(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 914 pages, and the total size of the file is 6.71 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. 2) Administrative functions are not included as part of the value chain because they are implicitly included in every business function. 3) Under the value chain concept, value-added activities are those that firms perform and that customers perceive as adding utility to the goods they purchase. 4) The value chain is comprised of the activities that take place only during the production process. 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 value-added activities. 6) Cost information itself is a product with its own customers. 7) Financial accounting information is sufficient for making operational decisions. 8) Cost accounting information is commonly used in developing financial accounting information. 9) Financial accounting information is designed for decision-makers who are directly involved in the daily management of the firm. 10) It is more important for financial accounting information to be comparable between firms than to be useful for managerial decision-making. 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). 12) A cost driver is a factor that causes costs. 13) A cost can be considered a differential cost for one particular course of action but not for another course of action. 14) A responsibility center can be a department, division, or segment, but not a subsidiary of the parent company. 15) It is important that the manager assigned to lead a responsibility center be held accountable for its operations. 2 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. 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. 18) In general, if activities that do not add value to the company can be eliminated, then costs associated with them will also be eliminated. 19) Accounting systems are important because they are a primary source of information for managers. 20) Benchmarking is a continuous process of measuring a company's products, services, or activities against competitors' performance. 21) Activity-based costing (ABC) is a management tool that focuses on the continuous improvement of all dimensions of a business. 22) Lean manufacturing techniques are used only in the production process. 23) Typical ERP systems integrate information systems that link production, purchasing, human resources, and finance into a single comprehensive information system. 24) Managers face ethical situations on a daily basis, while accountants face them infrequently. 25) Compliance with Sarbanes-Oxley does not mean that the manager has met all of his or her ethical responsibilities. 26) Ethical behavior depends more on a firm's code of conduct than the individual's personal beliefs. 27) Cost accounting information can be used by managers to defraud customers, creditors, and owners. 28) The boundary between what is cost accounting and what belongs in another discipline is often blurred. 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. 3 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 30) Which of the following activities would not be considered a value-added activity? A) Production B) Marketing C) Accounting D) Distribution 31) Which of the following statements is false? 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 provide all the information for operational decisions commonly made by managers. C) The supply or distribution chain is a linked set of organizations that exchange goods and services in combination to provide a final product or service to the customer. D) Eliminating nonvalue-added activities always reduces costs without affecting the value of the product to customers. 32) Managers do not make decisions about future events based on: A) Perfect information. B) Estimated information. C) Actual information. D) Financial information. 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 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. 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. 4 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 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. 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 to as: A) budgeting. B) benchmarking. C) cost-benefit analysis. D) value-added analysis. 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. 39) The field of accounting that focuses on the criterion of relevant information rather than comparability of firms is: A) cost accounting. B) financial accounting. C) responsibility accounting. D) international accounting. 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. 41) (CIA adapted) The primary reason for adopting total quality management (TQM) is to achieve: A) reduced delivery time. B) reduced delivery charges. C) greater customer satisfaction. D) greater employee participation. 5 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 42) According to the Institute of Management Accountants (IMA), the final step in resolving an ethical dilemma is to: A) consult your own attorney as to legal obligations and rights concerning the ethical conflict. B) clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethical Counselor, an appropriate and confidential ethics hotline, or other impartial advisor. C) consult with the local police. D) discuss the situation with an immediate supervisor. 43) According to the Institute of Management Accountants (IMA), the first step in resolving an ethical dilemma is to: A) consult your own attorney as to legal obligations and rights concerning the ethical conflict. B) call the IMA's ethics hotline. C) clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethical Counselor or other impartial advisor. D) discuss the situation with an immediate supervisor, except when it appears that the supervisor is involved, or with the next level supervisor if involvement of the immediate supervisor is suspected. 44) Which of the following is not one of the basic standards of the Institute of Management Accountants (IMA) Code of Ethics? A) Competence B) Confidentiality C) Honesty D) Integrity 45) Which of the following is not one of the overarching ethical principles of the Institute of Management Accountants (IMA) Code of Ethics? A) Competence B) Responsibility C) Honesty D) Objectivity 46) A general term for a metric that indicates how well an individual, business, product, or firm is working is called: A) a performance measure. B) benchmarking. C) a budget. D) a responsibility center. 47) The cost accounting system that minimizes wasteful or unnecessary transaction processes is: A) performance measure. B) benchmarking. C) budgeting. D) lean accounting. 6 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 48) The continual process of measuring a company's own products, services, or activities against competitors' performance is: A) performance measure. B) benchmarking. C) budgeting. D) responsibility center. 49) The costing method that first assigns costs to activities and then assigns them to products based on the products' consumption of activities is called: A) lean accounting. B) responsibility centers. C) activity-based costing. D) budgeting. 50) Having one or more of the firm's activities performed by another firm or individual in the supply or distribution chain is called: A) lean accounting. B) responsibility centers. C) activity-based costing. D) outsourcing. 51) Systems that identify the costs of producing defective units as well as low-quality items that lose sales are called: A) customer relationship management systems. B) distribution chains. C) enterprise resource planning systems. D) cost of quality systems. 52) Systems that allow firms to target profitable customers by assessing customer revenue and costs are called: A) customer relationship management systems. B) distribution chains. C) enterprise resource planning systems. D) cost of quality systems. 53) Information technology that links the various processes of the company into a single comprehensive information system is called: A) a customer relationship management system. B) a distribution chain. C) a cost of quality system. D) an enterprise resource planning system. 7 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 54) A management method by which the organization seeks to excel on all dimensions of quality is called: A) customer relationship management. B) a just-in-time method. C) total quality management. D) cost of quality. 55) Which of the following is not a key financial manager in an organization? A) Chief financial officer B) Treasurer C) External auditor D) Controller 56) Which of the following is not normally considered part of the value chain? A) Research and development B) Purchasing C) Administration D) Distribution 57) In 2020, the TransUnion Company had consulting revenues of $1,000,000 while costs were $750,000. In 2021, TransUnion will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in costs. Assuming no changes are expected for the other services, operating profits are expected to increase between 2020 and 2021 by: A) $250,000. B) $150,000. C) $90,000. D) $60,000. 58) In 2020, the Merkel Company had revenues of $2,000,000 and costs of $1,500,000. During 2021, Merkel will be introducing a new product line that is expected to increase sales revenue by $200,000 and costs by $160,000. Assuming no changes are expected for the other products, the operating profits are expected to increase by: A) $540,000. B) $200,000. C) $160,000. D) $40,000. 59) Moving of inventory is an example of a(n): A) cost-benefit analysis. B) value-added activity. C) activity-based cost. D) nonvalue-added activity. 8 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 60) Costs that differ among or between two or more alternative courses of action are: A) differential costs. B) cost-benefit analysis. C) activity-based costs. D) cost drivers. 61) Which of the following activities would not be included in the value chain of a manufacturing company? A) Research and Development B) Customer Service C) Design D) Accounting 62) A firm's reply to customer questions via email would be an example of which component of the value chain? A) Customer Service B) Marketing C) Design D) Supply 63) The delivery of products or services to customers is an example of which element in the value chain? A) Production B) Design C) Marketing D) Distribution 64) Which of the following provides much of the information necessary for the coordination of the value chain? A) Distribution chain. B) Financial accounting system. C) Cost accounting system. D) Supply chain. 65) Advertising costs would be associated with which of the following value chain components? A) Production. B) Research and Development. C) Distribution. D) Marketing and sales. 66) Which part of the value chain is outside the firm? A) Design component B) Research and Development component C) Production activity D) Distribution chain 9 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 67) Which of the following statements regarding the value chain is true? A) Service firms benefit from the value chain more than manufacturing firms. B) Value chain components do not overlap. C) Value is not created until after the research and development stage. D) Administrative functions are not included as a separate component of the value chain. 68) Which of the following statements concerning the value chain is false? A) The goal of a value chain is to find areas where a company can either add value or reduce cost. B) The value chain focuses on the entire production process, as well as the sale of the product and service after the sale. C) If a company cannot compete in a specific area of the value chain, it might outsource that portion of the value chain to another entity which can perform it better. D) Successful firms are ones that operate within the entire value chain, thereby overseeing every aspect of the value chain for the customer. 69) Which of the following could be considered part of the value chain in a service firm? A) Inspection of product B) Advertising C) Raw materials D) Distribution 70) Place the four components in the order they appear along the value chain: A = Customer service; B = Design; C = Distribution; and D = Production. A) ABDC B) ACDB C) BDCA D) BADC 71) Managers evaluate value-added activities to determine how they contribute to the final product's: A) service only. B) quality only. C) cost only. D) service, quality, and cost. 72) Which of the following is the best reason why cost accounting information does not need to be comparable to similar information in other organizations? A) Because it is only used by investors and creditors. B) Because no publicly traded companies use cost accounting. C) Because IFRS and cost accounting are converging which eliminates the need for comparability. D) Because managers that use this information are making decisions only for their organization. 10 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 73) Financial accounting: A) focuses on the future. B) must comply with GAAP (generally accepted accounting principles). C) reports include detailed information on the various operating segments of the business. D) is prepared for the use of management. 74) The individual who would most likely use only financial accounting information in making decisions is a: A) vice president of marketing. B) factory supervisor. C) department manager. D) company shareholder. 75) The financial accounting system is the primary source of information for: A) decision making on the factory floor. B) improving the performance level of customer service. C) planning the budget for next year. D) preparing the income statement for shareholders. 76) Managerial decisions using cost accounting are more appropriate for which types of costs? A) future costs. B) historical costs. C) current costs. D) externally reported costs. 77) At the middle management level, where managers supervise work and make operating decisions, cost information highlights: A) the company's overall performance. B) comparability across firms. C) financial position and income according to accounting rules. D) some aspect of operations that is different from expectations. 78) Financial accounting provides a historical perspective, while cost accounting emphasizes: A) reporting to shareholders. B) a current perspective. C) the future. D) past transactions. 79) The concept of considering both the costs and benefits of a proposal is known as: A) cost-benefit analysis. B) performance measurement. C) nonvalue-added analysis. D) preparation of financial statements. 11 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 80) Departmental managers at Boswell Department Store are allowed considerable discretion in both sourcing and pricing of products, based on local tastes and competition, as well as being responsible for departmental staffing. Based on the concept of the responsibility center, which of the following would not be a performance measure that would be useful in evaluating the performance of departmental managers at the stores? A) Departmental profit compared to budgeted departmental profit. B) Trends in general and administrative expenses for each store. C) Growth in departmental sales compared to the prior period sales D) Departmental customer satisfaction. 81) Snuggle Toys, Inc. had the following summarized results for the month ending July 31: Actual Budget Revenues $ 60,000 $ 52,000 Costs 53,600 45,600 Operating profits $ 6,400 $ 6,400 As the cost accountant, which single statement related to the above financial results is most appropriate in the report to management? A) The departmental manager is performing to expectations because budgeted profits equals actual profits. B) Revenues are above budget and a bonus based on this increase should be considered. C) Costs as a percentage of revenues are above budget and a further scrutiny of the results might be appropriate. D) Costs are 17.5% above budget and the department manager's position should be critically evaluated by senior management. 82) CraftMaster Corporation purchased a machine 7 years ago for $339,000 when it launched product X05K. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 360 machine costing $353,000 or by a new model 280 machine costing $332,000. Management has decided to buy the model 280 machine. It has less capacity than the model 360 machine, but its capacity is sufficient to continue making product X05K. Management also considered, but rejected, the alternative of dropping product X05K and not replacing the old machine. If that were done, the $332,000 invested in the new machine could instead have been invested in a project that would have returned a total of $426,000. In making the decision to buy the model 280 machine rather than the model 360 machine, the differential cost was: A) $21,000. B) $87,000. C) $7,000. D) $14,000. 12 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 83) When comparing activity-based costing (ABC) with conventional costing methods, which of the following is the key benefit of the ABC method? A) It is cheaper to implement. B) It is based on only one or two factors, generally volume-related. C) It is simpler. D) It provides more accurate cost numbers. 84) Geno's Body Shop had sales revenues and operating costs in 2020 of $650,000 and $525,000, respectively. In 2021, Geno plans to expand the services it provides to customers to include detailing services. Revenues are expected to increase by $85,000 and operating costs by $50,000 as a result of this expansion. Assuming that there are no changes to the existing body shop business, operating profits would be expected to increase during 2021 by: A) $125,000. B) $85,000. C) $160,000. D) $35,000. 85) Geno's Body Shop had sales revenues and operating costs in 2020 of $650,000 and $525,000, respectively. In 2021, Geno plans to expand the services it provides to customers to include detailing services. Revenues are expected to increase by $85,000 and operating costs by $50,000 as a result of this expansion. Assuming that there are no changes to the existing body shop business, what is the amount of operating profits that are expected be earned in 2021? A) $125,000 B) $85,000 C) $160,000 D) $35,000 86) The goals and objectives of establishing budgeting in an organization include all of the following except: A) the ability to decide whether goals can be achieved. B) the resources needed to carry out its tasks. C) anticipated revenues to be generated. D) the consistent application of generally accepted accounting principles. 87) In 2020, the Allen Company had consulting revenues of $1,000,000, while operating costs were $750,000. In 2021, Allen will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in operating costs. Assuming no changes are expected for the other services, the differential operating costs for 2021 will be: A) $250,000. B) $150,000. C) $90,000. D) $60,000. 13 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 88) In 2020, the Allen Company had consulting revenues of $1,000,000 while operating costs were $750,000. In 2021, Allen will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in operating costs. Assuming no changes are expected for the other services, the differential revenue for 2021 will be: A) $250,000. B) $150,000. C) $90,000. D) $60,000. 89) San Juan, Inc. is considering two alternatives: A and B. The costs associated with the alternatives are listed below: Alternative A Alternative B Material costs $ 35,000 $ 57,000 Processing costs 36,000 57,000 Building costs 12,000 28,000 Equipment rental 19,000 19,000 Are the materials costs and processing costs differential in the choice between alternatives A and B? (Ignore the building costs and equipment rental in this question.) A) Neither materials costs nor processing costs are differential. B) Both materials costs and processing costs are differential. C) Only processing costs are differential. D) Only materials costs are differential. 90) San Juan, Inc. is considering two alternatives: A and B. The costs associated with the alternatives are listed below: Alternative A Alternative B Material costs $ 35,000 $ 57,000 Processing costs 36,000 57,000 Building costs 12,000 28,000 Equipment rental 19,000 19,000 If only the differential costs of the two decisions are considered, the total differential costs of Alternative B is: A) $161,000. B) $131,500. C) $59,000. D) $102,000. 14 Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written onsent of McGraw-Hill Education. 91) Two alternatives, identified X and Y, are under consideration at Hayden Corporation. Costs associated with the alternatives are listed below. Alternative X Alternative Y Material costs $ 44,000 $ 56,000 Processing costs 37,000 59,000 Building costs 14,000 14,000 Equipment rental 11,000 11,000 Are the materials costs and processing costs differential in the choice between alternatives X and Y? (Ignore the building costs and equipment rental in this question.) A) Both materials costs and processing costs are differential. B) Only materials costs are differential. C) Only processing costs are differential. D) Neither materials costs nor processing costs are differential. 92) Two alternatives, identified X and Y, are under consideration at Hayden Corporation. Costs associated with the alternatives are listed below. Alternative X Alternative Y Material costs $ 44,000 $ 56,000 Processing costs 37,000 59,000 Building costs 14,000 14,000 Equipment rental 11,000 11,000 What is the total differential costs of Alternative Y over Alternative X? A) $140,000 B) $123,000 C) $34,000 D) $106,000 93) Marcus Roberts is putting together a training session about value chain components. Which of the following would be a good example of a cost for the component of purchasing? A) Advertising B) Warranty repairs C) Vendor certification D) Patent applications 94) Anna Potts is putting together a training session about value chain components. Which of the following would be a good example of a cost for the component of distribution? A) Advertising B) Warranty repairs C) Vendor certification D) Website creation, hosting, and maintenance