Chapter 1 – Introduction to management accounting
MULTIPLE CHOICE
1. ____ is devoted to providing information for external users.
a.
Management accounting
b.
Financial accounting
c.
Internal accounting
d.
Cost accounting
2. Management accounting and financial accounting differ in that management accounting information is
prepared
a.
following prescribed rules.
b.
using whatever methods the company finds beneficial.
c.
for shareholders.
d.
to summarize the whole company with little detail.
3. The primary objective of management accounting is
a.
to provide shareholders and potential investors with useful information for decision
making.
b.
to provide banks and other creditors with information useful in making credit decisions.
c.
to provide management with information useful for planning and control of operations.
d.
to provide the relevant taxation authorities with information about taxable income.
4. Management accounting is the branch of accounting concerned with reporting to
a.
internal managers.
b.
shareholders.
c.
the government.
d.
bankers.
5. Which of the following characteristics does NOT pertain to management accounting?
a.
provides information and estimates about future activity
b.
generates specific-purpose financial statements and reports
c.
provides financial and operating data multidisciplinary in scope
d.
has externally imposed standards
6. Which of the following does NOT describe management accounting?
a.
evaluation of segments or products within the firm
b.
emphasis on the future
c.
externally focused
d.
detailed information
7. Management accounting reports are prepared
a.
to meet the needs of decision makers within the firm.
b.
whenever shareholders request them.
c.
according to guidelines prepared by the shares and Financial Services Authority.
d.
according to financial accounting standards.
8. Cost accounting
a.
is concerned with assigning costs to various cost objects.
b.
attempts to satisfy the costing objectives of both financial accounting and management
accounting.
c.
provides cost information that supports planning, controlling, and decision making.
d.
All of the above descriptions are true.
9. Which of the following costing activities is associated with the financial accounting system?
a.
determining the cost of a department
b.
determining the cost of goods sold for financial statements
c.
preparing budgets
d.
determining the cost of a customer
10. Which of the following activities is NOT associated with the financial accounting information system?
a.
reporting on the cost of quality
b.
reporting to the shareholders
c.
preparing reports for the tax authorities
d.
preparing a statement of cash flows
11. Factors that have led to a global market for manufacturing and service firms are
a.
improved transportation and communications systems.
b.
improved telemarketing and communications.
c.
improved distribution and transportation systems.
d.
None of these factors have contributed.
12. Which of the following activities is NOT significant to the advancement of information technology?
a.
enterprise resource planning software
b.
emergence of electronic commerce
c.
theory of constraints
d.
decision support systems
13. Software that has integrated system capability using real time data is
a.
enterprise resource planning software.
b.
on-line analytic programs.
c.
computer-assisted engineering software.
d.
none of the above.
14. Total quality management emphasizes
a.
zero defects.
b.
continual improvement.
c.
elimination of waste.
d.
all of the above.
15. Which of the following emerging themes in cost accounting deals with managers striving to create an
environment that will enable workers to manufacture perfect (zero-defect) products?
a.
advances in information technology
b.
time as a competitive element
c.
global competition
d.
total quality management
16. Competitive advantage is established by
a.
providing more customer products than competitors.
b.
providing better quality than competitors.
c.
providing greater customer value for less cost than competitors.
d.
providing greater efficiencies than competitors.
17. Improvement in time performance is most likely NOT enhanced by
a.
redesign of products.
b.
adding processes in production.
c.
eliminating waste.
d.
eliminating nonvalue-added activities.
18. Which of the following statements is NOT true about world-class firms?
a.
World-class firms are firms that are poor in customer support.
b.
World-class firms know their market and their products.
c.
World-class firms strive continually to improve product design, manufacture, and delivery.
d.
World-class firms can compete with the best of the best in a global environment.
19. Accounting
a.
always has an external orientation.
b.
always has an internal orientation.
c.
information assists in planning and controlling.
d.
terms serve as a model of the organization.
20. Monitoring the number of defects produced is an example of the management function of
a.
planning.
b.
control.
c.
decision making.
d.
both a and c.
21. The setting of objectives and the identification of methods to achieve those objectives is called
a.
planning.
b.
controlling.
c.
performance evaluation.
d.
decision making.
22. Comparing actual quality costs with planned quality costs is an example of
a.
planning.
b.
controlling.
c.
performance evaluation.
d.
both b and c.
23. Which of the following statements correctly distinguishes between financial and management
accounting?
a.
Management accounting reports on the whole organization.
b.
Financial accounting is oriented toward the future.
c.
Financial accounting is primarily concerned with providing information for internal users.
d.
Management accounting is oriented more toward the planning and control aspects of
management.
24. Setting the company’s profit targets for the upcoming year is an example of the management function
of
a.
planning.
b.
control.
c.
variance analysis.
d.
internal auditing.
25. Setting the selling price of a company’s product is an example of
a.
planning.
b.
control.
c.
decision making.
d.
all of the above.
26. Developing a company strategy for responding to anticipated new markets is an example of
a.
planning.
b.
control.
c.
decision making.
d.
all of the above.
27. The planning process includes
a.
setting objectives.
b.
identifying means of achieving the objectives.
c.
making decisions.
d.
all of the above.
28. Investigating production variances and adjusting the production process is an example of
a.
planning.
b.
control.
c.
internal auditing.
d.
both a and c.
29. Evaluating the performance of a segment of the company is an example of
a.
planning.
b.
control.
c.
internal auditing.
d.
both a and c.
30. Determining the bid your company should submit on a construction contract is an example of
a.
planning.
b.
control.
c.
decision making.
d.
both a and b.
31. The formulation of a scheme or program for the accomplishment of a specific purpose or goal is
referred to as
a.
controlling.
b.
motivating.
c.
organizing.
d.
planning.
32. The monitoring of a plan’s implementation is called
a.
planning.
b.
controlling.
c.
decision making.
d.
budgeting.
33. Continuous improvement is NOT
a.
critical in a dynamic environment.
b.
important to finding and maintaining a competitive advantage.
c.
an effort to find ways to increase overall efficiency, improve quality, and reduce costs.
d.
a responsibility of managers in world-class organizations.
34. Principles of personal ethical behaviour that are essential to an ethical life include
a.
integrity.
b.
respect for others.
c.
accountability.
d.
all of the above.
35. Which one of the following statements about ethical behaviour is true?
a.
Ethical behaviour is not guided by well-defined rules and is often subjective.
b.
Ethical behaviour is best described as doing actions that are permitted by law.
c.
Ethical behaviour always involves choosing between actions that are clearly right or
wrong.
d.
Ethical behaviour is best guided by a policy of placing corporate performance above
individual ends.
36. The standards of ethical conduct for management accountants include
a.
competence and performance.
b.
integrity and respect for others.
c.
confidentiality, confidence, integrity, and observance.
d.
competence, confidentiality, integrity, and objectivity.
37. In resolving an ethical conflict, which of the following would never be appropriate?
a.
discussing the matter with the chief executive officer
b.
discussing the matter with an external member of the board of directors
c.
taking the matter to the press where there is no legal requirement
d.
resigning from the position because of a conflict
38. Management accounting is concerned with which kind of decision?
a.
product costing and pricing
b.
continuous operational improvement
c.
financial control
d.
all of the above
39. One advantage of employee empowerment is
a.
it frees up some of the time of upper management for more strategic decision making.
b.
workers can improve production processes in a timely manner.
c.
employees closest to the work can provide valuable input in increasing efficiency.
d.
all of the above are advantages
40. Breakthroughs in technology this century have given rise to which one of the following effects?
a.
Direct materials have GREATLY decreased as a percentage of total manufacturing costs.
b.
Manufacturing overhead has only SLIGHTLY decreased as a percentage of total
manufacturing costs.
c.
Direct labour has GREATLY decreased as a percentage of total manufacturing costs.
d.
Manufacturing overhead has GREATLY decreased as a percentage of total manufacturing
costs.
41. The overall objective of accounting information systems is to
a.
provide information to users.
b.
manage the organization.
c.
prepare financial reports.
d.
report to the government.
42. A(n) ____ is a computerized information system that strives to input data once and make it available to
people across the company for different purposes.
a.
cost management information system
b.
enterprise resource planning system
c.
internal accounting system
d.
financial accounting information system
43. Management accounting:
a.
provides a framework to evaluate information in light of an organization’s goals.
b.
provides relevant information to managers.
c.
provides relevant information to meet specific needs of persons inside the organization.
d.
all of the above
44. Financial accounting information is least useful in providing:
a.
information for stating corporate wide goals.
b.
information for internal decision makers.
c.
periodic reports for shareholders.
d.
aggregate information about an organization’s assets, obligations and performance.
45. Management accounting is primarily concerned with:
a.
providing investors with useful information for valuing securities.
b.
providing creditors information on the status of their loans.
c.
providing managers with relevant information to help achieve organizational goals.
d.
providing the relevant taxation authorities with information to determine the amount of
taxes owed.
46. To compete on the basis if price, the seller must carefully manage:
a.
cost.
b.
service.
c.
quality.
d.
none of the above.
47. World-class companies must continuously struggle to improve performance in the dimensions of:
a.
price/cost.
b.
service.
c.
quality.
d.
all of the above.
48. Which of the following statements most accurately describes an effect of employee empowerment?
a.
Employee empowerment reduces the cost of implementing decisions.
b.
Employee empowerment decreases the speed in which decisions are made.
c.
Employee empowerment leads to an increased number of corporate staff positions
d.
Employee empowerment places greater emphasis on decisions made by upper
management.
SHORT ANSWER
1. Discuss the change in composition of total manufacturing costs during the last century, using the three
major cost categories: direct materials, direct labour, and manufacturing overhead.
ANS:
PROBLEM
1. Briefly discuss the differences between financial and management accounting.
2. Identify and discuss the emerging themes that are affecting the way cost accounting is practiced.
3. What is customer orientation? Why is it important in a global environment? What role does cost
management play in serving customers?
4. Why has time become such an important factor in competition?
5. Personal computers significantly increase a manager’s capabilities to process and use accounting
information. Do you agree? Explain.
6. Describe the connection between planning, controlling, and feedback.
7. Give some examples of reporting feedback that will assist in continuous improvement of a dry
cleaning company.
8. Discuss how the goal of profit maximization is affected by ethical considerations. What incentives are
there for managers to manipulate accounting data in unethical ways in order to increase profits?
9. What can a company do to increase the likelihood of its employees being ethical in all their
undertakings?
10. Explain what is meant by confidentiality and why it is important.
11. Describe a cost management information system, its objectives, and major subsystems.
ANS:
ESSAY
1. Identify the trends impacting management accounting and discuss the implications for management
accounting.