Management advisory services

TEST BANK – 01: ANSWER KEY

COVERAGE:
 Overview of Management Accounting

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For each of the following activities, identify whether the main role of, accounting is (1) problem solving, (2)
scorekeeping, or (3) attention directing.
1. Analyzing the impact of introducing a new product on production.
2. Comparing results between actual costs and budgeted costs for each step of manufacturing a product.
3. Preparing a report that analyzes changes in cost resulting from reducing the number of tubing sizes used during
production from six down to two.
4. Reporting sales by branch for the sales manager.

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Classify each cost item into one of the business functions of the value chain, either (1) R&D, (2) Design, (3) Production,
(4) Marketing, (5) Distribution, or (6) Customer service.
5. Cost of samples mailed to promote sales of a new product.
6. Labor cost of workers in the manufacturing plant.
7. Bonus paid to person with a 90% satisfaction rating in handling customers with complaints.
8. Transportation costs for shipping products to retail outlets.

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Classify each cost item of Regal Printers into one of the business functions of the value chain, either (1) R&D, (2)
Design, (3) Production, (4) Marketing; (5) Distribution, or (6) Customer service.
9. Cost of customer order forms.
10. Cost of paper used in manufacture of books.
11. Cost of paper used in packing cartons to ship books.
12. Cost of paper used in display at national trade show.
13. Depreciation of trucks used to transport books to college bookstores.
14. Cost of the wood used to manufacture paper.
15. Salary of the scientists attempting to find another source of printing ink.
16. Cost of defining the book size so that a standard-sized box is filled capacity.

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For each of the following activities, identify if the main role the accountant is performing — problem solving,
scorekeeping, or attention directing.
17. Preparing a monthly* statement of Australian sales for the IBM marketing vice president.
18. Interpreting differences between actual results and budgeted amounts on a performance report for the Customer
Warranty Department of General Electric.
19. Preparing a schedule of depreciation for forklift trucks in the Receiving Department of a Hewlett-Packard plant
in Scotland.
20. Analyzing, for a Mitsubishi international manufacturing manager, the desirability of having some auto parts
made in Korea.
21. Interpreting why a Birmingham distribution center did not adhere to its delivery costs budget.
22. Explaining a Xerox Shipping Department's performance report.
23. Preparing, for the manager of production control of a U.S. steel plant, a cost comparison of two computerized
manufacturing control systems.
24. Preparing a scrap report for the Finishing Department of a Toyota parts plant.
 Management advisory services
TEST BANK – 01: ANSWER KEY

25. Preparing the budget for the Maintenance Department of Mount Sinai Hospital.
26. Analyzing, for a General Motors product designer, the impact on product costs of some new headlight lamps.

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The items that follow are associated - with a management accounting in formation system.
27. Repairing a defective part.
28. Providing information for planning and control.
29. Designing a product.
30. Measuring the cost of design.
31. A-budget that shows how much should be spent on design activity.
32. Using output information to make a decision.
33. Usage of materials.
34. A report comparing the actual costs of quality with the expected costs of quality.
35. Surveying customers to assess post purchase costs.
36. Incurrence of post purchase costs.
37. Costing out products.
38. Assigning the cost of labor to a product.
39. Report showing the cost of a product.
40. Measuring the cost of quality.
Required: Classify the items into one of the following categories:
a. Inputs
b. Processes
c. Outputs
d. System objectives

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Listed below are several terms that relate to organizations, the work of management, and the role of managerial
accounting:

Budgets Chief Financial Officer Controller

Decentralization Directing and motivating Feedback
Financial accounting Line Managerial accounting
Nonmonetary data Performance report Planning
Precision Staff

Choose the term or terms above that most appropriately complete the following statements.
41. _____ is concerned with providing information for the use of those who are inside the organization, whereas
_____ is concerned with providing information for the use of those who are outside the organization.
42. _____ consists of identifying alternatives, selecting from among the alternatives the one that is best for the
organization, and specifying what actions will be taken to implement the chosen alternative.
43. When _____, managers oversee day-to-day activities and keep the organization functioning smoothly.
44. The accounting and other reports corning to management that are used in controlling the organization are called
_____.
45. The delegation of decision-making authority throughout an organization by allowing managers at various
operating levels to make key decisions relating to their area of responsibility is called _____.
46. A position on the organization chart that is directly related to achieving the basic " objectives of an organization
is called a _____ position.
47. A _____ position provides service or assistance to other parts of the organization and does not directly achieve
the basic objectives of the organization.
 Management advisory services
TEST BANK – 01: ANSWER KEY

48. The manager in charge of the accounting department is generally known as the _____.
49. The plans of management are expressed formally in _____.
50. A detailed report to management comparing budgeted data to actual data for a specific time period is called a
_____.
51. The _____ is the member of the top management team who is responsible for providing timely and relevant
data to support planning and control activities and for preparing financial statements for external users.
52. Managerial accounting places less emphasis on _____ and more emphasis on _____ than financial accounting.

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53. Which of the following statements is true?
a. Management accounting information focuses on external reporting.
b. The statement of financial position, income statement and statement of cash flows are used for financial
accounting but not for management accounting.
c. Financial accounting is broader in scope than management accounting.
d. Modern cost accounting plays a significant role in management decision making.
54. Which of the following statements is false?
a. Cost accounting, measures and reports short-term, long-tern financial, and nonfinancial information.
b. Cost management provides information that helps increase value for customers.
c. All strategies should be evaluated regarding the resources and capabilities of the company.
d. A good cost accounting system is narrowly focused on a continuous reduction of costs.
55. Which of the following statements is correct?
a. The best-designed strategies are valuable whether or not they are effectively implemented.
b. To take advantage of changing market opportunities, the annual budget should be strictly enforced.
c. Linking rewards to performance is a major deterrent to good management performance.
d. An important strategic decision is making the correct investments in productive assets.
56. All of the following statements are false except
a. Attention-directing activities should focus on cost-reduction opportunities, and not on value-adding
opportunities.
b. For strategic decisions, scorekeeping is the most prominent role played by management accounting.
c. A budget may be used as a planning tool, but not as a control tool.
d. Management accountants often are simultaneously doing problem-solving, scorekeeping, and attention-
directing activities.
57. Management accounting
a. focuses on estimating future revenues, costs, and other measures to forecast activities and their results.
b. provides information about the company as a whole.
c. reports information that has occurred in the past that is verifiable and reliable.
d. provides information that is generally available only on a quarterly or annual basis.
58. Financial accounting
a. focuses on the future and includes activities such as preparing next year's operating budget.
b. must comply with PFRS (Philippine Financial Reporting Standards).
c. reports include detailed information on the various operating segments of the business such as product lines or
departments.
d. is prepared for the use of department heads and other employees.
59. The person MOST likely to use management accounting information is a(n)
 Management advisory services
TEST BANK – 01: ANSWER KEY

a. banker evaluating a credit application.

b. shareholder evaluating a stock investment
c. governmental taxing authority.
d. assembly department supervisor.
60. Which of the following descriptors refers to management accounting information?
a. It is verifiable and reliable.
b. It is driven by rules.
c. It is prepared for shareholders.
d. It provides reasonable and timely estimates.
61. Which of the following groups would be LEAST likely to receive detailed management accounting reports?
a. Stockholders
b. Sales representatives
c. Production supervisors
d. Managers
62. Management accounting information includes
a. tabulated results of customer satisfaction surveys.
b. the cost of producing a product.
c. the percentage of units produced that are defective.
d. all of the above.
63. Which of the following types of information are used in management accounting?
a. Financial information
b. Nonfinancial information
c. Information focused on the long term
d. All of the above
64. Management accounting includes
a. implementing strategies.
b. developing budgets.
c. preparing special studies and forecasts.
d. all of the above.
65. Financial accounting is concerned PRIMARILY with
a. external reporting to investors, creditors, and government authorities.
b. cost planning and cost controls.
c. profitability analysis.
d. providing information for strategic and tactical decisions.
66. Financial accounting provides a historical perspective, whereas management accounting emphasizes
a. the future.
b. past transactions.
c. a current perspective.
d. reports to shareholders.
67. Strategy specifies
a. how an organization matches its own capabilities with the opportunities in the marketplace.
b. standard procedures to ensure quality products.
 Management advisory services
TEST BANK – 01: ANSWER KEY

c. incremental changes for improved performance.

d. the demand created for products and services.
68. Control includes
a. implementing planning decisions.
b. evaluating performance.
c. providing feedback to help with future decision making.
d. all of the above.
69. Linking rewards to performance
a. helps to motivate managers.
b. allows companies to charge premium prices.
c. should only be based on financial information.
d. does all of the above.
70. Control measures should
a. be set and not changed until the next budget cycle.
b. be flexible to allow for employees who are slackers.
c. be kept confidential from employees so that competitors don't have an opportunity to gain a competitive
advantage.
d. be linked by feedback to planning.
71. For control decisions, emphasis is placed on the role(s) of management accounting.
a. problem-solving
b. scorekeeping
c. attention-directing
d. both (b) and (c)
72. _____ means reporting and interpreting information that helps managers to focus on operating problems,
imperfections, inefficiencies, and opportunities.
a. Scorekeeping
b. Attention directing
c. Problem solving
d. None of the above
73. Management accounting is considered successful when it
a. helps creditors evaluate the company's performance.
b. helps managers improve their decisions.
c. is accurate.
d. is relevant and reported annually.
74. The Institute of Management Accountants (IMA)
a. is a professional organization of management accountants.
b. is a professional organization of financial accountants.
c. issues standards for management accounting.
d. issues standards for financial accounting.
75. Line management includes
a. manufacturing managers.
b. human-resource managers.
 Management advisory services
TEST BANK – 01: ANSWER KEY

c. information-technology managers.
d. management-accounting managers.
76. Staff management includes
a. manufacturing managers.
b. human-resource managers.
c. purchasing managers.
d. distribution managers.
77. Responsibility of a CFO include all EXCEPT
a. providing financial reports to shareholders.
b. managing short-term and long-term financing.
c. investing in new equipment.
d. preparing tax returns.
78. The Standards of Ethical Conduct for management accountants include concepts related to
a. competence, performance, integrity, and reporting.
b. competence, confidentiality, integrity and objectivity.
c. experience, integrity, reporting, and objectivity.
d. none of the above as ethical issues do not affect management accountants.
79. Ethical challenges for management accountants include
a. whether to accept gifts from suppliers, knowing it is an effort to indirectly influence decisions.
b. whether to report unfavorable department information that may result in unfavorable consequences for a friend.
c. whether to file a tax return this year.
d. both (a) and (b).
80. If a financial manager/management accountant has a problem in identifying unethical behavior or resolving an
ethical conflict, the first action (s)he should normally take is to
a. consult the board of directors.
b. discuss the problem with his/her immediate superior.
c. notify the appropriate law enforcement.
d. resign from the company.
81. Katrina is a financial manager who has discovered that her company is violating environmental regulations. If her
immediate superior is involved. her appropriate action is to
a. do nothing since she has a duty of loyalty to the organization.
b. consult the audit committee.
c. present the matter to the next higher managerial level.
d. confront her immediate superior.
82. If a financial manager/management accountant discovers unethical conduct in his/her organization and fails to act,
(s)he will be in violation of which ethical standard(s)?
a. "Actively or passively subvert the attainment of the organization's legitimate and ethical objectives."
b. "Communicate unfavorable as well as favorable information."
c. "Condone the commission of such acts by others within their Organizations."
d. All of the other answers are correct.
83. Corporate social responsibility is
a. effectively enforced through the controls envisioned by classical economics.
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TEST BANK – 01: ANSWER KEY

b. the obligation to shareholders to earn a profit.

c. the duty to embrace service to the public interest.
d. the obligation to serve long-term, organizational interests.
84. A common argument against corporate involvement in socially responsible behavior is that
a. it encourages government intrusion in decision making.
b. as a legal person, a corporation, is accountable for its conduct.
c. it creates goodwill.
d. in a competitive market, such behavior incurs costs that place the company at a disadvantage.
85. Integrity is an ethical requirement for all financial managers/management accountants. One aspect of integrity
requires
a. performance of professional duties in accordance with applicable laws.
b. avoidance of conflict of interest.
c. refraining from improper use of inside information.
d. maintenance of an appropriate level of professional competence.
86. A financial manager/management accountant discovers a problem that could mislead users of the firm's financial
data and has informed his/her immediate superior. (S)he should report the circumstances to the audit committee and/or
the board of directors only if
a. the immediate superior, who reports to the chief executive officer, knows about the situation but refuses to
correct it.
b. the immediate superior assures the financial manager/management accountant that the problem will be
resolved.
c. the immediate superior reports the situation to his/her superior.
d. the immediate superior, the firm's chief executive officer knows about the situation but refuses to correct it.
87. In which situation is a financial manager/management accountant permitted to communicate confidential
information to individuals or authorities outside the firm?
a. There is an ethical conflict and the board has refused to take action.
b. Such communication is legally prescribed.
c. The financial manager/management accountant knowingly communicates the information indirectly through a
subordinate.
d. An officer at the financial manager/management accountant's bank has requested information on a transaction
that could influence the firm's stock price.
88. Which ethical standard is most clearly violated if a financial manager/management accountant knows of a problem
that could mislead users but does nothing about it?
a. Competence
b. Legality
c. Objectivity
d. Confidentiality
89. _____ produces information that helps workers. managers, and executives in organizations make better decisions.
a. Governmental accounting
b. Management accounting
c. Auditing
d. Financial accounting
90. _____ is the recognition and evaluation of business transactions and other economic exerts for appropriate
accounting action.
 Management advisory services
TEST BANK – 01: ANSWER KEY

a. Identification
b. Analysis
c. Communication
d. Evaluating
91. _____ is the quantification of business transactions or other economic events that have occurred or forecasts of
those that
may occur.
a. Accumulation
b. External reporting
c. Measurement
d. Internal reporting
92. _____ is a determination of the reasons for the reported activity and its relationship with other economic
circumstances.
a. Analysis
b. Measurement
c. Evaluation
d. Accumulation
e. events
93. Includes strategic, tactical and operating aspects.
a. Controlling
b. Communication
c. Planning
d. Evaluating
94. Which of the following statements about managerial accountants is false?
a. Managerial accountants more and more are considered “business partners.”
b. Managerial accountants often are part of cross-functional teams.
c. An increasing number of organizations are segregating managerial accountants in a separate managerial
accounting departments.
d. The role of managerial accountants has changed considerably over the past decade.
95. Which function is best descri