Test Bank for Managerial Accounting Tools for Business Decision-Making, 6th Canadian Edition by TBtutors

Type:

Test Bank

Resource:

Managerial Accounting Tools for Business Decision-Making

Edition:

6th Edition

Author(s):

Jerry J. Weygandt Paul D. Kimmel Donald E. Kieso Ibrahim M. Aly

CHAPTER 1 MANAGERIAL ACCOUNTING SUMMARY OF QUESTION TYPES BY LEARNING OBJECTIVE, BLOOM’S TAXONOMY, LEVEL OF DIFFICULTY, AACSB CODES, AND CPA CODES Item LO BT LODAACSB CPA Item LO BT LODAACSB CPA Item LO BT LODAACSB CPA True-False Statements 1. 1 C E AN MA 3. 2 K E AN MA 5. 4 K E AN MA 2. 1 C E AN MA 4. 2 K E AN MA Multiple Choice Questions 6. 1 K E AN MA 36. 2 K E AN MA 66. 4 C E AN MA 7. 1 K E AN MA 37. 2 C E AN MA 67. 4 K E AN MA 8. 1 K E AN MA 38. 2 K E AN MA 68. 4 K E AN MA 9. 1 C E AN MA 39. 2 K E AN MA 69. 4 C E AN MA 10. 1 K E AN MA 40. 3 C E E MA 70. 4 C E AN MA 11. 1 C E AN MA 41. 3 C E E MA 71. 4 K E AN MA 12. 1 K E AN MA 42. 3 K E AN MA 72. 4 K E AN MA 13. 1 K E AN MA 43. 3 K E AN MA 73. 4 C E AN MA 14. 1 C E AN MA 44. 3 K E AN MA 74. 4 K E AN MA 15. 1 K E AN MA 45. 3 K E AN MA 75. 4 C E AN MA 16. 1 C E AN MA 46. 3 C E AN MA 76. 4 C E AN MA AN MA 47. 3 K E AN MA 77. 4 C AN MA 17. 1 C E E 18. 1 K E AN MA 48. 3 K E AN MA 78. 4 AN M AN MA 19. 1 K E AN MA 49. 3 C E AN MA 79. 4 K E AN MA 20. 1 K E AN MA 50. 3 C E AN MA 80. 4 K E AN MA 21. 1 C E AN MA 51. 3 K E AN MA 81. 4 C E AN MA 22. 1 K E AN MA 52. 3 K E AN MA 82. 4 K E AN MA 23. 1 K E AN MA 53. 4 C E AN MA 83. 4 K E AN MA 24. 1 K E AN MA 54. 4 K E AN MA 84. 4 K E AN MA 25. 1 K E AN MA 55. 4 K E AN MA 85. 4 K E AN MA 26. 2 C E AN MA 56. 4 K E AN MA 86. 4 K E AN MA 27. 2 K E AN MA 57. 4 K E AN MA 28. 2 K E AN MA 58. 4 K E AN MA 29. 2 K E AN MA 59. 4 C E AN MA 30. 2 K E AN MA 60. 4 C E AN MA 31. 2 K E AN MA 61. 4 C E AN MA 32. 2 K E AN MA 62. 4 K E AN MA 33. 2 C E AN MA 63. 4 K E AN MA 34. 2 K E AN MA 64. 4 K E AN MA 35. 2 C E AN MA 65. 4 C E AN MA Bloom’s: LOD: AACSB: CPA:

AN = Analysis C = Comprehension K = Knowledge E = Easy M = Medium H = Hard AN = Analytic E = Ethics MA = Management Accounting

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Test Bank for Managerial Accounting, Sixth Canadian Edition

SUMMARY OF QUESTION TYPES BY LEARNING OBJECTIVE, BLOOM’S TAXONOMY, LEVEL OF DIFFICULTY, AACSB CODES, AND CPA CODES (CONT’D) Item LO BT 87. 88. 89. 96. 97. 98. 99. 106. 107. 112. 113. 114.

LOD AACSB CPA Item LO BT LOD AACSB CPA Item LO BT LOD AACSB CPA Brief Exercises 1 C E AN MA 90. 3 C E E MA 93. 4 C E AN MA 2 C E AN MA 91. 3 C E E MA 94. 4 K E AN MA 2 C E AN MA 92. 4 K E AN MA 95. 4 C E AN MA Exercises 1 C E AN MA 100. 2 K E AN MA 104. 1,4 AN M AN MA 1,2 AN M AN MA 101. 3 C E AN MA 105. 4 AN M AN MA 2 C E AN MA 102. 3 C E AN MA 2 AN M AN MA 103. 3 C E AN MA Completion Statements 1 K E AN MA 108. 1 K E AN MA 110. 2 K E AN MA 1 K E AN MA 109. 2 K E AN MA 111. 2 K E AN MA Matching 4 K E AN MA Short-Answer Essay 1 C E AN MA 115. 3 AN M AN MA 117. 4 C E AN MA 2 C E AN MA 116. 3 C E AN MA Bloom’s: LOD: AACSB: CPA:

AN = Analysis C = Comprehension K = Knowledge E = Easy M = Medium H = Hard AN = Analytic E = Ethics MA = Management Accounting

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SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE Item

Type

Item

Type

Item

1. 2. 6. 7. 8. 9.

TF TF MC MC MC MC

10. 11. 12. 13. 14. 15.

MC MC MC MC MC MC

16. 17. 18. 19. 20. 21.

3. 4. 26. 27.

TF TF MC MC

28. 29. 30. 31.

MC MC MC MC

32. 33. 34. 35.

40. 41. 42. 43.

MC MC MC MC

44. 45. 46. 47.

MC MC MC MC

48. 49. 50. 51.

5. 53. 54. 55. 56. 57. 58.

TF MC MC MC MC MC MC

59. 60. 61. 62. 63. 64. 65.

MC MC MC MC MC MC MC

66. 67. 68. 69. 70. 71. 72.

Note:

TF = True-False MC = Multiple Choice Ma = Matching

Type

Item

Type

Item

Learning Objective 1 MC 21. MC 96. MC 22. MC 97. MC 23. MC 104. MC 24. MC 106. MC 25. MC 107. MC 87. BE 108 Learning Objective 2 MC 36. MC 88. MC 37. MC 89. MC 38. MC 97. MC 39. MC 109. Learning Objective 3 MC 52. MC 102. MC 90. BE 103. MC 91. BE 115. MC 101. Ex 116. Learning Objective 4 MC 73. MC 80. MC 74. MC 81. MC 75. MC 82. MC 76. MC 83. MC 77. MC 84. MC 78. MC 85. MC 79. MC 86. C = Ex =

Completion Exercise

Type

Item

Type

Ex Ex Ex C C C

113.

SAE

BE BE Ex C

110. 111. 114.

C C SAE

92. 93. 94. 95. 104. 105. 112.

BE BE BE BE Ex Ex Ma

Item

Type

117.

SAE

Ex Ex SAE SAE MC MC MC MC MC MC MC BE = SAE =

Brief Exercise Short-Answer Essay

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Test Bank for Managerial Accounting, Sixth Canadian Edition

CHAPTER LEARNING OBJECTIVES 1. Explain the distinguishing features of managerial accounting. Managerial accounting is needed in all types of businesses—service, merchandising, and manufacturing. It also applies to all forms of business organization—proprietorships, partnerships, and corporations. Managerial accounting is needed in not-for-profit entities, as well as in profit-oriented enterprises. Managerial accounting provides tools that help management make decisions and evaluate the effectiveness of those decisions. The distinguishing features of managerial accounting are ∙ the primary users of reports—internal users, who are officers, department heads, managers, and supervisors in the company; ∙ the type and frequency of reports—internal reports that are issued as frequently as needed; ∙ the purpose of reports—to provide special-purpose information for a particular user for a specific decision; ∙ the content of reports—pertains to subunits of the business and may be very detailed and may extend beyond the double-entry accounting system; the reporting standard is relevant to the decision being made; and ∙ the verification of reports—no independent audits. 2. Identify the three broad functions of management and the role of management accountants in an organizational structure. The three functions are planning, directing, and controlling. Planning requires management to look ahead and to establish objectives. Directing involves coordinating a company’s diverse activities and human resources to produce a smoothly running operation. Controlling is the process of keeping the activities on track. Management accountants serve as staff members in an organization and play an important role in providing the required information for decision making. 3. Explain the importance of business ethics. All employees in an organization are expected to act ethically in their business activities. In Canada, the professional accounting organization promotes high standards of ethics in the accounting profession. These standards of ethics can be used as guidelines in dealing with the public and the organizations’ members. In the United States, the Institute of Management Accountants’ Statement of Ethical Professional Practice provides the codes of conduct. Moreover, companies are now evaluating their performance with regard to their corporate social responsibility. 4. Identify changes and trends in managerial accounting. Managerial accounting has experienced many changes in recent years. Among these are a shift toward meeting the needs of service companies and improving practices to better meet the needs of managers. Improved practices include a focus on managing the value chain through techniques such as just-in-time inventory and technological applications such as enterprise resource planning (ERP). In addition, techniques have been developed to improve decisionmaking, such as the theory of constraints and activity-based costing (ABC). Finally, many companies now use the balanced scorecard and data analytics in order to have a more comprehensive view of the company’s operations. Data analytics is important in business to understand problems facing an organization, and to use data to both predict and influence customer behaviour.

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In Canada, the accounting profession has recently been reorganized by the founding of CPA Canada (Chartered Professional Accountants of Canada) in 2013, into which the three legacy accounting bodies—Chartered Accountants (CA), Certified Management Accountants (CMA), and Certified General Accountants (CGA)—were merged.

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Test Bank for Managerial Accounting, Sixth Canadian Edition

TRUE-FALSE STATEMENTS 1. Management accounting and financial accounting, while in the same field, are mutually exclusive disciplines.

2. Given the decision to employ straight-line amortization or a usage-based amortization method, the management accountant’s need to report the most relevant economic information to external users will determine which method is used.

3. Decision making is an integral part of the planning, directing, and motivating functions, but not of the controlling function.

4. Employees with staff positions serve other employees, while those with line positions work directly in line with the company’s revenue generating goals.

5. Activity-based costing is a method of allocating overhead costs to products.

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ANSWERS TO TRUE-FALSE STATEMENTS Item 1.

Ans. F

Item 2.

Ans. F

Item 3.

Ans. F

Item 4.

Ans. T

Item 5.

Ans. T

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Test Bank for Managerial Accounting, Sixth Canadian Edition

MULTIPLE CHOICE QUESTIONS 6. Managerial accounting a) information generally pertains to an entity as a whole and is very detailed. b) applies only to manufacturing companies. c) focuses primarily on reports for both internal and external users. d) provides tools that help management make decisions and evaluate the effectiveness of those decisions.

7. Reports scrutinized by managerial accountants a) do not include those focused on business subunits. b) do not include non-financial data relevant to business decision making. c) are highly aggregated. d) are special purpose for specific decisions.

8. Managerial accounting a) is concerned with costing products. b) is governed by generally accepted accounting principles. c) pertains to the entity as a whole and is highly aggregated. d) places emphasis on special-purpose information.

9. Managerial accounting information is generally prepared for a) shareholders. b) managers. c) regulatory agencies. d) investors.

10. Managerial accounting information a) pertains to the entity as a whole and is highly aggregated. b) must be prepared according to generally accepted accounting principles. c) pertains to subunits of the entity and may be detailed. d) is prepared only once a year.

11. The major reporting standard for management accounting is a) the Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management. b) the Sarbanes-Oxley Act of 2002. c) relevance to decisions. d) generally accepted accounting principles. 12. Managerial accounting applies to which of the following forms of business organizations? a) sole proprietorship b) partnership c) corporation

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d) all forms of business organizations 13. Which of the following is false in terms of the reason companies replace a CEO with a management committee? a) To enhance decision-making b) To improve collaboration. c) To avoid disruption associated with replacing a CEO. d) To reduce management continuity.

14. Managerial accounting is also called a) inside reporting. b) cost accounting. c) management accounting. d) strategic management.

15. Which of the following is not an internal user? a) corporate officers b) staff employees c) stockholders d) department manager

16. Which of the following is not part of managerial accounting? a) determining whether planned goals are being met b) reporting financial information to the shareholders c) calculating product costs d) controlling costs

17. Which of the following uses managerial accounting? a) manufacturing and service entities, but not merchandising b) profit-oriented businesses only c) service, manufacturing, and merchandising entities d) only manufacturing entities

18. Which one of the following tasks would not be performed by a management accountant? a) being concerned with the impact of cost and volume on profits b) strategic cost management c) assisting in budget planning d) preparing reports primarily for external users

19. How often are internal managerial reports communicated? a) as frequently as needed b) annually c) during every audit by the company’s CPA d) monthly

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Test Bank for Managerial Accounting, Sixth Canadian Edition

20. Which description identifies financial statements that are prepared for external users? a) external reports b) special purpose c) user-specific d) general-purpose

21. Which term describes managerial accounting reports? a) GAAP reports b) special purpose c) general-purpose d) regulatory reports

22. Which of the following statements about internal reports is true? a) Most internal reports are summarized rather than detailed. b) Internal reports focus on general-purpose needs of users. c) The content of internal reports extends beyond the double-entry accounting system. d) Internal reports are often very general.

23. Which one of the following describes internal reports? a) They are often audited by CPAs. b) They must be prepared according to GAAP. c) They are aggregated. d) They are detailed.

24. Which of the following reports would management find useful in decision making? a) monthly reports on activities to the Board of Directors b) quarterly reporting to the Toronto Stock Exchange c) specific purpose statements on services delivered d) audited financial information in the annual report to shareholders

25. How often should management receive or prepare reports on its internal process activities? a) on a fixed time basis b) as often as is necessary c) never more than monthly d) weekly

26. How often should management receive or prepare reports on its external business process activities? a) as they correspond to external financial reporting b) never more than monthly c) according to the company’s business cycle d) as often as is necessary 27. A company must inform readers of its annual report of

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a) all changes in financial accounting policies. b) results of any overseas activities. c) all changes in internal accounting information. d) changes to management’s bonus system.

28. How could management information assist in motivating its employees? a) By keeping track of quality improvements. b) By highlighting the company’s percent of market share. c) By presenting the statistics on plant safety. d) All areas would benefit from providing internal management information.

29. In establishing a good internal reporting system, a company should a) ensure that these reports agree to generally accepted accounting principles. b) have the Board of Directors agree to the information provided. c) establish clearly understood standards of performance. d) All of the above are valid reasons.

30. What broad functions do the management of an organization perform? a) directing, manufacturing, and controlling b) planning, directing, and controlling c) planning, directing, and selling d) planning, manufacturing and controlling 31. Which one of the following involves coordinating a company’s activities to produce a smooth-running operation? a) auditing b) controlling c) planning d) directing

32. Which one of the following does the planning function involve? a) analyzing financial statements b) setting goals and objectives for an entity c) hiring the right people for a particular job d) coordinating the accounting information system

33. Which one of the following is true concerning the managerial function of controlling? a) It includes performance evaluation by management. b) It is concerned mainly with operating a manufacturing segment. c) It is performed only by the controller of a company. d) It includes hiring and training employees.

34. Which of the following represents two management functions? a) regulating and directing

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Test Bank for Managerial Accounting, Sixth Canadian Edition

b) controlling and directing c) controlling and auditing d) auditing and planning

35. Which management function is a manager performing when objectives are being established? a) regulating b) planning c) motivating d) directing

36. The organizational chart of a company shows a) the interrelationships of activities within a company. b) the delegation of authority within a company. c) the delegation of responsibility within a company. d) all of the above.

37. Which function is achieved when a manager is determining whether planned goals are being met? a) controlling b) motivating c) planning d) directing 38. What activities and responsibilities are not associated with management’s functions? a) planning b) accountability c) controlling d) directing

39. Directing includes a) providing a criteria framework for management when needed, to assist in terminating employees. b) running a department under quality control standards that are universally accepted. c) coordinating a company’s diverse activities and human resources to produce a smoothrunning operation. d) developing a performance ranking system to give certain high performers substantial raises.

40. Which of the following is true? a) Generally Accepted Accounting Principles (GAAP) form the backbone of managerial accounting conventions, and local and/or regional standards and professional judgment allow for variations among practitioners. b) Each province in Canada has its own code of ethics and rules and guidelines of professional conduct. c) The Sarbanes-Oxley Act in the U.S. and similar legislation in Canada aims to guide ethical

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standards used in management accounting practices. d) Chartered Professional Accountants of Canada plays an important role in promoting high standards of ethics in the accounting profession, excluding managerial accounting.

41. Corporate social responsibility only considers: a) profitability. b) sustainable business practices with regards to the environment. c) the triple bottom line including performance with regard to people, plant and profit. d) sustainable business practices with regards to employees.

42. Which of the following is true? a) Managerial accountants are the employees who are principally responsible for ethical behaviour. b) Investment losses have been precipitated by lax ethical standards. c) Corporate fraud was found to have decreased between the years 1998 and 2003. d) Expense account abuse has been cited as one of the rarest forms of unethical employee behaviour.

43. Choose the incorrect answer. a) While generally not encouraged, lapses in ethical behaviour are irrelevant to a company’s operating income. b) Proper incentives need to be implemented to foster an ethical business environment. c) Manufacturing companies need to establish effective and realistic production goals for their processes. d) As a result of the Sarbanes-Oxley Act, companies now pay more attention to the composition of the board of directors.

44. Which is the best definition of fraud? a) unknowingly misrepresenting the facts b) using business supplies for personal use c) the intentional misstatement of facts d) misappropriating funds for personal financial gain

45. Which of the following is true? a) Dissatisfied employees cite a decline in ethical behaviour is a result of a change in corporate culture. b) Unethical corporate behaviour occurs only in the United States because of its capitalistic environment. c) Unethical behaviour rarely causes a decline in investor confidence. d) Unethical actions are reasonable in an environment wherein unreasonable budgets and targets have been set.

46. The production manager at ABC Inc. is responsible for formulating the budget for his

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department. He will be evaluated on his ability to control costs. After considerable thought, he arrives at his best estimate of costs, and then adds a further 10% to the projections. Chances are he has inflated the cost projections because a) that is the way it has always been done. b) conservative accounting practise requires that he not under report expenses. c) by overestimating expenses, it will make it easier for him to come in under budget and receive a favourable evaluation. d) none of the above.

47. In Canada, which of the following professional accounting organizations play an important role in promoting high standards of ethics in the accounting profession? a) Chartered Professional Accountants of Canada (CPA Canada) b) The Financial Planning Standards Council (FPSC) c) The Canadian Institute of Financial Planning (CIFP) d) all of the above

48. The Ontario Securities Commission introduced regulations governing the composition and duties of audit committees, as well as their members’ behaviour. The new rules a) are as robust as parallel rules required by the U.S. Sarbanes-Oxley Act. b) were adopted by all provincial and territorial securities regulators, except for British Columbia’s. c) were introduced in conjunction with the Canadian Securities Administrators. d) all of the above.

49. A company acting ethically must adapt its external reports to any changes required a) instantly. b) as it is appropriate for its business cycle. c) as stipulated by the CPA Canada handbook and GAAP. d) if they are considered pertinent to its business activities.

50. A company acting ethically must adapt its internal reports to any changes required a) instantly. b) as it is appropriate for its business cycle. c) as stipulated by the CPA Canada handbook and GAAP. d) if they are considered pertinent to its business activities.

51. A recent survey of fraud by international accounting firm KPMG reported a) reported a 13% decrease in instances of corporate fraud compared with five years earlier. b) that employee fraud (such things as expense account abuse, payroll fraud, and theft of assets) represents 60% of all instances of fraud. c) financial reporting fraud (the intentional misstatement of financial reports) was the least costly to companies. d) business scandals with large investment losses and few employee layoffs. 52. The accounting professional bodies each have professional codes of ethical conduct. The code covers

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a) competence, ethical behaviour, objectivity, confidentiality. b) integrity, credibility, competence, and confidentiality. c) competence, objectivity, credibility, integrity. d) credibility, integrity, confidentiality, objectivity.

53. Data visualizations a) refer to the use of software to analyze data. b) do not help managers in acquiring an understanding of the relationships between variables. c) is the use of techniques to analyze data to make informed decisions. d) help managers in acquiring an understanding of business trends. 54. The value chain a) is affected by technology through business-to-business on the Internet. b) refers to all the activities associated with providing a product with the exception of research and development. c) has not been enhanced by computerization and automation. d) refers to all the activities associated with providing a service with the exception of sales and marketing.

55. Lean manufacturing a) is being used less often by manufacturing firms. b) is in contrast to traditional mass-production operations. c) is apt to be used by firms that use large amounts of direct labour to produce their products. d) sets out to minimize rather than eliminate waste.

56. Which one of the following managerial accounting approaches attempts to allocate manufacturing overhead in a more meaningful fashion? a) theory of constraints b) just-in-time inventory c) activity-based costing d) total-quality management

57. Which one of the following is not a main component of the value chain sequence? a) ERP b) sales and marketing c) production d) customer relations

58. What is one primary benefit of an enterprise resource planning (ERP) system? a) It reduces inventory levels. b) It permits companies to be more streamlined in production. c) It replaces research and development in a company. d) It requires an increased emphasis on product quality.

59. One of the advantages of a just-in-time inventory system is that it reduces inventory

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Test Bank for Managerial Accounting, Sixth Canadian Edition

quantities. Why is this considered to be a benefit? a) Carrying inventory incurs storage costs, hence reducing inventory quantities reduces costs. b) Carrying large inventory raises the risk that customers will want an item that you do not have. c) Carrying large inventory reduces the risk that customers will want an item that you do not have. d) none of the above 60. What is “balanced” in the balanced scorecard approach? a) the number of products produced b) the emphasis on financial and non-financial performance measurements c) the amount of costs allocated to products d) the number of defects found on each product

61. For what purpose is the theory of constraints used? a) to reduce product defects b) to balance performance measurement c) to identify and manage constraints that bottleneck operations d) to reduce inventory levels

62. In Canada the three different professional accounting designations that merged into CPA Canada are a) CPA, CA, CMA. b) CMA, CGA, CPA. c) CA, CMA, CGA. d) MA, CPA, CA.

63. Which of the following is a reason for the reorganization of the three accounting bodies in Canada into one, CPA Canada? a) There was conflict within the standard setting process between the three accounting bodies. b) Extensive competition between the three organizations was causing friction. c) The reorganization was mandated by the Canadian government. d) A larger unified profession would mean a more prominent and cohesive Canadian presence internationally.

64. Choose the correct statement. a) CGA stands for Certified Generic Accountant. b) CMA stands for Certified Managing Accountant. c) CA stands for Chartered Accountant. d) CPA stands for Certified Professional Accountant.

65. Which of the following statements is true? a) In recent decades, the Canadian economy in general has shifted toward an emphasis on providing services rather than goods. This trend has reduced the importance of managerial accounting. b) In recent decades, the Canadian economy in general has shifted toward an emphasis on

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providing goods rather than services. This trend has reduced the importance of managerial accounting. c) In recent decades, the Canadian economy in general has shifted toward an emphasis on providing services rather than goods. This trend has not reduced the importance of managerial accounting. d) In recent decades, the Canadian economy in general has shifted toward an emphasis on providing goods rather than services. This trend has not reduced the importance of managerial accounting.

66. Which of the following is an accounting question a service company may face? a) whether to purchase new equipment b) how much to charge for various services c) how efficient and productive individual staff members are d) all of the above

67. For a manufacturing company, the activities in the value chain would not include a) research and development. b) purchase of raw materials. c) customer relations. d) performance evaluation.

68. What term describes all activities associated with providing a product or service? a) the manufacturing chain b) the product chain c) the supply chain d) the value chain

69. How do most companies manage their value chain? a) by using activity-based costing b) by creating enterprise resource planning systems c) using an action plan d) using total-quality management systems

70. How have many companies significantly lowered inventory levels and costs? a) They use activity-based costing. b) They utilize an enterprise resource planning system. c) They have a just-in-time method. d) They focus on a total-quality management system.

71. Some companies implement systems to reduce defects in finished products with the goal of achieving zero defects. What are these systems called? a) activity-based costing systems b) enterprise resource planning systems c) value chain systems d) total-quality management systems

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Test Bank for Managerial Accounting, Sixth Canadian Edition

72. In order to obtain more accurate product costs, how do many companies allocate overhead? a) By using activity-based costing. b) By using enterprise resource planning systems. c) By using just-in-time methods. d) By using total-quality management systems.

73. Which one of the following characteristics would likely be associated with a just-in-time inventory method? a) ending inventory of work in process that allows for several production runs b) a backlog of inventory orders not yet shipped c) minimal finished goods inventory on hand d) an understanding with customers that they may come to the showroom and select from inventory on hand

74. What is value chain management best defined as? a) a large chain that keeps the machines from falling on the production floor b) management decisions that affect how quickly the production run occurs c) the incremental value of costs associated with hiring a new production floor leader d) all activities associated with providing a product or service

75. Which one of the following is an example of activity-based costing? a) monitoring the salaries of managers that do untimely quality control checks b) keeping close track of shrinkage associated with thefts off the showroom floor c) ensuring that management is diligently working with the local union on keeping labour costs in line d) allocating the set-up cost associated with getting a machine ready for a production run

76. Bottlenecks are a) the point at which the finished product leaves the factory. b) constraints that limit the company’s potential profitability. c) the point at which a company’s plan is put into action. d) factors that consume a great deal of managers’ attention but have little impact on the company.

77. For what reason is a product cost primarily tracked? a) to keep up with current cost trends to bring products to market b) to effectively allocate the cost of products to measure profitability c) to determine what amounts are necessary for allocating overhead d) to keep management’s bonuses increasing every year

78. Which one of the following is an activity not associated with TQM? a) Tightening the bolts on a chassis so that the frame will not drop out. b) Redesigning the gas tank after learning fuel efficiency standards are not being met.

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c) Verifying the 10 check points associated with producing the highest quality loaf of bread. d) Ensuring that the mattress just manufactured meets the standard of comfort of a random factory line worker.

79. The theory of constraints is a) a theory that the benefit of making a change in a production process should be weighed against the cost of making that change. b) that even the best suggestions for improvement are likely to be rejected due to opposition from those who have to implement the changes. c) a specific approach used to identify and manage constraints in order to achieve the company’s goals. d) not applicable to service operations.

80. What is ERP? a) efficient resource procurement b) earnings reporting policies c) enterprise resource planning d) effective resource procurement

81. A balanced scorecard is a) a performance-measurement approach that uses both financial and non-financial measures to evaluate a company’s operations in an integrated way. b) a tool used to measure the benefits and costs of implementing a new strategy. c) used only by small organizations that cannot afford more expensive methods of evaluating their operations. d) focuses on non-financial measures in order to balance the many other financial reports companies use to evaluate their operations. 82. Which component of a company’s value chain would benefit most from internal management information? a) complaints from its customers over services offered b) bonuses paid to managers of the company c) the company’s efforts to develop new services d) All such components would benefit from internal management information.

83. Managerial accounting has become more important in service industries due to a) the decline of the manufacturing sector has freed up many accountants. b) service delivery is extremely complex and requires proper monitoring. c) the economy has become more service-oriented recently. d) the increase in complexity in computer systems requires accounting specialists.

84. The five steps in the lean thinking model, in order are: a) 1. Define value, 2. Identify the pull factors, 3. Identify the value stream, 4. Make the value stream flow, 5. Revise until perfection is achieved. b) 1. Define value, 2. Identify the value stream, 3. Make the value stream flow, 4. Implement a

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pull system, 5. Strive for perfection. c) 1. Identify unproductive activities that need to be reduced, 2. Identify push factors causing those unproductive activities, 3. Develop operations so that the work flows smoothly, 4. Strive for perfection, 5. Evaluate the value that has been added. d) 1. Identify push factors, 2. Develop strategies to turn those factors into pull factors, 3. Assess the value added by steps one and two, 4. Strive for perfection, 5. Repeat the process on a regular basis.

85. Step one in the lean thinking model requires a) target costing, that is determining the acceptable cost the customer is willing to pay. b) an assessment of the potential value that can be added to the firm by adopting the lean manufacturing concept. c) identifying processes that do not add value to the manufacturing process. d) identifying push factors that can be converted to pull factors.

86. Step two in the lean thinking model a) deals with push and pull factors. b) is the central element in understanding how a company can evaluate what is value added and what is waste. c) is always the most time consuming. d) can be excluded if step one is done correctly.

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ANSWERS TO MULTIPLE CHOICE QUESTIONS Item 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Ans. d d d b c a d d c c b c d a

Item 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31.. 32.. 33..

Ans. d b c d c b d a d c b b b a

Item 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47.

Ans. b b d a b c b c b a c a c a

Item 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61.

Ans. d c d b b d a b c a b a b c

Item 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75.

Ans. c d c c d d d b c d a c d d

Item 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86.

Ans. b b a c c a d b b a b

Item

Ans.

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Test Bank for Managerial Accounting, Sixth Canadian Edition

BRIEF EXERCISES Brief Exercise 87 The Cheepencheerful Bakery Company produces muffins that it sells to hotel chains in the city. It generally breaks even at the end of the year but not always. It only knows this when the company’s external accountants prepare financial statements that are used by the bank and to file tax returns. The company does its best to keep its costs down and as a result does not pay its employees very much. When the president’s wife, who is the bookkeeper, decided to retire, the president advertised for her replacement. He thought he could find someone who would work for slightly more than minimum wage. This would be in line with his desire to keep costs down. Comment on the president’s desire to keep his costs down by hiring a poorly paid accountant for his organization. Solution 87 The president is being short-sighted in his desire to keep costs low in a critical area of his company. As president, he is responsible for planning, directing, and controlling the company’s activities. For a medium sized company, it is difficult for one person to accomplish all of these objectives effectively. A professionally trained accountant with the proper training and accreditation can assist the president in these areas. The accountant can help plan targets for profitability and return on assets used in the business. Once these targets are set, the accountant can then help direct the day-to-day activities to ensure the company’s internal procedures are operating efficiently. The accountant can also implement effective internal managerial accounting procedures to ensure that the organizations activities are properly controlled.

Brief Exercise 88 Preparation of a budget at the beginning of a period entails looking at last year’s results, adjusting for any changes in prices and activity in the current year and anticipating consumer demand levels based on economic activity and historical trends. The process of preparing a budget is part of which management function? The process of comparing actual results to the budget is part of which other management function? Solution 88 The process of preparing a budget is part of planning while the process of comparing a budget to actual results is part of control.

Brief Exercise 89 Activities in a warehouse may include materials and inventory handling, staffing and scheduling, setting up production runs, and managing quality. The management of these activities is part of which one of the key three management functions: planning, directing, or controlling? Solution 89 The management of these activities is part of directing.