Test Bank for Managerial Accounting 6th Edition by Hartgraves True-False Questions Most costs are actually incurred as a result of activity cost drivers True False Value Chain Analysis concerns the study of value-producing activities, stretching from basic raw materials to the final consumer of a product or service True False 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 True False A primary goal of managerial accounting is to provide information to investment managers who analyze a company’s stock for external investors True False An organization’s mission is best described as the basic purpose toward which activities are directed True False The decision to use both fulltime and part time employees during the holiday season is an example of a strategic cost driver True False All costs have at least one primary cost driver True False Competition among companies normally takes place only on the dimension of price/cost True False Managers who prepare and/or have responsibility for managerial accounting information rarely encounter choices that have questionable ethical dimensions or overtones True False One of the companies to first employ a successful cost leadership strategy was Carnegie Steel Company True False Multiple Choice Questions-Page Which of the following departments often found in a merchandising organization would be classified as a line department? A) Maintenance B) Human Resources C) Payroll D) Home Furnishings 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 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 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 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 glass and 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 The process of making the organization into a well-ordered whole is referred to as: A) Organizing B) Controlling C) Motivating D) Planning _ are fundamental choices about the size and scope of operations and about technologies employed in delivering products or services to customers A) Activities B) Management systems C) Organizational strategies D) Structural cost drivers 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 Delegating responsibility and authority to employees in an organization is an example of: A) Planning B) Organizing C) Controlling D) Motivating 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 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 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 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 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 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 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 According to Michael Porter, which of the following is an example of product or service differentiation as a business strategy? A) A regional beer brewer that caters to local tastes B) An automobile manufacturer that focuses on the rapid introduction of technological change in new automobile 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 _ 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 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 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 owed D) Providing managers with relevant information to help achieve organizational goals Which of the following is not one of the three strategic positions that Porter views as leading to business success? A) Market niche B) Cost leadership C) All things to all people D) Product or service differentiation 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 Which of the following is not a component of strategic cost management? A) Ratio analysis B) Value chain analysis C) Cost driver analysis D) Strategic position analysis The process of ensuring that results agree with plans is referred to as: A) Controlling B) Decision making C) Organizing D) Planning The process of selecting strategies to achieve goals is often referred to as: A) Controlling B) Organizing C) Motivating D) Planning 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 Financial accounting is primarily focused on: A) Providing the Internal Revenue Service with information to determine the amount of taxes owed B) 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 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 The act of delegating authority for implementing plans to other managers and employees can be viewed as an aspect of: A) Controlling B) Decision making C) Organizing D) Planning To compete on the basis of price, the seller must most carefully manage: A) Service B) Product development C) Cost D) Quality 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 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 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 World-class companies must continuously struggle to improve performance in the dimension(s) of: A) Price/cost B) Service C) Quality D) All of the above The three analyses that comprise strategic cost management include each of the following except: A) Ratio analysis B) Cost driver analysis C) Strategic position analysis D) Value chain analysis 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 63 Free Test Bank for Managerial Accounting 6th Edition by Hartgraves Multiple Choice Questions-Page Which of the following best defines a structural cost driver? A) Fundamental choices about the size and scope of operations and technologies employed in delivering products or services to customers B) Choices concerning the organization of activities and the involvement of persons inside and outside the organization in decision making C) Specific units of work performed to serve customer needs that consume costly resources D) The process of ensuring that results agree with plans Which of the following phrases is primarily relevant to managerial accounting as opposed to financial accounting? A) Preparing periodic financial statements B) Calculating earnings per share for shareholders C) Helping managers make decisions D) Summarizing information about past events Codes of ethics are limited to which of the following types of organizations: A) Professional organizations and associations B) For-profit organizations C) Not-for-Profit organizations D) All of the above Which of the following is an example of an organizational cost driver? A) Deciding how to arrange raw materials inventory within a warehouse B) Inspecting incoming raw materials C) Determining the best location for a manufacturing facility D) Receiving raw materials into the warehouse E) None of the above Corporate social responsibility would include all of the following elements except: A) Providing quality daycare for young dependents of an organization B) Estimating the cost of environmental clean-up upon the ultimate disposal of an asset C) Limiting the return on investment to investors D) Donating employee time for community service From a managerial accounting standpoint, which of the following areas of the Sarbanes-Oxley Act of 2002 (SOX) are most pertinent? A) External Auditing Standards B) Review of internal controls C) Codes of ethics for financial officers D) Penalties for fraud Which of the following phrases is primarily relevant to financial accounting as opposed to managerial accounting? A) Analyzing cost drivers B) Helping managers to make decisions C) Evaluating a company’s strategic position D) Conforming to external standards Which of the following best describes corporate governance? A) The system of policies, processes, laws, and regulations that affect the way a company is directed and controlled B) The moral quality, fitness, or propriety of a course of action that can injure or benefit people C) What is permitted under the law D) Understanding the difference between right and wrong Which of the following best describes ethics? A) The system of policies, processes, laws, and regulations that affect the way a company is directed and controlled B) The moral quality, fitness, or propriety of a course of action that can injure or benefit people C) What is permitted under the law D) Understanding the difference between right and wrong To stay competitive in the express delivery business, both Federal Express and United Parcel Service most compete against each other based on which of the following? A) Price/Cost B) Service C) Quality D) All of the above Ethics deals will all of the following except: A) The fitness of a course of action B) The moral quality of a course of action C) The legal responsibility under law D) The propriety of a course of action Which of the following can be considered to be unethical behavior? A) Forecasting the amount of ending inventory on hand at the end of a budgetary period B) Transferring ending inventory to another warehouse in another geographic location C) Keeping inventory that is unlikely to be used so as to avoid recording a loss D) Building up inventory in anticipation of increased sales in the next accounting period Which of the following can be considered to be unethical behavior? A) Assigning direct labor costs to Contract A and Contract B using different rates for different employees B) Assigning different direct material costs to Contract A and Contract B based on usage C) Assigning overhead costs to Contract A based on labor hours and Contract B based on machine hours D) Assigning costs of Contract A to Contract B to avoid an unfavorable performance report on Contract A A code of ethics should include which of the following elements? A) Definition B) Purpose C) Enforcement D) All of the above Which of the following can be considered to be unethical behavior? A) Forecasting raw material requirements for next months production forecast B) Purchasing raw materials from a relative or friend rather than seeking bids C) Inspecting incoming raw materials from a supplier D) Working closely with a limited number of suppliers Which of the following employees often found in a manufacturing organization would be classified as part of a line department? A) Production Manager B) Treasurer C) Chief Information Officer (CIO) D) Controller All of the following are examples of activity cost drivers except: A) Placing a purchase order for raw materials B) Inspecting incoming raw materials C) Hiring and training a new employee D) Providing employees with cost information and authorizing them to make decisions To compete on the basis of service, the seller must carefully manage: A) The degree to which products or services meet customer’s needs B) Timely delivery and customer support C) Communications between buyer and seller D) Operating and maintenance costs Which of the following best defines an organizational cost driver? A) Fundamental choices about the size and scope of operations and technologies employed in delivering products or services to customers B) Choices concerning the organization of activities and the involvement of persons inside and outside the organization in decision making C) Specific units of work performed to serve customer needs that consume costly resources D) The process of ensuring that results agree with plans Which of the following is an example of a structural cost driver? A) Deciding how to arrange raw materials inventory within a warehouse B) Moving items being manufactured between workstations C) Determining the best location for a manufacturing facility D) Placing a purchase order for raw materials E) None of the above Which of the following can be considered to be unethical behavior? A) Accelerating or decelerating shipments at the end of the quarter to meet current earnings forecasts B) Allocating overhead costs to a product based on labor hours C) Estimating sales in order to prepare the annual budget for the company D) Ordering more raw materials that forecast in anticipation of uncertain demand Which of the following best defines an activity cost driver? A) Fundamental choices about the size and scope of operations and technologies employed in delivering products or services to customers B) Choices concerning the organization of activities and the involvement of persons inside and outside the organization in decision making C) Specific units of work performed to serve customer needs that consume costly resources D) The process of ensuring that results agree with plans Which of the following performance factors is least relevant for a “world-class” company to compete globally? A) Price/Cost B) Location C) Service D) Quality Ethical behavior: A) Is guided by well-defined rules of conduct B) Involves choosing between actions that are either right or wrong C) Is best guided by placing corporate performance above individual ends D) Is often subjective and based on the moral quality, fitness, or propriety of a course of action Which of the following is an example of an activity cost driver? A) Deciding how to arrange raw materials inventory within a warehouse B) Designing components of a product so they can fit together only in the correct manner C) Determining the best location for a manufacturing facility D) Receiving raw materials into the warehouse E) None of the above To compete on the basis of quality, the seller must carefully manage: A) The degree to which products or services meet customer’s needs B) Timely delivery and customer support C) Communications between buyer and seller D) Operating and maintenance costs To compete on the basis of price, the seller must carefully manage: A) The degree to which products or services meet customer’s needs B) Timely delivery and customer support C) Communications between buyer and seller D) Operating and maintenance costs Free Text Questions Briefly discuss the planning, organizing, and controlling functions of management Answer Given The three functions of management are planning, organizing, and controlling Planning is the formulation of a scheme or program for the accomplishment of a specific purpose or goal A distinction is often made between long-range planning and short- range planning Long-range planning emphasizes the selection of programs to move the organization toward its goals over the next several years Short-range planning is based on the organization's long-range plan, as well as on its current situation, and focuses on specific near-term activities to move the organization from its current situation toward its long-range goals Short-range planning involves the interpretation of goals and long-range plans to establish performance objectives for the coming year and the selection of specific actions to achieve these objectives Organizing is the process of making the organization into a well-ordered whole as management attempts to structure and divide the tasks that need to be done Specific people are assigned specific tasks Within a formal structure established to show the relationships among organization members, authority is delegated to managers and other employees who are subsequently held accountable for the activities they control Controlling is the process of ensuring that results agree with plans In the process of controlling operations, management compares actual performance with plans If actual results deviate significantly from plans, management either attempts to bring operations into line with the original plan or adjusts the plan The original plan is adjusted if management determines that it is no longer appropriate because of changed circumstances Hence, the process of controlling feeds back into the process of planning to form a continuous cycle Define strategic cost management and briefly discuss the three themes that make up strategic cost management Answer Given Strategic cost management is defined as making decisions concerning specific cost drivers within the context of an organization’s business strategy, internal value chain, and position in a larger value chain stretching from the development and use of resources to final customers Strategic cost manageme nt has emerged from a blending of three themes: Cost driver analysis—the study of factors that cause or influence costs Strategic position analysis—an organization’s basic way of competing to sell products or services Value chain analysis—the study of valueproducing activities, stretching from basic raw materials to the final consumer of the product or service Identify and describe the three strategic positions that lead to business success Answer Given The three strategic positions are: (1) cost leadership, (2) product or service differentiation, and (3) focus on a market niche Cost leadership requires aggressive construction of efficient-scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization in areas like R & D, service, sales force, advertising, and so on Product and service differentiation involves creating something that is perceived as being unique and worth a premium price The strategic position of focusing on a specific market niche (such as a buyer group, segment of the product line, or geographic market) rests on the premise that the firm will be able to serve its narrow target more effectively and efficiently than will competitors Briefly explain the nature of the ethical dilemmas that managers and accountants confront, giving examples Answer Given Most ethical dilemmas appear as small short-term compromises that can be corrected in the long term They involve decisions that are viewed as grey areas – they are not clearly ethical or unethical Examples include (a) accelerating shipments at the end of the quarter to improve current profits, (b) keeping inventory that is unlikely to be used so as to avoid recording a loss, (c) basing a budget on an overly optimistic sales forecast, and (d) assigning some costs of one contract to another contract to avoid an unfavorable performance report on the first contract Identify and briefly discuss the three dimensions on which competition takes place Answer Given Competition takes place on the dimensions of (1) price/cost, (2) service, and (3) quality Well-informed buyers routinely search the world for the product or service that best fits their needs on the three interrelated dimensions To compete on the basis of price, the seller must carefully manage costs Otherwise, reduced prices might squeeze product margins to such an extent that a sale becomes unprofitable Quality refers to the degree to which products or services meet the customer’s needs Service includes such things as timely delivery, helpfulness of sales personnel, and subsequent support Differentiate among structural, organizational, and activity cost drivers Answer Given Structural cost drivers are fundamental choices about the size and scope of operations and about technologies employed in delivering products or services to customers Organizational cost drivers are choices concerning the organization of activities and choices concerning the involvement of persons inside and outside the organization in decision making Activity cost drivers are specific units of work (activities) performed to serve customer needs that consume costly resources  ... reporting period Financial accounting information is least useful in providing: A) Aggregate information about an organization’s assets, obligations and performance B) Information for stating corporate... 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 63 Free Test Bank for Managerial. .. Providing investors with useful information for valuing securities D) Providing information for internal users A decision to work closely with a limited number of suppliers for the purpose of ensuring