Fundamentals of Cost Accounting 7th Edition Test Bank by TBtutors

Type:

Test Bank

Resource:

Fundamentals of Cost Accounting

Edition:

7th Edition

Author(s):

William N. Lanen Shannon Anderson Michael W. Maher

TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1) The value chain comprises activities from research and development through the production process but does not include activities related to the distribution of products or services. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Industry Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Gradable : automatic Accessibility : Screen Reader Compatible

2) Administrative functions are not included as part of the value chain because they are implicitly included in every business function. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Industry Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Gradable : automatic Accessibility : Screen Reader Compatible

3) Under the value chain concept, value-added activities are those that firms perform and that customers perceive as adding utility to the goods they purchase. ⊚ true ⊚ false

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4) The value chain is comprised of the activities that take place only during the production process. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Industry Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Gradable : automatic Accessibility : Screen Reader Compatible

5) If a poor facility layout exists and work-in-process inventory must be moved during the production process, the company is likely to be performing some nonvalue-added activities. ⊚ true ⊚ false

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Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Remember Difficulty : 1 Easy AACSB : Reflective Thinking AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Our Framework for Assessing Cost Accounting Systems Gradable : automatic Accessibility : Screen Reader Compatible

Cost information is a product with its own customers. ⊚ true ⊚ false

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Remember Difficulty : 1 Easy AACSB : Reflective Thinking AICPA : BB Critical Thinking Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac Gradable : automatic Accessibility : Screen Reader Compatible

Financial accounting information is always sufficient for making operational decisions. ⊚ true ⊚ false

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8) Cost accounting information is commonly used in developing financial accounting information. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Remember Difficulty : 1 Easy AACSB : Reflective Thinking AICPA : BB Critical Thinking Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac Gradable : automatic Accessibility : Screen Reader Compatible

9) Financial accounting information is designed for decision makers who are directly involved in the daily management of the firm. ⊚ true ⊚ false

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy AICPA : BB Critical Thinking Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac Gradable : automatic Accessibility : Screen Reader Compatible

10) It is more important for financial accounting information to be comparable between firms than to be useful for managerial decision making. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac AICPA : FN Reporting Gradable : automatic Accessibility : Screen Reader Compatible

11) Cost accounting information developed for managers to use in making decisions must comply with generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS). ⊚ true ⊚ false

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac AICPA : FN Measurement Gradable : automatic Accessibility : Screen Reader Compatible

12)

A cost driver is a factor that causes costs. ⊚ true ⊚ false

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy AICPA : FN Measurement Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Gradable : automatic Accessibility : Screen Reader Compatible

13) A cost can be considered a differential cost for one particular course of action but not for another course of action. ⊚ true ⊚ false

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14) A responsibility center can be a department, division, or segment, but not a subsidiary of the parent company. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Gradable : automatic Accessibility : Screen Reader Compatible

15) It is important that the manager assigned to lead a responsibility center be held accountable for its operations. ⊚ true ⊚ false

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Gradable : automatic Accessibility : Screen Reader Compatible

16) Budgeting is primarily used to determine year-end bonuses based on managerial and organizational performance. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Gradable : automatic Accessibility : Screen Reader Compatible

17) Managers are usually responsible for the revenues needed to achieve the targets set during the budgeting process, but not the resources consumed to achieve those targets. ⊚ true ⊚ false

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Gradable : automatic Accessibility : Screen Reader Compatible

18) In general, if activities that do not add value to the company can be eliminated, then costs associated with them will also be eliminated. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy AICPA : FN Measurement Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Our Framework for Assessing Cost Accounting Systems Gradable : automatic Accessibility : Screen Reader Compatible

19) Accounting systems are important because they are a primary source of information for managers. ⊚ true ⊚ false

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Our Framework for Assessing Cost Accounting Systems Gradable : automatic Accessibility : Screen Reader Compatible

20)

Critical thinking is a systematic process used to analyze a business issue or decision. ⊚ true ⊚ false

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy AICPA : BB Critical Thinking Learning Objective : 01-04 Identify current trends in cost accounting, including data analytics and d Topic : Trends in Cost Accounting and Business Decisions Gradable : automatic Accessibility : Screen Reader Compatible

21) Data visualization is the systematic evaluation of information to address a decision problem. ⊚ true ⊚ false

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Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-04 Identify current trends in cost accounting, including data analytics and d Topic : Trends in Cost Accounting and Business Decisions AICPA : BB Leveraging Technology AACSB : Technology Gradable : automatic Accessibility : Screen Reader Compatible

22) Big data is defined by the amount of data, the speed the data is generated and made available, or the variety of data available. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-04 Identify current trends in cost accounting, including data analytics and d Topic : Trends in Cost Accounting and Business Decisions AICPA : BB Leveraging Technology AACSB : Technology Gradable : automatic Accessibility : Screen Reader Compatible

23) Typical ERP systems integrate information systems that link production, purchasing, human resources, finance, and sales into a single comprehensive information system. ⊚ true ⊚ false

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Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Identify current trends in cost accounting, including data analytics and d Topic : Trends in Cost Accounting and Business Decisions AICPA : BB Leveraging Technology AACSB : Technology Gradable : automatic Accessibility : Screen Reader Compatible

24) Managers face ethical situations on a daily basis, while accountants face them infrequently. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Remember Difficulty : 1 Easy AICPA : BB Critical Thinking AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Topic : Choices: Ethical Issues for Accountants Gradable : automatic Accessibility : Screen Reader Compatible

25) Compliance with Sarbanes-Oxley does not mean that the manager has met all of his or her ethical responsibilities. ⊚ true ⊚ false

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Question Details Accessibility : Keyboard Navigation Type : Static AICPA : BB Critical Thinking Difficulty : 3 Hard AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Bloom's : Apply Topic : Choices: Ethical Issues for Accountants Gradable : automatic Accessibility : Screen Reader Compatible

26) Ethical behavior for an individual depends more on the individual’s personal beliefs than a firm's code of conduct. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Topic : Choices: Ethical Issues for Accountants Gradable : automatic Accessibility : Screen Reader Compatible

27)

Cost accounting information can be used to defraud customers, creditors, and owners. ⊚ true ⊚ false

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Topic : Choices: Ethical Issues for Accountants Gradable : automatic Accessibility : Screen Reader Compatible

28) The boundary between what is cost accounting and what belongs in another discipline is often blurred. ⊚ true ⊚ false Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac Gradable : automatic Accessibility : Screen Reader Compatible

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 29) The set of activities that transforms raw resources into the goods and services end users purchase and consume is called the: A) value chain. B) supply chain. C) demand chain. D) cost-benefit analysis.

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Industry Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Gradable : automatic Accessibility : Screen Reader Compatible

30)

Which of the following activities would not be considered a value-added activity? A) Production B) Marketing C) Accounting D) Distribution

31)

Which of the following statements is false?

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A) In essence, the value chain and the supply chain are similar; each creates something for which the customer is willing to pay. B) Financial accounting information is important since it is sufficient to provide all the information for operational decisions commonly made by managers. C) The supply or distribution chain is a linked set of organizations that exchange goods and services in combination to provide a final product or service to the customer. D) Eliminating nonvalue-added activities always reduces costs without affecting the value of the product to customers.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Industry Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Our Framework for Assessing Cost Accounting Systems Gradable : automatic Accessibility : Screen Reader Compatible

32)

Managers do not make decisions about future events based on: A) Perfect information B) Estimated information C) Actual information D) Financial information

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac AICPA : BB Resource Management Gradable : automatic Accessibility : Screen Reader Compatible

33)

Which of the following is a nonvalue-added activity? A) Product design B) Customer service C) Research and development D) Rework of defective items

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Our Framework for Assessing Cost Accounting Systems Gradable : automatic Accessibility : Screen Reader Compatible

34)

The systematic evaluation of information to address a decision problem is: A) enterprise resource planning. B) data analytics. C) big data. D) data visualization.

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35)

Data visualization is: A) how the results of the data analysis are summarized and presented. B) the volume and speed with which information is generated and made available. C) the systematic evaluation of information to address a decision problem. D) a systematic process used to analyze a business issue or decision.

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions AICPA : BB Leveraging Technology AACSB : Technology Gradable : automatic Accessibility : Screen Reader Compatible

36) During 2023, the Beach Restaurant had sales revenues and food costs of $710,000 and $505,000, respectively. During 2024, Beach plans to introduce a new menu item that is expected to increase sales revenues by $95,000 and food costs by $43,000. Assuming no changes are expected for the other food items, operating profits for 2024 are expected to increase by:

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A) $257,000. B) $95,000. C) $52,000. D) $43,000.

Question Details Accessibility : Keyboard Navigation AACSB : Analytical Thinking Difficulty : 3 Hard AICPA : FN Measurement Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Apply Gradable : automatic Type : Algorithmic Accessibility : Screen Reader Compatible

37) During 2023, the Beach Restaurant had sales revenues and food costs of $850,000 and $630,000, respectively. During 2024, Beach plans to introduce a new menu item that is expected to increase sales revenues by $110,000 and food costs by $45,000. Assuming no changes are expected for the other food items, operating profits for 2024 are expected to increase by: A) $285,000. B) $110,000. C) $65,000. D) $45,000.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Difficulty : 3 Hard AICPA : FN Measurement Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Apply Gradable : automatic Accessibility : Screen Reader Compatible

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38) (CMA adapted) The process of creating a financial plan of the revenues and resources needed to carry out activities and meet financial goals is referred to as: A) budgeting. B) benchmarking. C) cost-benefit analysis. D) value-added analysis.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions AICPA : BB Resource Management Gradable : automatic Accessibility : Screen Reader Compatible

39) The field of accounting that reports according to generally accepted accounting principles (GAAP) is called: A) cost accounting. B) financial accounting. C) managerial accounting. D) responsibility accounting.

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac AICPA : FN Reporting Gradable : automatic Accessibility : Screen Reader Compatible

40) The field of accounting that focuses on the criterion of relevant information rather than comparability of firms is: A) cost accounting. B) financial accounting. C) responsibility accounting. D) international accounting.

41)

Enterprise resource planning (ERP) is an information technology that:

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A) evaluates information to address a decision problem. B) links individual systems into a single comprehensive system. C) summarizes and presents the results of data analysis. D) refers to the volume and speed information is generated and made available.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-04 Identify current trends in cost accounting, including data analytics and d Topic : Trends in Cost Accounting and Business Decisions AICPA : BB Resource Management Gradable : automatic Accessibility : Screen Reader Compatible

42) Which of the following is not a goal of integrating various activities in an organization through enterprise resource planning (ERP) systems? A) Avoid lost orders B) Avoid duplication of effort C) Avoid compliance with the Sarbanes-Oxley Act D) Avoid costly studies about the state of the enterprise

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43) According to the Institute of Management Accountants (IMA), the final step in resolving an ethical dilemma is to: A) consult your own attorney as to legal obligations and rights concerning the ethical conflict. B) clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethical Counselor, an appropriate and confidential ethics hotline, or another impartial advisor. C) consult with the local police. D) discuss the situation with an immediate supervisor.

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Topic : Choices: Ethical Issues for Accountants Gradable : automatic Accessibility : Screen Reader Compatible

44) According to the Institute of Management Accountants (IMA), the first step in resolving an ethical dilemma is to: A) consult your own attorney as to legal obligations and rights concerning the ethical conflict. B) call the IMA's ethics hotline. C) clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethical Counselor or other impartial advisor. D) discuss the situation with an immediate supervisor or with the next level supervisor if involvement of the immediate supervisor is suspected.

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45) Which of the following is not one of the basic standards of the Institute of Management Accountants (IMA) Statement of Ethical Professional Practice? A) Professional competence B) Confidentiality C) Independence D) Integrity

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Topic : Choices: Ethical Issues for Accountants Topic : Institute of Management Accountants Code of Ethics Gradable : automatic Accessibility : Screen Reader Compatible

46) The Sarbanes-Oxley Act of 2002 requires which of the following individuals to sign financial statements and stipulate that the financial statements do not omit material information?

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A) CEO and CFO B) Cost Accountant and Controller C) Financial Accountant and Cost Accountant D) CEO and Internal Auditor

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Remember Difficulty : 1 Easy AICPA : BB Critical Thinking AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Topic : Choices: Ethical Issues for Accountants Gradable : automatic Accessibility : Screen Reader Compatible

47)

A general term for a systematic process used to analyze a business issue or decision is: A) critical thinking. B) data visualization. C) enterprise resource planning. D) value chain.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Learning Objective : 01-04 Identify current trends in cost accounting, including data analytics and d Topic : Trends in Cost Accounting and Business Decisions Gradable : automatic Accessibility : Screen Reader Compatible

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48)

The volume and speed with which information is generated and made available is: A) enterprise resource planning. B) data visualization. C) data analytics. D) big data.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Identify current trends in cost accounting, including data analytics and d Topic : Trends in Cost Accounting and Business Decisions AICPA : BB Resource Management Gradable : automatic Accessibility : Screen Reader Compatible

49)

Which of the following critical thinking questions can data visualization help answer? A) What are the relevant questions? B) How can I effectively and persuasively communicate the results of my analysis? C) What are the data relevant to the analysis and where do I find them? D) What are the appropriate tools for analyzing data?

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Learning Objective : 01-04 Identify current trends in cost accounting, including data analytics and d Topic : Trends in Cost Accounting and Business Decisions Gradable : automatic Accessibility : Screen Reader Compatible

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50)

Which of the following critical thinking questions can big data help to best answer? A) What are the relevant questions? B) How can I effectively and persuasively communicate the results of my analysis? C) What are the data relevant to the analysis and where do I find them? D) What are the appropriate tools for analyzing data?

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Learning Objective : 01-04 Identify current trends in cost accounting, including data analytics and d Topic : Trends in Cost Accounting and Business Decisions Gradable : automatic Accessibility : Screen Reader Compatible

51) Having one or more of the firm's activities performed by another firm or individual in the supply or distribution chain is called: A) lean accounting. B) responsibility centers. C) activity-based costing. D) outsourcing.

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AICPA : BB Resource Management Gradable : automatic Accessibility : Screen Reader Compatible

52)

Data visualization can include the use of which of the following? A) Numbers only B) Graphics only C) Words and numbers only D) Words, numbers, and graphics

53) Which of the following ensures compliance with laws, regulations, and company policies and procedures?

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A) Internal auditor B) External auditor C) Cost accountant D) Treasurer

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac AICPA : BB Resource Management Topic : Key Financial Players in the Organization Gradable : automatic Accessibility : Screen Reader Compatible

54)

The controller of an organization performs all of the following duties except: A) determining cost accounting policies. B) maintaining accounting records. C) designing incentive systems. D) determining policy on debt versus equity financing.

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55)

Cross-functional teams add value to decision making by all of the following except: A) bringing a variety of expertise and perspectives. B) ensuring the needs of the customer are considered. C) ensuring the accounting department makes all final decisions. D) determining the economic feasibility of projects.

56)

Which of the following is not a key financial manager in an organization? A) Chief financial officer B) Treasurer C) External auditor D) Controller

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac AICPA : BB Resource Management Topic : Key Financial Players in the Organization Gradable : automatic Accessibility : Screen Reader Compatible

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57)

Which of the following is not normally considered part of the value chain? A) Research and development B) Purchasing C) Administration D) Distribution

58) In 2023, the TransUnion Company had consulting revenues of $1,200,000 while costs were $745,000. In 2024, TransUnion will be introducing a new service that will generate $250,000 in sales revenues and $80,000 in costs. Assuming no changes are expected for the other services, operating profits are expected to increase between 2023 and 2024 by: A) $455,000. B) $250,000. C) $170,000. D) $80,000.

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59) In 2023, the TransUnion Company had consulting revenues of $1,000,000 while costs were $750,000. In 2024, TransUnion will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in costs. Assuming no changes are expected for the other services, operating profits are expected to increase between 2023 and 2024 by: A) $250,000. B) $150,000. C) $90,000. D) $60,000.

60) In 2023, the Merkel Company had revenues of $2,100,000 and costs of $1,600,000. During 2024, Merkel will be introducing a new product line that is expected to increase sales revenue by $210,000 and costs by $162,000. Assuming no changes are expected for the other products, the operating profits are expected to increase by: Version 1

A) $548,000. B) $210,000. C) $162,000. D) $48,000.

61) In 2023, the Merkel Company had revenues of $2,000,000 and costs of $1,500,000. During 2024, Merkel will be introducing a new product line that is expected to increase sales revenue by $200,000 and costs by $160,000. Assuming no changes are expected for the other products, the operating profits are expected to increase by: A) $540,000. B) $200,000. C) $160,000. D) $40,000.

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62)

Moving of inventory is an example of a(n): A) cost-benefit analysis. B) value-added activity. C) activity-based cost. D) nonvalue-added activity.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe AICPA : BB Resource Management Topic : Our Framework for Assessing Cost Accounting Systems Gradable : automatic Accessibility : Screen Reader Compatible

63)

Costs that differ among or between two or more alternative courses of action are: A) differential costs. B) cost-benefit analysis. C) activity-based costs. D) cost drivers.

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium AICPA : FN Measurement Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Gradable : automatic Accessibility : Screen Reader Compatible

64) Which of the following activities would not be included in the value chain of a manufacturing company? A) Research and Development B) Customer Service C) Design D) Accounting

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations AACSB : Reflective Thinking AICPA : BB Critical Thinking Gradable : automatic Accessibility : Screen Reader Compatible

65) A firm's reply to customer questions via email would be an example of which component of the value chain?

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A) Customer Service B) Marketing C) Design D) Supply

Question Details Accessibility : Keyboard Navigation Type : Static Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Marketing Gradable : automatic Accessibility : Screen Reader Compatible

66) The delivery of products or services to customers is an example of which element in the value chain? A) Production B) Design C) Marketing D) Distribution

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67) Which of the following provides much of the information necessary for the coordination of the value chain? A) Distribution chain B) Financial accounting system C) Cost accounting system D) Supply chain

Question Details Accessibility : Keyboard Navigation Type : Static Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Gradable : automatic Accessibility : Screen Reader Compatible

68) Advertising costs would be associated with which of the following value chain components? A) Production B) Research and Development C) Distribution D) Marketing and sales

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Question Details Accessibility : Keyboard Navigation Type : Static Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Gradable : automatic Accessibility : Screen Reader Compatible

69)

Which part of the value chain is outside the firm? A) Design component B) Research and Development component C) Production activity D) Distribution chain

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Gradable : automatic Accessibility : Screen Reader Compatible

70)

Which of the following statements regarding the value chain is true? A) Service firms benefit from the value chain more than manufacturing firms. B) Value chain components do not overlap. C) Value is not created until after the research and development stage. D) Administrative functions are not included as separate components of the value chain.

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Gradable : automatic Accessibility : Screen Reader Compatible

71)

Which of the following statements concerning the value chain is false?

A) The goal of a value chain is to find areas where a company can either add value or reduce cost. B) The value chain focuses on the entire production process, as well as the sale of the product and service after the sale. C) If a company cannot compete in a specific area of the value chain, it might outsource that portion of the value chain to another entity which can perform it better. D) Successful firms are ones that operate within the entire value chain, thereby overseeing every aspect of the value chain for the customer.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations AICPA : BB Critical Thinking Difficulty : 3 Hard Bloom's : Apply Gradable : automatic Accessibility : Screen Reader Compatible

72)

Which of the following could be considered part of the value chain in a service firm?

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A) Inspection of product B) Advertising C) Raw materials D) Distribution

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Gradable : automatic Accessibility : Screen Reader Compatible

73) Place the four components in the order they appear along the value chain: A = Customer service; B = Design; C = Distribution; and D = Production. A) ABDC B) ACDB C) BDCA D) BADC

Question Details Accessibility : Keyboard Navigation Type : Static Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Gradable : automatic Accessibility : Screen Reader Compatible

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74) Managers evaluate value-added activities to determine how they contribute to the final product's: A) service only. B) quality only. C) cost only. D) service, quality, and cost.

Question Details Accessibility : Keyboard Navigation Type : Static Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Gradable : automatic Accessibility : Screen Reader Compatible

75) Which of the following is the best reason why cost accounting information does not need to be comparable to similar information in other organizations? A) Because it is only used by investors and creditors. B) Because no publicly traded companies use cost accounting. C) Because IFRS and cost accounting are converging which eliminates the need for comparability. D) Because managers that use this information are making decisions only for their organization.

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Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac Gradable : automatic Accessibility : Screen Reader Compatible

76)

Financial accounting: A) focuses on the future. B) must comply with GAAP (generally accepted accounting principles). C) reports include detailed information on the various operating segments of the business. D) is prepared for the use of management.

77) The individual who would most likely use only financial accounting information in making decisions is a:

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A) vice president of marketing. B) factory supervisor. C) department manager. D) company shareholder.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac Gradable : automatic Accessibility : Screen Reader Compatible

78)

The financial accounting system is the primary source of information for: A) decision making on the factory floor. B) improving the performance level of customer service. C) planning the budget for next year. D) preparing the income statement for shareholders.

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79) Managerial decisions using cost accounting are more appropriate for which types of costs? A) Future costs B) Historical costs C) Current costs D) Externally reported costs

80) At the middle management level, where managers supervise work and make operating decisions, cost information highlights: A) the company's overall performance. B) comparability across firms. C) financial position and income according to accounting rules. D) some aspect of operations that is different from expectations.

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81)

Financial accounting provides a historical perspective, while cost accounting emphasizes: A) reporting to shareholders. B) a current perspective. C) the future. D) past transactions.

82)

The concept of considering both the costs and benefits of a proposal is known as: A) cost-benefit analysis. B) performance measurement. C) nonvalue-added analysis. D) preparation of financial statements.

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Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Our Framework for Assessing Cost Accounting Systems Gradable : automatic Accessibility : Screen Reader Compatible

83) Departmental managers at Boswell Department Store are allowed considerable discretion in both sourcing and pricing of products, based on local tastes and competition, as well as being responsible for departmental staffing. Based on the concept of the responsibility center, which of the following would not be a performance measure that would be useful in evaluating the performance of departmental managers at the stores? A) Departmental profit compared to budgeted departmental profit. B) Trends in general and administrative expenses for each store. C) Growth in departmental sales compared to the prior period sales. D) Departmental customer satisfaction.

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Gradable : automatic Accessibility : Screen Reader Compatible

84) Snuggle Toys, Incorporated, had the following summarized results for the month ending July 31:

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Actual

Budget

Revenues Costs

$ 60,000 53,600

$ 52,000 45,600

Operating profits

$ 6,400

As the cost accountant, which single statement related to the above financial results is most appropriate in the report to management? A) The departmental manager is performing to expectations because budgeted profits equal actual profits. B) Revenues are above budget and a bonus based on this increase should be considered. C) Costs as a percentage of revenues are above budget and a further scrutiny of the results might be appropriate. D) Costs are above budget and the department manager's position should be critically evaluated by senior management.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Evaluate Gradable : automatic Accessibility : Screen Reader Compatible

85) CraftMaster Corporation purchased a machine 7 years ago for $357,000 when it launched product X05K. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 360 machine costing $407,000 or by a new model 280 machine costing $349,000. Management has decided to buy the model 280 machine. It has less capacity than the model 360 machine, but its capacity is sufficient to continue making product X05K. Management also considered, but rejected, the alternative of dropping product X05K and not replacing the old machine. If that were done, the $349,000 invested in the new machine could instead have been invested in a project that would have returned a total of $443,000. In making the decision to buy the model 280 machine rather than the model 360 machine, the differential cost was: Version 1

A) $58,000. B) $86,000. C) $8,000. D) $50,000.

Question Details Accessibility : Keyboard Navigation AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Evaluate AICPA : FN Decision Making Gradable : automatic Type : Algorithmic Accessibility : Screen Reader Compatible

86) CraftMaster Corporation purchased a machine 7 years ago for $339,000 when it launched product X05K. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 360 machine costing $353,000 or by a new model 280 machine costing $332,000. Management has decided to buy the model 280 machine. It has less capacity than the model 360 machine, but its capacity is sufficient to continue making product X05K. Management also considered, but rejected, the alternative of dropping product X05K and not replacing the old machine. If that were done, the $332,000 invested in the new machine could instead have been invested in a project that would have returned a total of $426,000. In making the decision to buy the model 280 machine rather than the model 360 machine, the differential cost was: A) $21,000. B) $87,000. C) $7,000. D) $14,000.

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Evaluate AICPA : FN Decision Making Gradable : automatic Accessibility : Screen Reader Compatible

87)

Which of the following is not true of the Sarbanes-Oxley Act of 2002?

A) It has provisions that affect both companies and accounting firms. B) It requires that the CEO and CFO take responsibility for a company’s financial statements. C) It requires managers to attest to the adequacy of their internal controls. D) It guarantees that all managers will behave ethically.

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic AICPA : BB Resource Management AACSB : Knowledge Application Topic : Choices: Ethical Issues for Accountants Gradable : automatic Accessibility : Screen Reader Compatible

88) Geno's Body Shop had sales revenues and operating costs in 2023 of $670,000 and $535,000, respectively. In 2024, Geno plans to expand the services it provides to customers to include detailing services. Revenues are expected to increase by $89,000 and operating costs by $52,000 as a result of this expansion. Assuming that there are no changes to the existing body shop business, operating profits would be expected to increase during 2024 by: Version 1

A) $135,000. B) $89,000. C) $172,000. D) $37,000.

89) Geno's Body Shop had sales revenues and operating costs in 2023 of $650,000 and $525,000, respectively. In 2024, Geno plans to expand the services it provides to customers to include detailing services. Revenues are expected to increase by $85,000 and operating costs by $50,000 as a result of this expansion. Assuming that there are no changes to the existing body shop business, operating profits would be expected to increase during 2024 by: A) $125,000. B) $85,000. C) $160,000. D) $35,000.

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90) Geno's Body Shop had sales revenues and operating costs in 2023 of $700,000 and $550,000, respectively. In 2024, Geno plans to expand the services it provides to customers to include detailing services. Revenues are expected to increase by $95,000 and operating costs by $55,000 as a result of this expansion. Assuming that there are no changes to the existing body shop business, what is the amount of operating profits that are expected to be earned in 2024? A) $150,000 B) $95,000 C) $190,000 D) $40,000

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91) Geno's Body Shop had sales revenues and operating costs in 2023 of $650,000 and $525,000, respectively. In 2024, Geno plans to expand the services it provides to customers to include detailing services. Revenues are expected to increase by $85,000 and operating costs by $50,000 as a result of this expansion. Assuming that there are no changes to the existing body shop business, what is the amount of operating profits that are expected to be earned in 2024? A) $125,000 B) $85,000 C) $160,000 D) $35,000

92) The goals and objectives of establishing budgeting in an organization include all of the following except: A) the ability to decide whether goals can be achieved. B) the resources needed to carry out its tasks. C) the generation of anticipated revenues. D) the consistent application of generally accepted accounting principles.

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Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Gradable : automatic Accessibility : Screen Reader Compatible

93) In 2023, the Allen Company had consulting revenues of $1,247,000, while, operating costs were $740,000. In 2024, Allen will be introducing a new service that will generate $169,000 in sales revenues and $59,000 in operating costs. Assuming no changes are expected for the other services, the differential operating costs for 2024 will be: A) $507,000. B) $169,000. C) $110,000. D) $59,000.

94) In 2023, the Allen Company had consulting revenues of $1,000,000, while, operating costs were $750,000. In 2024, Allen will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in operating costs. Assuming no changes are expected for the other services, the differential operating costs for 2024 will be: Version 1

A) $250,000. B) $150,000. C) $90,000. D) $60,000.

95) In 2023, the Allen Company had consulting revenues of $1,125,000, while operating costs were $800,000. In 2024, Allen will be introducing a new service that will generate $160,000 in sales revenues and $65,000 in operating costs. Assuming no changes are expected for the other services, the differential revenue for 2024 will be: A) $325,000. B) $160,000. C) $95,000. D) $65,000.

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96) In 2023, the Allen Company had consulting revenues of $1,000,000, while operating costs were $750,000. In 2024, Allen will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in operating costs. Assuming no changes are expected for the other services, the differential revenue for 2024 will be: A) $250,000. B) $150,000. C) $90,000. D) $60,000.

97) San Juan, Incorporated, is considering two alternatives: A and B. The costs associated with the alternatives are listed below:

Material costs Processing costs Building costs Equipment rental

Alternative A

Alternative B

$ 35,000 36,000 12,000 19,000

$ 57,000 57,000 28,000 19,000

Are the materials costs and processing costs differential in the choice between alternatives A and B?

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A) Neither materials costs nor processing costs are differential. B) Both materials costs and processing costs are differential. C) Only processing costs are differential. D) Only materials costs are differential.

98) San Juan, Incorporated, is considering two alternatives: A and B. The costs associated with the alternatives are listed below: Alternative A Material costs Processing costs Building costs Equipment rental

$ 39,500 44,500 14,000 21,000

Alternative B $ 69,000 69,000 39,000 21,000

If only the differential costs of the two decisions are considered, the total differential costs of Alternative B are: A) $198,000. B) $158,500. C) $79,000. D) $119,000.

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Question Details Accessibility : Keyboard Navigation AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Evaluate Gradable : automatic Type : Algorithmic Accessibility : Screen Reader Compatible

99) San Juan, Incorporated, is considering two alternatives: A and B. The costs associated with the alternatives are listed below: Alternative A Material costs Processing costs Building costs Equipment rental

$ 38,000 38,000 10,000 21,000

Alternative B $ 60,000 57,000 24,000 21,000

If only the differential costs of the two decisions are considered, the total differential costs of Alternative B are: A) $162,000. B) $141,000. C) $55,000. D) $107,000.

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100) Two alternatives, identified X and Y, are under consideration at Hayden Corporation. Costs associated with the alternatives are listed below: Alternative X Material costs Processing costs Building costs Equipment rental

$ 44,000 37,000 14,000 11,000

Alternative Y $ 56,000 59,000 14,000 11,000

Are the materials costs and processing costs differential in the choice between alternatives X and Y? A) Both materials costs and processing costs are differential. B) Only materials costs are differential. C) Only processing costs are differential. D) Neither materials costs nor processing costs are differential.

101) Two alternatives, identified X and Y, are under consideration at Hayden Corporation. Costs associated with the alternatives are listed below: Alternative X Material costs

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$ 41,000

Alternative Y $ 56,000

Processing costs Building costs Equipment rental

36,000 14,300 11,300

60,000 14,300 11,300

What is the total differential costs of Alternative Y over Alternative X? A) $141,600 B) $122,100 C) $39,000 D) $102,600

Question Details Accessibility : Keyboard Navigation AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Evaluate Gradable : automatic Type : Algorithmic Accessibility : Screen Reader Compatible

102) Two alternatives, identified X and Y, are under consideration at Hayden Corporation. Costs associated with the alternatives are listed below: Alternative X Material costs Processing costs Building costs Equipment rental

$ 44,000 37,000 14,000 11,000

Alternative Y $ 56,000 59,000 14,000 11,000

What is the total differential costs of Alternative Y over Alternative X?

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A) $140,000 B) $123,000 C) $34,000 D) $106,000

103) Marcus Roberts is putting together a training session about value chain components. Which of the following would be a good example of a cost for the component of purchasing? A) Advertising B) Warranty repairs C) Vendor certification D) Patent applications

Question Details Accessibility : Keyboard Navigation Type : Static AICPA : BB Industry Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking Gradable : automatic Accessibility : Screen Reader Compatible

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104) Anna Potts is putting together a training session about value chain components. Which of the following would be a good example of a cost for the component of distribution? A) Advertising B) Warranty repairs C) Vendor certification D) Website creation, hosting, and maintenance

105) Megan Towe is putting together a training session about value chain components. Which of the following would be a good example of a cost for the component of research and development? A) Advertising B) Warranty repairs C) Vendor certification D) Patent applications

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106)

An Enterprise Resource Planning (ERP) 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.

107) The specific unit of an organization that is assigned to a manager who is held accountable for that unit’s operations and resources is known as a:

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A) responsibility center. B) cost driver. C) nonvalue-added activity. D) budget.

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions AICPA : BB Leveraging Technology AACSB : Technology Gradable : automatic Accessibility : Screen Reader Compatible

108) Research and development (R&D), production, and customer service are business functions that are included as part of: A) the value chain. B) benchmarking. C) marketing. D) the supply chain.

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109)

Examples of the controller's functions include all of the following except: A) cost accounting policies. B) budgeting. C) investor relations. D) general ledger.

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac Topic : Key Financial Players in the Organization Gradable : automatic Accessibility : Screen Reader Compatible

110)

Cost accounting is an integral part of the ________ function in an organization. A) treasurer's B) controller's C) internal auditor's D) president's

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Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac Topic : Key Financial Players in the Organization Gradable : automatic Accessibility : Screen Reader Compatible

111) All of the following actions enhance the new focus on making cost accounting information more relevant in helping a firm achieve strategic goals except: A) increasing emphasis on the management accountant as a business partner. B) increasing emphasis on external financial reporting. C) decreasing emphasis on financial statement inventory cost valuation. D) increasing emphasis on timely and useful information.

Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac Difficulty : 3 Hard Bloom's : Apply Gradable : automatic Accessibility : Screen Reader Compatible

112) The Institute of Management Accountants' (IMA) standards of ethical conduct for management accountants includes the elements of:

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A) confidentiality, independence, integrity, and relevance. B) competence, confidentiality, integrity, and credibility. C) competence, confidentiality, and independence. D) competence, accuracy, integrity, and independence.

113) According to the IMA Code of Ethics, what should a management accountant do if a significant ethical situation cannot be resolved by following established policies? A) The accountant should confront the guilty party and demand the unethical action be stopped. B) The accountant should try to rationalize and understand the position of the other party. C) The accountant should say nothing about the matter until he or she has retired. D) The accountant should first discuss the matter with the immediate supervisor.

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114) With the enactment of the Sarbanes-Oxley Act of 2002, CEOs and CFOs are now responsible for all of the following except: A) stipulating that the financial statements do not omit material information. B) attesting to the adequacy of the company’s internal controls. C) attesting to the accuracy of the company’s credit rating with the largest rating agencies. D) disclosing that they have notified the company’s auditors and audit committee of any fraud that involves management.

115) The Sarbanes-Oxley Act of 2002 requires an effective internal control system for publicly owned firms. Therefore, with regards to strategic investment decisions, it is important that management consider including all of the following except: A) internal audits of strategic decisions. B) a code of ethics. C) a system of preparing and reporting on investment decisions. D) a system that limits information available to investors.

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Reflective Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Bloom's : Analyze Topic : Choices: Ethical Issues for Accountants Gradable : automatic Accessibility : Screen Reader Compatible

116) Where there is a lack of good performance measures, it is difficult to motivate managers by using: A) performance-based incentives. B) monetary rewards. C) compensation. D) rewards for products.

Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Topic : Choices: Ethical Issues for Accountants Gradable : automatic Accessibility : Screen Reader Compatible

117) Which of the following is a false statement regarding cost information and ethical responsibilities?

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A) Compliance with Sarbanes-Oxley guarantees that a manager has met all of his or her ethical responsibilities. B) Sarbanes-Oxley is important for managers who design cost information systems. C) Managers must be aware of the potential that cost information could be misleading or support fraudulent activity. D) Managers need to understand that performance measurement and compensation systems can lead to unethical conduct.

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 118) Carley Incorporated incurs many types of costs in its operations. Place the number of the appropriate stage in the value chain in Column 2 in the blank next to each cost in Column 1. Cost

Stage in the Value Chain

Transportation costs to ship vans to customers Labor costs for factory workers

1. Customer Service

Overtime costs for scientists working on new engine technology Utilities cost for the design testing center Costs to survey customers about their satisfaction Costs to sponsor a sporting event

3. Research & Development 4. Marketing

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2. Distribution

5. Production 6. Design

______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Industry Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium Gradable : manual Accessibility : Screen Reader Compatible

119) SuperMax is an integrated provider of genetically engineered corn. Many types of costs are incurred in its operations. Place the number of the appropriate stage in the value chain in Column 2 in the blank next to each cost in Column 1. Cost Warehouse costs to store seed awaiting shipment to customers Utility costs for seed mill Equipment costs in genetics laboratory Labor costs to staff help-line call center Costs to prepare advertising campaign in national agriculture magazine Costs to contract with growers to provide seed

Stage in the Value Chain 1. Customer Service 2. Distribution 3. Research & Development 4. Marketing 5. Production 6. Design

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120) Travon's Limo Service provides transportation services in and around Bentonville. Its profits have been declining, and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year. The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year. The present manager will continue to supervise all services. However, labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the package delivery service is added. Travon’s Limo Service Annual Income Statement Before Expansion Sales Revenue

$ 960,000

Costs: Vehicle Leases

$ 400,000

Labor

290,000

Utilities

50,000

Rent

100,000

Other Costs

60,000

Manager’s Salary

120,000

Total Costs

1,020,000

Operating Profit (Loss)

$ (60,000)

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a. Prepare a report of the differential costs and revenues if the delivery service is added. b. Should management start up the delivery service? Explain your answer. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze AICPA : FN Decision Making Gradable : manual Accessibility : Screen Reader Compatible

121) Morris Incorporated is a management consulting firm that specializes in management training programs. Tackle Manufacturing Incorporated has approached Morris to contract for management training for a one-year period. Last year's income statement for Morris is as follows: Sales Revenue

$ 360,000

Costs: Labor

$ 120,000

Equipment Lease

12,000

Rent

24,000

Utilities

8,400

Supplies

23,600

Other Costs

14,400

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Manager’s Salary

80,000

Total Costs

282,400

Operating Profit (Loss)

$ 77,600

To satisfy the Tackle contract, another part-time trainer will need to be hired at $42,000. Supplies will increase by 12% and other costs will increase by 15%. In addition, new equipment will need to be leased at a cost of $2,500. a. What are the differential costs that would be incurred if the Tackle contract is signed? b. If Tackle will pay $55,000 for one year, should Morris accept the contract? Explain your answer. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze AICPA : FN Decision Making Gradable : manual Accessibility : Screen Reader Compatible

122) The Arielle Company reported the following results for the manufacture and sale of one of its products known as Controllers during the most recent year. Sales (6,500 Controllers at $130 each) Cost of sales Distribution costs Advertising expense Salaries

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$ 845,000 390,000 65,000 275,000 25,000

Building costs

145,000

Operating loss

$ (55,000)

The Arielle Company is trying to determine whether or not to discontinue the manufacture and sale of Controllers. The operating results reported above for last year are expected to continue in the foreseeable future if the product is not dropped. The building costs represent the costs of production facilities and equipment that the Controllers product shares with other products produced by Arielle. If the Controllers product were dropped, there would be no change in the building costs of the company. Management has determined that discontinuing the manufacture and sale of Controllers will have no effect on the company's other product lines. Determine the change in operating profits that will happen if the manufacture and sale of Controllers is discontinued. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

123) The management of Parachute Corporation is considering dropping product ABC123. Data from the company's accounting system appear below: Sales Cost of goods sold Building expenses Selling and administrative expenses

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$ 260,000 125,000 88,000 75,000

All building expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $42,000 of the building expenses and $48,000 of the selling and administrative expenses will not be incurred if product ABC123 is discontinued. a. According to the company's accounting system, what are the operating profits earned by product ABC123? b. What would be the impact on the company's overall operating profits if product ABC123 is dropped? Should the product be dropped? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

124) The management of Marvel Corporation has been concerned for some time with the financial performance of its product EX123 and has considered discontinuing it on several occasions. Data from the company's accounting system appear below: Sales Cost of goods sold Building expenses Selling and administrative expenses

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$ 650,000 293,000 221,000 150,000

In the company's accounting system, all building expenses of the company are fully allocated to products. Further investigation has revealed that $95,000 of the building expenses and $85,000 of the selling and administrative expenses will not be incurred if product EX123 is discontinued. a. According to the company's accounting system, what are the operating profits (losses) earned by product EX123? b. What would be the effect on the company's overall operating profits if product EX123 is dropped? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

125) Place the letter of the appropriate element of an organization's value chain in Column 2 in the blank next to each operation in Column 1. Column 1 Macy’s replies to customers' questions on merchandise Updating PetSmart’s electronic Internet catalogue of chew bones and leash merchandise. Development of new software applications at Apple. Contracting with United Parcel Services to ship computers to customers at Best

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Column 2 Research and Development Design

Production

Marketing

Buy Writing of software programs at QuickBooks Professional Accountant Division. Creation of new movie ideas at Universal Studios.

Distribution

Customer Service

______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AACSB : Reflective Thinking AICPA : BB Critical Thinking Gradable : manual Accessibility : Screen Reader Compatible

126) Old-Fashion Flavors is a local ice cream shop. The company currently is showing an operating loss, as evidenced by the income statement below: Sales Costs: Food supplies Labor Utilities Rent Other Manager’s salary Total Costs Operating Profits (Losses)

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$ 75,000

20,000 16,000 4,000 12,000 4,000 25,000 81,000 $ (6,000)

The President of the company is considering adding sandwiches to the menu. Sales will be expected to increase by $60,000. The cost of sandwich supplies would be $30,000. Labor costs would increase 40% and other costs 10%. The current manager will continue to manage the operation. a. Prepare a quantitative analysis of the decision to add sandwiches to the menu. b. What qualitative considerations should the company consider in this decision? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

127) The Brogan family currently lives in a suburb of a major city. They have a lovely home close to major routes of transportation. Both Mr. and Mrs. Brogan have convenient commutes of 30 minutes or less. Because the school system in their town does not have a quality reputation, they currently send their daughter to private school, conveniently located less than one mile from their home. The family's current monthly living expenses are listed below: Monthly Budget Mortgage, including taxes and insurance Other utilities, including water, heat and telephone Costs of running automobiles Cost of private school

$ 5,000 500 800 2,000

Total monthly budget

$ 8,300

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The Brogans are considering moving to a town approximately 20 minutes away. Because of the desirability of the local schools and strict zoning, housing is very expensive in this town. Their daughter would attend public schools. The Brogans estimate that their monthly mortgage, taxes and insurance would increase to $7,000 per month, while the cost of running automobiles would increase 20% and other utilities 10%. Mortgage interest costs are tax deductible and the Brogans are in the 25% tax bracket. Assume that $700 of the increase in their monthly budget is for mortgage interest. What are the costs and benefits of moving? Which can be quantified and which cannot? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

128) Place the letter of the appropriate business function of the value chain in Column 2 in the blank next to each cost item in Column 1. Column 1 Cost of customer order forms Cost of paper used in manufacture of books Cost of paper used in packing cartons to ship books Cost of paper used in display at national trade show

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Column 2 A Research and Development B Design C Production D Marketing

Depreciation of trucks used to transport books to college bookstores Cost of the wood used to manufacture paper Salary of the scientists attempting to find another source of printing ink Cost of defining the book size so that a standard-sized box is filled to capacity

E Distribution F Customer Service

______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Gradable : manual Accessibility : Screen Reader Compatible

129) Morgantown Manufacturing produces electronic storage devices and uses the following three-part classification for its manufacturing costs: materials, labor, and support costs. Total support costs for June were $300 million and were allocated to each product on the basis of labor costs of each line. Summary data (in millions) for June for the most popular electronic storage device, the Giant Watt, was: Material costs Labor costs Indirect manufacturing costs Units produced

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$ 9,000,000 $ 3,000,000 $ 8,500,000 40,000

a. Compute the manufacturing cost per unit for each Giant Watt produced in June. b. Suppose production will be reduced to 30,000 units in July. Speculate as to whether the unit costs in July will most likely be higher or lower than unit costs in June; it is not necessary to calculate the exact July unit cost. Briefly explain your reasoning. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

130) The list of representative cost drivers in the right column below are randomized with respect to the list of functions in the left column. That is, they do not match. Function

Representative Cost Driver

Purchasing

A. Number of employees

Billing

B. Number of shipments

Shipping

C. Number of customers

Computer Support

D. Number of invoices

Personnel

E. Number of desktop computers

Customer Service

F. Number of purchase orders

Required: Match each business function with its representative cost driver.

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Function

Insert letter of appropriate driver (A through F)

1. Purchasing 2. Billing 3. Shipping 4. Computer Support 5. Personnel 6. Customer Service

______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Bloom's : Understand Difficulty : 2 Medium AICPA : BB Critical Thinking Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Gradable : manual Accessibility : Screen Reader Compatible

131) A restaurant is deciding whether it wants to update its image or not. It currently has a cozy appeal with an outdated décor that is still in good condition, menus and carpet that need to be replaced anyway, and loyal customers. Identify the following for the restaurant management: a.Costs that are relevant to this decision. b.Costs that would not be differential to this decision. c.Any qualitative factors that should be considered.

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______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Reflective Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

132) You have been employed as an entry-level management accountant for a little under a year. You suspect that your immediate supervisor is involved in a significant fraud involving diverting company assets to personal use. Briefly describe the steps you might take to resolve this dilemma. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AICPA : BB Critical Thinking Difficulty : 3 Hard AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Bloom's : Analyze Gradable : manual Topic : Choices: Ethical Issues for Accountants Accessibility : Screen Reader Compatible

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133) Snacking Macs, Incorporated, currently manufactures three different types of scientifically balanced dog food. The firm is considering eliminating one of the three products. What factors should be taken into account in making this decision? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Reflective Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Evaluate Gradable : manual Accessibility : Screen Reader Compatible

134) MegaStores is a large, publicly-held corporation. The company does about 80% of its work in government contracts. All contracts use a cost plus fixed fee basis; costs of jobs are agreed upon by contract. Any overruns will result in losses to the company. The company controller, Ricky Bowers CPA, CMA, is discussing two current jobs with the Job Supervisor, Leslie Dawn. Job 101 is currently coming in under budget, but due to construction problems, Job 102 is 20% over budget. Bowers is considering the possibility of having employees who work on Job 102 record their time to Job 101. What are the implications of this decision? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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Question Details Accessibility : Keyboard Navigation Type : Static Difficulty : 3 Hard AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Bloom's : Evaluate Gradable : manual AICPA : BB Legal Topic : Choices: Ethical Issues for Accountants Accessibility : Screen Reader Compatible

135) The owner of a small retail business asks, "Why do I need cost accountants? My CPA produces financial statements, which are sufficient for me to discover my costs. Look at my Income Statement. I expect sales to increase by 10% next year, so I am planning on a 10% increase in profits. I don't need a cost accountant to tell me that." Income Statement for the Year Ending December 31 Sales Revenue Cost of Goods Sold Gross Margin Selling Costs Administrative Costs

$ 457,234 296,348 160,886 76,234 62,350

Profit before Taxes

$ 22,302

Use your knowledge of the concept of differential costs and explain why a cost accountant would question the conclusion that a 10% increase in sales would yield a 10% increase in profit. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze AICPA : FN Decision Making Gradable : manual Accessibility : Screen Reader Compatible

136) Create a diagram of the value chain by putting the following components into the correct order: (a) purchasing; (b) marketing and sales; (c) research and development; (d) customer service; (e) distribution; (f) design; (g) production. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Industry Learning Objective : 01-01 Describe the way managers use accounting information to create value in or Topic : Value Creation in Organizations Bloom's : Understand Difficulty : 2 Medium Gradable : manual Accessibility : Screen Reader Compatible

137) Explain the difference between a value chain, a supply chain, and a distribution chain. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Version 1

138) Compare financial accounting and cost accounting using the following concepts: users of the information; important criteria; who establishes or defines the system; and how to determine an accounting treatment. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac AICPA : FN Reporting Difficulty : 3 Hard Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

139) The IMA Code of Ethics describes three basic steps a cost accountant should take when faced with an ethical conflict: Discuss, clarify, and consult. Describe each of these three steps.

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______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static Bloom's : Understand Difficulty : 2 Medium AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic AICPA : FN Decision Making Gradable : manual Topic : Choices: Ethical Issues for Accountants Accessibility : Screen Reader Compatible

140) Respond to this comment: "Since cost accountants just prepare accounting data for internal management, cost accountants do not need to be concerned with GAAP or IFRS." ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Topic : Accounting Systems Learning Objective : 01-02 Distinguish between the uses and users of cost accounting and financial ac AICPA : FN Reporting Difficulty : 3 Hard Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

141)

What are characteristics of information used in decision making?

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______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AACSB : Reflective Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

142) The Flamboyant Flirt is a small but prosperous hair cutting salon. Diane Stock, the manager of the salon, has been asked by several clients if she will ever offer other "hair related" services (e.g., perm, dye, etc.). After careful thought, Ms. Stock is considering expanding her offerings. However, in order to do so, she will have to hire one additional stylist at a salary of $26,000 per year. Other expenses will increase as follows: rent by 20%, supplies and utilities by 25%, and miscellaneous expenses by 10%. Her revenues from additional services are likely to be $55,000 for the next year (i.e., 2024). The Flamboyant Flirt's income statement for the most recent year is presented below: The Flamboyant Flirt Income Statement for the Year Ended December 2023 Sales Revenue $ 220,000 Costs: Labor

$ 52,000

Utilities

12,000

Supplies

45,000

Rent

18,000

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Miscellaneous

5,000

Manager’s Salary

30,000

Operating Profits

162,000 $ 58,000

a. Based on your financial analysis, should Diane Stock go ahead with the expansion? b. What other factors must Ms. Stock consider before making a final decision? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Evaluate Gradable : manual Accessibility : Screen Reader Compatible

143) The manager of a profit center of a large electronics manufacturing corporation made some projections regarding sales and profits for the upcoming fourth quarter of the year. The managers' performance evaluation and compensation depended significantly on his ability to meet budget goals. The manager discovered that the fourth quarter would have to be a particularly good quarter in order to meet these goals. He decided to implement a sales program offering liberal payment terms in order to pull some sales that would normally occur next year into the current year. Customers accepting delivery in the fourth quarter would not have to pay the invoice for 140 days. Also, he sold some equipment that was not being used and realized a significant profit on the sale. Are these actions ethical? Why or why not?

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______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AICPA : FN Reporting Difficulty : 3 Hard AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Bloom's : Evaluate Gradable : manual Topic : Choices: Ethical Issues for Accountants Accessibility : Screen Reader Compatible

144) The controller of one division of IntroTel, a large diversified firm is compensated by salary plus bonus. The bonus is a significant part of total compensation and is based directly on the profits of the division. Thus, the controller has an incentive to find ways to increase profits, including the delay of discretionary expenses such as research and development, delay of maintenance and repair of manufacturing equipment, and delay of sales promotions. Is finding ways to increase profits as described above unethical? Why or why not? Who is to blame, if anyone? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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Question Details Accessibility : Keyboard Navigation Type : Static AICPA : FN Reporting Difficulty : 3 Hard AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Bloom's : Evaluate Gradable : manual Topic : Choices: Ethical Issues for Accountants Accessibility : Screen Reader Compatible

145) Critical thinking is a process used to analyze a business issue or decision. There are a number of resources available to aid in that process, including big data, data analytics, and data visualization. Briefly describe each of those resources and how they aid in the critical thinking process. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking Difficulty : 3 Hard Learning Objective : 01-04 Identify current trends in cost accounting, including data analytics and d Topic : Trends in Cost Accounting and Business Decisions AICPA : BB Leveraging Technology Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

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146) Adair Company has been busy over the first few years of its existence in penetrating its market and gaining a respectable market share. To facilitate this, Mr. Adair, the CEO, and his controller, Mr. Brown, have been developing the annual master budgets. To date this approach has worked well. Adair has been acquired by a company in a related business but will continue to operate as an independent subsidiary. The CFO of the acquiring company, Mr. Horwitz, has suggested to Mr. Adair that, since it was expected that his company would continue to grow, it adopts a departmental budgeting system; a suggestion Mr. Adair agreed to readily. Mr. Horwitz explained to Adair's departmental managers the concepts of a departmental participative budgeting system and their involvement. The managers were encouraged to take the information and come back with suggestions which could then be put into a formal budget process. a. What benefits will accrue to Adair under this new budgeting system? b. What behavioral issues might arise for departmental managers and for production workers? c. What is the most probable long-term reaction of Adair's people to the participative budget system? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard Learning Objective : 01-03 Explain how cost accounting information is used for decision making and pe Topic : Cost Data for Managerial Decisions Bloom's : Analyze Gradable : manual Accessibility : Screen Reader Compatible

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147) The New York Times recently reported that a number of publicly held corporations have been accused of illegally doctoring hourly employees' time records. Examples included: ● Workers sued Family Dollar and Pep Boys, accusing managers of deleting hours from their time records. ● More than a dozen former Walmart employees said in interviews and depositions that managers had altered time records to shortchange employees. ● The Department of Labor reached two back-pay settlements with Kinko's photocopy centers after finding that managers had erased time for 13 employees. When interviewed, many of the managers cited pressure from upper-level management and the impact of their actions on their own compensation as underlying causes for their actions. All of the companies strongly denied encouraging such illegal and unethical behavior by managers. Compensation experts interviewed agreed that the companies' incentive performance systems may have contributed to the managers' behavior. ( New York Times, April 4, 2004) a. Explain how the incentive performance systems of the above-named companies could have contributed to this illegal behavior by managers. b. Discuss the ethical issues involved in the design of incentive performance systems. In designing a performance-based incentive system, what measures should companies take to avoid illegal and unethical behavior by supervisors? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Question Details Accessibility : Keyboard Navigation Type : Static AACSB : Analytical Thinking AICPA : BB Critical Thinking Difficulty : 3 Hard AACSB : Ethics Learning Objective : 01-05 Understand ethical issues faced by accountants and ways to deal with ethic Bloom's : Analyze Gradable : manual Topic : Choices: Ethical Issues for Accountants Accessibility : Screen Reader Compatible

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Answer Key Test name: Lanen7e_ch01 1) FALSE The value chain comprises activities from research and development (R&D) through the production process and including distribution and customer service. 2) TRUE 3) TRUE 4) FALSE 5) TRUE The statement is true. If a poor facility layout exists and work-in-process inventory must be moved during the production process, the company is likely to be performing nonvalue-added activities. 6) TRUE 7) FALSE Financial accounting information is generally used by those external to the firm and is not sufficient for making operational decisions. 8) TRUE 9) FALSE 10) TRUE Important criteria for financial accounting include comparability and decision relevance (for investors); decision relevance (for managers) and timeliness are the important criteria for cost accounting. 11) FALSE 12) TRUE 13) TRUE 14) FALSE

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A responsibility center is a specific unit of an organization assigned to a manager who is held accountable for its operations and resources. As such, a department, division, segment, or subsidiary could be considered a responsibility center. 15) TRUE 16) FALSE 17) FALSE 18) TRUE 19) TRUE 20) TRUE This is the definition of critical thinking. 21) FALSE This is the definition of data analytics. Data visualization refers to how the results of the data analysis are summarized and presented to decision makers. 22) TRUE 23) TRUE 24) FALSE 25) TRUE 26) TRUE 27) TRUE 28) TRUE 29) A The value chain is the set of activities that transforms raw resources into the goods and services end users purchase and consume. 30) C Accounting for something does not add value; it is an administrative function. 31) B

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Financial accounting information is not sufficient for operational decisions made by managers. 32) A Perfect information is never available; there is always some uncertainty. 33) D Performing a task correctly adds value; correcting mistakes does not add value. 34) B Data analytics is the systematic evaluation of information to address a decision problem. 35) A Data visualization refers to how the results of data analysis are summarized and presented to decision makers. 36) C Increase in operating profits would be $95,000 − $43,000 = $52,000. 37) C Increase in operating profits would be $110,000 − $45,000 = $65,000. 38) A Budgeting is the process of creating a financial plan of the revenues and resources needed to carry out activities and meet financial goals. 39) B Financial accounting is governed by generally accepted accounting principles (GAAP). Cost, managerial, and responsibility accounting do not depend on GAAP. 40) A The important criterion of cost accounting is that information be relevant for managers making operational decisions; those making decisions using financial accounting data are interested in comparing firms. 41) B

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ERP is an information technology that links activities such as production, purchasing, human resources, finances, and sales into a single comprehensive information system. 42) C By linking the various activities of the organization through ERP systems, managers hope to avoid lost orders, duplication of effort, and costly studies to determine the current state of the enterprise. 43) A Per the IMA Code of Ethics, consulting your own attorney is a last step. 44) D It is best to discuss the situation with the immediate supervisor before bringing in outsiders. 45) C The IMA Statement of Ethical Professional Practice states that members have the responsibility to maintain professional competency, refrain from disclosing confidential information, and maintain integrity and objectivity in their work. Independence is not a standard. 46) A Sarbanes-Oxley requires that the CEO and CFO sign the financial statements and stipulate that the statements do not omit material information. 47) A Critical thinking is a systematic process used to analyze a business issue or decision. 48) D Big data is defined by the sheer amount of data, the speed at which the data is generated and made available, or the variety of data available. 49) B

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Data visualization is used to communicate the results of analysis. It refers to how the results of the analysis are summarized and presented to decision makers. 50) C Big data refers to the volume and speed with which information is generated and made available and can assist in identifying and finding relevant data. 51) D Outsourcing is having one or more of the firm’s activities performed by another firm or individual in the supply or distribution chain. 52) D While we generally think of data visualization in terms of graphical presentations, it may also be textual (consisting of words and numbers). 53) A An internal auditor ensures compliance with laws, regulations, and company policies and procedures. 54) D The chief financial officer (CFO) determines policy on debt versus equity financing. 55) C Cross-functional teams do no ensure that any one department makes all final decisions. 56) C 57) C Administration is imbedded in all of the business functions; it is not a separate function of the value chain. 58) C Increase in operating profit would be $250,000 − $80,000 = $170,000. 59) C Increase in operating profit would be $150,000 − $60,000 = $90,000. Version 1

60) D Increase in operating profit would be $210,000 − $162,000 = $48,000. 61) D Increase in operating profit would be $200,000 − $160,000 = $40,000. 62) D Producing product adds value, moving it around does not add value. 63) A Differential costs are the costs that change in response to a particular course of action. 64) D Accounting is not a separate component in the value chain, instead it is included in every business function of the value chain. 65) A This activity is an example of customer service. 66) D This activity is an example of distribution. 67) C The cost accounting system provides much of the information necessary for the coordination of the value chain. 68) D Advertising costs would be associated with the value chain component of marketing and sales. 69) D The distribution chain is a part of the value chain outside the firm. 70) D Administrative functions are not included as separate components of the value chain. They are included in every business function of the value chain. 71) D

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A "total value chain focus" ensures the utility of each value chain function. 72) B Advertising would be a part of the marketing and sales component of the value chain in a service firm. The other three answer choices describe an activity with a "physical" product, not a service. 73) C The correct order is Design, Production, Distribution, and Customer service. 74) D Managers evaluate value-added activities to determine how they contribute to the final product's service, quality, and cost. 75) D Because the managers are making decisions only for their own organization, there is no need for the informa-tion to be comparable to similar information in other organizations. 76) B Financial accounting must comply with GAAP. The other answer choices are characteristics of cost accounting. 77) D Company shareholders would most likely use only financial accounting information in making decisions. The other answer choices are internal users who focus primarily on cost accounting information. 78) D Financial accounting information is used primarily for preparing the income statement. The other answer choices describe internal functions that have to do with the cost accounting system. 79) A

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Managerial decisions deal with the future, so estimates of future costs are more valuable for decision making than are the histori-cal and current costs that are reported externally. 80) D At the middle management level, where managers supervise work and make operating decisions, cost information is used to identify problems by highlighting when some aspect of operations is different from expectations. 81) C Future focus is a basic function of cost accounting. The other answer choices relate to financial accounting. 82) A The concept of considering both the costs and benefits of a proposal is cost-benefit analysis. 83) B A responsibility center allows the specific unit of an organization to be assigned to a manager who is held accountable for its operations and resources. The departmental manager does not have responsibility for controlling all the administrative expenses for each store location. 84) C If revenue is higher, then profits should be higher, unless there is a problem with costs. 85) A Model 360 cost ($407,000) − Model 280 cost ($349,000) = Differential cost ($58,000) 86) A Model 360 cost ($353,000) − Model 280 cost ($332,000) = Differential cost ($21,000). 87) D

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Compliance with Sarbanes-Oxley does not mean that a manager has met all of his or her ethical responsibilities. Sarbanes-Oxley is a law and ethics is based on behavior. 88) D Revenues ($89,000) − Operating costs ($52,000) = Additional operating profit ($37,000) 89) D Revenues ($85,000) − Operating costs ($50,000) = Additional operating profit ($35,000). 90) C Total Revenues ($700,000 + $95,000) − Total Operating costs ($550,000 + $55,000) = Total operating profit = $190,000 91) C Total Revenues ($650,000 + $85,000) − Total Operating costs ($525,000 + $50,000) = Total operating profit = $160,000. 92) D 93) D The additional operating costs are the differential amount of $59,000. 94) D The additional operating costs are the differential amount of $60,000. 95) B The additional revenues are the differential amount of $160,000. 96) B The additional revenues are the differential amount of $150,000. 97) B Both material costs and processing costs are differential because they differ between the two alternatives. 98) C All of the costs except equipment rental are differential ($29,500 + $24,500 + $25,000 = $79,000). Version 1

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99) C All of the costs except equipment rental are differential ($22,000 + $19,000 + $14,000 = $55,000). 100) A Both material costs and processing costs are differential because they differ between the two alternatives. 101) C Both material costs and processing costs are differential ($15,000 + $24,000 = $39,000). 102) C Both material costs and processing costs are differential ($12,000 + $22,000 = $34,000). 103) C Vendor certification is an example related to the value chain component of purchasing. 104) D Website creation, hosting, and maintenance is an example related to the value chain component of distribution. 105) D Patent applications is an example related to the value chain component of research and development. 106) B An ERP system links the various systems of the enterprise into a single comprehensive information system. 107) A A responsibility center allows the specific unit of an organization to be assigned to a manager who is held accountable for its operations and resources. 108) A All three of these business functions are found in the value chain. Version 1

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109) C All are examples of the controller's functions except for investor relations. 110) B Cost accounting is an integral part of the controller's function. 111) B Financial accounting focuses on external financial reporting; whereas, cost accounting information is designed to help managers make better decisions. 112) B IMA members have a responsibility to maintain professional competency, refrain from disclosing confidential information, and maintain integrity and objectivity (credibility) in their work. 113) D 114) C Attesting to the accuracy of external credit ratings is not a requirement under the Sarbanes-Oxley Act of 2002. 115) D The Sarbanes-Oxley Act does not suggest that management limit information available to investors. 116) A Good performance measures are necessary in implementing performance-based incentives. 117) A Compliance with Sarbanes-Oxley does not mean that a manager has met all of his or her ethical responsibilities. 118) Cost 2

Transportation costs to ship vans to customers

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Stage in the Value Chain 1. Customer Service

105

5 3

Labor costs for factory workers 2. Distribution Overtime costs for scientists working on 3. Research & new engine technology Development Utilities cost for the design testing 4. Marketing center Costs to survey customers about their 5. Production satisfaction Costs to sponsor a sporting event 6. Design

6 1 4

119) Cost 2 5 3 1 4 6

Stage in the Value Chain

Warehouse costs to store seed awaiting shipment to customers Utility costs for seed mill Equipment costs in genetics laboratory Labor costs to staff help-line call center Costs to prepare advertising campaign in national agriculture magazine Costs to contract with growers to provide seed

1. Customer Service 2. Distribution 3. Research & Development 4. Marketing 5. Production 6. Design

120)a. Travon’s Limo Service Income Statement Status Quo: No Alternative: Delivery With Delivery Service Service (1) (2) Sales Revenue Costs: Vehicle Leases Labor Utilities Rent Other Costs Manager’s Salary Total Costs Operating Profit (Loss)

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Difference

(3)

$ 960,000

$ 1,235,000

$ 275,000

400,000 290,000 50,000 100,000 60,000 120,000 $ 1,020,000

460,000 406,000 70,000 115,000 69,000 120,000 $ 1,240,000

60,000 116,000 20,000 15,000 9,000 0 $ 220,000

$ (60,000)

$ (5,000)

$ 55,000

106