slackers C) be kept confidential from employees so that competitors don't have an opportunity to gain a competitive advantage D) be linked by feedback to planning Answer: D 92) A well-conceived plan allows managers the ability to: A) not make decisions again until the next planning session B) keep lower-level managers from implementing change C) underestimate costs so that actual operating results will be favorable when comparisons are made D) take advantage of unforeseen opportunities Answer: D 93) Which of the following statements concerning performance reports is NOT correct? A) The performance report shows actual performance as compared to the budget. B) The performance report is a feedback tool. C) The performance report often leads to more investigations and action. D) The performance report contains no actual results due to confidentiality. Answer: D 94) Management accounting is considered most likely to be successful when it: A) helps creditors evaluate the company’s performance B) helps investors improve their decisions C)is timely D) is relevant and reported annually Answer: C [Mr Amir Rabie] 20COST ACCOUNTING CHAPTER 1 95) The last step in the decision-making processis to make decisions by choosing among alternatives. Answer: FALSE 96) One of the steps in planning is making predictions about the future. ‘Answer: TRUE 97) It is difficult to control activities without a budget. Answer: TRUE 98) To take advantage of changing market opportunities, the annual budget should be strictly enforced. ‘Answer: FALSE 99) A budget is a quantitative expression of a plan. ‘Answer: TRUE 100) The scenario that resources should be spent if the expected benefits to the company exceed the expected costs describes: ‘A) Cost-benefit approach B) Behavioral and technical considerations C) Balanced scorecard D) Different costs for different purposes Answer: A 101) the act of simply measuring and reporting information: A) Focuses the attention of employees on those processes B) Diverts employee's attention to other activities C) Disproves the saying "What gets measured gets managed." D) Has no effect on employee behavior Answer: A. Mr. Amir Rabie 21COST ACCOUNTING CHAPTER 1 102) which statement is true? ‘A) Management is primarily a technical activity. B) People do not react to measurements. C) Employees spend more attention on those variables that are getting measured. D) Resources should be spent if the expected benefits to the company are less than the expected costs. Answer: C 103) The primary criterion when faced with a resource allocation decision A) cost minimization B) reduction in the amount of time required to perform a particular job C)achievement of organizational goals D) how well the alternative options help achieve organizational goals in relation to the costs incurred for these systems Answer: D 104) Which of the following statements about the cost-benefit approach is true? A) Resources should be spent if they are expected to better attain company goals in relation to the expected costs of these resources. B) In a cost-benefit analysis, both costs and benefits are easy to obtain. C) Resources should be spent if the costs ofa decision outweigh the benefits of the decision. D) A cost-benefit approach would not be appropriate for a decision to install a budget system or not. Answer: A 105) It is generally easy to quantify expected benefits and costs when applying the cost- benefit approach. Answer: FALSE Mr. Amir Rabie 22COST ACCOUNTING CHAPTER 1 106) The technical considerations of budgeting encourage managers and other employees to strive for achieving the goals of the organization. Answer: FALSE 107) A cost concept used for external reporting purposes may not be appropriate for internal, routine reporting to managers. Answer: TRUE 108) Accounting methods for internal reporting purposes are specified by Generally Accepted Accounting Principles (GAAP). Answer: FALSE 109) If there is an ethical conflict concerning your direct supervisor, when appropriate to contact authorities or individuals NOT employed by the organization? ‘A) when there is a personal conflict B) when your supervisor is about to receive a bonus C) when there is a clear violation of the law D) when you are about to be terminated Answer: C 110) Credibility includes maintaining an appropriate level of professional expertise by continually developing knowledge and skills. Answer: FALSE 111)___ includes providing financial information for reports to managers and shareholders, and oversceing the overall operations of the accounting system. A) Intemal audit B) External audit C) Controllership D) Treasury ‘Answer: C Mr. Amir Rabie 23COST ACCOUNTING CHAPTER 1 112) ___ includes banking and short- and long-term financing, investments, and cash management. A) Risk management B) Internal audit C) Controllership D) Treasury Answer: D 113) Line management includes: A) Manufacturing managers B) Human-resource managers C) Information-technology managers D) Management-accounting managers ‘Answer: A 114) Staff management includes: A) Manufacturing managers B) Human-resource managers C) Purchasing managers D) Distribution managers ‘Answer: B 115) An external audit includes reviewing and analyzing financial and other records to attestto the integrity of the organization's financial reports and to adherence to its policies and procedures. Answer: FALSE 116) The controlleris generally a staff position. ‘Answer: TRUE Mr. Amir Rabie 24COST ACCOUNTING CHAPTER 1 120) Which item is NOT an indication of confidentiality under the Standards of Ethical Conduct? A) Keep information confidential except when disclosure is authorized or legally required. B) Inform all relevant parties regarding, appropriate use of confidential information. C)Reffain from using confidential information for unethical or illegal advantage. D) All of the above indicate confidentiality. Answer: D 117) If there is an ethical conflict concerning your direct supervisor, you may contact all of the following groups EXCEPT: A) Local media B) Audit committee C) Executive committee D) Board of directors ‘Answer: A 118) Which item is NOT an indication of competence under the Standards of Ethical Conduct? A) Maintain an appropriate level of professional expertise by continually developing knowledge and skills. B) Keep information confidential except when disclosure is authorized or legally required. C) Perform professional duties in accordance with relevant laws, regulations, and technical standards, D) Provide decision support information and recommendations that are accurate, clear, concise, and timely. Answer: B Mr. Amir Rabie 25