Chapter001CostAccounting:InformationforDecisionMaking

True/FalseQuestions
1.Thevaluechaincomprisesactivitiesfromresearchanddevelopmentthroughthe
productionprocess,butdoesnotincludeactivitiesrelatedtothedistributionofproductsor
services.
FALSE

3.Administrativefunctionsarenotincludedinthevaluechainbecausetheyareimplicitly
includedineverybusinessfunction.
TRUE

AACSB:Analytic
Difficulty:Simple
LearningObjective:1

4.Thesupplychainisalinkedsetoforganizationsthatexchangegoodsandservicesin
combinationtoprovideafinalproductorservicetothecustomer.
TRUE

AACSB:Analytic
Difficulty:Moderate
LearningObjective:1

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Chapter001CostAccounting:InformationforDecisionMaking

5.Inessence,thevaluechainandthesupplychainaresimilar;eachcreatessomethingfor
whichthecustomeriswillingtopay.
TRUE

AACSB:Analytic
Difficulty:Moderate
LearningObjective:1

6.Accountingsystemsareimportantbecausetheyprovidethebestinformationfordecisions
commonlymadebymanagers.
FALSE

AACSB:Analytic
Difficulty:Moderate
LearningObjective:1

7.Ownersaremoreinterestedinorganizationalandmanagerialperformancethaninadding
valuetotheorganization.
FALSE

AACSB:Analytic
Difficulty:Complex
LearningObjective:1

8.Allnonvalueaddedactivitiescanbeeliminated,oncetheyareidentified.
FALSE

AACSB:Analytic
Difficulty:Complex
LearningObjective:1

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Chapter001CostAccounting:InformationforDecisionMaking

9.Eliminatingnonvalueaddedactivitiesalwaysreducescostswithoutaffectingthevalueof
theproducttocustomers.
TRUE

AACSB:Analytic
Difficulty:Complex
LearningObjective:1

10.Costbenefitanalysisinvolvescomparingthecostsandbenefitsofapotentialinvestment
option.
TRUE

AACSB:Analytic
Difficulty:Simple
LearningObjective:1

11.Acostdriverisavariablethatcausescosts.
TRUE

AACSB:Analytic
Difficulty:Simple
LearningObjective:3

12.Costaccountinghasasmuchtodowithrecordingpasteventsasitdoeswithestimating
costsandrevenuesassociatedwithpossiblefutureevents.
TRUE

AACSB:Analytic
Difficulty:Moderate
LearningObjective:3

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Chapter001CostAccounting:InformationforDecisionMaking

19.Managersareresponsibleforthecostsincurredtoachievethetargetssetduringthe
budgetingprocess,butnottheresourcesconsumedtoachievethosetargets.
FALSE

21.Financialaccountinginformationisdesignedfordecisionmakerswhoaredirectly
involvedinthedailymanagementofthefirm.
FALSE

AACSB:Analytic
Difficulty:Simple
LearningObjective:2

22.Itismoreimportantforfinancialaccountinginformationtobecomparablebetweenfirms
thantobeusefulformanagerialdecisionmaking.
TRUE

AACSB:Analytic
Difficulty:Complex
LearningObjective:2

23.Costaccountinginformationisdesignedprimarilyformanagerstouseintheirdecision
making.
TRUE

AACSB:Analytic
Difficulty:Simple
LearningObjective:2

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Chapter001CostAccounting:InformationforDecisionMaking
24.Generallyacceptedaccountingprinciples(GAAP)aredesignedtoprovideconsistencyin
reportingaccountingdata.
TRUE

AACSB:Analytic
Difficulty:Simple
LearningObjective:2

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Chapter001CostAccounting:InformationforDecisionMaking

25.Costaccountinginformationdevelopedformanagerstouseinmakingdecisionsmust
complywithgenerallyacceptedaccountingprinciples(GAAP).
FALSE

AACSB:Analytic
Difficulty:Moderate
LearningObjective:2

26.Themostimportantparticipantsthatmanagementmustconsiderinabusinessarethe
owners.
FALSE

AACSB:Analytic
Difficulty:Simple
LearningObjective:2

27.Costaccountinginformationcanbeusedbymanagerstodefraudcustomers,creditors,and
owners.
TRUE

AACSB:Analytic
Difficulty:Simple
LearningObjective:2

28.Theprimarygoalofthejustintimemethodsiskeepinginventoriesataminimum.
TRUE

AACSB:Analytic
Difficulty:Simple
LearningObjective:4

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Chapter001CostAccounting:InformationforDecisionMaking

29.Totalqualitymanagement(TQM)isamanagementmethodbywhichthefirmseeksto
excelonalldimensions,withproductionmanagementdefiningquality.
FALSE

AACSB:Analytic
Difficulty:Simple
LearningObjective:4

30.Benchmarkingisanongoingprocessthatcomparesacompany'sproductsorservices
withthebestlevelsofperformancefromotherfirms.
TRUE

AACSB:Analytic
Difficulty:Simple
LearningObjective:4

31.Activitybasedcosting(ABC)isamanagementtoolthatfocusesonthecontinuous
improvementofalldimensionsofabusiness.
FALSE

AACSB:Analytic
Difficulty:Simple
LearningObjective:4

32.Activitybasedcostinginformationcanassistsmanagersinidentifyingnonvalueadded
activitiesforpossibleelimination.
TRUE

AACSB:Analytic
Difficulty:Moderate
LearningObjective:4

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Chapter001CostAccounting:InformationforDecisionMaking

36.Managersfaceethicalsituationsonadailybasis,whileaccountantsfacethem
infrequently.
FALSE

AACSB:Analytic
Difficulty:Simple
LearningObjective:5

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Chapter001CostAccounting:InformationforDecisionMaking

MultipleChoiceQuestions
40.Thesetofactivitiesthatincreasestheusefulnessofthegoodsandservicesofan
organizationiscalled:
A. Valuechain.
b.Supplychain.
c.Demandchain.
d.Costbenefitanalysis.

AACSB:Analytic
Difficulty:Simple
LearningObjective:1

41.Whichofthefollowingactivitieswouldnotbeconsideredavalueaddedactivity?
a.production
b.marketing
C. accounting
d.distribution
e.administration

AACSB:Analytic
Difficulty:Moderate
LearningObjective:1

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Chapter001CostAccounting:InformationforDecisionMaking
42.Whichofthefollowingstatementsisfalse?
a.Inessence,thevaluechainandthesupplychainaresimilar;eachcreatessomethingfor
whichthecustomeriswillingtopay.
B. Accountingsystemsareimportantbecausetheyprovidealltheinformationfordecisions
commonlymadebymanagers.
c.Thesupplychainisalinkedsetoforganizationsthatexchangegoodsandservicesin
combinationtoprovideafinalproductorservicetothecustomer.
d.Eliminatingnonvalueaddedactivitiesalwaysreducescostswithoutaffectingthevalueof
theproducttocustomers.

AACSB:Analytic
Difficulty:Moderate
LearningObjective:1

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Chapter001CostAccounting:InformationforDecisionMaking

43.Managersdonotmakedecisionsaboutfutureeventsbasedon:
A. Perfectinformation.
b.Estimatedinformation.
c.Actualinformation.
d.Financialinformation.
e.Costinformation.

AACSB:Analytic
Difficulty:Moderate
LearningObjective:1

44.Whichofthefollowingisanonvalueaddedactivity?
a.Productdesign
b.Customerservice
c.Researchanddevelopment
D. Reworkofdefectiveitems

AACSB:Analytic
Difficulty:Moderate
LearningObjective:1

45.Anaccountingsystemthatcollectsfinancialandoperatingdataonthebasisofthe
underlyingnatureandextentofcostdriversis(CMAadapted)
a.fullabsorptioncosting.
B. activitybasedcosting.
c.variablecosting.
d.benchmarking.

AACSB:Analytic
Difficulty:Simple
LearningObjective:2

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Chapter001CostAccounting:InformationforDecisionMaking

46.Costdriversare(CMAadapted)
A. activitiesthatcausecoststoincreaseastheactivityincreases.
b.accountingtechniquesandpracticesusedtocontrolcosts.
c.accountingreimbursementsusedtoevaluatewhetherperformanceisproceedingaccording
toplan.
d.amechanicalbasis,suchasmachinehours,computertime,orfactorysquarefootage,used
toassigncoststoactivities.

AACSB:Analytic
Difficulty:Simple
LearningObjective:2

47.Inanactivitybasedcosting(ABC)system,costreductionisaccomplishedbyidentifying
andeliminating(CPAadapted)

a.
b.
C.
d.

AACSB:Analytic
Difficulty:Simple
LearningObjective:2

50.Theprocessofcreatingaformalplanandtranslatinggoalsintoaquantitativeformatis
(CMAadapted)
A. budgeting.
b.benchmarking.
c.costbenefitanalysis.
d.valueaddedanalysis.
e.activitybasedcosting.

AACSB:Analytic
Difficulty:Simple
LearningObjective:2

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Chapter001CostAccounting:InformationforDecisionMaking
51.Thefieldofaccountingthatdependsongenerallyacceptedaccountingprinciples(GAAP)
iscalled
a.costaccounting.
B. financialaccounting.
c.managerialaccounting.
d.responsibilityaccounting.
e.internationalaccounting.

AACSB:Analytic
Difficulty:Simple
LearningObjective:3

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Chapter001CostAccounting:InformationforDecisionMaking

52.Whichfieldofaccountingemphasizesrelevancyovercomparability?
A. costaccounting.
b.financialaccounting.
c.responsibilityaccounting.
d.internationalaccounting.

AACSB:Analytic
Difficulty:Simple
LearningObjective:3

54.Thedevelopmentofjustintime(JIT)methodsofproductionfocusedon
a.increasingsalesrevenue.
B. reducinginventories.
c.increasingcustomerservice.
d.reducingoperatingexpenses.
e.increasingproductquality.

AACSB:Analytic
Difficulty:Simple
LearningObjective:4

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Chapter001CostAccounting:InformationforDecisionMaking

55.Companiesthatadoptjustintime(JIT)purchasingsystemsoftenexperience(CMA
adapted)
a.lessneedforlinkagewithavendor'scomputerizedorderentrysystem.
B. agreaterneedforinspectionofgoodsasthegoodsarrive.
c.areductioninthenumberofsuppliers.
d.fewerdeliveriesfromsuppliers.

AACSB:Analytic
Difficulty:Moderate
LearningObjective:3

EssayQuestions

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