Cost Accounting 15th Edition题库Test Bank

Cost Accounting, 15e (Horngren/Datar/Rajan)

Chapter 1 The Manager and Management Accounting

Objective 1.1

1) Management accounting ________.

A) focuses on estimating future revenues, costs, and other measures to forecast activities and their results

B) provides information about the company as a whole

C) reports information that has occurred in the past that is verifiable and reliable D) provides information that is generally available only on a quarterly or annual basis Answer: A

Diff: 1 Objective: 1

AACSB: Analytical thinking

2) Managers use management accounting information to ________. A) help external users such as investors, banks, regulators, and suppliers B) communicate, develop, and implement strategies

C) communicate a firm's financial position to investors, banks, regulators, and other outside parties

D) ensure that financial statements are consistent with the SEC rules Answer: B

Diff: 1 Objective: 1

AACSB: Analytical thinking

3) Financial accounting ________.

A) focuses on the future and includes activities such as preparing next year's operating budget

B) must comply with GAAP (generally accepted accounting principles)

C) is the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization D) is prepared for the use of department heads and other employees Answer: B

Diff: 1 Objective: 1

AACSB: Analytical thinking

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4) The primary user of financial accounting information is a ________. A) factory shift supervisor B) distribution manager C) current shareholder D) department manager Answer: C

Diff: 1 Objective: 1

AACSB: Analytical thinking

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5) The primary user of management accounting information is a(n) ________. A) the controller

B) a shareholder evaluating a stock investment C) bondholder D) external regulator Answer: A

Diff: 1 Objective: 1

AACSB: Analytical thinking

6) Financial accounting provides the primary source of information for ________. A) decision making in the finishing department B) improving customer service

C) preparing the income statement for shareholders D) planning next year's operating budget Answer: C

Diff: 1 Objective: 1

AACSB: Analytical thinking

7) Which of the following is true of management accounting information? A) It focuses on documenting past business actions of a firm. B) It is prepared based on SEC rules and FASB accounting principles. C) It is prepared for shareholders.

D) It co-ordinates product design, production, and marketing decisions. Answer: D

Diff: 2 Objective: 1

AACSB: Analytical thinking

8) Which of the following statements refers to management accounting information? A) There are no regulations governing the reports. B) The reports are generally delayed and historical.

C) The audience tends to be stockholders, creditors, and tax authorities. D) It primarily measures manager's compensation on reported financial results. Answer: A

Diff: 2 Objective: 1

AACSB: Analytical thinking

9) Which of the following groups would be least likely to receive detailed management accounting reports? A) stockholders B) sales managers

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C) production supervisors D) distribution managers Answer: A

Diff: 1 Objective: 1

AACSB: Analytical thinking

10) Management accounting information typically includes ________. A) tabulated results of customer satisfaction surveys B) the cost of producing a product

C) the percentage of units produced that are defective D) All of these answers are correct. Answer: D

Diff: 1 Objective: 1

AACSB: Application of knowledge

11) Cost accounting ________.

A) measures the costs of acquiring or using resources in an organization B) helps managers to develop, communicate, and implement strategies

C) coordinates product design, production, and marketing decisions and evaluate a company's performance

D) communicates information to investors, banks, regulators, and other outside parties Answer: A

Diff: 1 Objective: 1

AACSB: Analytical thinking

12) Which of the following differentiates cost accounting and financial accounting? A) The primary users of cost accounting are the investors, whereas the primary users of financial accounting are the managers.

B) Cost accounting deals with product design, production, and marketing strategies, whereas financial accounting deals mainly with pricing of the products.

C) Cost accounting measures only the financial information related to the costs of acquiring fixed assets in an organization, whereas financial accounting measures financial and nonfinancial information of a company's business transactions.

D) Cost accounting measures information related to the costs of acquiring or using resources in an organization, whereas financial accounting measures a financial position of a company to investors, banks, and external parties. Answer: D

Diff: 2 Objective: 1

AACSB: Analytical thinking

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13) Which of the following is true of financial accounting information? A) It is prepared based on cost-benefit analysis.

B) It is primarily used by managers to make internal business decisions. C) It focuses on the past-oriented financial performance of a company. D) It only measures the cash transactions of a company. Answer: C

Diff: 2 Objective: 1

AACSB: Analytical thinking

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b. (1) routine internal reporting

c. (3) external reporting to investors and other outside parties d. (1) routine internal reporting

Diff: 3 Objective: 1

AACSB: Application of knowledge

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35) Describe management accounting and financial accounting.

Answer: Management accounting provides information to internal decision makers of the business such as top executives, managers, sales representatives, and production supervisors. Its purpose is to help managers predict and evaluate future results. Reports are generated often and usually broken down into smaller reporting divisions such as department or product line. There are no rules to be complied with since these reports are for internal use only. Management accounting embraces more extensively such topics as the development and implementation of strategies and policies, budgeting, special studies and forecasts, influence on employee behavior, and nonfinancial as well as financial information.

Financial accounting, by contrast, provides information to external decision makers such as investors and creditors. Its purpose is to present a fair picture of the financial condition of the company. Reports are generated quarterly or annually and report on the company as a whole. The financial statements must comply with GAAP (generally accepted accounting principles). A CPA audits, or verifies, that GAAP is being followed.

Diff: 3 Objective: 1

AACSB: Analytical thinking

36) Cost accounting provides information for both management accounting and financial accounting professionals. Explain.

Answer: Cost accounting is the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization. For example, calculating the cost of a product is a cost accounting function that meets both the financial accountant's inventory-valuation needs and the management accountant's decision-making needs such as deciding how to price products and choosing which products to promote.

Diff: 3 Objective: 1

AACSB: Analytical thinking

37) Is it possible to have an active cost management program without an Enterprise Resource Planning (ERP) System?

Answer: Yes, an active cost management program can occur without an Enterprise

Resource Planning (ERP) System. Cost management is a philosophy that guides management in their short-run and long-run planning and control decisions that increase value for customers and lower costs of products and services. Cost management is not dependent on any particular system or database, but it is rather an overall philosophy of operation.

Diff: 2 Objective: 1

AACSB: Analytical thinking

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38) What competitive advantage could a company obtain from a successful cost management program?

Answer: There are three broad outcomes from a successful cost management program: 1) costs are reduced with no loss in customer value. In this scenario, a company might gain a competitive advantage by lowering its price with no loss in profit, or maintain the same price and increase profit; 2) customer value is increased with no change in costs. This scenario might increase customer satisfaction resulting in increased customer loyalty and perhaps increase the overall demand for the product; 3) customer value might be increased while costs are reduced simultaneously. This scenario would result in the benefits described in both 1) and 2).

Diff: 3 Objective: 1

AACSB: Analytical thinking

Objective 1.2

1) Which of the following statements concerning an organization's strategy is true?

A) Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.

B) Cost accountants formulate strategy in an organization since they have more inputs about costs.

C) A good strategy will always overcome poor implementation.

D) Businesses usually follow one of two broad strategies: offering a quality product at a high price, or offering a unique product or service priced lower than the competition. Answer: A

Diff: 2 Objective: 2

AACSB: Analytical thinking

2) Strategy specifies ________.

A) how an organization matches its own capabilities with the opportunities in the marketplace

B) standard procedures to ensure quality products C) incremental changes for improved performance D) the demand created for products and services Answer: A

Diff: 2 Objective: 2

AACSB: Analytical thinking

3) Which of the following is not a concern for management accountants in formulating a strategy?

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A) identifying the most important warehouse location for the distribution of goods B) substituting products that exist in the marketplace

C) strategizing compliance with GAAP (Generally Accepted Accounting Principles) D) maintaining adequate fixed assets available to implement the strategy Answer: C

Explanation: C) This is more of a concern of financial accountants than of management accountants.

Diff: 2 Objective: 2

AACSB: Analytical thinking

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4) Strategy is formulated ________.

A) by identifying the most important customers

B) by forecasting the composition of adequate fixed assets C) based on the qualified opinion of external auditors D) by eliminating sunk costs Answer: A

Diff: 2 Objective: 2

AACSB: Analytical thinking

5) In designing strategy, a company must match its opportunities in the marketplace with ________.

A) environment friendly goals B) its resources and capabilities C) branding opportunities

D) the requirements of credit rating agencies Answer: B

Diff: 2 Objective: 2

AACSB: Analytical thinking

6) Which of the following statements about customer value is true? A) Customer value is shown in a corporation's balance sheet.

B) Creating value for customers is an important part of planning and implementing strategy. C) Customer value is the only focus that helps managers to formulate strategies. D) Customer value is lost with increase in costs of the product. Answer: B

Diff: 2 Objective: 2

AACSB: Analytical thinking

7) A company's strategy specifies how an organization matches its capabilities with the opportunities in the marketplace. Answer: TRUE

Diff: 2 Objective: 2

AACSB: Analytical thinking

8) The two broad strategies that companies follow are cost leadership strategy and product differentiation strategy. Answer: TRUE

Diff: 1 Objective: 2

AACSB: Analytical thinking

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9) The best-designed strategies are valuable whether or not they are effectively implemented. Answer: FALSE

Explanation: Implementation is essential or the strategy is useless.

Diff: 1 Objective: 2

AACSB: Analytical thinking

10) The key to a company's success is creating value for customers while differentiating itself from its competitors. Answer: TRUE

Diff: 1 Objective: 2

AACSB: Analytical thinking

11) The key to a company's success is always to be the low cost producer in a particular industry. Answer: FALSE

Explanation: The low cost producer in a particular industry will not necessarily be successful.

Diff: 2 Objective: 2

AACSB: Analytical thinking

12) Management accountants work closely with managers in various departments to formulate strategies by providing information about the sources of competitive advantage. Answer: TRUE

Diff: 2 Objective: 2

AACSB: Analytical thinking

13) Management accountants should have little or no role in deciding on a company's strategy. Answer: FALSE

Explanation: Management accountants should play a significant role in deciding on a company's strategy.

Diff: 1 Objective: 2

AACSB: Analytical thinking

14) Companies can decide on an appropriate strategy based strictly on internally available information. Answer: FALSE

Explanation: Companies must obtain external information as well as internal information to

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decide on an appropriate strategy.

Diff: 2 Objective: 2

AACSB: Analytical thinking

15) Strategic financial management describes cost management that specifically focuses on strategic issues. Answer: FALSE

Explanation: Strategic cost management describes cost management that specifically focuses on strategic issues.

Diff: 2 Objective: 2

AACSB: Analytical thinking

16) Identifying a company's most important customers helps to formulate a strategy. Answer: TRUE

Diff: 1 Objective: 2

AACSB: Analytical thinking

17) The best-designed strategies and the best-developed capabilities are useless unless they are effectively executed. Answer: TRUE

Diff: 1 Objective: 2

AACSB: Analytical thinking

18) Describe the major differences between management accounting and financial accounting for the following: 1. Primary users 2. Focus and emphasis

3. Rules of measurement and reporting Answer:

1. The primary users of management accounting information are managers of the

organization. The primary users of financial accounting are external users such as investors, banks, regulators, and suppliers.

2. Management accounting is future oriented. Financial accounting is past oriented. 3. Management accounting measurement and reporting does not have to follow GAAP but are based on cost-benefit analysis. Financial accounting measurement and reporting must be prepared in accordance with GAAP and be certified by external, independent auditors.

Diff: 3 Objective: 2

AACSB: Analytical thinking

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19) What is strategy? Briefly describe the two broad types of strategies that companies may choose to pursue.

Answer: Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. In other words, strategy describes how a company will compete.

Companies follow one of two broad strategies. One is provide a quality product or service at low prices. The other is to compete on their ability to offer a unique product or service that is generally offered at a higher price.

Diff: 2 Objective: 2

AACSB: Analytical thinking

20) Briefly describe the list of items that managers undertake to formulate strategies. Answer: ONE: Identifying the most important customers, and how the company can be competitive and deliver value to them.

TWO: Identifying the substitute products existing in the marketplace, and how do they differ from our product in terms of features, price, cost, and quality.

THREE: Identifying most critical capability-whether it is technology, production or marketing.

FOUR: Checking the adequacy of cash available to fund the strategy, or will additional funds need to be raised-through issue of debt or equity.

Diff: 3 Objective: 2

AACSB: Analytical thinking

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21) Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition. Assume you are opening a small food outlet across the street from your campus. How might that business be operated under each of the two broad strategies? Consider the following specific operational areas:

a. target customers b. products offered c. product pricing d. location choice e. advertising content f. advertising media

Answer: The purpose of this question is to explore some of the differences in business operations as a result of a broad strategic choice. Answers will differ from student to student, but you should see some specific themes. Operational Area Low Price Strategy Target customers Target customers might be students on a tight budget. Differential Strategy Target customers might be more wealthy students, faculty, or perhaps neighbors who live nearby. Products offered Few products, heavy probably set up as a high volume operation. Product pricing Location choice Priced at or lower than the competition in the area. Convenient to the target customers. Not as convenient, perhaps in a higher-end shopping or entertainment area. Customers might seek out the high quality and be willing to travel a bit for it. Advertising content Advertising would emphasize Advertising would emphasize the low price of the products quality or ambience. offered. Advertising media Media that would be looked at Media that would be looked by the target customers, such at by the target customer, as student newspapers. Diff: 3 Objective: 2

AACSB: Application of knowledge

High quality products, restaurant might have a lot of ambience. Higher priced products. emphasis on tight cost control, probably a reasonable choice, local magazines and newspapers. 19

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22) Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition. Is it possible to follow a strategy that is \

Answer: There is some dispute about the correct answer to this question. Some will argue that it is not good for companies to get \confused as to whether or not the company is competing on price or is trying to make some other appeal. If the customer is confused about how the company is giving them value, they might perceive they are getting no value and abandon the product to a competitor with a clearer customer value proposition. The other side of the argument is that cost management is a necessary part of any strategy and even if the company chooses to pursue a differential strategy, management of the company should always be seeking ways to manage costs and increase customer value simultaneously regardless of their strategy. The student should be able to articulate one or the other arguments coherently.

Diff: 3 Objective: 2

AACSB: Application of knowledge

Objective 1.3

1) Place the four business functions in the order they appear along the value chain:

A) Customer Service, Design, Production, Marketing B) Customer Service, Marketing, Production, Design C) Design, Production, Marketing, Customer Service D) Design, Customer Service, Production, Marketing Answer: C

Diff: 2 Objective: 3

AACSB: Analytical thinking

Customer service Design Marketing Production

2) R&D, production, and customer service are business functions that are all included as part of ________. A) the value chain B) benchmarking

C) customer relationship management D) the supply chain Answer: A

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Diff: 1 Objective: 3

AACSB: Analytical thinking

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3) The value chain is the sequence of business functions in which ________. A) value is deducted from the products or services of an organization B) producing and delivering the product or service is of prime importance

C) products and services are evaluated with respect to their value to the supply chain D) usefulness is added to the products or services of an organization Answer: D

Diff: 2 Objective: 3

AACSB: Analytical thinking

4) ________ is the generation of, and experimentation with, ideas related to new products, services, or processes. A) Research and development

B) Design of products, services, or processes C) Production D) Marketing Answer: A

Diff: 1 Objective: 3

AACSB: Analytical thinking

5) ________ is the detailed planning and engineering and testing of products, services, or processes.

A) Plan of implementation B) Design C) Production

D) Research and development Answer: B

Diff: 1 Objective: 3

AACSB: Analytical thinking

6) Production is the ________.

A) generation of, and experimentation with, ideas related to new products, services, or processes

B) processing orders and shipping products or services to customers

C) acquisition, coordination, and assembly of resources to produce a product or deliver a service

D) detailed planning and engineering of products, services, or processes Answer: C

Diff: 2 Objective: 3

AACSB: Analytical thinking

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7) Marketing is the ________.

A) generation of, and experimentation with, ideas related to new products, services, or processes

B) detailed planning and engineering of products, services, or processes

C) acquisition, coordination, and assembly of resources to produce a product or deliver a service

D) the manner by which companies promote and sell their products or services to customers or perspective customers Answer: D

Diff: 2 Objective: 3

AACSB: Analytical thinking

8) Which of the following differentiates marketing from customer service?

A) Marketing is the process of promoting and selling products or services to customers or prospective customers, whereas customer service is the process of providing after-sales service to customers.

B) Marketing is the process of processing orders and shipping products or services to customers, whereas customer service is the process of providing additional information to customers about the product.

C) Marketing is the process of detailed planning, engineering, and testing of products and processes, whereas customer service concentrates on existing customers.

D) Marketing is the process of processing orders and shipping products or services to customers, whereas customer service is concerned with choosing the right customer for the product. Answer: A

Diff: 2 Objective: 3

AACSB: Analytical thinking

9) ________ is an after-sale support provided to customers. A) Distribution B) Customer service C) Production D) Marketing Answer: B

Diff: 1 Objective: 3

AACSB: Analytical thinking

10) ________ is a strategy that integrates people and technology in all business functions to enhance relationships with customers, partners, and distributors. A) Supply-chain analysis

B) Customer relationship management

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C) Value-chain analysis

D) Continuous quality improvement Answer: B

Diff: 1 Objective: 3

AACSB: Analytical thinking

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11) Customer relationship management initiatives use technology to coordinate all ________. A) advertising and marketing techniques to attract customers B) research activities C) customer-facing activities

D) quality control management activities Answer: C

Diff: 1 Objective: 3

AACSB: Analytical thinking

12) ________ describes the flow of goods, services, and information from the purchase of materials to the delivery of products to consumers, regardless of whether those activities occur in the same organization or with other organizations. A) Supply chain B) Production process C) Quality control

D) Customer relationship management Answer: A

Diff: 1 Objective: 3

AACSB: Analytical thinking

13) Processing orders and shipping products or providing services to customers is known as ________.

A) after-sales services B) distribution C) marketing D) supply chain Answer: B

Diff: 1 Objective: 3

AACSB: Analytical thinking

14) ________ is a philosophy in which management improves operations throughout the value chain to deliver products and services that exceed customer expectations. A) Cost-benefit approach B) Customer focus

C) Customer relationship management D) Total quality management Answer: D

Diff: 1 Objective: 3

AACSB: Analytical thinking

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15) Which of the following is an area that customers want to see improved levels of performance?

A) higher sales margin B) quality of the product C) lower marginal costs D) profit margins Answer: B

Diff: 2 Objective: 3

AACSB: Analytical thinking

16) Which of the following statements about a company's supply chain is true? A) A company's supply chain is always internal to a firm. B) A company's supply chain is always external to a firm.

C) A company's supply chain is the same thing as a company's value chain.

D) Management accountants provide information to enhance a company's supply chain. Answer: D

Diff: 2 Objective: 3

AACSB: Analytical thinking

17) Management accounting information helps managers calculate a target cost for a product ________.

A) by subtracting from the target price the operating income per unit of product that the company wants to earn

B) by subtracting from the target price the net income per unit of product that the company wants to earn

C) by subtracting profit margin per unit from the target price of product that the company wants to earn

D) by adding the operating income per unit and the contribution margin per unit Answer: A

Diff: 2 Objective: 3

AACSB: Analytical thinking

18) The ________ function supports the six functions of value-chain analysis. A) administration B) controlling C) planning D) direction Answer: B

Diff: 1 Objective: 3

AACSB: Analytical thinking

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19) ________ aims to improve operations throughout the value chain and to deliver products and services that exceed customer expectations. A) Total Quality Management B) Innovation

C) Customer response time D) Cost and efficiency Answer: A

Diff: 1 Objective: 3

AACSB: Analytical thinking

20) New-product development time is the time taken by companies to ________. A) test the prototype and start the large scale production of a product B) design and develop the prototype product C) create new products and bring them to market

D) improvise existing products and re-launch them to market Answer: C

Diff: 2 Objective: 3

AACSB: Analytical thinking

21) Customer response time involves ________.

A) the speed it takes a customer to respond to an advertisement and place an order B) the speed at which an organization responds to customer requests C) the speed it takes to develop a new product

D) the speed it takes an organization to develop a Total Quality Management (TQM) program Answer: B

Diff: 2 Objective: 3

AACSB: Analytical thinking

22) Which of the following is true of sustainability?

A) It helps in implementing strategies to improvise the product. B) It concerns with purchase of material in larger quantities.

C) It helps the development and implementation of strategies to achieve long-term financial, social, and environmental goals.

D) It helps manufacturing firms produce products more efficiently ensuring lower costs at an optimum use of available resources. Answer: C

Diff: 2 Objective: 3

AACSB: Analytical thinking

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23) The supply chain refers to the sequence of business functions in which customer usefulness is added to products or services. Answer: FALSE

Explanation: The value chain refers to the sequence of business functions in which customer usefulness is added to products or services.

Diff: 2 Objective: 3

AACSB: Analytical thinking

24) An effective way to cut costs is to eliminate activities that do NOT improve the product attributes that customers value. Answer: TRUE

Diff: 1 Objective: 3

AACSB: Analytical thinking

25) For optimal planning success it is best if each business function within the value chain is performed one at a time in sequence. Answer: FALSE

Explanation: Optimally, success is achieved when two or more of the individual business functions work concurrently as a team.

Diff: 2 Objective: 3

AACSB: Analytical thinking

26) For best results, cost management emphasizes independently coordinating supply chain activities within your company and with other companies that act as suppliers and customers. Answer: TRUE

Diff: 2 Objective: 3

AACSB: Analytical thinking

27) Technological innovation has led to shorter product-life cycles and increased the need to bring new products to market more rapidly. Answer: TRUE

Diff: 1 Objective: 2

AACSB: Analytical thinking

28) Management accounting information helps managers calculate a target cost for a product by subtracting from the target price the net income per unit of product that the company wants to earn. Answer: FALSE

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Explanation: Management accounting information helps managers calculate a target cost for a product by subtracting from the target price the operating income per unit of product that the company wants to earn.

Diff: 2 Objective: 2

AACSB: Analytical thinking

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29) Customer relationship management initiatives use technology to coordinate all

customer-facing activities (such as marketing, sales calls, distribution, and after-sales support) and the design and production activities necessary to get products to customers. Answer: TRUE

Diff: 2 Objective: 3

AACSB: Analytical thinking

30) The supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers. Answer: TRUE

Diff: 2 Objective: 3

AACSB: Analytical thinking

31) The supply chain always occurs within a single organization. Answer: FALSE

Explanation: The supply chain can include organizations external to a single organization.

Diff: 1 Objective: 3

AACSB: Analytical thinking

32) Distribution refers to promoting and selling products or services to customers or prospective customers. Answer: FALSE

Explanation: Marketing refers to promoting and selling products or services to customers or prospective customers.

Diff: 1 Objective: 3

AACSB: Analytical thinking

33) The design of products, services, and processes component of the supply chain refers to the detailed planning, engineering, and testing of products and processes. Answer: TRUE

Diff: 2 Objective: 3

AACSB: Analytical thinking

34) Management accountants might provide information on decisions on whether to buy a product from outside or manufacture it in-house. Answer: TRUE

Diff: 1 Objective: 3

AACSB: Analytical thinking

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35) The parts of the value chain associated with producing and delivering a product or service–production and distribution–are referred to as the supply chain. Answer: TRUE

Diff: 2 Objective: 3

AACSB: Analytical thinking

36) Value chain refers to its value to the employee. Answer: FALSE

Explanation: Value chain refers to its value to the customer.

Diff: 1 Objective: 3

AACSB: Analytical thinking

37) Managers track the costs incurred in each value-chain category is to reduce costs and to improve efficiency. Answer: TRUE

Diff: 1 Objective: 3

AACSB: Analytical thinking

38) Competitive information serves as a benchmark that managers use to continuously improve their operations. Answer: TRUE

Diff: 1 Objective: 3

AACSB: Analytical thinking

39) Increased global competition is placing pressure on companies to reduce costs. Answer: TRUE

Diff: 1 Objective: 3

AACSB: Analytical thinking

40) The increasing pace of technological information has resulted in longer product lifecycles. Answer: FALSE

Explanation: The increasing pace of technological information has resulted in shorter product lifecycles.

Diff: 2 Objective: 3

AACSB: Application of knowledge

41) Managers rely on management accounting information to evaluate alternative investment

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and R&D decisions. Answer: TRUE

Diff: 1 Objective: 3

AACSB: Analytical thinking

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42) Classify each cost item into one of the business functions of the value chain, either (1) R&D, (2) design, (3) production, (4) marketing, (5) distribution, or (6) customer service. Item:

a. cost of samples mailed to promote sales of a new product b. labor cost of workers in the manufacturing plant

c. bonus paid to a person with a 90% satisfaction rating in handling customers with complaints

d. transportation costs for shipping products to retail outlets Answer: a. (4) marketing b. (3) production c. (6) customer service d. (5) distribution

Diff: 3 Objective: 3

AACSB: Application of knowledge

43) Classify each cost item of Ripon Printers given below into one of the business functions of the value chain, either (1) R&D, (2) design of products and processes, (3) production, (4) marketing (including sales), (5) distribution, or (6) customer service. Item:

a. cost of customer order forms

b. cost of paper used in manufacture of books c. cost of paper used in packing cartons to ship books d. cost of paper used in display at national trade show

e. depreciation of trucks used to transport books to college bookstores f. cost of the wood used to manufacture paper

g. salary of the scientists attempting to find another source of printing ink h. cost of designing the book size so that a standard-sized box is filled to capacity Answer:

a. (4) marketing (including sales) b. (3) production c. (5) distribution

d. (4) marketing (including sales) e. (5) distribution f. (3) production

g. (1) research and development h. (2) design of products and processes

Diff: 3 Objective: 3

AACSB: Application of knowledge

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44) Describe the value chain and how it can help organizations become more effective. Answer: A value chain is a sequence of business functions whose objective is to provide a product to a customer or provide an intermediate good or service in a larger value chain. These business functions include R&D, design, production, marketing, distribution, and customer service.

An organization can become more effective by focusing on whether each link in the chain adds value from the customer's perspective by focusing on the organization's objectives.

Diff: 2 Objective: 3

AACSB: Application of knowledge

45) Value chain and classification of costs, car company. General Motors incurs the following costs:

a. Electricity costs for the plant assembling the Chevrolet Camaro b. Transportation costs for shipping the Camaro to dealers c. Payment to Shelby Designs for the design of the Camaro. d. Salary of an engineer working on the next generation of Camaros e. Cost of GM employees' visit to an auto show to demonstrate the Camaro f. Testing the Camaro at the GM track

g. Payment to television network for running Camaro advertisements

h. Cost of brake pads purchased from outside supplier to be installed on the Camaro

Required:

Classify each of the cost items (a-h) into one of the business functions of the value chain. 1) Research and development 2) Design of products and processes 3) Production

4) Marketing and sales 5) Distribution 6) Customer service Answer: a. 3) Production b. 5) Distribution

c. 2) Design of products and processes d. 1) Research and development e. 4) Marketing and sales

f. 2) Design of products and processes g. 4) Marketing and sales h. 3) Production

Diff: 3 Objective: 3

AACSB: Application of knowledge

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Objective 1.4

1) Place the five steps in the decision-making process in the correct order:

A) C D B E A B) E D A B C C) C A E B D D) A E B D C Answer: C

Diff: 2 Objective: 4

AACSB: Analytical thinking

A = Obtain information

B = Make decisions by choosing among alternatives C = Identify the problem and uncertainties

D = Implement the decision, evaluate performance, and learn E = Make predictions about the future

2) Which of the following is true of planning in decision making? A) It helps an organization to select goals and strategies. B) It improves the quality of products. C) It helps in evaluating performance.

D) It helps in the analysis of actual performance. Answer: A

Diff: 1 Objective: 4

AACSB: Analytical thinking

3) The most important planning tool is a ________. A) performance evaluation report B) fishbone diagram C) control chart D) budget Answer: D

Diff: 2 Objective: 4

AACSB: Analytical thinking

4) A report showing the actual financial results for a period compared to the budgeted financial results for that same period would most likely be called a ________. A) strategic plan

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B) management forecast C) performance report D) revised plan Answer: C

Diff: 2 Objective: 4

AACSB: Analytical thinking

5) A budget ________.

A) is the qualitative expression of a proposed plan of action by management B) is an aid to coordinating what needs to be done to execute a plan C) helps in identifying problems and uncertainties D) promotes production automation Answer: B

Diff: 2 Objective: 4

AACSB: Analytical thinking

6) Which of the following is true of planning? A) It makes predictions about the future.

B) It assumes the functional hierarchy of any business is linear. C) It improves the quality of products. D) It evaluates customer feedback Answer: A

Diff: 1 Objective: 4

AACSB: Analytical thinking

7) A budget serves as much as a control tool as a planning tool because ________. A) it aids in the coordination and communication among various business functions B) it helps to evaluate customer needs and feedback

C) it is a benchmark against which actual performance can be compared D) it helps.to make predictions about the future Answer: C

Diff: 2 Objective: 4

AACSB: Analytical thinking

8) Which of the following is an example of an extrinsic reward? A) receiving a high rating on customer service B) appreciation mail from a customer C) promotions based on performance D) verbal appreciation from CEO Answer: C

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Diff: 1 Objective: 4

AACSB: Application of knowledge

9) Which of the following is an example of an intrinsic reward? A) bonuses paid to employees B) recognition of job well done C) promotions based on performance D) salaries paid to employees Answer: B

Diff: 1 Objective: 4

AACSB: Application of knowledge

10) Linking rewards to performance ________. A) helps to motivate managers

B) allows companies to charge premium prices C) should only be based on financial information D) enhances agency costs Answer: A

Diff: 2 Objective: 4

AACSB: Analytical thinking

11) Control measures should ________.

A) be set and not changed until the next budget cycle B) be set by excluding nonfinancial information

C) be kept confidential from employees so that competitors don't have an opportunity to gain a competitive advantage

D) be linked by feedback to help future planning Answer: D

Diff: 2 Objective: 4

AACSB: Analytical thinking

12) A well-conceived plan allows managers the ability to ________. A) not make decisions again until the next planning session B) keep lower-level managers from implementing change

C) underestimate costs so that actual operating results will be favorable when comparisons are made

D) take advantage of unforeseen opportunities Answer: D

Diff: 2 Objective: 4

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AACSB: Analytical thinking

13) Which of the following statements is true of performance reports?

A) The performance report shows actual performance as compared to the budget. B) The performance report depicts the performance of a firm's competitors.

C) The performance report compares only the budgeted performance over the years. D) The performance report contains no actual results due to confidentiality. Answer: A

Diff: 2 Objective: 4

AACSB: Analytical thinking

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14) Management accounting is considered most likely to be successful when it ________. A) helps creditors evaluate the company's performance B) helps investors improve their decisions C) is timely

D) is relevant and reported annually Answer: C

Diff: 2 Objective: 4

AACSB: Analytical thinking

15) The last step in the decision-making process is to make decisions by choosing among alternatives. Answer: FALSE

Explanation: The last step in the decision-making process is to implement the decision, evaluate performance, and learn.

Diff: 1 Objective: 4

AACSB: Analytical thinking

16) One of the steps in planning is evaluating the performance and taking corrective measures. Answer: FALSE

Diff: 2 Objective: 4

AACSB: Analytical thinking

17) A budget helps to control activities by adhering to the prescribed plan. Answer: TRUE

Diff: 1 Objective: 4

AACSB: Analytical thinking

18) To take advantage of changing market opportunities, the annual budget should be strictly enforced. Answer: FALSE

Explanation: To take advantage of changing market opportunities, the annual budget should be updated to reflect those changes.

Diff: 2 Objective: 4

AACSB: Analytical thinking

19) A budget is a qualitative expression of a plan. Answer: FALSE

Explanation: Explanation: A budget is a quantitative expression of a plan.

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