(Test Bank) Management And Cost Accounting

Drury,Tayles, 11

Business

Test Bank

11th Edition

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Author(s): Drury, Tayles

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Test Bank for Management and Cost Accounting, 11e Colin Drury, Mike Tayles Chapter 01 - Introduction to management accounting 1. ____ is devoted to providing information for external users. a. Management accounting b. Financial accounting c. Internal accounting d. Cost accounting ANSWER: b 2. Management accounting and financial accounting differ in that management accounting information is prepared a. following prescribed rules. b. using whatever methods the company finds beneficial. c. for shareholders. d. to summarize the whole company with little detail. ANSWER: b 3. The primary objective of management accounting is a. to provide shareholders and potential investors with useful information for decision -making. b. to provide banks and other creditors with information useful in making credit decisions. c. to provide management with information useful for planning and control of operations. d. to provide the relevant taxation authorities with information about taxable income. ANSWER: c 4. Management accounting is the branch of accounting concerned with reporting to a. internal managers. b. shareholders. c. the government. d. bankers. ANSWER: a 5. Which of the following characteristics does NOT pertain to management accounting? a. Provides information and estimates about future activity b. Generates specific -purpose financial statements and reports c. Provides financial and operating data multidisciplinary in scope d. Has externally imposed standards ANSWER: d 6. Which of the following does NOT describe management accounting? a. Evaluation of segments or products within the firm b. Emphasis on the future c. Externally focused d. Detailed information ANSWER: c Test Bank for Management and Cost Accounting, 11e Colin Drury, Mike Tayles Chapter 01 - Introduction to management accounting 7. Management accounting reports are prepared a. to meet the needs of decision -makers within the firm. b. whenever shareholders request them. c. according to guidelines prepared by the shares and Financial Services Authority. d. according to financial accounting standards. ANSWER: a 8. Cost accounting a. is concerned with assigning costs to various cost objects. b. attempts to satisfy the costing objectives of both financial accounting and management accounting. c. provides cost information that supports planning, controlling, and decision -making. d. All of the above descriptions are true. ANSWER: d 9. Which of the following costing activities is associated with the financial accounting system? a. Determining the cost of a department b. Determining the cost of goods sold for financial statements c. Preparing budgets d. Determining the cost of a customer ANSWER: b 10. Which of the following activities is NOT associated with the financial accounting information system? a. Reporting on the cost of quality b. Reporting to the shareholders c. Preparing reports for the tax authorities d. Preparing a statement of cash flows ANSWER: a 11. Factors that have led to a global market for manufacturing and service firms are a. improved transportation and communications systems. b. improved telemarketing and communications. c. improved distribution and transportation systems. d. None of these factors have contributed. ANSWER: a 12. Total quality management emphasizes a. zero defects. b. continual improvement. c. elimination of waste. d. all of the above. ANSWER: d Test Bank for Management and Cost Accounting, 11e Colin Drury, Mike Tayles Chapter 01 - Introduction to management accounting 13. Which of the following emerging themes in cost accounting deals with managers striving to create an environment that will enable workers to manufacture perfect (zero -defect) products? a. Advances in information technology b. Time as a competitive element c. Global competition d. Total quality management ANSWER: d 14. Competitive advantage is established by a. providing more customer products than competitors. b. providing better quality than competitors. c. providing greater customer value for less cost than competitors. d. providing greater efficiencies than competitors. ANSWER: c 15. Improvement in time performance is most likely NOT enhanced by a. redesign of products. b. adding processes in production. c. eliminating waste. d. eliminating non-value -added activities. ANSWER: b 16. Which of the following statements is NOT true about world -class firms? a. World -class firms are firms that are poor in customer support. b. World -class firms know their market and their products. c. World -class firms strive continually to improve product design, manufacture, and delivery. d. World -class firms can compete with the best of the best in a global environment. ANSWER: a 17. Accounting a. always has an external orientation. b. always has an internal orientation. c. information assists in planning and controlling. d. terms serve as a model of the organization. ANSWER: c 18. Monitoring the number of defects produced is an example of the management function of a. planning. b. control. c. decision -making. d. both planning and decision -making. Test Bank for Management and Cost Accounting, 11e Colin Drury, Mike Tayles Chapter 01 - Introduction to management accounting ANSWER: b 19. The setting of objectives and the identification of methods to achieve those objectives is called a. planning. b. controlling. c. performance evaluation. d. decision -making. ANSWER: a 20. Comparing actual quality costs with planned quality costs is an example of a. planning. b. controlling. c. performance evaluation. d. both controlling and performance evaluation. ANSWER: d 21. Which of the following statements correctly distinguishes between financial and management accounting? a. Management accounting reports on the whole organization. b. Financial accounting is oriented toward the future. c. Financial accounting is primarily concerned with providing information for internal users. d. Management accounting is oriented more toward the planning and control aspects of management. ANSWER: d 22. Setting the company's profit targets for the upcoming year is an example of the management function of a. planning. b. control. c. variance analysis. d. internal auditing. ANSWER: a 23. Setting the selling price of a company's product is an example of a. planning. b. control. c. decision -making. d. all of the above. ANSWER: c 24. Developing a company strategy for responding to anticipated new markets is an example of a. planning. b. control. c. decision -making. d. all of the above. Test Bank for Management and Cost Accounting, 11e Colin Drury, Mike Tayles Chapter 01 - Introduction to management accounting ANSWER: a 25. The planning process includes a. setting objectives. b. identifying means of achieving the objectives. c. making decisions. d. all of the above. ANSWER: d 26. Investigating production variances and adjusting the production process is an example of a. planning. b. control. c. internal auditing. d. both planning and internal auditing. ANSWER: b 27. Evaluating the performance of a segment of the company is an example of a. planning. b. control. c. internal auditing. d. both planning and internal auditing. ANSWER: b 28. Determining the bid your company should submit on a construction contract is an example of a. planning. b. control. c. decision -making. d. both planning and control. ANSWER: c 29. The formulation of a scheme or program for the accomplishment of a specific purpose or goal is referred to as a. controlling. b. motivating. c. organizing. d. planning. ANSWER: d 30. The monitoring of a plan's implementation is called a. planning. b. controlling. c. decision -making. d. budgeting. Test Bank for Management and Cost Accounting, 11e Colin Drury, Mike Tayles Chapter 01 - Introduction to management accounting ANSWER: b 31. Continuous improvement is NOT a. critical in a dynamic environment. b. important to finding and maintaining a competitive advantage. c. an effort to find ways to increase overall efficiency, improve quality and reduce costs. d. a responsibility of managers in world -class organizations. ANSWER: b 32. Principles of personal ethical behaviour that are essential to an ethical life include a. integrity. b. respect for others. c. accountability. d. all of these. ANSWER: d 33. Which one of the following statements about ethical behaviour is true? a. Ethical behaviour is not guided by well-defined rules and is often subjective. b. Ethical behaviour is best described as doing actions that are permitted by law. c. Ethical behaviour always involves choosing between actions that are clearly right or wrong. d. Ethical behaviour is best guided by a policy of placing corporate performance above individual ends. ANSWER: a 34. In resolving an ethical conflict, which of the following would never be appropriate? a. Discussing the matter with the chief executive officer b. Discussing the matter with an external member of the board of directors c. Taking the matter to the press where there is no legal requirement d. Resigning from the position because of a conflict ANSWER: c 35. Management accounting is concerned with which kind of decision? a. Product costing and pricing b. Continuous operational improvement c. Financial control d. All of the above ANSWER: d 36. One advantage of employee empowerment is a. it frees up some of the time of upper management for more strategic decision -making. b. workers can improve production processes in a timely manner. c. employees closest to the work can provide valuable input in increasing efficiency. d. all of the above are advantages Test Bank for Management and Cost Accounting, 11e Colin Drury, Mike Tayles Chapter 01 - Introduction to management accounting ANSWER: d 37. The overall objective of accounting information systems is to a. provide information to users. b. manage the organization. c. prepare financial reports. d. report to the government. ANSWER: a 38. Management accounting a. provides a framework to evaluate information in light of an organization's goals. b. provides relevant information to managers. c. provides relevant information to meet specific needs of persons inside the organization. d. all of the above ANSWER: d 39. Financial accounting information is least useful in providing a. information for stating corporate wide goals. b. information for internal decision -makers. c. periodic reports for shareholders. d. aggregate information about an organization's assets, obligations and performance. ANSWER: b 40. Management accounting is primarily concerned with a. providing investors with useful information for valuing securities. b. providing creditors information on the status of their loans. c. providing managers with relevant information to help achieve organizational goals. d. providing the relevant taxation authorities with information to determine the amount of taxes owed. ANSWER: c 41. To compete on the basis of price, the seller must carefully manage a. cost. b. service. c. quality. d. none of the above. ANSWER: a 42. World -class companies must continuously struggle to improve performance in the dimensions of a. price/cost. b. service. c. quality. d. all of the above. Test Bank for Management and Cost Accounting, 11e Colin Drury, Mike Tayles Chapter 01 - Introduction to management accounting ANSWER: d 43. Which of the following statements most accurately describes an effect of employee empowerment? a. Employee empowerment reduces the cost of implementing decisions. b. Employee empowerment decreases the speed in which decisions are made. c. Employee empowerment leads to an increased number of corporate staff positions. d. Employee empowerment places greater emphasis on decisions made by upper management. ANSWER: a 44. The development of IT has allowed management accountants to a. focus on the interpretation of information. b. become an adviser to business. c. provide business support. d. all of the above. ANSWER: d 45. The potential to influence and enhance management accounting information by revealing patterns and trends is best described as a. Internet of Things. b. artificial intelligence. c. big data. d. internet commerce. ANSWER: c 46. An important role for management accounting in light of the development of IT is a. ensuring that information is only accessible by management accountants. b. ensuring management have all information available. c. ensuring management are reliant on management accountants. d. ensuring information for management adds value. ANSWER: d 47. Briefly discuss the differences between financial and management accounting. ANSWER: Management accounting differs from financial accounting in the following major ways: (1) an internal focus, (2) emphasis on the future, (3) freedom from GAAP and other mandatory rules, (4) multidisciplinary and broader in scope, (5) evaluates individual segments within the firm, and (6) provides more detailed information. 48. Identify and discuss the emerging themes that are affecting the way cost accounting is practised. ANSWER: Seven emerging themes affecting cost element accounting are as follows: customer orientation, total quality management, time as a competitive factor, advances in information technology, advances in the manufacturing environment, service industry growth and global competition. Customer orientation, total quality management and time as a competitive factor require the accountant to create and track nonfinancial measures of customer satisfaction such as quality improvement and responsiveness. Advances in information technology have led to Test Bank for Management and Cost Accounting, 11e Colin Drury, Mike Tayles Chapter 01 - Introduction to management accounting the creation of relationship databases that allow a variety of users to develop their own reports based on their particular needs. Advances in the manufacturing environ ment are characterized by activity -based costing and the emergence of the JIT philosophy. Service industry growth has led to the need for increased management accounting information to improve productivity and quality. Finally, global competition means that companies are now competing with the best of the best. Accurate, timely, and relevant accounting data are crucial in appropriately managing cost. 49. What is customer orientation? Why is it important in a global environment? What role does cost management play in serving customers? ANSWER: Organizations are concerned with the importance and value that customers have for their processes, activities, products and services. Firms want to deliver value to customers in order to keep them and to attract new customers in an increasingly competitive global environment. Managing activities and costs is a critical component of managing the value chain. 50. Why has time become such an important factor in competition? ANSWER: Reducing the time that it takes to act means that companies are able to respond to customers and suppliers more quickly. It fosters adaptability and the ability to respond to changing demands. Reducing time is accomplished by reducing waste and non-value -added activities. Reducing activities and waste lowers cost and builds competitive advantage. 51. Personal computers significantly increase a manager's capabilities to process and use accounting information. Do you agree? Explain. ANSWER: Yes. Personal computers allow managers to access accounting data and to build their own reports and to perform many of their own analyses. 52. Describe the connection between planning, controlling and feedback. ANSWER: Planning establishes performance standards, feedback compares actual performance with planned performance, and control uses feedback to evaluate deviations from plans. 53. Give some examples of reporting feedback that will assist in continuous improvement of a dry cleaning company. ANSWER: A dry cleaner's will be interested in monitoring all aspects of performance. It may prepare performance reports on materials and labour usage, as well as on meeting revenue targets. It will want to keep track of things important to customers, turnaround time, customer satisfaction, types of complaints and requests for auxiliary services (i.e., delivery and tailoring). It may keep records about the characteristics of customers (i.e., profession, residence, age) to better understand their market. It will be interested in efficiency and productivity of labour and equipment. It might monitor the usage of capacity. It will be interested in reporting on all aspects of performance. 54. Describe a cost management information system, its objectives and major subsystems. ANSWER: The cost management information system is an accounting information subsystem that is primarily concerned with producing outputs for internal users using inputs and processes needed to satisfy management objectives. The objectives are as follows: 1. To provide information for costing out services, products and other objects of interest to managemen t. 2. To provide information for planning and control. 3. To provide information for decision -making. Test Bank for Management and Cost Accounting, 11e Colin Drury, Mike Tayles Chapter 01 - Introduction to management accounting The major subsystems of a cost management information system are the cost accounting information system and the operational control information system. 55. Identify the trends impacting management accounting and discuss the implications for management accounting. ANSWER: Changes in the manufacturing environment, brought about by the implementation of JIT manufacturing, increasing quality requirements, product diversity, diminishing product life cycles, automation and advances in information technology, are having a significant influence on the management accounting environment. Many traditional management accounting practices will be altered because of the revolution taking place among many manufacturing firms. Deregulation and growth in the service sector of our economy are also increasing the demand for management accounting practices. Name: Class: Date: Chapter 02 - An introduction to cost terms and concepts 1. A supervisor's salary of £2,000 per month is an example of a a. fixed cost. b. variable cost. c. step cost. d. mixed cost. ANSWER: a 2. Fixed cost per unit is £9 when 20,000 units are produced and £6 when 30,000 units are produced. What is the total fixed cost when nothing is produced? a. £120,000 b. £270,000 c. £15 d. £180,000 ANSWER: d 3. Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that is parallel to the horizontal axis? a. Total direct material costs b. A consultant paid £75 per hour with a maximum fee of £1,200 c. Employees who are paid £10 per hour and guaranteed a minimum weekly wage of £200 d. Rent on exhibit space at a convention ANSWER: d 4. Which of the following costs is a variable cost? a. Supervisors' salaries b. Research and development c. Materials used in production d. Rent ANSWER: c 5. As the volume of activity increases within the relevant range, the variable cost per unit a. decreases. b. decreases at first, then increases. c. remains the same. d. increases. ANSWER: c 6. Direct materials are an example of a a. fixed cost. b. variable cost. c. step cost. d. mixed cost. ANSWER: b 7. Which of the following statements is TRUE about fixed and variable costs? Name: Class: Date: Chapter 02 - An introduction to cost terms and concepts a. Both costs are constant when considered on a per-unit basis. b. Both costs are constant when considered on a total basis. c. Fixed costs are constant in total and variable costs are constant per unit. d. Variable costs are constant in total and fixed costs are constant per unit. ANSWER: c 8. The direct material cost is £10,000 when 2,000 units are produced. What is the direct material cost for 2,500 units produced? a. £10,000 b. £8,000 c. £15,000 d. £12,500 ANSWER: d 9. Holly Ltd. has the following costs for 1,000 units: Total Cost Cost per Unit Direct materials £ 1,500 £ 1.50 Direct labour 7,500 7.50 Depreciation on building 30,000 30.00 What is the total amount of direct materials for 100 units? a. £1.50 b. £3.00 c. £150.00 d. £225.00 ANSWER: c 10. Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that starts at the origin and reaches a maximum value and beyond the point that the line becomes parallel to the horizontal axis? a. Total direct material costs b. A consultant paid £100 per hour with a maximum fee of £2,000 c. Employees who are paid £15 per hour and guaranteed a minimum weekly wage of £300 d. Rent on exhibit space at a convention ANSWER: b 11. Adams Ltd. rents a truck for a flat fee plus an additional charge per mile. What type of cost is the rent? a. Fixed cost b. Mixed cost c. Variable cost d. Step cost ANSWER: b 12. Mixed costs contain both a. product and period costs. b. fixed and variable costs. Name: Class: Date: Chapter 02 - An introduction to cost terms and concepts c. direct and indirect costs. d. controllable and noncontrollable costs. ANSWER: b 13. If production volume increases from 8,000 to 10,000 units, a. total costs will increase by 20 per cent. b. total costs will increase by 25 per cent. c. total variable costs will increase by 25 per cent. d. mixed and variable costs will increase by 25 per cent. ANSWER: c 14. An equipment lease that specifies a payment of £5,000 per month plus £8 per machine hour used is an example of a a. fixed cost. b. variable cost. c. step cost. d. mixed cost. ANSWER: d 15. Which of the following is an example of a step-fixed cost? a. Cost of disposable surgical scissors, which are purchased in increments of 100 b. Cost of soaking solution to clean jewellery (each jar can soak 50 rings before losing effectiveness) c. Cost of tuition at £300 per credit hour up to 15 credit hours (hours taken in excess of 15 hours are free) d. Cost of disposable gowns used by patients in a hospital ANSWER: a 16. Salaries paid to shift supervisors is an example of a a. step-variable cost. b. step-fixed cost. c. variable cost. d. mixed cost. ANSWER: b 17. Sunk costs a. are future costs that have no benefit. b. are relevant costs that have only short -run benefits. c. are target costs. d. cannot be avoided. ANSWER: d 18. Which item is not an example of a sunk cost? a. Materials needed for production b. Purchase cost of machinery c. Depreciation d. All are sunk costs. Name: Class: Date: Chapter 02 - An introduction to cost terms and concepts ANSWER: a 19. Which of the following is an example of a fixed cost? a. Power cost in the machining department b. Wood in the manufacture of furniture c. Labour cost paid on a piece basis d. Lease payments on machinery ANSWER: d 20. Variable costs, a. in total, remain constant within a relevant range. b. on a per unit basis, are constant as activity increases or decreases. c. on a per unit basis, decreases as activity decreases. d. in total, decrease when activity increases. ANSWER: b 21. Which of the following is an example of a variable cost? a. Insurance on the production equipment b. Direct materials c. The production supervisor's salary d. Depreciation of the factory building ANSWER: b 22. Mixed costs a. are step costs. b. in total, remain constant within a relevant range. c. have a fixed and variable component. d. on a per unit basis, are constant as activity increases or decreases. ANSWER: c 23. Whether a cost is fixed or variable depends on the time horizon. In the long run, all costs are a. fixed. b. variable. c. mixed. d. step. ANSWER: b 24. Which statement describes step-cost behaviour? a. Discontinuous b. Displays a constant level of cost for a range of output and then jumps to a higher level at some point c. Must be purchased in chunks d. All of the above describe step-cost behaviour. ANSWER: d 25. An equipment lease that specifies payment of £1,000 per month plus £5 per machine hour used is an example of a Name: Class: Date: Chapter 02 - An introduction to cost terms and concepts a. fixed cost. b. variable cost. c. mixed cost. d. step cost. ANSWER: d 26. Which of the following cost behaviour patterns are unrelated to unit activity? a. Fixed costs b. Variable costs c. Step costs d. Mixed costs ANSWER: a 27. Which of the following costs would be classified as variable costs with respect to volume? a. Property taxes on the manufacturing facility b. The wheels on an automobile c. The cost of installing production equipment d. All of the above ANSWER: b 28. Which of the following costs would be classified as fixed costs with respect to volume? a. The salary of the manager of the Research and Development Department b. The cost of a copy machine in the Human Resource Department c. The property taxes on the manufacturing facility d. All of the above ANSWER: d 29. Which one of the following sentences about step costs is true? a. Step costs increase with each additional unit produced. b. Step costs have no relation to number of units produced. c. Step costs are constant within certain ranges of activity but differ outside those ranges of activity. d. Step costs are variable within narrowly defined ranges of activity, but constant over wider ranges of activity. ANSWER: c 30. A cost used up in the production of revenues is a(n) a. unexpired cost. b. expense. c. loss. d. asset. ANSWER: b 31. Which of the following is an example of a possible cost object? a. A product b. A customer