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Chapter 1
The Accountant's Role
in the Organization
1) Management accounting information focuses on external
reporting.
2) Cost management is narrowly focused on a continuous
reduction of costs.
3) Managers always require the information in an accounting
system to be presented in the same format.
4) Modern cost accounting plays a significant role in
management decision making.
5) The balance sheet, income statement, and statement of
cash flows are used for financial accounting, but not for management
accounting.
6) Financial accounting is broader in scope than management
accounting.
7) Cost accounting measures and reports short-term,
long-term, financial, and nonfinancial information.
8) Cost management provides information that helps increase
value for customers.
9) Management accounting has to strictly follow the rules of
generally accepted accounting principles
for the purposes of measurement and reporting.
10) An ideal database should consist of data that could be
used for a single purpose only.
11) An Enterprise Resource Planning (ERP) System is a single
database that collects data and feeds into applications that support each of
the company's business activities, such as purchases, production, distribution,
and sales.
12) Cost accounting provides information only for management
accounting purposes.
13) Cost management involves long-term and short-term
decisions that attempt to increase value for customers and lower costs of
products or services.
14) Strategy does NOT specify how an organization matches
its capabilities with the opportunities in the marketplace.
15) All strategies should be evaluated regarding the
resources and capabilities of the company.
16) The best-designed strategies are valuable whether or not
they are effectively implemented.
17) The key to a company's success is creating value for
customers while differentiating itself from its competitors.
18) The key to a company's success is always to be the low
cost producer in a particular industry.
19) 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.
20) Management accountants should have little or no role in
deciding on a company's strategy.
21) Companies can decide on an appropriate strategy based
strictly on internally available information.
22) Strategic cost management describes cost management that
specifically focuses on strategic issues.
23) Identifying a company's most important customers does
not help formulate strategy.
24) The best-designed strategies and the best-developed
capabilities are useless unless they are effectively executed.
25) The supply chain refers to the sequence of business
functions in which customer usefulness is added to products or services.
26) An effective way to cut costs is to eliminate activities
that do not improve the product attributes that customers value.
27) For optimal planning success it is best if each business
function within the value chain is performed one at a time in sequence.
28) For best results, cost management emphasizes
independently coordinating supply chain activities within your company and not
interfering with other companies.
29) Technological innovation has led to shorter product-life
cycles and a need to bring new products to market more rapidly.
30) Key success factors include cost, quality, timeliness,
and innovation.
31) Customers are demanding increased levels of performance
in all aspects of the value chain and the supply chain.
32) The value chain describes the flow of goods, services,
and information from the initial sources of materials and services to the
delivery of products to consumers.
33) The supply chain always occurs within a single
organization.
34) Distribution refers to promoting and selling products or
services to customers or prospective customers.
35) The production component of the value chain refers to
acquiring, coordinating, and assembling resources to produce a product or
deliver a service.
36) Management accountants might provide information on
decisions on whether to buy a product from outside or manufacture it
in-house.
37) Key success factors are geared to improving customer
satisfaction.
38) Value chain refers to its value to the employee.
39) Companies have to follow strict guidelines when
designing a management accounting system.
40) Tracking what is happening in other companies is
illegal.
41) Increased global competition is placing pressure on
companies to reduce costs.
42) The increasing pace of technological innovation has
resulted in longer product life cycles.
43) A bottleneck occurs when the work to be performed
exceeds the available capacity.
44) The first step in the decision-making process is to
obtain information.
45) One of the steps in planning is making predictions about
the future.
46) It is difficult to control activities without a
budget.
47) To take advantage of changing market opportunities, the
annual budget should be strictly enforced.
48) A budget is a tool used to plan and express
strategy.
49) The process of preparing a budget forces coordination
and communication throughout the company.
50) Linking rewards to performance is a major deterrent to
good management performance.
51) Employees pay little attention to how their performance
is measured.
52) A budget may be used as a planning tool, but not as a
control tool.
53) Financial accounting reports financial and nonfinancial
information that helps managers implement company strategies.
54) Feedback and learning helps in the future
decision-making process.
55) Control includes deciding what feedback to provide that
will help with future decision making.
56) When a particular aspect of employee performance is
measured, employees pay more attention to it.
57) A performance report compares actual performance to the
amount budgeted.
58) Management accounting is playing an increasingly
important role by helping managers develop and implement strategy.
59) It is generally easy to quantify expected benefits and
costs when applying the cost-benefit approach.
60) The purpose of a budget is strictly technical. It does
NOT influence behavior.
61) A cost concept used for external reporting purposes may
not be appropriate for internal, routine reporting to managers.
62) Generally accepted accounting principles (GAAP) require
that the same accounting methods be used for both internal and external reporting.
63) Line management is directly responsible for attaining
the goals of the organization.
64) Staff management should NOT provide advice and
assistance to line management.
65) The use of teams to achieve corporate objectives is
increasing.
66) The controller is usually responsible for banking,
short- and long-term financing, investments, and cash management.
67) The controller (also called the chief accounting
officer) is the financial executive primarily responsible for both management
accounting and financial accounting.
68) By reporting and interpreting relevant data, the
controller exerts an influence that impels management toward making informed
decisions.
69) The controller is generally a staff position.
70) Management accountants must have behavioral and
interpersonal skills.
71) The Sarbanes-Oxley legislation was passed in response to
a series of corporate scandals.
72) The Sarbanes-Oxley legislation does NOT provide a
process for employees to report violations of illegal and unethical acts.
73) Management accountants have important ethical
responsibilities that are related to competence, confidentiality, integrity,
and credibility.
74) A managerial accountant should not disclose confidential
information to an outside party (such as a newspaper) unless legally obligated
to do so.
75) If a managerial accountant were not keeping up with
current developments in managerial accounting, that behavior might violate a
competence standard of professional ethical behavior.
76) If a managerial accountant suspected his or her
immediate superior of wrongdoing, the managerial accountant should request an
immediate meeting with the Board of Directors.
77) The Institute of Management Accountants provides a
hotline to discuss ethical issues.
78) When faced with a potential ethical conflict, the
managerial accountant should first consult any internal procedures of that
organization.
79) When confronted with a potential ethical conflict, a managerial
accountant should not contact his or her personal attorney concerning rights
and obligations.
80) Most professional accounting organizations around the
globe do NOT issue statements about professional ethics.
81) Management accounting:
A) focuses on estimating future revenues, costs, and other
measures to forecast activities 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 on
a quarterly or annual basis
82) Managers use management accounting information to
________ strategy.
A) choose
B) communicate
C) implement
D) All of these answers are correct.
83) 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
84) 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
85) The person MOST likely to use management accounting
information is a(n):
A) banker evaluating a credit application
B) shareholder evaluating a stock investment
C) governmental taxing authority
D) assembly department supervisor
86)
Financial accounting provides the PRIMARY source of
information for:
A)
decision making in the finishing department
B)
improving customer service
C)
preparing the income statement for shareholders
D)
planning next year's operating budget
87)
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.
88)
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.
89)
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
90)
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.
91)
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.
92)
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.
93)
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.
94)
A data warehouse or infobarn:
A)
is reserved for exclusive use by the CFO
B)
is primarily used for financial reporting purposes
C)
stores information used by different managers for multiple
purposes
D)
gathers only nonfinancial information
95)
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
96)
Management accounting includes:
A)
implementing strategies
B)
developing budgets
C)
preparing special studies and forecasts
D)
All of these answers are correct.
97)
Financial accounting is concerned PRIMARILY with:
A)
external reporting to investors, creditors, and government
authorities
B)
cost planning and cost controls
C)
profitability analysis
D)
providing information for strategic and tactical
decisions
98)
Financial accounting provides a historical perspective,
whereas management accounting emphasizes:
A)
the future
B)
past transactions
C)
a current perspective
D)
reports to shareholders
99)
An Enterprise Resource Planning System can best be described
as:
A)
a collection of programs that use a variety of unconnected
databases
B)
a single database that collects data and feeds it into
applications that support each of the company's business activities, such as
purchases, production, distribution, and sales
C)
a database that is primarily used by a purchasing department
to determine the correct amount of a particular supply item to purchase
D)
a sophisticated means of linking two or more companies to
facilitate their planning processes
100)
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 known as:
A)
value chain management
B)
enterprise resource planning
C)
cost management
D)
customer value management
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