(Test Bank) Fundamentals Of Cost Accounting

Lanen,Anderson,Maher, 6

Business

Test Bank

6th Edition

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Test Bank for Fundamentals Of Cost Accounting, The downloadable file consists of 2155 pages, and the total size of the file is 13.29 MB. Purchase now only for highly discounted price.

Author(s): Lanen, Anderson, Maher

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1 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. Fundamentals of Cost Accounting, 6e (Lanen) Chapter 1 Cost Accounting: Information for Decision Making 1) The value chain comprises activities from research and development through the production process but does not include activities related to the distribution of products or services. Answer: FALSE Explanation: The value chain comprises activities fro m research and development (R&D) through the production process and including distribution and customer service. Difficulty: 1 Easy Topic: Value Creation in Organizations Learning Objective: 01 -01 Describe the way managers use accounting information to c reate value in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 2) Administrative functions are not included as part of the value chain because they are implicitly included in every business function. Answ er: TRUE Explanation: This statement is true. Administrative expenses are not included as part of the value chain because they are included instead in every business function of the value chain. Difficulty: 1 Easy Topic: Value Creation in Organizations Learning Objective: 01 -01 Describe the way managers use accounting information to create value in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 3) Under the value chain concept, value -added activities a re those that firms perform and that customers perceive as adding utility to the goods they purchase. Answer: TRUE Explanation: The statement is true. Under the value chain concept, the value -added activities are those that the customer perceives as add ing utility to the goods or services they purchase. Difficulty: 2 Medium Topic: Value Creation in Organizations Learning Objective: 01 -01 Describe the way managers use accounting information to create value in organizations. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 2 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 4) The value chain is comprised of the activities that take place only during the production process. Answer: FALSE Explanation: This statement is false. The value chain comprises activities from research and development through the production process to customer service. Difficulty: 1 Easy Topic: Value Creation in Organizations Learning Objective: 01 -01 Describe the way managers use accounting information to create value in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 5) If a poor facility layout exists and work -in-process inventory must be moved during the production process, the company is likely to be performing some non value -added activities. Answer: TRUE Explanation: The statement is true. If a poor facility layout exists and work -in-process inventory must be moved during the production process, the company is likely to be performing nonvalue -added activities. Difficulty: 1 Easy Topic: Our Framework for Assessing Cost Accounting Systems Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Cost information itself is a product with its own customers. Answer: TRUE Explanation: The statement is true. Cost information itself is a product with its own customers, who are managers that need to control and improve operations. Difficulty: 1 Easy Topic: Accounting Systems Learning Objective: 01 -02 Distinguish between the uses and users of cost accounting and financial accounting information. Bloom's: Remember AACSB: Reflective Thinking Accessib ility: Keyboard Navigation 3 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 7) Financial accounting information is sufficient for making operational decisions. Answer: FALSE Explanation: The statement is false. Financial accounting information is not sufficient for making operational decisions. Difficulty: 1 Easy Topic: Accounting Systems Learning Objective: 01 -02 Distinguish between the uses and users of cost accounting and financial accounting information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Cost accounting information is commonly used in developing financial accounting information. Answer: TRUE Explanation: The statement is true. Cost accounting information is commonly used in developing financial accounting information. Difficulty: 1 Easy Topic: Accounting Systems Learning Objective: 01 -02 Distinguish between the uses and users of cost accounting and financial accounting information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Financial accounting information is designed for decision -makers who are directly involved in the daily management of the firm. Answer: FALSE Explanation: This statement is false. Financial accounting is designed for external parties; cos t accounting is designed for managers. Difficulty: 1 Easy Topic: Accounting Systems Learning Objective: 01 -02 Distinguish between the uses and users of cost accounting and financial accounting information. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 4 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 10) It is more important for financial accounting information to be comparable between firms than to be useful for managerial decision -making. Answer: TRUE Explanation: Important criteria for financial accounting in clude comparability and decision relevance (for investors); decision relevance (for managers) and timeliness are the important criteria for cost accounting. Difficulty: 2 Medium Topic: Accounting Systems Learning Objective: 01 -02 Distinguish between the uses and users of cost accounting and financial accounting information. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 11) Cost accounting information developed for managers to use in making decisions must comply with generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS). Answer: FALSE Explanation: This statement is false. In contrast to cost data for financial reporting to shareholders, cost data for manag erial use (that is, within the organization) need not comply with GAAP or IFRS. Difficulty: 2 Medium Topic: Accounting Systems Learning Objective: 01 -02 Distinguish between the uses and users of cost accounting and financial accounting information. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 12) A cost driver is a factor that causes costs. Answer: TRUE Explanation: This statement is true. A cost driver is a factor that causes costs Difficulty: 1 Easy Topic: Cost Data for Managerial Decisions Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Ke yboard Navigation 5 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 13) A cost can be considered a differential cost for one particular course of action but not for another course of action. Answer: TRUE Explanation: This statement is true. A differential cost is a cost that changes in response to a particular course of action. A cost may change in response to one course of action but not in response to a different course of action. Difficulty: 1 Easy Topic: Cost Data for Managerial Decisions Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 14) A responsibility center can be a department, division, or segment, but not a subsidiary of the parent company. Answer: FALSE Explanation: A responsibility center is a specific unit of an organization assigned to a manager who is held accountable for its operations and resources. As such, a department, division, segment, or subsidiary could be considered a responsibility center. Difficulty: 2 Medium Topic: Cost Data for Managerial Decisions Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizatio ns. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 15) It is important that the manager assigned to lead a responsibility center be held accountable for its operations. Answer: TRUE Explanation: The statement is true. Responsibility does not work without accountability. Difficulty: 1 Easy Topic: Cost Data for Managerial Decisions Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 6 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 16) Budgeting is primarily used to determine year -end bonuses based on managerial and organizational performance. Answer: FALSE Explanation: This statement is false. A budget is a financial plan of the revenues and resources needed to carry out activities and meet financial goals. Budgeting helps managers decide whether their goals can be achieved and, if not, what modifications a re necessary. Difficulty: 1 Easy Topic: Cost Data for Managerial Decisions Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Bloom's: Remember AACSB: Analytical Th inking Accessibility: Keyboard Navigation 17) Managers are usually responsible for the revenues needed to achieve the targets set during the budgeting process, but not the resources consumed to achieve those targets. Answer: FALSE Explanation: This st atement is false. Usually, managers are responsible for both the revenues and resources needed to carry out activities and meet financial goals. Difficulty: 2 Medium Topic: Cost Data for Managerial Decisions Learning Objective: 01 -03 Explain how cost acc ounting information is used for decision making and performance evaluation in organizations. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 18) In general, if activities that do not add value to the company can be eli minated, then costs associated with them will also be eliminated. Answer: TRUE Explanation: This statement is true. In general, if activities that do not add value to the company can be eliminated, then costs associated with them will also be eliminated . Difficulty: 1 Easy Topic: Our Framework for Assessing Cost Accounting Systems Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 7 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 19) Accounting systems are important because they are a primary source of information for managers. Answer: TRUE Explanation: This statement is true. Accounting systems are important because they are a primary source of information for managers. Difficulty: 1 Easy Topic: Our Framework for Assessing Cost Accounting Systems Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance eva luation in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 20) Benchmarking is a continuous process of measuring a company's products, services, or activities against competitors' performance. Answer: TRUE Explanation: This is the definition of benchmarking. Difficulty: 1 Easy Topic: Trends in Cost Accounting throughout the Value Chain Learning Objective: 01 -04 Identify current trends in cost accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 21) Activity -based costing (ABC) is a management tool that focuses on the continuous improvement of all dimensions of a business. Answer: FALSE Explanation: This statement is false. ABC is a costing method that assigns costs to activities and then assigns them to products based on the products' consumption of activities. Difficulty: 2 Medium Topic: Trends in Cost Accounting throughout the Value Chain Learning Objective: 01 -04 Identify current trends in cost acc ounting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 8 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 22) Lean manufacturing techniques are used only in the production process. Answer: FALSE Explanation: This statement is false. Lean manufacturing techniques can be applied to design, materials, and cost accounting decisions throughout the life of a product. Difficulty: 2 Medium Topic: Trends in Cost Accounting throughout the Value Chain Learning Objective: 01 -04 Identify current trends in cost accounting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 23) Typical ERP systems integrate information systems that link production, purchasing, human resources, and finance into a single comprehensive information system. Answ er: TRUE Explanation: This statement is true. ERP systems are integrated information systems that link the various systems of the enterprise into a single comprehensive information system. Difficulty: 2 Medium Topic: Trends in Cost Accounting throughout the Value Chain Learning Objective: 01 -04 Identify current trends in cost accounting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 24) Managers face ethical situations on a daily basis, while accountants face them infrequently. Answer: FALSE Explanation: This statement is false. Professional accountants, managers, and business owners face ethical situations on an everyday basis. Difficulty: 1 Easy Topic: Choices: Ethical Issues for Accounta nts Learning Objective: 01 -05 Understand ethical issues faced by accountants and ways to deal with ethical problems that you face in your career. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 9 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 25) Compliance with Sarbanes -Oxley d oes not mean that the manager has met all of his or her ethical responsibilities. Answer: TRUE Explanation: This statement is true. Compliance with Sarbanes -Oxley does not mean that the manager has met all of his or her ethical responsibilities. Difficu lty: 3 Hard Topic: Choices: Ethical Issues for Accountants Learning Objective: 01 -05 Understand ethical issues faced by accountants and ways to deal with ethical problems that you face in your career. Bloom's: Apply AACSB: Ethics Accessibility: Keyboa rd Navigation 26) Ethical behavior depends more on a firm's code of conduct than the individual's personal beliefs. Answer: FALSE Explanation: This statement is false. Codes of conduct look good on paper, but ultimately much of ethical behavior comes f rom an individual's personal beliefs. Difficulty: 2 Medium Topic: Choices: Ethical Issues for Accountants Learning Objective: 01 -05 Understand ethical issues faced by accountants and ways to deal with ethical problems that you face in your career. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 27) Cost accounting information can be used by managers to defraud customers, creditors, and owners. Answer: TRUE Explanation: The statement is true. The design of the cost account ing system has the potential to be misused to defraud customers, employees, or shareholders. Difficulty: 1 Easy Topic: Choices: Ethical Issues for Accountants Learning Objective: 01 -05 Understand ethical issues faced by accountants and ways to deal with ethical problems that you face in your career. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 10 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 28) The boundary between what is cost accounting and what belongs in another discipline is often blurred. Answer: TRUE Explanation: This statement is true. Real world problems are generally multidisciplinary. Difficulty: 2 Medium Topic: Accounting Systems Learning Objective: 01 -02 Distinguish between the uses and users of cost accounting and financial accounting informati on. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) The set of activities that transforms raw resources into the goods and services end users purchase and consume is called the: A) value chain. B) supply chain. C) demand chain. D) cost -benefit analysis. Answer: A Explanation: The value chain is the set of activities that transforms raw resources into the goods and services end users purchase and consume. Difficulty: 1 Easy Topic: Value Creation in Orga nizations Learning Objective: 01 -01 Describe the way managers use accounting information to create value in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 30) Which of the following activities would not be considered a value -added activity? A) Production B) Marketing C) Accounting D) Distribution Answer: C Explanation: Accounting for something does not add value; it is an administrative function. Difficulty: 2 Medium Topic: Value Creation in Organiza tions Learning Objective: 01 -01 Describe the way managers use accounting information to create value in organizations. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 11 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 31) Which of the following statements is false ? A) In essence, the value chain and the supply chain are similar; each creates something for which the customer is willing to pay. B) Financial accounting information is important because it is sufficient to p rovide all the information for operational decisions commonly made by managers. C) The supply or distribution chain is a linked set of organizations that exchange goods and services in combination to provide a final product or service to the customer. D) E liminating nonvalue -added activities always reduces costs without affecting the value of the product to customers. Answer: B Explanation: Financial accounting information is not sufficient for operational decisions made by managers. Difficulty: 2 Medium Topic: Value Creation in Organizations; Accounting Systems; Our Framework for Assessing Cost Accounting Systems Learning Objective: 01 -01 Describe the way managers use accounting information to create value in organizations.; 01 -02 Distinguish between t he uses and users of cost accounting and financial accounting information.; 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Bloom's: Understand AACSB: Analytical Thinking Accessibilit y: Keyboard Navigation 32) Managers do not make decisions about future events based on: A) Perfect information. B) Estimated information. C) Actual information. D) Financial information. Answer: A Explanation: Perfect information is never available; t here is always some uncertainty. Difficulty: 2 Medium Topic: Accounting Systems Learning Objective: 01 -02 Distinguish between the uses and users of cost accounting and financial accounting information. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 12 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 33) Which of the following is a nonvalue -added activity? A) Product design B) Customer service C) Research and development D) Rework of defective items Answer: D Explanation: Performing a task correctly adds value; correcting mistakes does not add value. Difficulty: 2 Medium Topic: Our Framework for Assessing Cost Accounting Systems Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance ev aluation in organizations. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 34) (CMA adapted) A costing method that first assigns costs to activities and then assigns them to products based on the products' consumption of those activities is: A) full -absorption costing. B) activity -based costing. C) variable costing. D) benchmarking. Answer: B Explanation: Activity -based costing is a costing method that first assigns costs to activities and then assigns them to produc ts based on the products' consumption of those activities. Difficulty: 1 Easy Topic: Trends in Cost Accounting throughout the Value Chain Learning Objective: 01 -04 Identify current trends in cost accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 13 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 35) (CMA adapted) Cost drivers are: A) activities that cause costs to increase as the activity increases. B) accounting techniques and practices used to control costs. C) accounting reimbursements used to evaluate whether performance is proceeding according to plan. D) a mechanical basis, such as machine hours, computer time, or factory square footage, used to assign costs to activities. Answer: A Explanation: Cost drivers are factors that cause costs. Difficulty: 1 Easy Topic: Cost Data for Managerial Decisions Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 36) During 2020, the Beach Restaurant had sales revenues and food costs of $800,000 and $600,000, respectively. During 2021, Beach plans to introduce a new menu item that is expected to increase sales revenues by $100,000 and food costs by $40,000. Assuming no changes are expected for the other food items, operating profits for 2021 are expected to increase by: A) $260,000. B) $100,000. C) $60,000. D) $40,000. Answer: C Explanation: Increase in operating prof its would be $100,000 − $40,000 = $60,000. Difficulty: 3 Hard Topic: Cost Data for Managerial Decisions Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation 14 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 37) (CMA adapted) The process of creating a financial plan of the revenues and resources needed to carry out activities and meet financial goals is referred t o as: A) budgeting. B) benchmarking. C) cost -benefit analysis. D) value -added analysis. Answer: A Explanation: Budgeting is the process of creating a financial plan of the revenues and resources needed to carry out activities and meet financial goals. Difficulty: 1 Easy Topic: Cost Data for Managerial Decisions Learning Objective: 01 -03 Explain how cost accounting information is used for decision making and performance evaluation in organizations. Bloom's: Remember AACSB: Analytical Thinking Accessib ility: Keyboard Navigation 38) The field of accounting that reports according to generally accepted accounting principles (GAAP) is called: A) cost accounting. B) financial accounting. C) managerial accounting. D) responsibility accounting. Answer: B Explanation: Financial accounting is governed by generally accepted accounting principles (GAAP). Cost, managerial, and responsibility accounting do not depend on GAAP. Difficulty: 1 Easy Topic: Accounting Systems Learning Objective: 01-02 Distinguish between the uses and users of cost accounting and financial accounting information. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 15 Copyright © 2020 McGraw -Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw -Hill Education. 39) The field of accounting that focuses on the criterion of relevan t information rather than comparability of firms is: A) cost accounting. B) financial accounting. C) responsibility accounting. D) international accounting. Answer: A Explanation: The important criterion of cost accounting is that information be relevan t for managers making operational decisions; individuals making decisions using financial accounting data are interested in comparing firms. Difficulty: 1 Easy Topic: Accounting Systems Learning Objective: 01 -02 Distinguish between the uses and users of cost accounting and financial accounting information. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 40) The just -in-time (JIT) method of production focuses on: A) increasing sales revenue. B) reducing inventories. C) increasing customer service. D) reducing operating expenses. Answer: B Explanation: JIT focuses on reducing inventories; the other items are all results or outcomes. Difficulty: 1 Easy Topic: Trends in Cost Accounting throughout the Value Chain Learning Objective: 01 -04 Identify current trends in cost accounting. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation