Chapter 1

Question 1

Summary of economic events during a period of time Shows Revenues generated by operations Expenses matched to those revenues Any gains and losses attributed to the period

Answer 1

Income Statement

Question 2

A summary of resource inflows and outflows stated in terms of cash Summarizes cash from Operating activities Investing activities Financing activities

Answer 2

Statement of Cash Flows

Question 3

A picture of the economic position of an organization at a specific time Shows Assets Claims on assets

Answer 3

Balance Sheet

Question 4

Primary focus is to assist management in decision making Provides management A framework to organize and evaluate data The information for decision making. Emphasis on achieving a company’s organizational goals

Answer 4

The focus of Managerial Accounting

Question 5

Consists of a blending of three themes: Strategic Position Analysis Cost Driver Analysis Value Chain Analysis

Answer 5

Strategic Cost Management

Question 6

The examination of a company’s basic way of competing to sell

Answer 6

Strategic Position Analysis

Question 7

The study of factors that cause or influence costs

Answer 7

Cost Driver Analysis

Question 8

The study of value-producing activities, from raw materials to consumers

Answer 8

Value Chain Analysis

Question 9

The basic purpose toward which a company’s activities are directed

Answer 9

Mission

Question 10

A definable measurable target or objective. Provides an organization with an identity and unifying purpose to ensure that all employees head in the right direction.

Answer 10

Goals

Question 11

A course of action that will assist in achieving one or more goals

Answer 11

Strategy

Question 12

Strategic Position Analysis

Answer 12

Michael Porter identified three possible strategic positions that lead to business success:

Question 13

Low costs creates higher profits at the same selling price as competition, or companies pursue aggressive price competition while remaining competitive

Answer 13

Cost Leadership

Question 14

Creates a perception of uniqueness and worth a premium price

Answer 14

Product or Service Differentiation

Question 15

Focusing on a specific market niche, such as a buyer group, segment of the product, or geographic market

Answer 15

Market Niche

Question 16

Managerial accounting supports the achievement of goals Careful budgeting Cost control Frequent and detailed performance reports

Answer 16

Managerial Accounting and Goal Attainment Managerial accounting supports the achievement of goals Careful budgeting Cost control Frequent and detailed performance reports

Question 17

Initial purchase price plus subsequent operating and maintenance costs

Answer 17

Price/Cost

Question 18

Degree to which products or services meet the customer’s needs

Answer 18

Quality

Question 19

Effects such as timely delivery, helpfulness of sales personnel, and subsequent support.

Answer 19

Service

Question 20

Managing activities requires understanding how costs respond to cost drivers

Answer 20

Activities Performance consumes resources that cost money

Question 21

Cost drivers are factors that influence costs

Answer 21

Costs Respond to cost driver

Question 22

A key determinant of success

Answer 22

Profit Increases when costs are lower

Question 23

Structural Cost Drivers Organizational Cost Drivers Activity Cost Drivers

Answer 23

Types of Cost Drivers

Question 24

Infrequent and difficult to change

Answer 24

Structural Cost Drivers

Question 25

Made within the context of previous structural cost driver decisions

Answer 25

Organizational Cost Drivers

Question 26

Units of work to serve customers

Answer 26

Activity Cost Drivers

Question 27

Fundamental choices about the size and scope of operations and technologies employed in delivering products or services to customers. Possible structural drivers Determining the size of stores Determining the type of construction Determining the location of stores Determining types of technology to employ in stores

Answer 27

Structural Cost Drivers

Question 28

Choices concerning the organization of activities and the involvement of persons inside and outside the organization in decision making. Possible organizational drivers Working closely with a limited number of suppliers Authorizing employees to make cost decisions Reorganizing equipment in the plant for efficiency Designing product components for efficiency Manufacturing low-volume products on lower cost equipment

Answer 28

Organizational Cost Drivers

Question 29

Specific units of work (activities) performed to serve customer needs that consume costly resources. Possible activity drivers Inspecting incoming raw materials Number of customer service phone calls Setting up a machine to work on a product Packing an order for shipment Processing a sales order Shipping a product

Answer 29

Activity Cost Drivers

Question 30

Deals with the moral quality, fitness, or propriety of a course of action Can injure or benefit people

Answer 30

Ethics

Question 31

Evolve from a series of small compromises Patterns of behavior become increasingly difficult to reverse Key to avoidance Recognizing and acting upon early warning signs of situations that involve questionable ethical behavior

Answer 31

Ethical dilemmas

Question 32

One of the most significant provisions of SOX is the emphasis on internal controls. Internal control systems are policies and procedures that exist to ensure company objectives are achieved with regard to: effectiveness and efficiency of operations reliability of financial reporting compliance with laws and regulations

Answer 32

Internal Control System