Chapter 1 Multiple choice

Question 1

What is the primary purpose of cost accounting?
a) To manage financial reporting for external stakeholders
b) To measure and report financial and nonfinancial information related to the cost of acquiring and using resources
c) To comply with government regulations
d) To predict future performance of a company

Answer 1

b) To measure and report financial and nonfinancial information related to the cost of acquiring and using resources

Question 2

Which of the following is not a goal of cost accounting?
a) Accumulation of costs (resources used to produce products)
b) Recovery of costs (purchases made by customers)
c) Making decisions for management strategies
d) Reporting to external parties

Answer 2

d) Reporting to external parties

Question 3

Which financial reports are typically used in financial accounting?
a) Balance Sheet, Income Statement, Cash Flow Statement
b) Cost Reports and Managerial Decision Reports
c) Financial performance analysis for internal management
d) Standard Cost and Budget Reports

Answer 3

a) Balance Sheet, Income Statement, Cash Flow Statement

Question 4

Which of the following is a decision that cost management might help with?
a) Reporting to shareholders
b) Identifying the economic health of the company
c) Closing a division
d) Preparing tax filings

Answer 4

c) Closing a division

Question 5

Who are the primary users of management accounting (cost accounting) information?
a) External stakeholders (such as investors)
b) Internal managers
c) Government tax authorities
d) Creditor

Answer 5

b) Internal managers

Question 6

What is the main objective of management accounting (cost)?
a) To report on past performance
b) To predict future performance
c) To comply with international accounting standards
d) To manage external relations with investors

Answer 6

b) To predict future performance

Question 7

Which of the following is not a report typically used in financial accounting?
a) Statement of Financial Position (SFP)
b) Statement of Comprehensive Income (SCI)
c) Statement of Cash Flow (SCF)
d) Budget Performance Report

Answer 7

d) Budget Performance Report

Question 8

What does cost management involve?
a) Identifying, reporting, and analyzing costs
b) Reporting past performance to external parties
c) Managing customer purchases and sales
d) Analyzing the company’s credit score

Answer 8

a) Identifying, reporting, and analyzing costs

Question 9

How does cost accounting support management decisions?
a) By providing external financial reports
b) By predicting the future performance based on past data
c) By analyzing and reporting on the company’s credit score
d) By organizing government tax filings

Answer 9

b) By predicting the future performance based on past data

Question 10

1. What is the primary purpose of business operations in a company?
   a) To ensure that resources are managed effectively for cost reduction
   b) To convert resources into a product or service that is ready for sale
   c) To analyze financial data for investors
   d) To manage customer relationships

Answer 10

b) To convert resources into a product or service that is ready for sale

Question 11

Which of the following is not typically involved in business operations?
a) Strategic decision-making
b) Day-to-day operational decisions when exceptions arise
c) Financial reporting for external stakeholders
d) Advanced information and analyses for decision-making

Answer 11

c) Financial reporting for external stakeholders

Question 12

What are the two broad strategies businesses use to compete in the market?
a) Cost leadership and revenue maximization
b) Cost leadership and value leadership
c) High quality and low cost
d) Profit margin and market share

Answer 12

b) Cost leadership and value leadership

Question 13

Which of the following best describes the concept of cost leadership?
a) Offering unique products at a higher price
b) Offering high-quality products for a low price
c) Focusing on premium services and products
d) Offering standard products at a low cost

Answer 13

b) Offering high-quality products for a low price

Question 14

What does the value chain represent?
a) A series of activities aimed at reducing costs across the company
b) A sequence of steps that add value to a product or service
c) A report on financial performance
d) The flow of goods from suppliers to consumers

Answer 14

b) A sequence of steps that add value to a product or service

Question 15

How does management accounting support the value chain?
a) By providing financial information for external stakeholders
b) By evaluating employee performance across departments
c) By providing financial data at each function in the value chain
d) By managing inventory and stock levels

Answer 15

c) By providing financial data at each function in the value chain

Question 16

What is the role of supply chain analysis?
a) To analyze financial performance across the company
b) To manage the flow of goods, services, and information from sources to consumers
c) To evaluate marketing strategies
d) To measure the effectiveness of management decisions

Answer 16

b) To manage the flow of goods, services, and information from sources to consumers

Question 17

What is the primary goal of cost management in the supply chain?
a) To increase product prices
b) To integrate and coordinate activities to reduce costs
c) To expand product offerings
d) To improve product quality

Answer 17

b) To integrate and coordinate activities to reduce costs

Question 18

Which of the following is the correct five-step decision-making process in management?
a) Identify problem, obtain info, make predictions, implement decisions, evaluate performance
b) Obtain info, make predictions, evaluate alternatives, make decisions, report results
c) Identify problem, analyze alternatives, implement decision, assess outcomes, set goals
d) Identify alternatives, implement solutions, evaluate performance, make predictions, identify problem

Answer 18

a) Identify problem, obtain info, make predictions, implement decisions, evaluate performance

Question 19

In management, what is the purpose of planning?
a) To evaluate performance and take corrective action
b) To predict future trends and develop financial reports
c) To analyze information and select and rank goals
d) To identify problems and implement solutions

Answer 19

c) To analyze information and select and rank goals

Question 20

What is control in the management process?
a) The process of setting goals and strategies
b) The measure and evaluation of performance and taking corrective action
c) The development of financial reports for external stakeholders
d) The identification of uncertainties and decision-making alternatives

Answer 20

b) The measure and evaluation of performance and taking corrective action

Question 21

Which of the following is a key guideline for management accounting?
a) Always prioritize short-term results over long-term goals
b) Costs should be analyzed for their technical and behavioral impact
c) Financial reports should be prepared only for internal use
d) Different departments should operate independently without coordination

Answer 21

b) Costs should be analyzed for their technical and behavioral impact

Question 22

What is the cost-benefit approach in management accounting?
a) Focusing only on financial costs without considering the benefits
b) Ensuring that the net benefits from using resources exceed the cost of those resources
c) Minimizing costs at all times
d) Reducing costs by eliminating non-essential resources

Answer 22

b) Ensuring that the net benefits from using resources exceed the cost of those resources

Question 23

Why is it important to recognize that different costs exist for different purposes in management accounting?
a) Because one cost concept cannot fit all purposes
b) Because it helps in reducing tax liabilities
c) Because it simplifies financial reporting
d) Because it encourages cost-cutting across all functions

Answer 23

a) Because one cost concept cannot fit all purposes