Midterm MBA 516 Flashcards
1) Managers use management accounting information to ________.
A) help external users such as investors, banks, regulators, and suppliers
B) communicate, develop, and implement strategies
C) communicate a firm’s financial position to investors, banks, regulators, and other outside parties
D) ensure that financial statements are consistent with the SEC rules
B) communicate, develop, and implement strategies
2) The primary user of management accounting information is a(n) ________.
A) the controller
B) a shareholder evaluating a stock investment
C) bondholder
D) external regulator
A) the controller
3) Financial accounting provides the primary source of information for ________.
A) decision making in the finishing department
B) improving customer service
C) preparing the income statement for shareholders
D) planning next year’s operating budget
C) preparing the income statement for shareholders
4) Which of the following statements refers to management accounting information?
A) There are no regulations governing the reports.
B) The reports are generally delayed and historical.
C) The audience tends to be stockholders, creditors, and tax authorities.
D) It primarily measures manager’s compensation on reported financial results.
A) There are no regulations governing the reports.
5) Which of the following groups would be least likely to receive detailed management accounting reports? A) stockholders B) sales managers C) production supervisors D) distribution managers
A) stockholders
True or False:
Financial accounting is broader in scope than management accounting.
False: Management accounting is broader in scope than financial accounting.
True or False:
Cost accounting measures and reports short-term, long-term, financial, and non-financial information.
True
True or False:
Management accounting has to strictly follow the rules of generally accepted accounting principles for the purposes of measurement and reporting.
False: Internal measures and reports do not have to follow GAAP.
True or False:
Cost management not only helps reducing costs but also improving customer satisfaction and the quality of a firm’s products.
True
Describe management accounting and financial accounting.
Management accounting provides information to internal decision makers of the business such as top executives, managers, sales representatives, and production supervisors. Its purpose is to help managers predict and evaluate future results. Reports are generated often and usually broken down into smaller reporting divisions such as department or product line. There are no rules to be complied with since these reports are for internal use only. Management accounting embraces more extensively such topics as the development and implementation of strategies and policies, budgeting, special studies and forecasts, influence on employee behavior, and nonfinancial as well as financial information.
Financial accounting, by contrast, provides information to external decision makers such as investors and creditors. Its purpose is to present a fair picture of the financial condition of the company. Reports are generated quarterly or annually and report on the company as a whole. The financial statements must comply with GAAP (generally accepted accounting principles). A CPA audits, or verifies, that GAAP is being followed.
11) Which of the following is not a concern for management accountants in formulating a strategy?
A) identifying the most important warehouse location for the distribution of goods
B) substituting products that exist in the marketplace
C) strategizing compliance with GAAP (Generally Accepted Accounting Principles)
D) maintaining adequate fixed assets available to implement the strategy
C) strategizing compliance with GAAP (Generally Accepted Accounting Principles)
This is more of a concern of financial accountants than of management accountants.
12) In designing strategy, a company must match its opportunities in the marketplace with ________.
A) environment friendly goals
B) its resources and capabilities
C) branding opportunities
D) the requirements of credit rating agencies
B) its resources and capabilities
13) Which of the following statements about customer value is true?
A) Customer value is shown in a corporation’s balance sheet.
B) Creating value for customers is an important part of planning and implementing strategy.
C) Customer value is the only focus that helps managers to formulate strategies.
D) Customer value is lost with increase in costs of the product.
B) Creating value for customers is an important part of planning and implementing strategy.
14) The key to a company’s success is creating value for customers while differentiating itself from its competitors.
True
15) The key to a company’s success is always to be the low cost producer in a particular industry.
False:
The low cost producer in a particular industry will not necessarily be successful.
True or False:
16) Management accountants should have little or no role in deciding on a company’s strategy.
False:
Management accountants should play a significant role in deciding on a company’s strategy.
17) Place the four business functions in the order they appear along the value chain:
Customer service
Design
Marketing
Production
A) Customer Service, Design, Production, Marketing
B) Customer Service, Marketing, Production, Design
C) Design, Production, Marketing, Customer Service
D) Design, Customer Service, Production, Marketing
C) Design, Production, Marketing, Customer Service
18) \_\_\_\_\_\_\_\_ is an after-sale support provided to customers. A) Distribution B) Customer service C) Production D) Marketing
B) Customer service
19) Management accounting information helps managers calculate a target cost for a product ________.
A) by subtracting from the target price the operating income per unit of product that the company wants to earn
B) by subtracting from the target price the net income per unit of product that the company wants to earn
C) by subtracting profit margin per unit from the target price of product that the company wants to earn
D) by adding the operating income per unit and the contribution margin per unit
A) by subtracting from the target price the operating income per unit of product that the company wants to earn
20) Customer response time involves ________.
A) the speed it takes a customer to respond to an advertisement and place an order
B) the speed at which an organization responds to customer requests
C) the speed it takes to develop a new product
D) the speed it takes an organization to develop a Total Quality Management (TQM) program
B) the speed at which an organization responds to customer requests
True or False:
21) Technological innovation has led to shorter product-life cycles and increased the need to bring new products to market more rapidly.
True
True or False:
22) Distribution refers to promoting and selling products or services to customers or prospective customers.
False:
Marketing refers to promoting and selling products or services to customers or prospective customers.
True or False:
23) Managers track the costs incurred in each value-chain category is to reduce costs and to improve efficiency.
True
True or False:
24) Managers rely on management accounting information to evaluate alternative investment and R&D decisions.
True
Production is the ________.
A) generation of, and experimentation with, ideas related to new products, services, or processes
B) processing orders and shipping products or services to customers
C) acquisition, coordination, and assembly of resources to produce a product or deliver a service
D) detailed planning and engineering of products, services, or processes
C) acquisition, coordination, and assembly of resources to produce a product or deliver a service
26) The most important planning tool is a \_\_\_\_\_\_\_\_. A) performance evaluation report B) fishbone diagram C) control chart D) budget
D) budget
27) Which of the following is true of planning?
A) It makes predictions about the future.
B) It assumes the functional hierarchy of any business is linear.
C) It improves the quality of products.
D) It evaluates customer feedback
A) It makes predictions about the future.
True or False:
28) To take advantage of changing market opportunities, the annual budget should be strictly enforced.
False:
To take advantage of changing market opportunities, the annual budget should be updated to reflect those changes.
True or False:
29) The process of preparing a budget forces coordination and communication throughout the company.
True
30) In order, list the five steps in the decision-making process.
- Identify the problem and uncertainties
- Obtain information
- Make predictions about the future
- Make decisions by choosing among alternatives
- Implement the decision, evaluate performance, and learn
31) Explain how a budget can help management implement strategy.
A budget is a planning tool, a quantitative expression of a plan of action. First, actions are planned and then they are communicated to the entire organization. The budget also helps with coordination.
32) The scenario that resources should be spent if the expected benefits to the company exceed the expected costs describes ________.
A) cost-benefit approach
B) behavioral and technical considerations
C) balanced scorecard
D) different costs for different purposes
A) cost-benefit approach
33) \_\_\_\_\_\_\_\_ includes providing financial information for reports to managers and shareholders, and overseeing the overall operations of the accounting system. A) Risk management B) Treasury management C) Controllership D) Strategic planning
C) Controllership
34) Which of the following is a function of a controller? A) operations administration B) controlling the stock price C) communication with the shareholders D) interest-rate risk management
A) operations administration
35) Which of the following differentiates confidentiality and credibility under the Standards of Ethical Conduct?
A) Credibility deals with refraining from activities that would prejudice carrying duties ethically, while confidentiality deals with communicating information fairly and objectively.
B) Confidentiality deals with refraining from the usage of critical information for unethical or illegal advantage, while credibility ensures disclosing the relevant information that would help the intended user’s understanding.
C) Credibility deals with refraining from the usage of critical information for unethical or illegal advantage, while confidentiality ensures disclosing the relevant information that would help the user’s understanding.
B) Confidentiality deals with refraining from the usage of critical information for unethical or illegal advantage, while credibility ensures disclosing the relevant information that would help the intended user’s understanding.
True or False:
36) Performing professional duties in accordance with relevant laws, regulations, and technical standards is a competent responsibility.
True
37) Comparing budgeted costs to actual costs helps managers to improve \_\_\_\_\_\_\_\_. A) coordination B) control C) implementation D) planning
B) control
38) Cost assignment ________.
A) includes future and arbitrary costs
B) encompasses allocating indirect costs to a cost object
C) is the same as cost accumulation
D) is the difference between budgeted and actual costs
B) encompasses allocating indirect costs to a cost object
True or False:
39) Accountants define a cost as a resource to be sacrificed to achieve a specific objective.
True
40) The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is \_\_\_\_\_\_\_\_. A) cost accumulation B) cost assignment C) cost tracing D) conversion costing
B) cost assignment
41) The determination of a cost as either direct or indirect depends upon the \_\_\_\_\_\_\_\_. A) accounting standards B) tax system chosen C) inventory valuation D) cost object chosen
D) cost object chosen
42) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is the ________.
A) material used to make the soccer balls
B) labor to shape the leather used to make the soccer ball
C) material used to manufacture the soccer studs
D) salary paid to plant supervisor
D) salary paid to plant supervisor
43) Which of the following is true of indirect costs?
A) Indirect costs are always considered sunk costs.
B) All indirect costs are included in cost of goods sold.
C) Indirect costs always vary in direct proportion to the level of production.
D) Indirect costs cannot be traced to a particular cost object in an economically feasible way.
D) Indirect costs cannot be traced to a particular cost object in an economically feasible way.
44) Which of the following statements is true of direct costs?
A) A direct cost of one cost object is a true sense of the budgeted costs.
B) All variable costs are direct costs.
C) A direct cost of one cost object can be an indirect cost of another cost object.
D) All fixed costs are direct costs.
C) A direct cost of one cost object can be an indirect cost of another cost object.
True or False:
45) The smaller the amount of a cost the more likely it is economically feasible to trace it to a particular cost object.
False:
The smaller the amount of a cost the less likely it is economically feasible to trace it to a particular cost object.
True or False:
46) A direct cost of one cost object can be an indirect cost of another cost object.
True
47) What are the differences between direct costs and indirect costs? Give an example of each.
Direct costs are costs that can be traced easily to the product manufactured or the service rendered. Examples of direct costs include direct materials and direct manufacturing labor used in a product. Indirect costs cannot be easily identified with individual products or services rendered, and are usually assigned using allocation formulas. In a plant that manufactures multiple products, examples of indirect costs include the plant supervisor’s salary and the cost of machines used to produce more than one type of product.
48) Cost behavior refers to ________.
A) how costs react to a change in the level of activity
B) whether a cost is incurred in a manufacturing, merchandising, or service company
C) classifying costs as either perpetual or period costs
D) whether a particular expense is expensed in the same or the following period
A) how costs react to a change in the level of activity
49) Fixed costs depend on the \_\_\_\_\_\_\_\_. A) amount of resources used B) amount of unchanged costs for a given time period C) volume of production D) total number of units sold
B) amount of unchanged costs for a given time period
