Deck 12: An Introduction to Management Accounting: a Strategic Perspective

Question 1

Short-term operating decisions can be translated into a budget, which is a plan of action expressed in monetary terms that compels management to look ahead and coordinate their activities.

Answer 1

True

Question 2

The determination of objectives and expressing how they are to be attained are together referred to as the planning process.

Answer 2

True

Question 3

The Australian Customs and Border Protection Service and the Australian Taxation Office have a statutory right of access to internal accounting information.

Answer 3

True

Question 4

The cost-benefit approach is often used to evaluate the net benefits of alternative accounting information systems.

Question 5

A control system is limited in its application, as it depends on the motivation of individuals.

Question 6

A major difference between strategic and operating decisions is that the former focus on the long-term policies of the firm, whereas operating decisions focus on the short-term use of resources.

Question 7

The efficiency and effectiveness of a control system can be affected by the costs associated with running the system.

Question 8

A major requirement of managers is to have detailed and timely information that enables them to monitor results and compare with plans and budgets, in order to take appropriate action for the future direction of the company.

Question 9

Organisational size and structure are major influences on the information needs of managers.

Question 10

In order for a banker to make judgements about the future needs and prospects of an entity in deciding whether to lend money, additional detailed information in the form of future cash flows may be required.

Question 11

In supplying external users with additional accounting information, there is a need to balance the costs and benefits of supplying that information, but this does not apply to internal users such as managers because the information is already available and does not incur any additional costs.

Question 12

If bankers are to make judgements about the future needs and prospects of the entity, they are likely to require information on projected cash flow statements, statements of comprehensive income and details of any other loans the company may have.

Question 13

A desired outcome of setting objectives in the planning process is to create criteria for assessing alternative business options.

Question 14

Bankers have a statutory right of access to internal accounting information.

Question 15

Strategic decisions are decisions that focus on the efficient use of the resources available to the firm in the short term.

Question 16

In a dynamic economic environment, there is often the need to revise operating decisions in order to meet long-term objectives, but this will not impact on strategic decisions as these are related to policy changes and are not affected by operating decisions.

Question 17

A company's results are judged against some expectations, which may be rough plans or detailed budgets.

Question 18

The monitoring process allows corrective action to be planned and taken after comparing actual performance with a predetermined plan.

Question 19

Many benefits associated with an information system are qualitative in nature.

Question 20

Detailed financial information is only generally available to managers and a limited number of external users, as it normally contains sensitive information that may be detrimental to the company if made publicly available.

Question 21

To be useful to management, accounting information must:

A) be prepared in accordance with general-purpose financial reports.
B) have the potential to affect decisions and influence behaviour.
C) be completely accurate.
D) be in the form of financial statements.

Question 22

Which of the following factors influence the information available to the management of an organisation?

A) Size of the organisation
B) Needs of management
C) Organisation structure
D) All of the above

Question 23

Decisions that require managers to evaluate the accomplishments of their organisation, and to make changes if the organisation is not meeting its goals, are usually referred to as:

A) regulatory decisions.
B) implementation decisions.
C) planning decisions.
D) control decisions.

Question 24

How are financial accounting information and management accounting information similar?

A) They are both used by managers.
B) They are both used in decision making.
C) They both involve quantitative and non-quantitative aspects.
D) All of the above are correct.

Question 25

The purpose of financial accounting is to provide information for decision making. What is the primary purpose of management accounting?

A) To enable managers to ask for higher salaries
B) To maximise a company's profits
C) To provide information for decision making
D) To create a value chain

Question 26

Decisions that require managers to identify goals and to develop strategies are usually referred to as:

A) authoritative decisions.
B) performance decisions.
C) planning decisions.
D) managed decisions.

Question 27

Traditional management accounting information:

A) gives managers the only information they need to make decisions.
B) integrates production and marketing concerns with accounting.
C) is the same in every company.
D) assists managers in their roles.
)

Question 28

The basic difference between management and financial accounting is that:

A) the financial accounting system relies on accounting information, whereas management accounting does not.
B) financial accounting relies on information gathered from sources outside the business, whereas management accounting relies on internally generated information.
C) financial accounting is concerned with providing information to outsiders, whereas management accounting is concerned with providing information to managers for their use in directing the activities of the organisation.
D) None of the above is correct.

Question 29

The contingency theory accepts that different types of organisation require different types of accounting information for effective functioning.

Question 30

Accounting information systems should be installed in an organisation when:

A) the financial controller decides they should.
B) benefits exceed the costs to an organisation.
C) another organisation in the same industry installs such a system.
D) the CEO decides they should.

Question 31

Planning is the process of:

A) ensuring that a reasonable profit is made each year.
B) creating a 'roadmap' for achieving corporate goals and objectives.
C) just setting goals and objectives.
D) ensuring that assets are properly used.

Question 32

Planning and control decisions are similar in that both:

A) tend to have a short-run focus.
B) focus on achieving the organisation's goals.
C) increase the risk to owners and creditors.
D) involve the setting of goals.

Question 33

Which of the following characteristics of information is desired by management?

A) Regular
B) Timely
C) Detailed
D) All of the above

Question 34

Which of the following is essential for management before it decides whether the business is succeeding or failing?

A) Accounts receivable.
B) A set of objectives.
C) A large organisation.
D) More current assets than non-current assets.

Question 35

Which of the following is part of the planning process?

A) Deciding on the objectives.
B) Detailing how the plans are to be achieved.
C) Ensuring that the plans will be achieved.
D) All of the above.

Question 36

Which of the following is not true of the control process? The control process:

A) is a part of the planning and control process.
B) involves monitoring action.
C) involves allocating resources for acquisitions of plant and equipment.
D) contains a corrective activity.

Question 37

The primary difference between planning and control decisions is that:

A) the former must follow the latter.
B) planning decisions involve investing decisions, whereas control decisions focus on financing and operating decisions.
C) planning is future-oriented, while control decisions are past and present-oriented.
D) planning decisions involve components of the transformation process, whereas control decisions do not.

Question 38

Decisions that require managers to evaluate the accomplishments of their organisation and to make changes if the organisation is not meeting its goals are usually referred to as: Planning decisions Control decisions

A) No No
B) No Yes
C) Yes No
D) Yes Yes

Question 39

Which of the following is not an external user of financial information?

A) Shareholders
B) Management
C) Suppliers of goods and services
D) Government

Question 40

The proper sequence for the planning and controlling process is:

A) set objectives, set goals, develop plans, implement plans, evaluate performance, modify goals or plans as needed.
B) develop plans, set objectives, set goals, implement plans, evaluate performance, modify goals or plans as needed.
C) set goals, set objectives, develop plans, implement plans, evaluate performance, modify goals or plans as needed.
D) set goals, develop plans, set objectives, implement plans, evaluate performance, modify goals or plans as needed.

Question 41

Name three ways that accounting information can assist managers who make marketing decisions.

Question 42

Strategic planning differs from operational planning in that strategic planning:

A) involves day-to-day activities.
B) is done by middle management.
C) often involves large investments.
D) would be involved in determining production levels for the next week.

Question 43

The identification of the origin of controllable costs and income allows at least one manager to be responsible for the costs, and:

A) results in minimising costs and maximising profits.
B) results in more efficient operations.
C) makes the manager accountable for each item on a performance report.
D) all of the above are correct.

Question 44

Name three ways that accounting information can assist managers who make production decisions.

Question 45

Operating decisions are undertaken to:

A) optimise the use of resources available to the firm in the long term.
B) compare actual versus predetermined performance.
C) result in profits in the long term.
D) identify efficient use of scarce resources in the short term.

Question 46

Ordinary Office Products, Inc., a retail office supply company, has a single outlet in a large metropolitan area. The company has a policy of delivering any size order, even a bottle of Liquid Paper, to any customer, regardless of the distance. Management believes that without this delivery policy the company will not be able to maintain its market share. Since delivery costs are considered a selling expense and not a product cost, the company has a positive gross margin. That is, the company appears to be making money on its sales. The problem is that the company has shown an operating loss for each of the past three years and is on the verge of having its bank financing withdrawn. Management has been attempting to solve its profitability problems by increasing sales of its delivered merchandise.

Question 47

What is meant by responsibility accounting?

Question 48

Distinguish managerial accounting from financial accounting. Your answer should include a brief discussion of differences in the types of information provided to users as well as differences in the identity of users of financial and managerial accounting information.

Question 49

Under contingency theory, the degree of competition refers to the:

A) environmental factor.
B) technological factor.
C) organisational factor.
D) structural factor.

Question 50

Evaluation of performance involves:

A) modifying goals and objectives to agree with actual performance.
B) comparing planned performance results with actual results.
C) determining who to blame if actual results are lower than planned performance results.
D) determining which employees should be promoted.

Question 51

Describe the four major stages involved in planning and controlling an organisation.

Question 52

The section of a business that has an individual in control of costs and revenues is:

A) a division.
B) a responsibility centre.
C) a program budget.
D) a control centre.

Question 53

Strategic decisions are decisions that:

A) relate to the efficient use of available resources.
B) allow the determination of the long-term policies of the firm.
C) result in huge amounts of profit for the firm.
D) correct the current situation of the company.

Question 54

One important use of managerial accounting information is performance evaluation. List and discuss the three major ways managers can identify and detect behaviour for performance evaluation purposes. For each major way, suggest two specific examples within the context of a consulting company.