Answer: False Rationale: Providing information for external users is the role of financial accounting, not managerial accounting.. Answer: False Rationale: The decision to use part time
Trang 1Chapter 1
Managerial Accounting: Tools for
Decision Making
Learning Objectives – coverage by question
True / False Multiple Choice Exercises Problems Essays
LO1 – Contrast financial and
managerial accounting and
explain how managerial
accounting is used by decision
makers
1, 2
1-4, 22-27,
LO2 – Explain how an
organization’s mission, goals,
and strategies affect
managerial accounting
3, 4
5-12, 28-30,32-37, 64-39
2, 3
LO3 – Discuss the factors
determining changes in the
nature of business
competition
LO4 – Differentiate among
structural, organizational, and
activity cost drivers 6-8
15-19, 43-49,
LO5 – Explain the nature of
the ethical dilemmas
managers and accountants
confront
9, 10 20, 21,50-59,
62, 63
Trang 2Chapter 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 information to investment managers who
analyze a company’s stock for external investors
Answer: False
Rationale: Providing information for external users is the role of financial accounting, not managerial
accounting The role of managerial accounting is to provide information useful to internal managers
Topic: Value Chain Analysis
LO: 1
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: 2
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: 2
4 One of the companies to first employ a successful cost leadership strategy 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 atfull capacity
Topic: Competition
LO: 3
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
Trang 3Topic: Cost Drivers
LO: 4
6 The decision to use both fulltime and part time employees during the holiday season is an example of
a strategic cost driver
Answer: False
Rationale: The decision to use part time employees instead of only fulltime employees would be an
example of an organizational cost driver, not a strategic cost driver Strategic cost drivers involvechoices about the size and scope of operations and the type of technologies used in developingproducts and services to employees
Topic: Cost Drivers
LO: 4
7 All costs have at least one primary cost driver.
Answer: True
Rationale: Every cost is driven by either an activity or a structural or organizational choice.
Topic: Cost Drivers
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 law, 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 overtones
Answer: False
Rationale: While most 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 betempted to be unduly cautious so as to make it easier to meet the budget and receive a favorableperformance report (and possibly a larger bonus) for the next period
Trang 4Multiple Choice
Topic: Focus of Managerial Accounting
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 owedD) Providing managers 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 informationneeds 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 Accounting 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 should
be tailored to meet the needs of each individual organization
Topic: Limited Use of financial Accounting 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
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
Trang 5Topic: 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: 2
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
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, andproduct/service differentiation
Topic: Differentiation Strategy
LO: 2
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 may be related to customer service,technological leadership, or even market image
Trang 6Topic: Selecting a Strategy
Rationale: Strategy setting is part of the “planning” process, as opposed to organizing, motivating,
controlling, which occur after plans (strategies) have been adopted
Rationale: Organizing results in making the organization a well-ordered whole by implementation of
plans and strategies
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: 2
12 The act of delegating authority for implementing plans to other managers and employees can be
viewed as an aspect of:
Trang 7Topic: Price Competition
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
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: 4
15 _ are fundamental choices about the size and scope of operations and about
technologies employed in delivering products or services to customers
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: 4
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 company makes regarding the organization
of activities Deciding on the arrangement of merchandise in a store would be an example of anorganizational cost driver
Trang 8Topic: Cost Drivers
LO: 4
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 organizationalcost driver
Topic: Cost Drivers
LO: 4
18 _ are 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 upmachines to convert raw materials into products, inspecting, and shipping goods
Topic: Cost Drivers
LO: 4
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: A
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 Ethicalbehavior 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 frequentlysubjective
Trang 9Topic: 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
22 Financial accounting is primarily focused on:
A) Providing the Internal Revenue Service with information to determine the amount of taxes owedB) Providing managers with relevant information to help achieve organizational goals
C) Providing investors with useful information 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
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
Trang 10Topic: 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 annually
D) Keeps records 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 measure time or customer satisfaction
B) Future oriented
C) Subject to cost-benefit analysis
D) Highly aggregated statements
Answer: D
Topic: Organization’s Mission
LO: 2
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 products and services to customers
D) Providing high quality products and services to customers
Answer: D
Topic: Organization’s Goal
LO: 2
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 products and services to customers
C) Adopt a cost effective plan for providing new products and services to customers
D) Become the world’s largest provider of consumer goods
Answer: A
Topic: Organization’s Strategy
LO: 2
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 products and services to customers
C) Adopt a cost effective plan for providing new products and services to customers
D) Become the world’s largest provider of consumer goods
Answer: C
Trang 11Topic: Cost Leadership
LO: 1
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 applications for glassand ceramics
C) An online bookseller utilizing the Internet to differentiate itself from traditional booksellers
D) A manufacturer focused on designing and building corporate jet aircraft
A) A regional beer brewer that caters to local tastes
B) An automobile manufacturer that focuses on the rapid introduction of technological change in newautomobile design
C) An online bookseller utilizing the Internet to differentiate itself from traditional booksellers
D) A manufacturer focused on designing and building corporate jet aircraft
Answer: B
Topic: Planning
LO: 2
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 upcoming year
D) Assigning managers to different regional centers to facilitate distribution of goods to customers
Answer: C
Topic: Controlling
LO: 2
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 sales goals for the upcoming year
C) Delegating authority to employees to address customer complaints
D) Assigning managers to different regional centers to facilitate distribution of goods to customers