Chapter 1: The Changing Role of Managerial Accounting in a Dynamic Business Environment
MULT!LE C"#CE $UE%T#&%
1. Which of the the following following stateme statements nts about manager managerial ial accountants accountants is is false? false? A. Managerial Managerial accountants accountants more more and more are considered considered "busines "businesss partners." partners." B. Managerial Managerial accountant accountantss often are are part part of cross-f cross-functio unctional nal teams. teams. C. An increasing increasing number number of organizatio organizations ns are segregatin segregating g managerial managerial accountants accountants in separate managerial-accounting departments. . !n a number of companies companies managerial managerial accountants accountants ma#e signifi significant cant business business decisions and resol$e operating problems. %. &he role of of managerial managerial accountant accountantss has changed changed considerabl considerabl' ' o$er the past past decade. Answer( C )*( 1 &'pe( +C ,. &he da'-to-da' da'-to-da' wor# wor# of management management teams will will t'picall' t'picall' comprise comprise all of the the following following acti$ities ecept( A. deci decisi sion on ma#i ma#ing. ng. B. planning. ng. C. cost cost mini minimi mizi zing ng.. . direct directing ing operati operationa onall acti$iti acti$ities. es. %. cont contrroll olling. ing. Answer( C )*( , &'pe( +C . Which of the the following following function functionss is best descri described bed as choosing choosing among among a$ailable a$ailable alternati$es? A. eci ecisi sion on ma#i ma#ing. ng. B. /lanning. C. irect irecting ing operat operation ional al acti$it acti$ities ies.. . Cont Contro roll llin ing. g. %. Budget geting. ng. Answer( A )*( , &'pe( +C 0. Which of the the following following managerial managerial functions functions in$ol$es in$ol$es a detailed detailed financial financial and operationa operationall description of anticipated operations? A. eci ecisi sion on ma#i ma#ing. ng. B. /lanning. C. irect irecting ing operat operation ional al acti$it acti$ities ies.. . Cont Contro roll llin ing. g. %. Measuring. Answer( B )*( , &'pe( +C
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. Which of the following in$ol$es the coordination of dail' business functions within an organization? A. ecision ma#ing. B. /lanning. C. irecting operational acti$ities. . Controlling. %. Moti$ating. Answer( C )*( , &'pe( +C 2. &itan Compan' has set $arious goals and management is now ta#ing appropriate action to ensure that the firm achie$es these goals. *ne such action is to reduce outla's for o$erhead which ha$e eceeded budgeted amounts. Which of the following functions best describes this process? A. ecision ma#ing. B. /lanning. C. Coordinating. . Controlling. %. *rganizing. Answer( )*( , &'pe( 3 4. Which of the following is not an ob5ecti$e of managerial accounting? A. /ro$iding information for decision ma#ing and planning. B. Assisting in directing and controlling operations. C. Maimizing profits and minimizing costs. . Measuring the performance of managers and subunits. %. Moti$ating managers toward the organization6s goals. Answer( C )*( &'pe( +C 7. &he role of managerial accounting information in assisting management is a8n9( A. financial-directing role. B. attention-directing role. C. planning and controlling role. . organizational role. %. problem-sol$ing role. Answer( B )*( &'pe( +C
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:. %mplo'ee empowerment in$ol$es encouraging and authorizing wor#ers to ta#e initiati$es to( A. impro$e operations. B. reduce costs. C. impro$e product ;ualit'. . impro$e customer ser$ice. %. all of the abo$e. Answer( % )*( &'pe( +C 1<. &he process of encouraging and authorizing wor#ers to ta#e appropriate initiati$es to impro$e the o$erall firm is commonl' #nown as( A. planning and control. B. emplo'ee empowerment. C. personnel aggressi$eness. . decision ma#ing. %. problem recognition and solution. Answer( B )*( &'pe( +C 11. Which of the following business models considers financial customer internal operating and other measures in the e$aluation of performance? A. eterministic simulation. B. Balanced scorecard. C. /a'off matri. . ecision tree. %. Chart of operating performance 8C*/9. Answer( B )*( &'pe( +C 1,. Which of the following perspecti$es is normall' absent in a balanced scorecard? A. =inancial. B. Customer. C. !nternal operations. . !nno$ation and learning. %. 3one of the abo$e. Answer( % )*( &'pe( +C
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1. Managerial accounting( A. focuses onl' on historical data. B. is go$erned b' >AA/. C. focuses primaril' on the needs of personnel within the organization. . pro$ides information for parties eternal to the organization. %. focuses on financial statements and other financial reports. Answer( C )*( 0 &'pe( +C 10. Managerial accounting( A. is unregulated. B. produces information that is useful onl' for manufacturing organizations. C. is based eclusi$el' on historical data. . is regulated b' the ecurities and %change Commission 8%C9. %. generall' focuses on reporting information about the enterprise in its entiret' rather than b' subunits. Answer( A )*( 0 &'pe( 3 1. Which of the following would li#el' be considered an internal user of accounting information rather than an eternal user? A. toc#holders. B. Consumer groups. C. )enders. . Middle-le$el managers. %. >o$ernment agencies. Answer( )*( 0 &'pe( +C 12. All of the following entities would ha$e a need for managerial accounting information ecept( A. ell Computer. B. &he )os Angeles odgers baseball club. C. *ffice epot. . &he =ederal Bureau of !n$estigation 8=B!9. %. 3one of the abo$e responses is correct as all of these entities would use managerial accounting information. Answer( % )*( 0 &'pe( 3
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14. Which of the following choices correctl' depicts whether Ban# of America Microsoft and =lorida tate @ni$ersit' would ha$e a need for managerial accounting? Ban# =lorida tate of America Microsoft @ni$ersit' A. es es 3o B. es 3o es C. es es es . 3o es 3o %. 3o es es Answer( C )*( 0 &'pe( 3 17. =inancial accounting focuses primaril' on reporting( A. to parties outside of an organization. B. to parties within an organization. C. to an organization6s board of directors. . to financial institutions. %. for financial institutions. Answer( A )*( 0 &'pe( +C 1:. Which of the following statements represents a similarit' between financial and managerial accounting? A. Both are useful in pro$iding information for eternal users. B. Both are go$erned b' >AA/. C. Both draw upon data from an organization6s accounting s'stem. . Both rel' hea$il' on published financial statements. %. Both are solel' concerned with historical transactions. Answer( C )*( 0 &'pe( 3 ,<. Which of the following emplo'ees at American Airlines would not be considered as holding a line position? A. /ilot. B. Chief financial officer 8C=*9. C. =light attendant. . &ic#et agent. %. Baggage handler. Answer( B )*( &'pe( 3
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,1. Which of the following emplo'ees would be considered as holding a line position? A. &he controller of %on Corporation. B. &he $ice-president for go$ernment relations of Microsoft. C. &he manager of food and be$erage ser$ices at isne'6s Magic ingdom. . A secretar' emplo'ed b' ewlett-/ac#ard. %. 3one of the abo$e. Answer( C )*( &'pe( 3 ,,. Which of the following emplo'ees at tarbuc#s would li#el' be considered as holding a staff position? A. &he compan'6s chief eecuti$e officer 8C%*9. B. &he manager of a store located in ansas Cit' Missouri. C. &he compan'6s lead in-house attorne'. . &he compan'6s chief financial officer 8C=*9. %. Both the compan'6s lead in-house attorne' and the chief financial officer. Answer( % )*( &'pe( 3 ,. &he chief managerial and financial accountant of an organization is the( A. chief eecuti$e officer 8C%*9. B. treasurer. C. $ice-president of accounting. . internal auditor. %. chief financial officer 8C=*9. Answer( % )*( &'pe( +C ,0. Which of the following t'picall' does not relate to the role of a controller? A. A controller super$ises the accounting department. B. A controller safeguards an organization6s assets. C. A controller prepares reports re;uired b' go$ernmental authorities. . A controller is in$ol$ed in planning and decision ma#ing. %. A controller normall' assumes a narrow role within the organization often pre$enting the indi$idual6s rise to the firm6s top management ran#s. Answer( B )*( 2 &'pe( +C
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,. A controller is normall' in$ol$ed with( A. preparing financial statements. B. managing in$estments. C. raising capital. . safeguarding assets. %. managing the firm6s credit polic'. Answer( A )*( 2 &'pe( +C ,2. Which of the following is not a function of the treasurer? A. afeguarding assets. B. Managing in$estments. C. /reparing financial statements. . Being responsible for an entit'6s credit polic'. %. +aising capital. Answer( C )*( 2 &'pe( +C ,4. Managerial accountants( A. often wor# on cross-functional teams. B. are located throughout an organization. C. are found throughout an organization wor#ing on cross-functional teams. . are found primaril' at lower le$els of the organizational hierarch'. %. are found primaril' at higher le$els of the organizational hierarch'. Answer( C )*( 2 &'pe( +C ,7. &he two dimensions of managerial accounting are( A. a decision-facilitating dimension and a decision-influencing dimension. B. a decision-facilitating dimension and a financial-influencing dimension. C. a decision-influencing dimension and a cost-minimizing dimension. . a cost-minimizing dimension and a profit-maimizing dimension. %. a decision-influencing dimension and a profit-maimizing dimension. Answer( A )*( 4 &'pe( +C
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,:. Much of managerial accounting information is based on( A. a cost-benefit theme. B. profit maimization. C. cost minimization. . the generation of eternal information. %. effecti$eness but not efficienc'. Answer( A )*( 4 &'pe( 3 <. Which of the following is not normall' considered to be an element of e-business? A. %-budgeting. B. uppl'-chain management. C. %-commerce. . Balanced scorecards. %. Choices "B" and "" abo$e. Answer( )*( 4 &'pe( +C 1. Managerial accounting has changed in recent 'ears because of( A. the growth of e-business. B. increased global competition. C. the emergence of new industries. . an increased focus on the customer. %. all of the abo$e factors. Answer( % )*( 4 &'pe( +C ,. Managerial accounting has changed in recent 'ears because of( A. a growing ser$ice econom' in the @nited tates. B. the growing popularit' of cross-functional teams. C. computer-integrated manufacturing 8C!M9. . time-based competition. %. all of the abo$e factors. Answer( % )*( 4 &'pe( +C
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. Which of the following statement8s9 about 5ust-in-time 8D!&9 in$entor' management is 8are9 true? !. !!. !!!.
A. B. C. . %.
&he emphasis of D!& is on "pull" manufacturing. +aw materials are purchased 5ust in time to be used in production. D!& is an in$entor' techni;ue that focuses on reduction of in$entor' and related in$entor' costs.
! onl'. !! onl'. !!! onl'. !! and !!!. ! !! and !!!.
Answer( % )*( 4 &'pe( +C 0. *hio Corporation recentl' implemented a 5ust-in-time 8D!&9 production s'stem along with a series of continuous impro$ement programs. !f the firm is now considering adopting a total ;ualit' management 8&EM9 program it would li#el' find that &EM( A. is consistent with both D!& and continuous impro$ement. B. is consistent with D!& but inconsistent with continuous impro$ement. C. is consistent with continuous impro$ement but inconsistent with D!&. . is inconsistent with both D!& and continuous impro$ement. %. is an anti;uated management techni;ue. Answer( A )*( 4 &'pe( 3 . Cost management s'stems tend to focus on an organization6s( A. machines. B. emplo'ees. C. acti$ities. . customers. %. rules and regulations. Answer( C )*( 4 &'pe( +C
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2. &he $alue chain of a manufacturer would tend to include acti$ities related to( A. manufacturing. B. research and de$elopment. C. product design. . mar#eting. %. all of the abo$e. Answer( % )*( 4 &'pe( +C 4. Which of the following choices correctl' depicts acti$ities that would be included in a manufacturer6s $alue chain? +esearch and e$elopment Mar#eting istribution A. es es 3o B. es 3o es C. es es es . 3o es 3o %. 3o es es Answer( C )*( 4 &'pe( +C 7. !n order for a compan' to achie$e a sustainable competiti$e ad$antage it must perform $alue chain acti$ities( A. at the same ;ualit' le$el as competitors at the same cost. B. at the same ;ualit' le$el as competitors but at a lower cost. C. at a higher ;ualit' le$el than competitors at a higher cost. . at a higher ;ualit' le$el than competitors but at no greater cost. %. at either the same ;ualit' le$el as competitors but at a lower cost or at a higher ;ualit' le$el than competitors but at no greater cost. Answer( % )*( 4 &'pe( +C :. &he acti$ities performed b' a manufacturing organization could be categorized as pre production 8such as research and de$elopment and product design9 production-related and post-production 8such as mar#eting and customer ser$ice9. Which acti$ities should the firm focus on if management understands the $alue chain concept and desires to meet organizational goals? A. /re-production acti$ities. B. /roduction-related acti$ities. C. /ost-production acti$ities. . /re-production production-related and post-production acti$ities. %. /re-production and production-related acti$ities. Answer( )*( 4 &'pe( 3
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0<. &he process of managing the $arious acti$ities in the $alue chain along with the associated costs is commonl' #nown as( A. acti$it'-based costing. B. strategic cost management. C. total ;ualit' management. . computer-integrated costing. %. sound management practices 8M/9. Answer( B )*( 4 &'pe( +C 01. A compan' has a bottlenec# operation that slows production. Which of the following tools or approaches could the firm use to determine the most cost-effecti$e wa's to eliminate this problem? A. )inear programming. B. &heor' of constraints. C. ecision-tree diagrams. . /a'off matrices. %. trategic path anal'sis 8/A9. Answer( B )*( 4 &'pe( +C 0,. Which of the following can be lin#ed to the recent wa$e of corporate scandals? A. >reed' corporate eecuti$es. B. Managers who ma#e o$er-reaching business deals. C. )ac# of o$ersight b' companies6 audit boards and boards of directors. . hodd' wor# b' eternal auditors. %. All of the abo$e. Answer( % )*( 7 &'pe( +C 0. Which of the following acts stri$es to impro$e corporate go$ernance and the ;ualit' of corporate accountingFreporting? A. +obinson-/atman. B. &aft-artle'. C. arbanes-*le'. . Bush-Chene'. %. =ran#s-Ashcroft. Answer( C )*( 7 &'pe( +C
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00. Which of the following is not an ethical standard of managerial accounting? A. Competence. B. Confidentialit'. C. %fficienc'. . !ntegrit'. %. *b5ecti$it'. Answer( C )*( 7 &'pe( +C 0. Which of the following is not an element of competenc'? A. &o de$elop appropriate #nowledge about a particular sub5ect. B. &o perform duties in accordance with rele$ant laws. C. &o perform duties in accordance with rele$ant technical standards. . &o refrain from engaging in an acti$it' that would discredit the accounting profession. %. &o prepare clear reports after an anal'sis of rele$ant and reliable information. Answer( )*( 7 &'pe( +C 02. Assume that a managerial accountant stri$es to full' disclose all rele$ant information that could be epected to influence a user6s understanding of a monthl' sales report. !n so doing the accountant will ha$e applied the ethical standard of( A. ob5ecti$it'. B. confidentialit'. C. integrit'. . efficienc'. %. unified beha$ior. Answer( A )*( 7 &'pe( +C
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E'ERC%E% Managers an( Decisions
04. /resent an eample of managerial accounting information that could help a manager ma#e each of the following decisions( A. A manufacturing compan' is currentl' ma#ing a part that is a production headache. &he firm is deciding whether to abandon production and bu' the part from an outside supplier. B. An operator of fast-food restaurants is deciding whether to open a new store in allas. )*( 1 &'pe( 3 Answer( 3ote( Man' correct answers are possible since onl' one eample is re;uested. A. &he cost of each alternati$e 8ma#e $s. bu'9 would be needed along with information about suppliers that pertains to reliabilit' and product ;ualit' 8e.g. testimonials from a supplier6s current customers that cite an' problems with on-time deli$eries product stoc#outs or abnormall' high spoilage rates of purchased goods9. >i$en the compan' is currentl' ma#ing the part what would happen to the facilities if the firm begins to purchase from outside suppliers? Could the facilities be subleased used for other profitable products or downsized 8with e;uipment being sold9? What would happen to eisting emplo'eesGwould there be an' la'offs and how much would the compan' sa$e? B. &he manager needs information about construction or leasing costs along with figures that focus on subse;uent operating costs. Also pro5ected sales mar#et share figures and data about competitors would be helpful.
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Management Decision) Ethics
07. en =ran#lin is the sales manager of a$idson %nterprises a $er' profitable distributor of office furniture to local businesses. A recent economic downturn has created an etremel' tight cash position and the compan' has been hurt b' the ban#ruptc' of two #e' customers. !n late *ctober anticipating an economic reco$er' =ran#lin began an etensi$e remodeling of the compan'6s sales floor. Construction costs decorating and e;uipment purchases are pro5ected to cost H,<<<<. a$idson has a polic' that indi$idual ependitures in ecess of H,<<<<< must be appro$ed b' the firm6s board of directors. =ran#lin unfortunatel' missed the deadline to ha$e the board consider this pro5ect at its regular eptember meeting. 3ot wanting to wait until the net meeting in ecember he subdi$ided the pro5ect in two partsG construction and decorating 8H1:<<<<9 and e;uipment purchases 8H2<<<<9Gneither of which needed board appro$al because of the dollar amounts in$ol$ed. &he pro5ect was recentl' completed and sales ha$e begun to reco$er. Customers ha$e ra$ed about the new sales area noting that it is far superior to those of a$idson6s competitors. +e;uired( A. Would =ran#lin6s approach of subdi$iding the pro5ect in two parts ha$e an' effect on the compan'6s financial statements? Briefl' eplain. B. Briefl' discuss whether =ran#lin beha$ed in an ethical manner. C. Which if an' of the following standards of conduct would ha$e applicabilit' to =ran#lin6s conduct( competence confidentialit' integrit' or ob5ecti$it'? Briefl' eplain. )*( 7 &'pe( 3
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Answer( A. Although some etra processing is in$ol$ed because of the "separate" pro5ects the same total costs will be incurred for the same assets. &hus there is no impact on the financial statements which ser$e to summarize financial acti$it'. B. =ran#lin beha$ed in an unethical manner. %$en though business is reco$ering and customers seem more than satisfied with the new sales area =ran#lin #nowingl' b'passed stated compan' polic'. &he pro5ect is being done in a single phase and is comprised of construction decorating and e;uipment ac;uisition. &his is reall' one pro5ectI 'et his accounting treatment implies otherwise. C. &wo ethical standards are rele$ant here. !ntegrit' holds that managers refrain from sub$erting the attainment of the organization6s legitimate and ethical ob5ecti$es. Additionall' ob5ecti$it' recognizes that managers ha$e a responsibilit' to communicate information fairl' and ob5ecti$el' and disclose all rele$ant information that could reasonabl' be epected to influence a user6s understanding of the reports and data presented. D%CU%%#& $UE%T#&% Balance( %corecar(
0:. Continental *$ernight operates an o$ernight pac#age deli$er' ser$ice that competes with =ederal %press and @nited /arcel er$ice 8@/9. &op management is considering the use of a balanced scorecard to e$aluate operations. A. What is a balanced scorecard and other than customer-satisfaction measures what are its t'pical #e' components? B. )ist se$eral customer-satisfaction measures that Continental might use to e$aluate performance. )*( &'pe( +C 3 Answer( A. &he balanced scorecard is a business model that helps to assess a firm6s competiti$e position and ensures that the firm is progressing toward long-term sur$i$al. Balanced scorecards differ from firm to firmI howe$er in addition to customer-satisfaction measures most ha$e a combination of financial measures internal operating measures and measures of inno$ation and learning. B. Customer-satisfaction measures could include number of pac#ages deli$ered mar#et share number of pac#ages lost or damaged number of customer complaints a$erage wait time when calling and scheduling a pac#age pic#up and response time to customer problems.
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Managerial Accounting vs* +inancial Accounting
<. Briefl' distinguish between managerial accounting and financial accounting. Be sure to comment on the general focus users and regulation related to the two fields. )*( 0 &'pe( +C Answer( Managerial accounting is concerned with pro$iding information to personnel within an organization so that the' can plan ma#e decisions e$aluate performance and control operations. &here are no rules and regulations associated with this field since the information is intended solel' for use within the firm. =inancial accounting in contrast focuses on financial statements and other financial reports. &his area deals with reporting to groups outside of an organization 8e.g. stoc#holders lenders go$ernment agencies9 so that some assessment of profitabilit' and o$erall financial health can be made. >i$en the large number of firms in our econom' and the $ar'ing le$el of user sophistication the field is hea$il' regulated 8b' the =inancial Accounting tandards Board and to a lesser degree b' the ecurities and %change Commission9. Cross,+unctional Teams an( Time,Base( Competition
1. Cross-functional teams and time-based competition are two themes of contemporar' management accounting. Briefl' eplain these two concepts. )*( 4 &'pe( +C Answer( Cross-functional teams in$ol$e bringing together indi$iduals from a $ariet' of d ifferent fields 8mar#eting design accounting production purchasing human resources9 for an "interdisciplinar' approach" to addressing management issues. uch an approach $aries from that used in the past when each of the indi$idual disciplines tended to stic# to their own turf. Cross-functional teams add $alue to the organization b' meeting the firm and customer6s needs in the most effecti$e manner possible. &ime-based competition relates to "doing things faster" to gain a competiti$e edge. Bringing a new product to mar#et faster than a ri$al firm responding to customer concerns and problems faster than the competition and reducing production downtime are a few of its #e' elements.
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The -alue Chain
,. &he $alue chain is a #e' component of contemporar' management accounting. efine the term "$alue chain" and eplain how it would relate to an airline. )*( 4 &'pe( +C 3 Answer( &he $alue chain is a set of acti$ities that wor# together to create $alue for an organization. With a manufacturer for instance acti$ities that range in scope from securing raw materials to production to deli$er' of products will culminate in goods that boost a firm6s bottom-line profitabilit'. Acti$ities in a $alue chain for an airline would include reser$ations and tic#eting maintenance catering baggage handling mar#eting customer ser$ice fre;uent-fl'er programs and of course flight operations.
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