Chapter 15 – The Changing Business Environment – A Manager’s Perspective
TRUE/FALSE
1. Management accounting is not a subordinate activity to financial accounting.
2. Management accounting is the process of identifying, measuring, accumulating, analyzing, preparing,
and communicating financial information used by management.
3. Financial accounting is defined as the use of management information to plan, evaluate, and control
within the organization and to ensure appropriate use and accountability for its resources.
4. Management accounting provides reports that are future oriented.
5. Rules applicable to accounting information created and prepared for management use are the same as
those for information reported to the general public.
6. Management accounting exists primarily for the benefit of people outside the company.
7. Management accounting must observe both financial accounting standards and cost accounting
standards if it is to be useful to the organization’s management.
8. Management accounting information is more subjective than financial accounting information.
9. Internal accounting reports should be prepared when they are needed, without regard to calendar dates
or regularity of issue.
10. The overall guideline or limit for management accounting information is that the report or analysis
must be meaningful and must answer the questions or issues under review.
11. Financial accounting comprises all rules governing the accounting for and reporting of financial
information that must be disclosed to people outside the company.
12. The analyses and flow of accounting data inside a company need not depend on the double-entry
format.
13. Management accounting data may be gathered for small segments or large divisions and may be
expressed in units of measurement other than historical dollars.
14. Most management decisions are based on analyses using expected future dollars.
15. Financial accounting usually involves analyses of various segments of a business, such as cost centers,
profit centers, or departments, or of some specific aspect of its operations.
16. Financial information included in financial statements prepared for external use is past data,
summarized for the user as of a particular date.
17. Financial accounting is concerned primarily with planning and control of internal operations.
18. Financial accounting information is determined objectively and is verifiable, whereas management
accounting usually represents subjective estimates of future events.
19. Financial accounting’s main emphasis is on full and accurate accounting for and disclosure of a
company’s operating results.
20. Similar to financial accounting reports, management accounting reports are standardized in format.
21. The four stages of the management process are plan, perform, evaluate, and communicate.
22. The keys to successful report writing include identifying the who, what, when, and why of the report.
23. Management executes a plan by overseeing the daily operations of an organization.
24. Comparing actual performance with expected performance levels is an evaluation activity.
25. Management accounting accumulates, maintains, and processes an organization’s financial and
nonfinancial information.
26. Management accounting complements each stage in the management process.
27. The management process and management accounting are identical.
28. Neither the amount of detail nor the format of a management accounting report is affected by those to
whom the report is sent.
29. Like balance sheets and income statements, management accounting formats are much the same from
company to company.
30. A business plan is a comprehensive statement of how a company will achieve its objectives, but does
not include budgets or performance goals.
31. A manager should write the purpose of a report before preparing it.
32. If a report is urgently needed, some accuracy may have to be sacrificed in the interest of timeliness.
33. A value chain includes only processes and services that add value to the final product or service.
34. Support services, such as legal services, are critical to making an efficient and effective value chain.
35. An advantage of value chain analysis is that it allows a company to focus on what a company does
best.
36. Hiring a janitorial service firm rather than employing full-time employees is an example of
outsourcing.
37. Each of the management tools can be used individually, or parts of them can be combined to create a
new operating environment.
38. In a JIT system, workers are trained to specialize in one specific task.
39. In a JIT system, materials and parts are not stockpiled.
40. Total quality management has many of the same characteristics as the JIT philosophy.
41. Total quality management focuses on reducing waste.
42. The main goal of total quality management is to reduce product costs.
43. The costs of quality consist entirely of rework costs and customer complaint costs.
44. Activity-based costing (ABC) is used most often to improve the assignment of overhead costs to
products.
45. Activity-based management is an extension of activity-based costing.
46. Activity-based management focuses on enhancing activities that add value to the product and reducing
those that do not.
47. JIT, TQM, and ABM all seek continuous improvement in operations.
48. JIT, TQM, ABM, and TOC all make a contribution to continuous improvement and are applicable in
service businesses as well as in manufacturing and retail businesses.
49. TQM seeks to improve the quality of both the product and the work environment.
50. The balanced scorecard has gained little acceptance as an approach to establish effective performance
measurement.
51. In making the transition from financial accounting to management accounting, you must become
accustomed to using the historical dollar as the primary unit of measurement.
52. Benchmarking enables a company to determine whether it is making continuous improvement in its
operations without regard to competition.
53. Performance measures are limited to financial data.
54. “Hours of inspection” is an example of a nonfinancial performance measure.
55. Financial performance measures are useful in reducing waste and inefficiencies in operating activities.
56. Performance measures are used only in the evaluation stage of the management process.
57. In order to obtain information about benchmarks, a manager might join a trade association for the
company’s particular industry.
58. In analyzing nonfinancial data, it is important to link the performance measures to the four
perspectives of the balanced scorecard and to the objectives that are to be achieved.
59. Evaluating employees based upon their performance is an example of developing benchmarks.
60. Comparing the number of bytes processed per nanosecond by each computer is an example of using
nonfinancial data analysis.
61. When there is an ethical conflict, the management accountant should resign if the immediate
supervisor is involved with the conflict.
62. Practitioners of management accounting and financial management have a responsibility to
communicate information fairly and objectively.
63. When unable to resolve an ethical conflict, the accountant should consider consulting with an attorney
as to the legal obligations and rights concerning the ethical conflict.
64. Although some management accountants strive to update their knowledge and skills, such updating is
not within the realm of management accountants’ ethical standards.
65. The management accountant must be knowledgeable about all relevant laws, regulations, and technical
standards that pertain to his or her duties.
66. If a management accountant gives information about a future merger of his or her company to a
relative, the accountant has acted unethically.
67. Management accountants working in purchasing must decline gifts from company vendors, because
acceptance of a gift might influence or be perceived as influencing their performance or decision
analyses.
68. Although management accountants should try not to engage in activities that would prejudice their
ability to carry out their duties, they are not obligated to refrain from such activities after business
hours, as long as these activities take place off company premises.
69. Management accountants who alter reports to meet targeted levels of performance are not acting
unethically, because their job is to provide information that will aid in communicating the goals of the
business.
70. Although the purpose of the confidentiality standard is to encourage management accountants to
remain loyal to their company, failure to disclose knowledge of internal illegal acts to outside
authorities can result in the accountants being charged as an accessory to the crime.
71. The management accountant who is responsible only for nonfinancial reports to management does not
have to remain objective, using the doctrine of fairness, when preparing all reports and analyses.
MULTIPLE CHOICE
1. Management accounting
a.
deals primarily with people and organizations outside of the business entity.
b.
requires only periodic reporting on a regular basis.
c.
uses any type of useful measurement unit, including physical as well as monetary
measures.
d.
deals only with the double-entry recording system.
2. Which of the following types of information is not essential for a manager to run a business
effectively?
a.
Product or service costing information
b.
Data for planning and controlling of operations
c.
Special reports and analyses to support decisions
d.
Quote of the current price of the company’s stock
3. Accumulating, interpreting, and reporting financial information is important for
a.
service-related firms only.
b.
manufacturing firms only.
c.
virtually all types of organizations.
d.
not-for-profit organizations only.
4. Which of the following is a characteristic of management accounting?
a.
It must follow generally accepted accounting principles.
b.
It is used primarily by internal users.
c.
It is concerned primarily with reporting past performance.
d.
It uses historical costs as the sole measurement unit.
5. Management accounting reports can
a.
use a flexible format.
b.
use financial and nonfinancial data.
c.
be prepared for any time period.
d.
include all of these.
6. In comparing management accounting with financial accounting, which of the following statements is
true?
a.
Both use historical costs as their primary unit of measurement.
b.
Both depend on the double-entry system of accounting.
c.
Both require adherence to GAAP.
d.
Financial accounting reports are more objective, whereas management accounting reports
are more subjective.
7. Management accounting and financial accounting are similar in which of the following respects?
a.
Both use the same unit of measurement.
b.
Both rely heavily on the double-entry system.
c.
Both produce almost all of their respective informational reports on a routine monthly
basis.
d.
Both provide relevant and useful information to management.
8. The unit of measurement used in management accounting is
a.
primarily the historical dollar.
b.
usually current replacement cost.
c.
any measurement unit that is useful in a particular situation.
d.
the measurement unit used by competing companies.
9. The management process includes all of the following stages except
a.
evaluate.
b.
communicate.
c.
plan.
d.
record.
10. Planning involves which of the following?
a.
Identifying operating tasks that minimize waste
b.
Comparing actual performance to expected performance
c.
Issuing periodic reports
d.
Formulating long-term strategies
11. Which of the following is not part of the “perform” stage in the management process?
a.
Matching human resources to the task to be performed
b.
Hiring and training personnel
c.
Identifying operating activities that minimize waste
d.
Controlling operations
12. Management accounting activities
a.
are synonymous with financial accounting activities.
b.
substitute for the management cycle.
c.
complement the management cycle.
d.
have nothing to do with the management cycle.
13. Which of the following is not a key question to be addressed when preparing a report?
a.
Who?
b.
What?
c.
When?
d.
Where?
14. All of the following are “Who” questions that dictate a managerial report’s format except
a.
who should write the report?
b.
to whom should the report be distributed?
c.
who will read the report?
d.
for whom is the report being prepared?
15. If the report is urgently needed, it is sometimes necessary to sacrifice accuracy for
a.
timeliness.
b.
personal feelings.
c.
profits.
d.
expectations.
16. Primary processes
a.
apply only to a just-in-time environment.
b.
include information systems and human resources.
c.
add value to a product or service.
d.
limit bottlenecks during production.
17. In today’s competitive business environment, managers
a.
need only be concerned with quality.
b.
must provide the highest value at the highest cost to customers.
c.
must provide the highest value at the lowest cost to customers.
d.
need not be concerned with the cost to the customers.
18. Primary processes in the value chain are comprised of
a.
marketing, legal and accounting services.
b.
research and development, marketing, supply, design, production, distribution, and
information systems.
c.
research and development, design, supply, production, marketing, distribution and
customer service.
d.
human resources, legal services, information systems and management accounting.
19. Services that support the primary processes in the value chain are
a.
human resources, legal services, information systems, and management accounting.
b.
research and development, design, supply, production, marketing, distribution, and
customer service.
c.
research and development, marketing, supply, design, production, distribution, and
information systems.
d.
marketing, legal, and accounting services.
20. An advantage of value chain analysis is that it allows a company to
a.
evaluate ethical conduct.
b.
focus on its core competencies.
c.
use the four “w’s.”
d.
increase sales to customers.
21. The just-in-time philosophy emphasizes
a.
completing products on schedule.
b.
increasing production.
c.
finishing all products before starting new ones.
d.
eliminating waste.
22. Which of the following is not a result of adopting a just-in-time operating environment?
a.
Reduced materials waste
b.
Reduced production time
c.
Reduced total labor hours
d.
Reduced production costs
23. TQM can be used in
a.
merchandising firms.
b.
service firms.
c.
manufacturing firms.
d.
all of these.
24. Which of the following is not included in the cost of quality?
a.
Inspection costs
b.
Costs of handling customer complaints
c.
Rework costs
d.
Inventory ordering costs
25. Activity-based management’s primary goal is to reduce
a.
nonvalue-adding costs.
b.
defects.
c.
inventory size.
d.
machine setup time.
26. Activity-based costing traces costs to a company’s activities related to
a.
purchasing and setup.
b.
production and nonproduction.
c.
production only.
d.
nonproduction only.
27. JIT, TQM, ABM, and TOC all make a contribution to
a.
encourage competition.
b.
eliminate all costs.
c.
continuous improvement.
d.
assign costs differently than before.
28. Performance measures are used in
a.
the “perform” stage of the management process.
b.
the “evaluate” stage of the management process.