(Test Bank) Managerial Accounting

Morse, 8

Business

Test Bank

8th Edition

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Author(s): Morse

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Test Bank for Managerial Accounting, 8e Hartgraves Morse Chapter 1 Managerial Accounting: Tools for Decision Making Learning Objectives – Coverage by Question True/ False Multiple Choice Exercises Problems Essays LO1 – Contrast the different uses of financial and managerial accounting information. 1 1-3, 22, 23, 25 -27, 60, 61 LO2 – Describe the three themes of strategic cost management and illustrate how strategic cost management ca n be used to create a long -term competitive advantage. 2 4, 5, 24 1 LO3 – Examine how an organization’ s mission, goals, and strategies affect managerial accounting. 3, 4 6-12, 28 -37, 64-69 2, 3 LO4 – Analyze how trends in the business environmen t impact the role of management accounting. 5 13, 14, 38 -42 4 LO5 – Assess the nature of the ethical dilemmas managers and accountants confront. 9, 10 20, 21, 50-59, 62, 63 6 LO6 – Dem onstrate the use of structural, organizational, and activity cost drivers. 6-8 15-19, 43 -49, 70, 71 5 Chapter 1: Managerial Accounting: Tools for Decision Making True /False Topic: Role of Managerial Accounting LO: 1 1. A primary goal of managerial accounting is to provide informa tion to investment managers who analyze a company’s stock for external investors. Answer: False Rationale: Providing information for external users is the role of finan cial accounting, not managerial accounting. The role of managerial accounting is to provide information useful to internal managers. Topic: Value Chain Analysis LO: 2 2. Value chain analysis concerns the study of value -producing activities, stretching from basic raw materials to the final consumer of a product or service. Answer: True Rationale: Value chain analysis involves all of the activities that affect the conversion of raw materials into a final product or service. Topic: Organization’s Mission LO: 3 3. An organization’s mission is best described as the basic purpose toward which activities are directed . Answer: True Rationale: As opposed to an organization’s goals and strategies, its mission statement addresses the broad purposes for which the organization exists. Topic: Cost Leadership Strategy LO: 3 4. One of the companies to first employ a successful cost leaders hip strateg y was Carnegie Steel Company. Answer: True Rationale: Carnegie’s operating strategy was to push its own direct costs below those of competitors so that it could charge prices that would always ensure enough demand to keep its plants running at full capaci ty. Topic: Competition LO: 4 5. Competition among companies normally takes place only on the dimension of price/cost. Answer: False Rationale: Competition occurs not only on the basis of price/cost, but also on the dimensions of quality and service. Topic: Cost Drivers LO: 6 6. The decision to use both full -time and part -time employees during the holiday season is an example of a structural cost driver. Answer: False Rationale: The decision to use part -time employees instead of only full-time employees would be an example of an organizational cost driver, not a structural cost driver. Structural cost drivers involve fundamental choices about the size and scope of operations and technologies employed in de livering products or services to customers . Topic: Cost Drivers LO: 6 7. All costs have at least one primary cost driver. Answer: True Rationale: Every cost is driven by either an activity , a structural or an organizational choice. Topic: Cost Drivers LO: 6 8. Most costs are actually incurred as a result of activity cost drivers. Answer: True Rationale: Strategic and organizational choices give rise to specific activities that drive costs. Topic: Ethics LO: 5 9. The best criterion for determining if a given action or choice is ethical is to determine if it is legal, because all legal actions are inherently ethical. Answer: False Rationale: Ethics goes beyond legality, which refers to what is permitted under the la w, to consider the moral quality of an action. Topic: Ethics in Managerial Accounting LO: 5 10. Managers who prepare and/or have responsibility for managerial accounting information rarely encounter choices that have questionable ethical dimensions or ov ertones. Answer: False Rationale: While some choices that managers face are clearly ethical or unethical, many choices pose ethical dilemmas for managers. For example, when setting budgets for the next period, one may be tempted to be unduly cautious so as to make it easier to meet the budget and receive a favorable performance report (and possibly a larger bonus) for the next period. Multiple Choice Topic: Focus of Managerial Acco unting LO: 1 1. Managerial accounting is primarily focused on: A) Providing creditors information on the status of their loans B) Providing investors with useful information for valuing securities C) Providing the Internal Revenue Service with information to determine the amount of taxes owed D) Providing ma nagers with relevant information to help achieve organizational goals Answer: D Rationale: As the name implies, managerial accounting focuses on the information needs of managers internal to the business, unlike financial accounting, which addresses the information needs of investors, creditors, and other external stakeholders. Topic: Managerial Accounting Reports LO: 1 2. In order to be useful to managers, management accounting reports: A) Should be prepared according to the stated Institute of Management Accounting guidelines B) Should be prepared according to Generally Accepted Accountin g Principals C) Should be prepared to meet the specific needs of decision makers D) Should not be prepared prior to the end of a fiscal reporting period Answer: C Rationale: There are no specific standards for preparing managerial accounting reports. They shou ld be tailored to meet the needs of each individual organization. Topic: Limited Use of Financial A ccounting Information LO: 1 3. Financial accounting information is least useful in providing: A) Aggregate information about an organization’s assets, obligations and performance B) Information for stating corporate wide goals C) Information for internal decision makers D) Periodic reports for shareholders Answer: C Rationale: Financial accounting, which is concerned primarily with the information needs of a broad population of parties external to the organization, has limited value in meeting the information needs of internal managers. Topic: Components of Strategic Cost Man agement LO: 2 4. The three analyses that comprise strategic cost management include each of the following except : A) Ratio analysis B) Cost driver analysis C) Strategic position analysis D) Value chain analysis Answer: A Rationale: Strategic cost management has been defined to include all of the above except ratio analysis. Topic: Strategic Position Analysis LO: 2 5. Strategic Position Analysis is best defined as: A) The process of making the organization into a well ordered whole B) Fundamental choices about the size and scope of operations and technologies C) The formulation of a program for a specific goal D) An organization’s basic way of competing to sell products and services Answer: D Rationale: Strategic position analysis involves the fundamental choices companies make for positioning itself in the market in relation to competitors. Topic: Organization Goals LO: 3 6. A goal is best defined as: A) The mission of an organization B) The implementation of specific ideas C) The fundamental purpose of an organization D) A definable and measurable objective Answer: D Rationale: A goal is related to an objective, as opposed to mission and strategy which have to do with the fundamental purpose and implementation of a plan. Topic: Strategic Positioning LO: 3 7. Which of the following is not one of the three strategic positions that Porter views as lead ing to business success? A) Market niche B) Cost leadership C) All things to all people D) Product or service differentiation Answer: C Rationale: Michael Porter popularized the notion of “strategic positioning” in his book, Competitive Strategy , in which he identified three primary strategic positions: cost leadership, market niche, and product/service differentiation. Topic: Differentiation Stra tegy LO: 3 8. Product or service differentiation involves: A) Any changes made to a product or service B) The use of new technologies in manufacturing C) Shifting sales to growing markets D) Creating something that is perceived as unique and worth a premium price Answer: D Rationale: Product or service differentiation involves offering something that the competition does not offer and for which the customer is willing to pay a premium. It ma y be related to customer service, technological leadership, or even market image. Topic: Selecting a Strategy LO: 3 9. The process of selecting strategies to achieve goals is often referred to as: A) Controlling B) Organizing C) Motivating D) Planning Answer: D Rationale: Strategy setting is part of the “planning” process, as opposed to organizing, motivating, controlling, which occur after plans (strategies) have been adopted . Topic: Organizing LO: 3 10. The process of making the organization into a well -ordered whole is referred to as: A) Organizing B) Controlling C) Motivating D) Planning Answer: A Rationale: Organizing results in making the organization a well -ordered whole by implementation of plans and strategies. Topic: Controlling LO: 3 11. The process of ensuring that results agree with plans is referred to as: A) Controlling B) Decision making C) Organizing D) Planning Answer: A Rationale: Controlling is the process of ensuring that plans are carried out and that goals are achieved as a result of the organizing function. Topic: Organizing LO: 3 12. The act of delegating authority for implementing plans to other managers and employees can be viewed as an aspect of: A) Controlling B) Decision making C) Organizing D) Planning Answer: C Rationale: A key aspect of organizing is delegating authority to managers and employees throughout the organization. Topic: Price Competition LO: 4 13. To compete on the basis of price, the seller must most carefully manage: A) Service B) Product development C) Cost D) Quality Answer: C Rationale: Price competition depends on managing costs, including not only the initial selling price but the total cost of ownership throughout the life of the product. Topic: World -Class Competition LO: 4 14. World -class companies must continuously struggle to improve performance in the dimension(s) of: A) Price/cost B) Service C) Quality D) All of the above Answer: D Rationale: A “world -class” company is one that can compete globally on the basis of not just price/cost, but also on the basis of service and quality. Topic: Cost Drivers LO: 6 15. _______________ are fundamental choices about the size and scope of operations and about technologies employed in delivering products or services to customers. A) Activities B) Management systems C) Organizational strategies D) Structural cost drivers Answer: D Rationale: Structural cost drivers relate to the strategic decisions made by management about how the organization will seek to achieve its mission. Topic: Cost Drivers LO: 6 16. This is an organizational cost driver for a discount department store chain: A) The decision to price lower than a key competitor B) The decision to rearrange merchandise within a store C) The decision to issue a purchase order for raw materials D) The decision to sale product globally versus only domestically Answer: B Rationale: Organizational cost drivers are choices that a c ompany makes regarding the organization of activities. Deciding on the arrangement of merchandise in a store would be an example of an organizational cost driver. Topic: Cost Drivers LO: 6 17. A decision to work closely with a limited number of suppliers for the purpose of ensuring that the proper materials are available at the optimal time is an example of: A) A batch level cost driver B) An activity cost driver C) An organizational cost driver D) A structural cost driver Answer: C Rationale: Organizational cost drivers are choices that a company makes regarding the organization of activities. A decision to work with a limited number of suppliers is an example of an organizational cost driver. Topic: Cost Drivers LO: 6 18. _______________ ar e specific units of work performed to serve customer needs that consume costly resources. A) Activity cost drivers B) Customer cost drivers C) Organizational cost drivers D) Structural cost drivers Answer: A Rationale: Activity cost drivers are defined as specific units of work (activities) performed to serve customer needs that consume resources. Examples would include moving raw materials, setting up machines to convert raw materials into products, inspecting, and ship ping goods. Topic: Cost Drivers LO: 6 19. Examples of activity cost drivers include all of the following except: A) Inspecting incoming raw materials B) Machine time spent working on a product C) Deciding how to arrange raw materials inventory within the warehouse D) Receiving (loading) raw materials into the warehouse Answer: C Rationale: Activity cost drivers include all of the above except deciding how to arrange raw materials in the warehouse, which is an example of an organizational cost driver. Topic: Ethics in Managerial Accounting LO: 5 20. Ethical behavior: A) Always involves choosing between actions that are clearly right or wrong B) Is best guided by a policy of placing corporate performance above individual ends C) Is best described as any actions that are permitted by law D) Is not guided by well -defined rules and is often subjective Answer: D Rationale: Ethical behavior is not a matter only of determining actions that are clearly right or wrong, or that are legally permissible. What is legal may actually be unethical in some situations. Ethical behavior will not always be achieved merely by placing corporate performance above individual ends. Such behavior is typically not guided by a well -defined set of rules and regulations and is frequently subjective. Topic: Ethics in Managerial Accounting LO: 5 21. Ethics deals with: A) The propriety of a course of action B) The fitness of a course of action C) The moral quality of a course of action D) All of the above Answer: D Rationale: While difficult to define, ethics involves all of the above: fitness, moral quality, and propriety of course of action. Topic: Financial Accounting LO: 1 22. Financial accounting is primarily focused on: A) Providing the Internal Revenue Service with information to det ermine the amount of taxes owed B) Providing managers with relevant information to help achieve organizational goals C) Providing investors with useful info rmation for valuing securities D) Providing information for internal users Answer: C Topic: Managerial Accounting LO: 1 23. Managerial accounting is primarily focused on: A) Providing information for internal and external users B) Providing general purpose financial statements C) Providing special -purpose information and reports D) Following generally accepted accounting principles Answer: C Topic: Strategic Cost Management LO: 2 24. Which of the following is not a component of strategic cost management? A) Ratio analysis B) Value chain analysis C) Cost driver analysis D) Strategic position analysis Answer: A Topic: Managerial Accounting LO: 1 25. Managerial accounting must conform to which of the following standards? A) Generally Accepted Accounting Principles (GAAP) B) International Financial Reporting Standards (IFRS) C) Internal Revenue Service tax code D) None of the above Answer: D Topic: Managerial Accounting LO: 1 26. Which of the following phrases is most descriptive of managerial accounting? A) Often used to state corporate goals B) May be subjective C) Typically prepared quarterly or ann ually D) Keeps rec ords of assets and liabilities Answer: B Topic: Financial Accounting LO: 1 27. Which of the following phrases is most descriptive of financial accounting? A) May measur e time or customer satisfaction B) Future oriented C) Subject to cost -benefit analysis D) Highly agg regated statements Answer: D Topic: Organization’s Mission LO: 3 28. Which of the following statements best defines the mission of an organization? A) Increase next year’s sales by 10 percent over current year sales B) Become the world’s largest provider of consumer goods C) Adopt cost effective plan for providing new pro ducts and s ervices to customers D) Providing high quality products and services to customers Answer: D Topic: Organization’s Goal LO: 3 29. Which of the following statements best defines a goal for an organization? A) Increase next year’s sales by 10 percent over current year sales B) Providing high quality pro ducts and services to customers C) Adopt a cost effective plan for providing new prod ucts and services to customers D) Become the world’s lar gest provider of consumer good s Answer: A Topic: Organization’s Strategy LO: 3 30. Which of the following statements best defines a strategy for an organization? A) Increase next year’s sales by 10 percent over current year sales B) Providing high quality pro ducts and services to customers C) Adopt a cost effective plan for providing new prod ucts and services to customers D) Become the world’s larg est provider of consumer goods Answer: C Topic: Cost Leadership LO: 3 31. According to Michael Porter, which of the following is an example of cost leadership as a business strategy? A) A regional beer brewer that caters to local tastes . B) A glass manufacturer utilizing research and development to identify new appl ications for glass and ceramics . C) An online bookseller utilizing efficient scale facilities and overhead cost control. D) A manufacturer focused on designing and b uilding corporate jet aircraft . Answer: C Topic: Product or Service Differentiation LO: 3 32. According to Michael Porter, which of the following is an example of product or service differentiation as a business strategy? A) A regional beer brewer that caters to local tastes . B) An automobile manufacturer that focuses on the rapid introduction of technol ogical change in new automobile design . C) An online bookseller utilizing efficient scale facilities and overhead cost control. D) A manufacturer focused on designing and buildi ng corporate jet aircraft . Answer: B Topic: Planning LO: 3 33. Which of the following descriptions best describes the process of planning ? A) Comparing the budget with actual results B) Delegating authority to employees to address customer complaints C) Preparing a budget for an organization that meets sales goals for the upc oming year D) Assigning managers to different regional centers to facilitate dis tribution of goods to customers Answer: C Topic: Controlling LO: 3 34. Which of the following descriptions best describes the process of controlling? A) Comparing the budget with actual results B) Preparing a budget for an organization that meets sa les goals for the upcoming year C) Delegating authority to employees to address custome r complaints D) Assigning managers to different regional centers to facilitate dist ribution of goods to customers Answer: A Topic: Organizing LO: 3 35. Delegating responsibility and authority to employees in an organization is an example of: A) Planning B) Organizing C) Controlling D) Motivating Answer: B Topic: Line Department LO: 3 36. Which of the following departments often found in a merchandising organization would be classified as a line department? A) Maintenance B) Human Resources C) Payroll D) Home Furnishings Answer: D Topic: Line Department LO: 3 37. Which of the following employees often found in a manufacturing organization would be classified as part of a line department? A) Production Manager B) Treasurer C) Chief Information Officer (CIO) D) Controller Answer: A Topic: Key Dimensions of Competition LO: 4 38. Which of the following performance factors is least relevant for a “world -class” company to compete globally? A) Price/Cost B) Location C) Service D) Quality Answer: B Topic: Key Dimensions of Competition LO: 4 39. To stay competitive in the express delivery busine ss, both Federal Express and United Parcel Service must compete against each other based on which of the following? A) Price/Cost B) Service C) Quality D) All of the above Answer: D Topic: Key Dimensions of Competition LO: 4 40. To compete on the basis of price , the seller must carefully manage: A) The degree to which products or services meet customer’s needs. B) Timely delivery and customer support. C) Communications between buyer and seller. D) Operating and maintenance costs. Answer: D Topic: Key Dimensions of Competition LO: 4 41. To compete on the basis of quality , the seller must carefully manage: A) The degree to which products or services meet customer’s needs B) Timely delivery and customer supp ort C) Communic ations between buyer and seller D) Operating and maintenance costs Answer: A Topic: Key Dimensions of Competition LO: 4 42. To compete on the basis of service , the seller must carefully manage: A) The degree to which products or services meet customer’s needs B) Timely delive ry and customer support C) Communic ations between buyer and seller D) Operating and maintenance costs Answer: B Topic: Structural Cost Drivers LO: 6 43. Which of the following best defines a structural cost driver ? A) Fundamental choices about the size and scope of operations and technologies employed in delivering pro ducts or services to customers B) Choices concerning the organization of activities and the involvement of persons inside and outside the organization in d ecision making C) Specific units of work performed to serve customer need s that consume costly resources D) The process of ensurin g that results agree with plans Answer: A Topic: Organizational Cost Drivers LO: 6 44. Which of the following best defines an organizational cost driver? A) Fundamental choices about the size and scope of operations and technologies employed in delivering pro ducts or services to customers. B) Choices concerning the organization of activities and the involvement of persons inside and outside the organization in decision making C) Specific units of work performed to serve customer need s that consume costly resources D) The process of ensurin g that results agree with plans Answer: B Topic: Activity Cost Drivers LO: 6 45. Which of the following best defines an activity cost driver? A) Fundamental choices about the size and scope of operations and technologies employed in delivering pro ducts or services to customers B) Choices concerning the organization of activities and the involvement of pe rsons inside and outside the organization in decision making C) Specific units of work performed to serve customer need s that consume costly resources D) The process of ensurin g that results agree with plans Answer: C Topic: Activity Cost Drivers LO: 6 46. Which of the following is an example of an activity cost driver? A) Deciding how to arrange raw materials inventory within a warehouse B) Designing components of a product so they can fit together only in the correct manner C) Determining the best location for a manufacturing facility D) Receiving raw materials into the warehouse E) None of the above Answer: D