Type:
Test Bank
Resource:
Cost Accounting A Managerial Emphasis
Edition:
14th Edition
Author(s):
Charles T. Horngren Srikant M. Datar Madhav Rajan
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 Diff: 2 Terms: treasury Objective: 1 AACSB: Reflective thinking 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 Diff: 1 Terms: treasury Objective: 1 AACSB: Analytical skills 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 Diff: 1 Terms: treasury Objective: 1 AACSB: Reflective thinking 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 Diff: 1 Terms: cost accounting Objective: 1 AACSB: Reflective thinking
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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 Diff: 2 Terms: treasury Objective: 1 AACSB: Reflective thinking 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 Diff: 1 Terms: cost accounting Objective: 1 AACSB: Reflective thinking 14) 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 Answer: C Diff: 1 Terms: cost accounting Objective: 1 AACSB: Reflective thinking 15) 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 Diff: 2 Terms: cost accounting Objective: 1 AACSB: Reflective thinking
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16) 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 Diff: 1 Terms: treasury Objective: 1 AACSB: Reflective thinking 17) 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 Answer: A Diff: 2 Terms: financial accounting Objective: 1 AACSB: Reflective thinking 18) 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 Diff: 1 Terms: financial accounting Objective: 1 AACSB: Reflective thinking 19) 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 Answer: B Diff: 1 Terms: cost accounting Objective: 1 AACSB: Use of Information Technology
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20) 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 Answer: C Diff: 1 Terms: cost management Objective: 1 AACSB: Analytical skills 21) Management accounting information focuses on external reporting. Answer: FALSE Explanation: Management accounting information focuses on internal reporting. Diff: 1 Terms: treasury Objective: 1 AACSB: Reflective thinking 22) Cost management is narrowly focused on a continuous reduction of costs. Answer: FALSE Explanation: Cost management is broadly focused to provide information that helps managers at all levels implement, monitor, and evaluate company strategies. Diff: 2 Terms: cost management Objective: 1 AACSB: Analytical skills 23) Managers always require the information in an accounting system to be presented in the same format. Answer: FALSE Explanation: Individual managers often require the information in an accounting system to be presented or reported differently. Diff: 1 Terms: treasury Objective: 1 AACSB: Analytical skills 24) Modern cost accounting takes the perspective that collecting cost information is a function of the management decisions being made. Answer: TRUE Diff: 1 Terms: cost accounting Objective: 1 AACSB: Analytical skills
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25) The balance sheet, income statement, and statement of cash flows are used for financial accounting, and also for management accounting. Answer: TRUE Diff: 1 Terms: financial accounting Objective: 1 AACSB: Analytical skills 26) Financial accounting is broader in scope than management accounting. Answer: FALSE Explanation: Management accounting is broader in scope than financial accounting. Diff: 2 Terms: financial accounting, management accounting Objective: 1 AACSB: Reflective thinking 27) Cost accounting measures and reports short-term, long-term, financial, and non financial information. Answer: TRUE Diff: 2 Terms: cost accounting Objective: 1 AACSB: Reflective thinking 28) Cost management provides information that helps increase value for customers. Answer: TRUE Diff: 1 Terms: cost management Objective: 1 AACSB: Reflective thinking 29) Management accounting has to strictly follow the rules of generally accepted accounting principles for the purposes of measurement and reporting. Answer: FALSE Explanation: Internal measures and reports do not have to follow GAAP. Diff: 1 Terms: treasury Objective: 1 AACSB: Ethical reasoning 30) An ideal database should store information in a way that allows different managers to access the information they need. Answer: TRUE Diff: 1 Terms: treasury Objective: 1 AACSB: Reflective thinking
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31) 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. Answer: TRUE Diff: 1 Terms: treasury Objective: 1 AACSB: Use of Information Technology 32) Cost accounting provides information only for management accounting purposes. Answer: FALSE Explanation: Cost accounting provides information for financial accounting as well as for management accounting purposes. Diff: 1 Terms: cost accounting Objective: 1 AACSB: Reflective thinking 33) 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 Diff: 1 Terms: cost management Objective: 1 AACSB: Reflective thinking 34) For each report listed below, identify whether the major purpose of the report is for (1) routine internal reporting, (2) nonroutine internal reporting, or for (3) external reporting to investors and other outside parties. Item: a. study detailing sale information of the top-ten selling products b. weekly report of total sales generated by each store in the metropolitan area c. annual Report sent to shareholders d. monthly report comparing budgeted sales by store to actual sales Answer: a. (2) nonroutine internal reporting b. (1) routine internal reporting c. (3) external reporting to investors and other outside parties d. (1) routine internal reporting Diff: 2 Terms: treasury Objective: 1 AACSB: Analytical skills
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35) Describe management accounting and financial accounting. Answer: Management accounting provides information to internal decision makers of the business such as top executives, managers, sales representatives, and production supervisors. Its purpose is to help managers predict and evaluate future results. Reports are generated often and usually broken down into smaller reporting divisions such as department or product line. There are no rules to be complied with since these reports are for internal use only. Management accounting embraces more extensively such topics as the development and implementation of strategies and policies, budgeting, special studies and forecasts, influence on employee behavior, and nonfinancial as well as financial information. Financial accounting, by contrast, provides information to external decision makers such as investors and creditors. Its purpose is to present a fair picture of the financial condition of the company. Reports are generated quarterly or annually and report on the company as a whole. The financial statements must comply with GAAP (generally accepted accounting principles). A CPA audits, or verifies, that the GAAP are being followed. Diff: 2 Terms: treasury Objective: 1 AACSB: Reflective thinking 36) Is financial accounting or management accounting more useful to an operations manager? Why? Answer: Management accounting is more useful to an operations manager because management accounting reports operating results by department or unit rather than for the company as a whole, it includes financial as well as nonfinancial data such as on-time deliveries and cycle times, and it includes quantitative as well as qualitative data such as the type of rework that was needed on defective units. Diff: 3 Terms: treasury Objective: 1 AACSB: Reflective thinking 37) Is it possible to have an active cost management program without an Enterprise Resource Planning (ERP) System? Answer: Yes, an active cost management program can occur without an Enterprise Resource Planning (ERP) System. Cost management is a philosophy that guides management in their short-run and longrun planning and control decisions that increase value for customers and lower costs of products and services. Cost management is not dependent on any particular system or database, but it is rather an overall philosophy of operation. Diff: 2 Terms: cost management Objective: 1 AACSB: Reflective thinking
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38) What competitive advantage could a company obtain from a successful cost management program? Answer: There are three broad outcomes from a successful cost management program: 1) costs are reduced with no loss in customer value. In this scenario, a company might gain a competitive advantage by lowering its price with no loss in profit, or maintain the same price and increase profit; 2) customer value is increased with no change in costs. This scenario might increase customer satisfaction resulting in increased customer loyalty and perhaps increase the overall demand for the product; 3) customer value might be increased while costs are reduced simultaneously. This scenario would result in the benefits described in both 1) and 2). Diff: 2 Terms: cost management Objective: 1 AACSB: Reflective thinking Objective 1.2 1) Which of the following statements concerning an organization's strategy is NOT true? A) Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. B) Management accountants provide input to help managers formulate strategy. C) A good strategy will always overcome poor implementation. D) Businesses usually follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition. Answer: C Diff: 2 Terms: total quality management (TQM) Objective: 2 AACSB: Analytical skills 2) 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 Diff: 2 Terms: total quality management (TQM) Objective: 2 AACSB: Reflective thinking 3) 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 Diff: 2 Terms: total quality management (TQM) Objective: 2 AACSB: Analytical skills 10 .
4) 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 Diff: 3 Terms: total quality management (TQM) Objective: 2 AACSB: Analytical skills 5) In designing strategy, a company must match the opportunities and threats in the marketplace with: A) those of the CFO (Chief Financial Officer) B) its resources and capabilities C) branding opportunities D) capabilities of current suppliers Answer: B Diff: 2 Terms: total quality management (TQM) Objective: 2 AACSB: Analytical skills 6) 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 possible to simultaneously lower cost and increase customer value. Answer: A Diff: 1 Terms: total quality management (TQM) Objective: 2 AACSB: Analytical skills 7) Strategy does NOT specify how an organization matches its capabilities with the opportunities in the marketplace. Answer: FALSE Explanation: Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. Diff: 1 Terms: total quality management (TQM) Objective: 2 AACSB: Reflective thinking
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8) Southwest Airlines is an example of a company that pursues a product differentiation strategy. Answer: FALSE Explanation: Southwest Airlines pursues a cost leadership strategy. Diff: 1 Terms: total quality management (TQM) Objective: 2 AACSB: Analytical skills 9) The best-designed strategies are valuable whether or not they are effectively implemented. Answer: FALSE Explanation: Implementation is essential or the strategy is useless. Diff: 1 Terms: total quality management (TQM) Objective: 2 AACSB: Analytical skills 10) The key to a company's success is creating value for customers while differentiating itself from its competitors. Answer: TRUE Diff: 1 Terms: total quality management (TQM) Objective: 2 AACSB: Reflective thinking 11) The key to a company's success is always to be the low cost producer in a particular industry. Answer: FALSE Explanation: The low cost producer in a particular industry will not necessarily be successful. Diff: 2 Terms: total quality management (TQM) Objective: 2 AACSB: Reflective thinking 12) 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 Diff: 2 Terms: total quality management (TQM) Objective: 2 AACSB: Reflective thinking 13) Management accountants should have little or no role in deciding on a company's strategy. Answer: FALSE Explanation: Management accountants should play a significant role in deciding on a company's strategy. Diff: 1 Terms: total quality management (TQM) Objective: 2 AACSB: Reflective thinking
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14) Companies can decide on an appropriate strategy based strictly on internally available information. Answer: FALSE Explanation: Companies must obtain external information as well as internal information to decide on an appropriate strategy. Diff: 1 Terms: total quality management (TQM) Objective: 2 AACSB: Reflective thinking 15) Strategic cost management describes cost management that specifically focuses on strategic issues. Answer: TRUE Diff: 1 Terms: strategic cost management Objective: 2 AACSB: Reflective thinking 16) Identifying a company's most important customers does NOT help formulate strategy. Answer: FALSE Explanation: Management accountants help formulate strategy by helping managers answer questions such as "Who are our most important customers, and how do we deliver value to them?" Diff: 1 Terms: strategic cost management Objective: 2 AACSB: Analytical skills 17) The best-designed strategies and the best-developed capabilities are useless unless they are effectively executed. Answer: TRUE Diff: 1 Terms: total quality management (TQM) Objective: 2 AACSB: Analytical skills 18) Describe the major differences between management accounting and financial accounting for the following: 1. Primary users 2. Focus and emphasis 3. Rules of measurement and reporting Answer: 1. The primary users of management accounting information are managers of the organization. The primary users of financial accounting are external users such as investors, banks, regulators, and suppliers. 2. Management accounting is future oriented. Financial accounting is past oriented. 3. Management accounting measurement and reporting does not have to follow GAAP but are based on cost-benefit analysis. Financial accounting measurement and reporting must be prepared in accordance with GAAP and be certified by external, independent auditors. Diff: 2 Terms: financial accounting, management accounting Objective: 2 AACSB: Analytical skills 13 .
19) What is strategy? Briefly describe the two broad types of strategies that companies may choose to pursue. Answer: Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. In other words, strategy describes how a company will compete. Companies follow one of two broad strategies. One is provide a quality product or service at low prices. The other is to compete on their ability to offer a unique product or service that is generally offered at a higher price. Diff: 2 Terms: total quality management (TQM) Objective: 2 AACSB: Reflective thinking 20) Briefly describe how managers make use of management accounting information. Answer: ONE: To choose strategy, to communicate it, and to determine how best to implement it. TWO: To plan business operations related to designing, producing, and marketing a product or service. This includes preparing budgets and determining the prices and cost of products and services. A company must know the cost of each product and service to decide which products to offer and whether to expand or discontinue product lines. THREE: To control business operations that includes comparing actual results to the budgeted results and taking corrective action when needed. Diff: 2 Terms: strategy, planning Objective: 2 AACSB: Reflective thinking
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21) Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition. Assume you are opening a small food outlet across the street from your campus. How might that business be operated under each of the two broad strategies? Consider the following specific operational areas: a. b. c. d. e. f.
target customers products offered product pricing location choice advertising content advertising media
Answer: The purpose of this question is to explore some of the differences in business operations as a result of a broad strategic choice. Answers will differ from student to student, but you should see some specific themes. Operational Area Target customers
Low Price Strategy Target customers might be students on a tight budget
Differential Strategy Target customers might be more wealthy students, faculty, or perhaps neighbors who live nearby. Products offered Few products, heavy emphasis High quality products, probably a on tight cost control, probably set reasonable choice, restaurant up as a high volume operation. might have a lot of ambience. Product pricing Priced at or lower than the Higher priced products. competition in the area. Location choice Convenient to the target Not as convenient, perhaps in a customers. higher-end shopping or entertainment area. Customers might seek out the high quality and be willing to travel a bit for it. Advertising content Advertising would emphasize the Advertising would emphasize low price of the products offered. quality or ambience. Advertising media Media that would be looked at by Media that would be looked at by the target customers, such as the target customer, local student newspapers. magazines and newspapers. Diff: 3 Terms: total quality management (TQM) Objective: 2 AACSB: Reflective thinking
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22) Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition. Is it possible to follow a strategy that is "in the middle"? Answer: There is some dispute about the correct answer to this question. Some will argue that it is not good for companies to get "caught in the middle" because the customer might get confused as to whether or not the company is competing on price or is trying to make some other appeal. If the customer is confused about how the company is giving them value, they might perceive they are getting no value and abandon the product to a competitor with a clearer customer value proposition. The other side of the argument is that cost management is a necessary part of any strategy and even if the company chooses to pursue a differential strategy, management of the company should always be seeking ways to manage costs and increase customer value simultaneously regardless of their strategy. The student should be able to articulate one or the other arguments coherently. Diff: 2 Terms: total quality management (TQM) Objective: 2 AACSB: Reflective thinking Objective 1.3 1) Place the four business functions in the order they appear along the value chain: Customer service 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 Answer: C Diff: 2 Terms: value chain Objective: 3 AACSB: Reflective thinking 2) 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 Diff: 1 Terms: value chain Objective: 3 AACSB: Analytical skills
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