ch1 Key
1. A cost-management system is the set of cost–management techniques that function together to support the
organization’s goals and activities.
2. Cost management is a philosophy, an attitude, and a set of techniques aimed at generating the most revenues
possible in a corporation.
ACIPA BB: Industry
3. Cost accounting and cost management are the same functions and operations.
4. Companies in the United States are required by law to follow the code of ethics developed by the Institute of
Management Accountants (IMA).
5. Strategy is an organization’s overall plan or policy to achieve its goals.
6. Two major questions asked in strategic decision making are “where” and “who.”
7. Strategic decision making is not applicable in non-profit organizations because financial rewards do not exist
for shareholders.
8. The Value Chain is a set of linked operations or processes that begins in the manufacturing process of a
company.
9. Quantitative information is expressed in dollars or other quantities relating to size or frequency.
10. The use of Internet-based information and Web sites for solicitations is an example of the customer service
part of the value chain.
11. The extended value chain encompasses the ways companies obtain their resources and distribute their
products and services, possibly using the services of other organizations.
12. Email response to customers’ questions and complaints is an example of the customer service aspect of the
value chain.
13. The value chain is a set of activities within an organization beginning with the purchase of materials and
ending with the completion of a finished product.
14. Companies that outsource support services do not understand the concepts underlying the value chain.
15. The ethical standard of confidentiality would prohibit Management Accountants from testifying in Court
against their employers. (Appendix)
16. Refraining from disclosing confidential information acquired in the course of their work is an example of
the ethical standard of competence for Management Accountants. (Appendix)
17. The first level of evaluating plans and outcomes is strategic performance analysis.
18. Removing obstacles to change is an important feature of successful organizational change.
19. The only primary processes in the value chain are research and development and design.
20. Benefit-cost analysis is a technique for identifying opportunities for improvement and measuring the effects
of proposed improvements by comparing both the costs and benefits of a proposal.
21. Quantitative information is expressed only in dollars.
22. Benefit–cost analysis takes into account only quantitative benefits and costs of proposed plans.
23. Qualitative information is descriptive and based on characteristics or perceptions, such as relative
desirability, rather than quantities.
24. Cost managers almost always have training as accountants.
25. Teams are replacing individual decision makers in many organizations.
26. Management should emphasize long term success over short term achievements in creating a successful
culture for organizational change.
27. Cost Management teams often find that employees are sources of valuable information and suggestions in
cost management review.
28. Variances are the differences between a plan’s actual and expected quantities.
29. The ethical standard of competence states that Management Accountants have a responsibility to perform
their professional duties in accordance with relevant laws, regulations and professional standards. (Appendix)
30. Management accountants have a responsibility to communicate only unfavorable professional judgments or
opinions. (Appendix)
31. Quantitative information is always more important than qualitative information in benefit–cost analysis.
32. Variance analysis will be primarily used in the quantitative aspect of performance evaluation.
33. Which one of the following is not a characteristic of cost management?
34. Cross Functional Decision Making:
35. Promoting the idea of continually finding ways to help organizations make the right decisions to create more
customer value at lower cost is an example of the characteristic of the:
36. Which of the following is not an ethical standard of competence in the Standards of Ethical Conduct for
Management Accountants?
37. Which of the following is not a piece of qualitative information in a decision?
38. Maria Kadison, Controller at Robbins Corporation, became aware that Robbins is in talks with Hallion
Company for a friendly merger. Maria discloses this information to her immediate family. No member of
Maria’s family purchases either Robbins’ or Hallion’s stock before the merger. Which of the following is True?
39. Which of the following would be found in a high risk, high return strategic mission?
40. Which of the following would be found in a low risk, low reward strategic mission?
41. Which of the following activities would be included in the value chain of a manufacturing company?
42. A company with a “hold” strategy as its strategic mission would focus on:
43. Microsoft’s replies to customers’ questions via email would be an example of which element of the value
chain?
44. The delivery of products or services to customers is an example of which element in the value chain?
45. The extended value chain:
46. Which of the following would not be a member of a cross-functional team?
47. Which of the following would not be part of an organization‘s eight-step process for implementing change?
48. The eight-step process for implementing change in a successful organization begins with:
Use the following to answer questions 49-52:
Perry’s Sandwich Department had the following summarized results for the month ending April 30:
Hilton – Chapter 01
49. As the cost accountant, which single note to the above financial results is most appropriate in the report to
management?
50. If the budget were based on the sale of 13,000 sandwiches at $2.00 each and the actual results reflect the
sale of 13,000 sandwiches, identify the most appropriate conclusion in the report to management
51. If an additional 2,000 sandwiches were sold at the regular price, during additional store opening hours,
identify the most appropriate conclusion in the report to management.
52. An example of a qualitative factor that should be considered in the benefit-cost analysis of opening the store
for additional hours is:
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
Difficulty: Medium
Hilton – Chapter 01 #52
Learning Objective: 4
Use the following to answer questions 53-55:
In the Management‘s Discussion and Analysis section of its 2005 annual report, the CEO of McDonald’s
Corporation discussed the strategic direction and financial performance of the company by referring to the
comprehensive revitalization plan initiated by the company in 2003:
“in 2003, the Company initiated a comprehensive revitalization plan focused on maximizing customer
satisfaction and strengthening our financial position. We redefined our strategy to emphasize growth through
adding more customers to existing restaurants and aligned the System around our customer– focused Plan to
Win. We streamlined processes such as new product development and restaurant operations, improved our
training programs, and implemented performance measures, including a restaurant review and measurement
process, to enable and motivate franchisees and restaurant employees to serve customers better.”
Among the improvements cited were:
(1) Improving the taste of many of the core offerings
(2) Streamlining processes such as new product development and restaurant operations
(3) Implemented performance measures to enable and motivate franchises to service customers better
(4) Achieved high levels of customer awareness worldwide
During 2005, McDonald‘s comparable sales increased 3.9%, earnings per share increased from $1.79 to $2.04,
cash from operations increased $433 million to $4.3 billion and the company repurchased $1.2billion in
common stock. (McDonald‘s 2005 Annual Report)
Hilton – Chapter 01
53. McDonald’s strategic mission could best be described as:
54. Which of the improvements cited by McDonald‘s is an example of the extended value chain?
55. Improvement number 3 is an example of which link in the value chain?
56. Match the following operations with appropriate elements of an organization’s value chain.
Value Chain Element
(A) Research and Development
(B) Design
(C) Supply
(D) Production
(E) Marketing
(F) Distribution
(G) Customer Service
____(1) Crate and Barrel’s replies to customers’ questions on merchandise.
____(2) Updating Pottery Barn’s electronic Internet catalogue of sporting goods and spring merchandise.
____(3) Development of new software applications at Oracle.
____(4) Inspection of incoming chip parts at IBM.
____(5) Contracting with Federal Express to ship computers to customers at Gateway.
____(6) Writing of software programs at IBM’s Lotus Division.
____(7) Creation of new movie ideas at Paramount Pictures
57. C & P Frosties is a local ice cream shop. The company currently is showing an operating loss, as evidenced
by the income statement below:
The President of the company is considering adding sandwiches to the menu. Sales will be expected to increase
by $60,000. The cost of sandwich supplies would be $30,000. Labor costs would increase 40% and other costs
10%. The current manager will continue to manage the operation.
Required:
58. The Callahan family currently lives in a suburb of a major city. They have a lovely home close to major
routes of transportation. Both Mr. and Mrs. Callahan have convenient commutes of 30 minutes or less. Because
the school system in their town does not have a quality reputation, they currently send their daughter to private
school, conveniently located less than one mile from their home. The family’s current monthly living expenses
are listed below:
The Callahans are considering moving to a town approximately 20 minutes away. Because of the desirability of
the local schools and strict zoning, housing is very expensive in this town. Their daughter would attend public
schools. The Facts estimate that their monthly mortgage, taxes and insurance would increase to $7,000 per
month, while the cost of running automobiles would increase 20% and other utilities 10%. Mortgage interest
costs are tax deductible and the Facts are in the 25% tax bracket. Assume that $700 of the increase in their
monthly budget is for mortgage interest. What are the costs and benefits of moving? Which can be quantified
and which cannot?
59. The Linden chain of ladies’ fashion wear wishes to appraise its security system in an effort to reduce
pilferage for the coming period. The following details are estimated for the current period:
60. Home Retail, Inc. wishes to appraise its security system in an effort to reduce pilferage for the coming
period. The following details are estimated for the current period: