Exam A) B)

Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Which of the following statements concerning an organization's strategy is NOT true? 1)A) Businesses usually follow one of two broad strategies: offering a quality product at a low

price, or offering a unique product or service priced higher than the competition.B) Strategy specifies how an organization matches its own capabilities with the opportunities in

the marketplace to accomplish its objectives.C) A good strategy will always overcome poor implementation.D) Management accountants provide input to help managers formulate strategy.

Diff: 2 Type: MC Var: 1 Page Ref:

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

2) The technical considerations of budgeting encourage managers and other employees to strive forachieving the goals of the organization.

2)

Diff: 2 Type: TF Var: 1 Page Ref:

3) The Sarbanes-Oxley legislation does NOT provide a process for employees to report violations ofillegal and unethical acts.

3)


4) A budget is a quantitative expression of a plan. 4)Diff: 2 Type: TF Var: 1 Page Ref:


5) The Standards of Ethical Conduct for management accountants include concepts related to: 5)A) competence, confidentiality, integrity, and credibilityB) competence, performance, integrity, and reportingC) experience, integrity, reporting, and objectivityD) None of these answers are correct.



6) It is generally easy to quantify expected benefits and costs when applying the cost-benefitapproach.

6)


7) Treasury includes banking and short- and long-term financing, investments, and cashmanagement.

7)


1


8) The scenario that resources should be spent if the expected benefits to the company exceed theexpected costs describes:

8)

A) cost-benefit approach B) different costs for different purposesC) balanced scorecard D) behavioral and technical considerations


9) Control measures should: 9)A) be set and not changed until the next budget cycleB) be linked by feedback to planningC) be kept confidential from employees so that competitors don't have an opportunity to gain a

competitive advantageD) be flexible to allow for employees who are slackers



10) Financial accounting reports financial and non financial information that helps managersimplement company strategies.

10)



11) ________ is the manner by which companies promote and sell their products or services tocustomers or perspective customers.

11)

A) Research and development B) DistributionC) Customer service D) Marketing


SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.

12) Classify each cost item of Ripon Printers into one of the business functions of the valuechain, either (1) R&D, (2) design, (3) production, (4) marketing, (5) distribution, or (6)customer service.

Item:a. cost of customer order formsb. cost of paper used in manufacture of booksc. cost of paper used in packing cartons to ship booksd. cost of paper used in display at national trade showe. depreciation of trucks used to transport books to college bookstoresf. cost of the wood used to manufacture paperg. salary of the scientists attempting to find another source of printing inkh. cost of defining the book size so that a standard-sized box is filled to capacity

12)

Diff: 2 Type: SA Var: 1 Page Ref:

2


13) Which of the following statements about a company's supply chain is true? 13)A) A company's supply chain is always external to a firm.B) A company's supply chain is always internal to a firm.C) A company's supply chain is the same thing as a company's value chain.D) Management accountants provide information to enhance a company's supply chain.


ESSAY. Write your answer in the space provided or on a separate sheet of paper.

14) What is strategy? Briefly describe the two broad types of strategies that companies may choose to pursue.Diff: 2 Type: ES Var: 1 Page Ref:


15) Management accounting is playing an increasingly important role by helping managers developand implement strategy.

15)



16) Explain how a budget can help management implement strategy.Diff: 3 Type: ES Var: 1 Page Ref:


17) Planning includes all of the following EXCEPT 17)A) providing feedback to help with future decision making.B) obtaining information.C) making predictions about the future.D) identifying the problem and uncertainties.


18) Customers are demanding improved performance related to: 18)A) lower costs, improved quality, and improved customer serviceB) both reduced costs and increased qualityC) reduced costsD) All of these answers are correct.



19) When faced with a potential ethical conflict, the managerial accountant should first consult anyinternal procedures of that organization.

19)


3


20) Strategy specifies: 20)A) incremental changes for improved performanceB) standard procedures to ensure quality productsC) the demand created for products and servicesD) how an organization matches its own capabilities with the opportunities in the marketplace



21) You have been employed as an entry-level management accountant for a little under a year. You suspect thatyour immediate supervisor is involved in a significant fraud involving diverting of company assets to personaluse. Briefly describe the steps you might take to resolve this dilemma.Diff: 3 Type: ES Var: 1 Page Ref:


22) Management accountants must have behavioral and interpersonal skills. 22)Diff: 1 Type: TF Var: 1 Page Ref:

23) The last step in the decision-making process is to make decisions by choosing among alternatives. 23)Diff: 1 Type: TF Var: 1 Page Ref:


24) Cost accounting provides all of the following EXCEPT: 24)A) financial information regarding the cost of acquiring resourcesB) information for management accounting and financial accountingC) pricing information from marketing studiesD) nonfinancial information regarding the cost of operational efficiencies


25) Examples of the controller's functions include all EXCEPT: 25)A) general ledger B) budgetingC) investor relations D) operations administration


26) ________ is the delivery of products or services to customers. 26)A) DistributionB) Design of products, services, or processesC) ProductionD) Customer service



27) Discuss the potential behavior implications of performance evaluation.Diff: 3 Type: ES Var: 1 Page Ref:

4


28) Which of the following is NOT one of the questions management accountants might attempt tohelp answer in the formulation of strategy?

28)

A) Will adequate cash be available to implement the strategy?B) Does the strategy comply with GAAP (Generally Accepted Accounting Principles)?C) What substitute products exist in the marketplace?D) Who are our most important customers?


29) The most important planning tool is a ________. 29)A) budget B) performance evaluation reportC) goal D) balanced scorecard


30) ________ describe(s) the flow of goods, services, and information from the purchase of materials tothe delivery of products to consumers, regardless of whether those activities occur in the sameorganization or with other organizations.

30)

A) Continuous improvement B) Supply chainC) Key success factors D) Customer focus



31) Companies can decide on an appropriate strategy based strictly on internally availableinformation.

31)


32) Distribution refers to promoting and selling products or services to customers or prospectivecustomers.

32)



33) Cost accounting: 33)A) provides information on the performance of an operating divisionB) provides information on the efficiency of factory laborC) provides information on the cost of servicing commercial customersD) All of these answers are correct.



34) It is difficult to control activities without a budget. 34)Diff: 1 Type: TF Var: 1 Page Ref:

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35) A data warehouse or infobarn: 35)A) is reserved for exclusive use by the CFOB) stores information used by different managers for multiple purposesC) gathers only nonfinancial informationD) is primarily used for financial reporting purposes



36) Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering aunique product or service priced higher than the competition. Assume you are opening a small food outletacross the street from your campus. How might that business be operated under each of the two broadstrategies? Consider the following specific operational areas:

a. target customersb. products offeredc. product pricingd. location choicee. advertising contentf. advertising mediaDiff: 3 Type: ES Var: 1 Page Ref:


37) A well-conceived plan allows managers the ability to: 37)A) take advantage of unforeseen opportunitiesB) underestimate costs so that actual operating results will be favorable when comparisons are

madeC) keep lower-level managers from implementing changeD) not make decisions again until the next planning session



38) Identifying a company's most important customers does NOT help formulate strategy. 38)Diff: 1 Type: TF Var: 1 Page Ref:

39) Line management is directly responsible for attaining the goals of the organization. 39)Diff: 1 Type: TF Var: 1 Page Ref:

40) The best-designed strategies and the best-developed capabilities are useless unless they areeffectively executed.

40)


6


41) The process of preparing a budget: 41)A) increases accounting efficienciesB) reduces overcapacityC) forces coordination and communication across business functionsD) promotes production automation



42) One of the steps in planning is making predictions about the future. 42)Diff: 1 Type: TF Var: 1 Page Ref:

43) A bottleneck occurs when the work to be performed exceeds the available capacity. 43)Diff: 1 Type: TF Var: 1 Page Ref:

44) An effective way to cut costs is to eliminate activities that do NOT improve the product attributesthat customers value.

44)



45) Which of the following statements about the cost-benefit approach is true? 45)A) In a cost-benefit analysis, both costs and benefits are easy to obtain.B) A cost-benefit approach would not be appropriate for a decision to install a budget system or

not.C) Resources should be spent if the costs of a decision outweigh the benefits of the decision.D) Resources should be spent if they are expected to better attain company goals in relation to

the expected costs of these resources.Diff: 2 Type: MC Var: 1 Page Ref:


46) Is financial accounting or management accounting more useful to an operations manager? Why?Diff: 3 Type: ES Var: 1 Page Ref:


47) Place the five steps in the decision-making process in the correct order:A = Obtain informationB = Make decisions by choosing among alternativesC = Identify the problem and uncertaintiesD = Implement the decisionE = Make predictions about the future

47)

A) C A E B D B) C D B E A C) A E B D C D) E D A B CDiff: 2 Type: MC Var: 1 Page Ref:

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48) ________ is a philosophy in which management improves operations throughout the value chainto deliver products and services that exceed customer expectations.

48)

A) Cost-benefit approach B) Total quality managementC) Customer relationship management D) Customer focus



49) Credibility includes maintaining an appropriate level of professional expertise by continuallydeveloping knowledge and skills.

49)



50) List the four standards of ethical conduct for management accountants. For eachstandard, give an example that demonstrates compliance with that standard.

50)



51) Management accounting has to strictly follow the rules of generally accepted accounting principlesfor the purposes of measurement and reporting.

51)



52) Which of the following groups would be LEAST likely to receive detailed management accountingreports?

52)

A) production supervisors B) sales representativesC) managers D) stockholders


53) Which item is NOT an indication of confidentiality under the Standards of Ethical Conduct? 53)A) Inform all relevant parties regarding appropriate use of confidential information.B) Keep information confidential except when disclosure is authorized or legally required.C) Refrain from using confidential information for unethical or illegal advantage.D) All of the above indicate confidentiality.


54) Financial accounting: 54)A) reports include detailed information on the various operating segments of the business such

as product lines or departmentsB) must comply with GAAP (generally accepted accounting principles)C) focuses on the future and includes activities such as preparing next year's operating budgetD) is prepared for the use of department heads and other employees


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55) Financial accounting provides the primary source of information for: 55)A) decision making in the finishing departmentB) improving customer serviceC) planning next year's operating budgetD) preparing the income statement for shareholders



56) Key success factors include cost, quality, timeliness, and innovation. 56)Diff: 1 Type: TF Var: 1 Page Ref:


57) How does a controller help "control" a company?Diff: 3 Type: ES Var: 1 Page Ref:


58) Companies generally follow one of two basic strategies: 1) providing a quality product or service atlow prices, or 2) offering a unique product or service often priced higher than competing products.

58)



59) Explain how a customer focus can result in increased profits for a company.Diff: 3 Type: ES Var: 1 Page Ref:


60) Accounting method for internal reporting purposes are specified by Generally AcceptedAccounting Principles (GAAP).

60)


61) Strategy does NOT specify how an organization matches its capabilities with the opportunities inthe marketplace.

61)



62) Place the four business functions in the order they appear along the value chain:Customer serviceDesignMarketingProduction

62)

A) Design, Production, Marketing, Customer ServiceB) Customer Service, Marketing, Production, DesignC) Customer Service, Design, Production, MarketingD) Design, Customer Service, Production, Marketing


9


63) The increasing pace of technological innovation has resulted in shorter product life cycles. 63)Diff: 1 Type: TF Var: 1 Page Ref:

64) Increased global competition is placing pressure on companies to reduce costs. 64)Diff: 1 Type: TF Var: 1 Page Ref:


65) In designing strategy, a company must match the opportunities and threats in the marketplacewith:

65)

A) capabilities of current suppliersB) branding opportunitiesC) those of the CFO (Chief Financial Officer)D) its resources and capabilities


66) Which of the following statements concerning performance reports is NOT correct? 66)A) The performance report often leads to more investigations and action.B) The performance report contains no actual results due to confidentiality.C) The performance report is a feedback tool.D) The performance report shows actual performance as compared to the budget.


67) Which item is an indication of integrity under the Standards of Ethical Conduct? 67)A) Refrain from engaging in any conduct that would prejudice carrying out duties ethically.B) Recognize and communicate professional limitations or other constraints that would

preclude responsible judgment or successful performance of an activity.C) Keep information confidential except when disclosure is authorized or legally required.D) Communicate information fairly and objectively.



68) Linking rewards to performance is a major deterrent to good management performance. 68)Diff: 1 Type: TF Var: 1 Page Ref:


69) Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering aunique product or service priced higher than the competition. Is it possible to follow a strategy that is "in themiddle"?Diff: 2 Type: ES Var: 1 Page Ref:


70) Feedback and learning helps in the future decision-making process. 70)Diff: 1 Type: TF Var: 1 Page Ref:

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71) Management accounting information includes: 71)A) the cost of producing a productB) tabulated results of customer satisfaction surveysC) the percentage of units produced that are defectiveD) All of these answers are correct.



72) A cost concept used for external reporting purposes may not be appropriate for internal, routinereporting to managers.

72)


73) The balance sheet, income statement, and statement of cash flows are used for financialaccounting, and also for management accounting.

73)



74) Which of the following is NOT a way for a company to improve customer response time? 74)A) Increase capacity of bottleneck operations.B) Purchase material in larger quantities.C) Produce the product more quickly.D) Use faster delivery procedures.



75) Describe management accounting and financial accounting.Diff: 2 Type: ES Var: 1 Page Ref:


76) The person(s) responsible for providing advice and assistance to line managers is/are: 76)A) staff management B) the treasurerC) the chief financial officer D) the controller



77) Southwest Airlines is an example of a company that pursues a product differentiation strategy. 77)Diff: 1 Type: TF Var: 1 Page Ref:


78) Briefly explain the planning and control activities in management accounting. How are these two activitieslinked to each other?Diff: 2 Type: ES Var: 1 Page Ref:

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79) ________ is the generation of, and experimentation with, ideas related to new products, services,or processes.

79)

A) Design of products, services, or processesB) Research and developmentC) MarketingD) Production


80) ________ includes banking and short- and long-term financing, investments, andcash management.

80)

A) Treasury B) Internal auditC) Risk management D) Controllership



81) Classify each cost item into one of the business functions of the value chain, either (1)R&D, (2) design, (3) production, (4) marketing, (5) distribution, or (6) customer service.

Item:a. cost of samples mailed to promote sales of a new productb. labor cost of workers in the manufacturing plantc. bonus paid to a person with a 90% satisfaction rating in handling customers withcomplaintsd. transportation costs for shipping products to retail outlets

81)



82) Which item is NOT an indication of competence under the Standards of Ethical Conduct? 82)A) Perform professional duties in accordance with relevant laws, regulations, and technical

standards.B) Keep information confidential except when disclosure is authorized or legally required.C) Provide decision support information and recommendations that are accurate, clear, concise,

and timely.D) Maintain an appropriate level of professional expertise by continually developing knowledge

and skills.Diff: 2 Type: MC Var: 1 Page Ref:

83) The person(s) directly responsible for attaining of organizational objectives is/are: 83)A) the treasurer B) the chief financial officerC) the controller D) line management



84) Customers are demanding increased levels of performance in all aspects of the value chain and thesupply chain.

84)


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85) Which of the following statements refers to management accounting information? 85)A) There are no regulations governing the reports.B) The reports are generally delayed and historical.C) It primarily measures and records business transactions.D) The audience tends to be stockholders, creditors, and tax authorities.


86) Modern cost accounting plays a role in: 86)A) planning new products B) controlling costsC) evaluating operational processes D) All of these answers are correct.


87) Customer response time involves: 87)A) the speed it takes a customer to respond to an advertisement and place an orderB) the speed at which an organization responds to customer requestsC) the speed it takes an organization to develop a Total Quality Management (TQM) programD) the speed it takes to develop a new product



88) Tracking what is happening in other companies is illegal. 88)Diff: 1 Type: TF Var: 1 Page Ref:

89) The controller (also called the chief accounting officer) is the financial executive primarilyresponsible for both management accounting and financial accounting.

89)



90) Which of the following actions should a management accountant take first in confronting apotential ethical conflict concerning your direct supervisor?

90)

A) Discuss the situation with your supervisor's direct supervisor.B) Inform the Board of Directors of the existence of a potential conflict.C) Confront the supervisor directly.D) Review your organization's procedures concerning resolution of such a conflict.


91) A budget: 91)A) is a quantitative expression of a proposed management planB) aids in the coordination and communication among various business functionsC) helps translate strategy into actionsD) All of these answers are correct.


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92) The primary criterion when faced with a resource allocation decision is: 92)A) how well the alternative options help achieve organizational goals in relation to the costs

incurred for these systemsB) achievement of organizational goalsC) cost minimizationD) reduction in the amount of time required to perform a particular job



93) Is it possible to have an active cost management program without an Enterprise Resource Planning (ERP)System?Diff: 2 Type: ES Var: 1 Page Ref:


94) For each type of report listed below, identify one planning decision and one controllingdecision for which the information would be helpful. Assume you are a WalgreenCompany store.

Item:a. annual financial statements for the past three yearsb. report detailing sales by department by each hour of the day for the past weekc. special study regarding increased road traffic due to the construction of a newshopping mall at a near-by intersection

94)



95) The process of preparing a budget forces coordination and communication throughout thecompany.

95)


96) Key success factors are geared to improving customer satisfaction. 96)Diff: 2 Type: TF Var: 1 Page Ref:

97) The production component of the value chain refers detailed planning, engineering, and testing ofproducts and processes.

97)


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98) Value chain and classification of costs, car company.General Motors incurs the following costs:a. Electricity costs for the plant assembling the Chevrolet Camarob. Transportation costs for shipping the Camaro to dealersc. Payment to Shelby Designs for the design of the Camaro.d. Salary of an engineer working on the next generation of Camarose. Cost of GM employees' visit to an auto show to demonstrate the Camarof. Testing the Camaro at the GM trackg. Payment to television network for running Camaro advertisementsh. Cost of brake pads purchased from outside supplier to be installed on the Camaro

Required:Classify each of the cost items (a-h) into one of the business functions of the value chain.1) Research and development2) Design of products and processes3) Production4) Marketing5) Distribution6) Customer serviceDiff: 2 Type: ES Var: 1 Page Ref:


99) ________ is the after-sale support provided to customers. 99)A) Marketing B) ProductionC) Distribution D) Customer service



100) A budget may be used as a planning tool, but NOT as a control tool. 100)Diff: 1 Type: TF Var: 1 Page Ref:

101) The supply chain always occurs within a single organization. 101)Diff: 1 Type: TF Var: 1 Page Ref:

102) Management accountants should have little or no role in deciding on a company's strategy. 102)Diff: 1 Type: TF Var: 1 Page Ref:


103) Which item is NOT a guideline used by management accountants to assist in strategic andoperational decision making?

103)

A) behavioral and technical considerations B) balanced scorecardC) different costs for different purposes D) cost-benefit approach


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104) Management accounting includes all of the following EXCEPT 104)A) developing budgets B) preparing special studies and forecastsC) implementing strategies D) preparing the statement of cash flows


105) Planning consists of all of these areas EXCEPT: 105)A) predicting results under various alternativesB) selecting organizational goalsC) evaluating performanceD) deciding how to attain the desired goals


106) Strategy is formulated by answering all of the following EXCEPT: 106)A) Who are our most important customers?B) Is industry demand growing or shrinking?C) How sensitive are purchasers to price, quality, and service?D) Will our external auditors certify our strategy?



107) The controller is usually responsible for banking, short- and long-term financing, investments,and cash management.

107)


108) An Enterprise Resource Planning (ERP) System is a single database that collects data and feedsinto applications that support each of the company's business activities, such as purchases,production, distribution, and sales.

108)



109) Long term financing is an integral part of the ________ function in an organization. 109)A) treasurer's B) president's C) controller's D) internal audit


110) ________ is the acquisition, coordination, and assembly of resources to produce a product ordeliver a service.

110)

A) Marketing B) Customer serviceC) Production D) Research and development


111) Management accounting: 111)A) reports information that has occurred in the past that is verifiable and reliableB) provides information that is generally available only on a quarterly or annual basisC) focuses on estimating future revenues, costs, and other measures to forecast activities and

their resultsD) provides information about the company as a whole


16

112) ________ is the detailed planning and engineering of products, services, or processes. 112)A) MarketingB) ProductionC) Design of products, services, or processesD) Distribution


113) Which of the following statements about customer value is NOT true? 113)A) It is possible to simultaneously lower cost and increase customer value.B) Creating value for customers is an important part of planning and implementing strategy.C) How our product delivers customer value should be determined as part of a company's

strategy formulation.D) Customer value is shown in a corporation's balance sheet.


114) Customer relationship management initiatives use technology to coordinate all: 114)A) production activities B) inventory management activitiesC) research activities D) customer-facing activities



115) Technological innovation has led to longer product-life cycles and lessened the need to bring newproducts to market more rapidly.

115)



116) Which of the following issues is NOT addressed by the Sarbanes-Oxley legislation? 116)A) disclosure practices of public corporationsB) disclosure practices of private companiesC) improving internal controlD) corporate governance



117) The key to a company's success is always to be the low cost producer in a particular industry. 117)Diff: 2 Type: TF Var: 1 Page Ref:

118) The best-designed strategies are valuable whether or not they are effectively implemented. 118)Diff: 1 Type: TF Var: 1 Page Ref:

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119) If there is an ethical conflict concerning your direct supervisor, when is it appropriate to contactauthorities or individuals NOT employed by the organization?

119)

A) when your supervisor is about to receive a bonusB) when there is a personal conflictC) when you are about to be terminatedD) when there is a clear violation of the law



120) Cost accounting provides information only for management accounting purposes. 120)Diff: 1 Type: TF Var: 1 Page Ref:


121) Managers use management accounting information to ________ strategy. 121)A) communicate B) chooseC) implement D) All of these answers are correct.



122) What areas of responsibility does a chief financial officer have in a typical organization?Diff: 3 Type: ES Var: 1 Page Ref:


123) Financial accounting provides a historical perspective, whereas management accountingemphasizes:

123)

A) reports to shareholders B) the futureC) a current perspective D) past transactions


124) Employees ________ how their performance is measured. 124)A) pay no attention to B) rarely knowC) pay close attention to D) None of the above are correct.



125) When a particular aspect of employee performance is measured, employees pay more attention toit.

125)


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126) The value chain is the sequence of business functions in which: 126)A) products and services are evaluated with respect to their value to the supply chainB) value is deducted from the products or services of an organizationC) value is proportionately added to the products or services of an organizationD) usefulness is added to the products or services of an organization



127) Employees pay little attention to how their performance is measured. 127)Diff: 1 Type: TF Var: 1 Page Ref:


128) A report showing the actual financial results for a period compared to the budgeted financialresults for that same period would most likely be called a:

128)

A) strategic plan B) revised planC) management forecast D) performance report


129) R&D, production, and customer service are business functions that are all included as part of: 129)A) benchmarking B) marketingC) the value chain D) the supply chain



130) Management accounting information focuses on external reporting. 130)Diff: 1 Type: TF Var: 1 Page Ref:

131) Financial accounting is broader in scope than management accounting. 131)Diff: 2 Type: TF Var: 1 Page Ref:


132) Describe the value chain and how it can help organizations become more effective.Diff: 3 Type: ES Var: 1 Page Ref:


133) Which statement is true? 133)A) Management is primarily a technical activity.B) Resources should be spent if the expected benefits to the company are less than the expected

costs.C) Employees spend more attention on those variables that are getting measured.D) People do not react to measurements.


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134) Value chain refers to its value to the employee. 134)Diff: 1 Type: TF Var: 1 Page Ref:


135) ________ aims to improve operations throughout the value chain and to deliver productsand services that exceed customer expectations.

135)

A) Customer response time B) InnovationC) Cost and efficiency D) Total Quality Management



136) If a managerial accountant were NOT keeping up with current developments in managerialaccounting, that behavior might violate a competence standard of professional ethical behavior.

136)



137) All of the following report to the CFO EXCEPT the: 137)A) tax department manager B) controllerC) treasurer D) production manager


138) If there is an ethical conflict concerning your direct supervisor, you may contact all of the followinggroups EXCEPT:

138)

A) executive committee B) board of directorsC) local media D) audit committee


139) ________ is a strategy that integrates people and technology in all business functions to enhancerelationships with customers, partners, and distributors.

139)

A) Value-chain analysis B) Continuous quality improvementC) Supply-chain analysis D) Customer relationship management



140) Describe the major differences between management accounting and financial accountingfor the following:1. Primary users2. Focus and emphasis3. Rules of measurement and reporting

140)


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141) An ideal database should store information in a way that allows different managers to access theinformation they need.

141)


142) Cost management involves long-term and short-term decisions that attempt to increase value forcustomers and lower costs of products or services.

142)



143) Briefly describe how managers make use of management accounting information.Diff: 2 Type: ES Var: 1 Page Ref:


144) In order, list the five steps in the decision-making process. 144)Diff: 2 Type: SA Var: 1 Page Ref:


145) For optimal planning success it is best if each business function within the value chain is performedone at a time in sequence.

145)


146) A managerial accountant should NOT disclose confidential information to an outside party (suchas a newspaper) unless legally obligated to do so.

146)



147) Which item is NOT an area that customers want to see improved levels of performance in? 147)A) innovation B) cost and efficiencyC) quality D) profit



148) What competitive advantage could a company obtain from a successful cost management program?Diff: 2 Type: ES Var: 1 Page Ref:

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149) An Enterprise Resource Planning System can best be described as: 149)A) a collection of programs that use a variety of unconnected databasesB) a sophisticated means of linking two or more companies to facilitate their planning processesC) 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 salesD) a database that is primarily used by a purchasing department to determine the correct

amount of a particular supply item to purchaseDiff: 1 Type: MC Var: 1 Page Ref:

150) Whose perceptions of the company's products or services are the most important to the manager? 150)A) board of directors' perception B) president's perceptionC) stockholders' perception D) customers' perception



151) Management accountants might provide information on decisions on whether to buy a productfrom outside or manufacture it in-house.

151)



152) Financial accounting is concerned primarily with: 152)A) providing information for strategic and tactical decisionsB) profitability analysisC) external reporting to investors, creditors, and government authoritiesD) cost planning and cost controls


153) Responsibilities of a CFO include all of the following EXCEPT: 153)A) managing short-term and long-term financingB) providing financial reports to shareholdersC) preparing federal, state, and international tax returnsD) investing in new equipment



154) Cost management provides information that helps increase value for customers. 154)Diff: 1 Type: TF Var: 1 Page Ref:


155) Staff management includes: 155)A) distribution managers B) manufacturing managersC) purchasing managers D) human-resource managers


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156) For best results, cost management emphasizes independently coordinating supply chain activitieswithin your company and with other companies that act as suppliers and customers.

156)



157) Complete a performance report for the month of May, 2011, for the Daily Bulletin, a regional newspapershowing four columns: 1) Actual Result; 2) Budgeted Amount; 3) Difference: Actual Result minus BudgetedAmount; 4) Difference as a Percentage of Budgeted Amount, given the following data:

Actual pages sold 550Budgeted advertising pages 500Actual Advertising revenue $3,850,000Budgeted Advertising revenue $4,000,000

Does the report indicate any cause for managerial investigation?Diff: 3 Type: ES Var: 1 Page Ref:


158) Modern cost accounting takes the perspective that collecting cost information is a function of themanagement decisions being made.

158)


159) The controller is generally a staff position. 159)Diff: 1 Type: TF Var: 1 Page Ref:

160) Management accountants have important ethical responsibilities that are related to competence,confidentiality, integrity, and credibility.

160)


161) Control includes deciding what feedback to provide that will help with future decision making. 161)Diff: 1 Type: TF Var: 1 Page Ref:


162) Processing orders and shipping products or services to customers (alsocalled outbound logistics) is also known as

162)

A) customer focus B) marketingC) supply chain D) distribution


163) Which of the following descriptors refers to management accounting information? 163)A) It is verifiable and reliable.B) It is driven by rules.C) It provides reasonable and timely estimates.D) It is prepared for shareholders.


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164) Which of the following types of information are used in management accounting? 164)A) information focused on the long term B) financial informationC) nonfinancial information D) All of these answers are correct.



165) Strategic cost management describes cost management that specifically focuses on strategic issues. 165)Diff: 1 Type: TF Var: 1 Page Ref:

166) When confronted with a potential ethical conflict, a managerial accountant should not contact hisor her personal attorney concerning rights and obligations.

166)



167) ________ includes providing financial information for reports to managers and shareholders, andoverseeing the overall operations of the accounting system.

167)

A) External audit B) Internal audit C) Controllership D) TreasuryDiff: 2 Type: MC Var: 1 Page Ref:


168) Companies have to follow strict guidelines when designing a management accounting system. 168)Diff: 1 Type: TF Var: 1 Page Ref:


169) Line management includes: 169)A) human-resource managers B) manufacturing managersC) management-accounting managers D) information-technology managers



170) The supply chain describes the flow of goods, services, and information from the initial sources ofmaterials and services to the delivery of products to consumers.

170)


171) Integrity includes mitigating actual conflicts of interest, regularly communicating with businessassociates to avoid apparent conflicts of interest, and advising all parties of any potential conflicts.

171)


172) Staff management should NOT provide advice and assistance to line management. 172)Diff: 1 Type: TF Var: 1 Page Ref:

173) Managers always require the information in an accounting system to be presented in the sameformat.

173)


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174) Ethical challenges for management accountants include: 174)A) whether to accept gifts from suppliers, knowing it is an effort to indirectly influence decisionsB) whether to report unfavorable department information that may result in unfavorable

consequences for a friendC) whether to file a tax return this yearD) Both A and B are correct.


175) The ________ is primarily responsible for management accounting and financial accounting. 175)A) controller B) COO (Chief Operating Officer)C) CIO (Chief Information Officer) D) treasurer



176) Cost management is narrowly focused on a continuous reduction of costs. 176)Diff: 2 Type: TF Var: 1 Page Ref:


177) For each report listed below, identify whether the major purpose of the report is for (1)routine internal reporting, (2) nonroutine internal reporting, or for (3) external reporting toinvestors and other outside parties.

Item:a. study detailing sale information of the top-ten selling productsb. weekly report of total sales generated by each store in the metropolitan areac. annual Report sent to shareholdersd. monthly report comparing budgeted sales by store to actual sales

177)



178) The approaches and activities of managers in short-run and long-run planning and controldecisions that increase value for customers and lower costs of products and services are known as:

178)

A) enterprise resource planning B) value chain managementC) cost management D) customer value management


179) The person most likely to use ONLY financial accounting information is a: 179)A) current shareholder B) department managerC) vice president of operations D) factory shift supervisor



180) To take advantage of changing market opportunities, the annual budget should be strictlyenforced.

180)


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181) ________ describes the flow of goods, services, and information from the initial sources ofmaterials and services to the delivery of products to consumers, regardless of whether thoseactivities occur in the same organization or in other organizations.

181)

A) The supply chain B) Product differentiationC) Distribution D) The value chain


182) Which of the following people is LEAST likely to use management accounting information? 182)A) the controllerB) an assembly department supervisorC) the treasurerD) a shareholder evaluating a stock investment


183) Management accounting is considered most likely to be successful when it: 183)A) is timelyB) helps creditors evaluate the company's performanceC) helps investors improve their decisionsD) is relevant and reported annually



184) Discuss the cost-benefit approach guideline management accountants use to provide value in strategic decisionmaking.Diff: 3 Type: ES Var: 1 Page Ref:


185) The supply chain refers to the sequence of business functions in which customer usefulness isadded to products or services.

185)


186) Cost accounting measures and reports short-term, long-term, financial, and non financialinformation.

186)


187) An external audit includes reviewing and analyzing financial and other records to attest to theintegrity of the organization's financial reports and to adherence to its policies and procedures.

187)



188) Linking rewards to performance: 188)A) helps to motivate managersB) should only be based on financial informationC) allows companies to charge premium pricesD) All of these answers are correct.


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189) The key to a company's success is creating value for customers while differentiating itself from itscompetitors.

189)



190) Which item is an indication of credibility under the Standards of Ethical Conduct? 190)A) Abstain from engaging in or supporting any activity that might discredit the profession.B) Refrain from using confidential information for unethical or illegal advantage.C) Maintain an appropriate level of professional expertise by continually developing knowledge

and skills.D) Disclose delays or deficiencies in information, timeliness, processing, or internal controls in

conformance with organization policy and/or applicable law.Diff: 2 Type: MC Var: 1 Page Ref:

191) The act of simply measuring and reporting information: 191)A) focuses the attention of employees on those processesB) disproves the saying "What gets measured gets managed."C) has no effect on employee behaviorD) diverts employee's attention to other activities



192) A performance report compares actual performance to the amount budgeted. 192)Diff: 1 Type: TF Var: 1 Page Ref:

193) The Institute of Management Accountants provides a hotline to discuss ethical issues. 193)Diff: 1 Type: TF Var: 1 Page Ref:

194) If a managerial accountant suspected his or her immediate superior of wrongdoing, themanagerial accountant should request an immediate meeting with the Board of Directors.

194)



195) A budget can serve as: 195)A) a control toolB) a planning toolC) a planning and control toolD) a basis for preparing financial statements


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Answer KeyTestname: CH1

1) C2) FALSE3) FALSE4) TRUE5) A6) FALSE7) TRUE8) A9) B

10) FALSE11) D12) a. (4) marketing

b. (3) productionc. (5) distributiond. (4) marketinge. (5) distributionf. (3) productiong. (1) research and developmenth. (2) design

13) D14) Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to

accomplish its objectives. In other words, strategy describes how a company will compete.

Companies follow one of two broad strategies. One is provide a quality product or service at low prices. The other is tocompete on their ability to offer a unique product or service that is generally offered at a higher price.

15) TRUE16) A budget is a planning tool, a quantitative expression of a plan of action. First, actions are planned and then they are

communicated to the entire organization.

The budget also helps with coordination.17) A18) D19) TRUE20) D21) The management accountant should first consult any internal company procedures concerning the resolution of

ethical issues, and make sure these procedures are followed as closely as possible. At the same time, the managementaccountant should make sure that the facts are accurate, and are not based on rumors or inaccurate information. Ifthese policies do not resolve the situation, present the facts to the next higher managerial level. Clarify the relevantethical issues with an objective advisor (e.g., Institute of Management Accountants hotline). Consult your ownattorney to be aware of your own rights and responsibilities. If all internal review procedures have still not resolvedthe ethical situation, the managerial accountant might have to resign and write an informative letter to an appropriaterepresentative of the organization, and perhaps notify other parties.

22) TRUE23) FALSE24) C25) C26) A

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27) As measurements are made on operations and, especially, on individuals and groups, the behavior of the individualsand groups are affected. People react to the measurements being made. They will focus on those variables or thebehavior being measured and spend less attention on variables and behavior that are not measured. In addition, ifmanagers attempt to introduce or redesign cost and performance measurement systems, people familiar with theprevious system will resist. Management accountants must understand and anticipate the reactions of individuals toinformation and measurements. The design and introduction of new measurements and systems must beaccompanied with an analysis of the likely reactions to the innovations.

28) B29) A30) B31) FALSE32) FALSE33) D34) TRUE35) B36) The purpose of this question is to explore some of the differences in business operations as a result of a broad strategic

choice. Answers will differ from student to student, but you should see some specific themes.

Operational Area Low Price Strategy Differential StrategyTarget customers Target customers might be

students on a tight budgetTarget customers might bemore wealthy students,faculty, or perhaps neighborswho live nearby.

Products offered Few products, heavyemphasis on tight cost control,probably set up as a highvolume operation.

High quality products,probably a reasonable choice,restaurant might have a lot ofambience.

Product pricing Priced at or lower than thecompetition in the area.

Higher priced products.

Location choice Convenient to the targetcustomers.

Not as convenient, perhaps ina higher-end shopping orentertainment area.Customers might seek out thehigh quality and be willing totravel a bit for it.

Advertisingcontent

Advertising would emphasizethe low price of the productsoffered.

Advertising would emphasizequality or ambience.

Advertising media Media that would be lookedat by the target customers,such as student newspapers.

Media that would be lookedat by the target customer, localmagazines and newspapers.

37) A38) FALSE39) TRUE40) TRUE41) C42) TRUE43) TRUE

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44) TRUE45) D46) Management accounting is more useful to an operations manager because management accounting reports operating

results by department or unit rather than for the company as a whole, it includes financial as well as nonfinancial datasuch as on-time deliveries and cycle times, and it includes quantitative as well as qualitative data such as the type ofrework that was needed on defective units.

47) A48) B49) FALSE50) Please note that answers may vary, but may include the following:

1. Competence: Maintain an appropriate level of professional expertise by continually developing knowledge andskills

2. Confidentiality: Refrain from using confidential information for unethical or illegal advantage

3. Integrity: Abstain from engaging in or supporting any activity that might discredit the profession

4. Credibility: Communicate information fairly and objectively51) FALSE52) D53) D54) B55) D56) TRUE57) By reporting and interpreting relevant data, the controller exerts a force or influence that impels management toward

making better-informed decisions.

The controller of Caterpillar described the job as "a business advisor to ...help the team develop strategy and focus theteam all the way through recommendations and implementation."

58) TRUE59) If customers who provide a company with the most profits are attracted, satisfied, and retained, profits will increase

as a result.60) FALSE61) FALSE62) A63) TRUE64) TRUE65) D66) B67) A68) FALSE69) There is some dispute about the correct answer to this question. Some will argue that it is not good for companies to

get "caught in the middle" because the customer might get confused as to whether or not the company is competing onprice or is trying to make some other appeal. If the customer is confused about how the company is giving them value,they might perceive they are getting no value and abandon the product to a competitor with a clearer customer valueproposition. The other side of the argument is that cost management is a necessary part of any strategy and even if thecompany chooses to pursue a differential strategy, management of the company should always be seeking ways tomanage costs and increase customer value simultaneously regardless of their strategy. The student should be able toarticulate one or the other arguments coherently.

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70) TRUE71) D72) TRUE73) TRUE74) B75) Management accounting provides information to internal decision makers of the business such as top executives,

managers, sales representatives, and production supervisors. Its purpose is to help managers predict and evaluatefuture results. Reports are generated often and usually broken down into smaller reporting divisions such asdepartment or product line. There are no rules to be complied with since these reports are for internal use only.Management accounting embraces more extensively such topics as the development and implementation of strategiesand policies, budgeting, special studies and forecasts, influence on employee behavior, and nonfinancial as well asfinancial information.

Financial accounting, by contrast, provides information to external decision makers such as investors and creditors. Itspurpose is to present a fair picture of the financial condition of the company. Reports are generated quarterly orannually and report on the company as a whole. The financial statements must comply with GAAP (generallyaccepted accounting principles). A CPA audits, or verifies, that the GAAP are being followed.

76) A77) FALSE78) Planning business operations relates to designing, producing, and marketing a product or service. This includes

preparing budgets and determining the prices and cost of products and services. A company must know the cost ofeach product and service to decide which products to offer and whether to expand or discontinue product lines.

Controlling business operations includes comparing actual results to the budgeted results and taking corrective actionwhen needed.

Feedback links planning and control. The control function provides information to assist in better future planning.79) B80) A81) a. (4) marketing

b. (3) productionc. (6) customer serviced. (5) distribution

82) B83) D84) TRUE85) A86) D87) B88) FALSE89) TRUE90) D91) D92) A93) Yes, an active cost management program can occur without an Enterprise Resource Planning (ERP) System. Cost

management is a philosophy that guides management in their short-run and long-run planning and control decisionsthat increase value for customers and lower costs of products and services. Cost management is not dependent on anyparticular system or database, but it is rather an overall philosophy of operation.

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94) Please note that answers will vary, but may include the following:

a. Planning: Decision by shareholder about whether to purchase more stock in the company.Control: Decision by bank to determine if financial ratios maintained in the line-of-credit (LOC) agreement

warrant increasing the LOC amount.

b. Planning: Decisions regarding future staffing needs.Control: Decision regarding whether the recent sales promotion led to an increase in revenue.

c. Planning: Decision of the store manager about whether to change the types of retail items carried.Control: Decision of the store manager regarding performance of the analyst that prepared the special study.

95) TRUE96) TRUE97) FALSE98) a. 3) Production

b. 5) Distributionc. 2) Design of products and processesd. 1) Research and developmente. 4) Marketingf. 2) Design of products and processesg. 4) Marketingh. 3) Production

99) D100) FALSE101) FALSE102) FALSE103) B104) D105) C106) D107) TRUE108) TRUE109) A110) C111) C112) C113) D114) D115) FALSE116) B117) FALSE118) FALSE119) D120) FALSE121) D122) The responsibilities vary among organizations, but generally include the following areas: controllership, treasury, risk

management, taxation, investor relations, and internal audit.123) B124) C125) TRUE

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126) D127) FALSE128) D129) C130) FALSE131) FALSE132) A value chain is a sequence of business functions whose objective is to provide a product to a customer or provide an

intermediate good or service in a larger value chain. These business functions include R&D, design, production,marketing, distribution, and customer service.

An organization can become more effective by focusing on whether each link in the chain adds value from thecustomer's perspective and furthers the organization's objectives.

133) C134) FALSE135) D136) TRUE137) D138) C139) D140) 1. The primary users of management accounting information are managers of the organization. The primary users

of financial accounting are external users such as investors, banks, regulators, and suppliers.2. Management accounting is future oriented. Financial accounting is past oriented.3. Management accounting measurement and reporting does not have to follow GAAP but are based on cost-benefitanalysis. Financial accounting measurement and reporting must be prepared in accordance with GAAP and becertified by external, independent auditors.

141) TRUE142) TRUE143) ONE: To choose strategy, to communicate it, and to determine how best to implement it.

TWO: To plan business operations related to designing, producing, and marketing a product or service. This includespreparing budgets and determining the prices and cost of products and services. A company must know the cost ofeach product and service to decide which products to offer and whether to expand or discontinue product lines.

THREE: To control business operations that includes comparing actual results to the budgeted results and takingcorrective action when needed.

144) 1. Identify the problem and uncertainties2. Obtain information3. Make predictions about the future4. Make decisions by choosing among alternatives5. Implement the decision, evaluate performance, and learn

145) FALSE146) TRUE147) D148) There are three broad outcomes from a successful cost management program: 1) costs are reduced with no loss in

customer value. In this scenario, a company might gain a competitive advantage by lowering its price with no loss inprofit, or maintain the same price and increase profit; 2) customer value is increased with no change in costs. Thisscenario might increase customer satisfaction resulting in increased customer loyalty and perhaps increase the overalldemand for the product; 3) customer value might be increased while costs are reduced simultaneously. This scenariowould result in the benefits described in both 1) and 2).

149) C33


150) D151) TRUE152) C153) D154) TRUE155) D156) TRUE157) The performance report should look something like the following:

ActualResult

(1)

BudgetedAmount

(2)

Difference (ActualResult - Budgeted

Amount)(3) = (1) - (2)

Difference as aPercentage of

Budgeted Amount(4) = (3) / (2)

Advertisingpages sold

550 pages 500 pages 50 pages Favorable 10.00% Favorable

Average rateper page(AdvertisingRevenues) /(Advertisingpages sold)

$7,000 $8,000 $1,000 Unfavorable 12.50%Unfavorable

Advertisingrevenues

$3,850,000 $4,000,000 $150,000Unfavorable

3.75% Unfavorable

The overall 3.75% unfavorable difference in advertising revenue is caused by offsetting differences in advertisingpages sold (favorable) and the average rate per page (unfavorable). The performance report highlights the favorableincrease in the advertising pages sold. While the percentage drop in advertising revenue per page is also dramatic,management might want to investigate the reasons behind such a drop. Some possibilities include: aggressive pricereductions to obtain revenue, or some aggressive competition, or an unrealistic budget.

158) TRUE159) TRUE160) TRUE161) TRUE162) D163) C164) D165) TRUE166) FALSE167) C168) FALSE169) B170) FALSE171) TRUE172) FALSE173) FALSE174) D175) A176) FALSE

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177) a. (2) nonroutine internal reportingb. (1) routine internal reportingc. (3) external reporting to investors and other outside partiesd. (1) routine internal reporting

178) C179) A180) FALSE181) A182) D183) A184) Management accountants continually face resource allocation decisions. The cost-benefit approach should be used in

making these decisions. Resources should be spent if the expected benefits to the company exceed the expected costs.The expected benefits and costs may not be easy to quantify, but it is a useful approach for making resource allocationdecisions.

185) FALSE186) TRUE187) FALSE188) A189) TRUE190) D191) A192) TRUE193) TRUE194) FALSE195) C

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Exam A) B)

Documents

Transcript of Exam A) B)