Deck 1: The Changing Role of Managerial Accounting

Question 1

Financial accounting focuses primarily on reporting:

A)to parties outside of an organization.
B)to parties within an organization.
C)to an organization's board of directors.
D)to the Vice President of Finance.
E)on behalf of financial institutions.

Answer 1

A

Question 2

Which of the following functions is best described as choosing among available alternatives?

A)Decision making.
B)Planning.
C)Directing operational activities.
D)Controlling.
E)Budgeting.

Answer 2

A

Question 3

The process of encouraging and authorizing workers to take appropriate initiatives to improve the overall firm is commonly known as:

A)planning and control.
B)employee empowerment.
C)directing operational activities.
D)decision making.
E)problem recognition and solution.

Answer 3

B

Question 4

Which of the following characteristics relates more to managerial accounting than to financial accounting?

A)A focus on reporting to personnel within an organization.
B)A focus on reporting to external parties.
C)An area of accounting that is heavily regulated.
D)A focus on providing information that assists shareholders in making investment and credit decisions.
E)A focus on providing information for the benefit of financial institutions.

Question 5

Which of the following would likely be considered an internal user of accounting information rather than an external user?

A)Shareholders.
B)Consumer groups.
C)Lenders.
D)Middle-level managers.
E)Government agencies.

Question 6

Which of the following activities involves the running of the organization on a day-to-day basis?

A)Decision making.
B)Planning.
C)Directing operational activities.
D)Controlling.
E)Motivating.

Question 7

The concept of employee empowerment does not involve encouraging and authorizing workers to take initiatives to:

A)improve operations.
B)reduce costs.
C)improve product quality.
D)improve customer service.
E)perform in strict adherence to the budget.

Question 8

Managerial accounting information often assists management through its:

A)financial-directing role.
B)attention-directing role.
C)planning and controlling role.
D)organizational role.
E)problem-solving role.

Question 9

Which of the following positions does the controller occupy in an organization?

A)A line position.
B)A staff position.
C)Neither a line nor a staff position, since the accounting department must be independent.
D)The position of internal auditor.
E)The position of treasurer.

Question 10

Which of the following best describes the role of a staff position in an organization?

A)It relates directly to the carrying out of the basic objectives of the organization.
B)It is supportive in nature, providing service and assistance to other parts of the organization.
C)It is superior in authority to a line position.
D)It relates directly to the provision of the goods and services of the organization.
E)It is superior in skill to a line position.

Question 11

Managerial accounting:

A)is unregulated.
B)produces information that is useful only for manufacturing organizations.
C)is based exclusively on historical data.
D)is regulated by the Securities and Exchange Commission (SEC).
E)generally focuses on reporting information about the enterprise in its entirety rather than by subunits.

Question 12

Which of the following statements about managerial accountants is false?

A)In the past, managerial accountants operated in a strictly staff capacity.
B)Managerial accountants often are part of cross-functional teams.
C)An increasing number of organizations are segregating managerial accountants in separate managerial-accounting departments.
D)In a number of companies, managerial accountants make significant business decisions and resolve operating problems.
E)The role of managerial accountants has changed considerably over the past decade.

Question 13

Fernbank Manufacturing Limited has set various goals, and management is now taking appropriate action to ensure that the firm achieves these goals. One such action is to reduce outlays for overhead, which have exceeded budgeted amounts. Which of the following functions best describes this process?

A)Decision making.
B)Planning.
C)Coordinating.
D)Controlling.
E)Organizing.

Question 14

Which of the following is not an objective of managerial accounting?

A)Providing information for decision making and planning.
B)Assisting Managers in directing and controlling operations.
C)Proactively participating as part of the management team in the decision-making and planning process.
D)Measuring and evaluating the performance of managers and subunits.
E)To strictly provide financial information to managers.

Question 15

The day-to-day work of management teams will typically comprise all of the following activities except:

A)decision making.
B)planning.
C)cost minimizing.
D)directing operational activities.
E)controlling.

Question 16

Managerial accounting:

A)focuses only on historical data.
B)is governed by GAAP.
C)focuses primarily on the needs of personnel within the organization.
D)provides information for parties external to the organization.
E)focuses on financial statements and other financial reports.

Question 17

Which of the following statements represents a similarity between financial and managerial accounting?

A)Both are useful in providing information for external users.
B)Both are governed by GAAP.
C)Both draw upon data from an organization's accounting system.
D)Both rely heavily on published financial statements.
E)Both are solely concerned with historical transactions.

Question 18

Financial accounting:

A)is unregulated.
B)produces information that is useful only for managers inside the organization.
C)is based almost exclusively on historical transaction data.
D)generally focuses on reporting information about departments and divisions.
E)generally focuses on reporting information about the enterprise by subunits.

Question 19

Which of the following choice of rows correctly depicts whether McDonald's, the University of British Columbia and The Gap would have a need for managerial accounting? $\begin{array} { | l | c | c | c | } \hline \text { Row } & \underline { \text { McDonald's } } & \frac { \text { University of British } } { \text { Columbia } } & \text { The Gap } \\\hline 1 & \text { Yes } & \text { Yes } & \text { No } \\\hline 2 & \text { Yes } & \text { No } & \text { Yes } \\\hline 3 & \text { Yes } & \text { Yes } & \text { Yes } \\\hline 4 & \text { No } & \text { Yes } & \text { No } \\\hline 5 & \text { No } & \text { Yes } & \text { Yes } \\\hline\end{array}$

A)1
B)2
C)3
D)4
E)5

Question 20

Which of the following managerial functions involves a detailed financial and operational description of anticipated operations?

A)Decision making.
B)Planning.
C)Directing operational activities.
D)Controlling.
E)Measuring.

Question 21

A controller is normally involved with:

A)preparing financial statements.
B)managing investments.
C)raising capital.
D)safeguarding assets.
E)managing the firm's credit policy.

Question 22

The chief managerial and financial accountant of an organization is the:

A)chief executive officer.
B)treasurer.
C)vice-president of accounting.
D)internal auditor.
E)chief financial officer.

Question 23

After careful planning, Nelson Manufacturing Corporation has decided to switch to a just-in-time inventory system. At the beginning of this switch, Nelson has 30 units of product in inventory. Nelson has 2,000 labour hours available in the first month of this switch. These hours could produce 500 units of product. Customer demand for this first month is 400 units. If just-in-time principles are correctly followed, how many units should Nelson plan to produce in the first month of the switch?

A)370
B)400
C)430
D)470
E)500

Question 24

Theoretical capacity refers to:

A)The upper limit on production if everything works perfectly
B)The upper limit on the amount of goods and services that an organization can produce in a specified period of time
C)The upper limit on production with an allowance for normal occurrences
D)The upper limit on the amount of goods and services that an organization can produce
E)The upper limit on production with an allowance for normal occurrences in a specified period of time

Question 25

Which of the following choice of rows correctly depicts activities that would be included in a manufacturer's value chain? $\begin{array} { l l l l } \text { Row } & \text { Research and } & & \\& \underline { \text { Development }} & \underline { \text { Marketing } }& \underline { \text { Distribution } }\\ 1 & \text { Yes } & \text { Yes } & \text { No } \\2 & \text { Yes } & \text { No } & \text { Yes } \\3 & \text { Yes } & \text { Yes } & \text { Yes } \\4 & \text { No } & \text { Yes } & \text { No } \\5 & \text { No } & \text { Yes } & \text { Yes }\end{array}$

A)1
B)2
C)3
D)4
E)5

Question 26

Much of managerial accounting information is based on:

A)a cost-benefit theme.
B)profit maximization.
C)cost minimization.
D)the generation of external information.
E)effectiveness but not efficiency.

Question 27

Which of the following is not a function of the treasurer?

A)Safeguarding assets.
B)Managing investments.
C)Preparing financial statements.
D)Being responsible for a company's credit policy.
E)Raising capital.

Question 28

Which of the following employees would be considered as holding a line position within their respective organization?

A)The Vice-President of Sunoco Canada.
B)The Chief Financial Officer of General Motors Canada.
C)A secretary employed by Rogers Communications.
D)The manager of food and beverage services at Canada's Wonderland.
E)The Controller at Roots Canada.

Question 29

Which of the following employees at Starbucks would likely be considered as holding a line position?

A)The company's treasurer.
B)The company's senior legal advisor.
C)The company's senior internal auditor.
D)The company's chief financial officer.
E)The Store Manager of the Kingston location.

Question 30

Which of the following employees at WestJet Airlines would not be considered as holding a line position?

A)Pilot.
B)Chief financial officer (CFO).
C)Flight attendant.
D)Ticket agent.
E)Baggage handler.

Question 31

The two dimensions of managerial accounting are:

A)a decision-facilitating dimension and a decision-influencing dimension.
B)a decision-facilitating dimension and a financial-influencing dimension.
C)a decision-influencing dimension and a cost-minimizing dimension.
D)a cost-minimizing dimension and a profit-maximizing dimension.
E)a decision-influencing dimension and a profit-maximizing dimension.

Question 32

Which of the following statements reflects a key concept of a JIT production system?

A)The raw materials, work-in-process, and finished goods inventories of manufacturing companies act as buffers so that operations can proceed smoothly, even if suppliers are late with deliveries or departments are unable to operate for a brief period due to breakdowns or other reasons.
B)The use of many suppliers ensures rapid delivery of materials for production.
C)The maintenance of a stock of raw materials allows defective materials to be replaced quickly so as to maintain a high rate of productivity.
D)Inventories are costly to carry and can be kept to minimum levels or eliminated completely with careful planning.
E)Inventories of raw materials and parts, partially completed goods and finished goods are kept as a reserve against the possibility of running out.

Question 33

Managerial accounting has not changed in recent years because of:

A)the growth of e-business.
B)increased global competition.
C)the increased speed of communication technology.
D)the adoption of Just-in-Time Inventory Management systems.
E)Management Accountants serving in the role of CEO.

Question 34

Managerial accountants:

A)often work as line managers in an organization.
B)are found throughout an organization but not on cross-functional teams
C)are found throughout an organization and work on cross-functional teams.
D)are found primarily at lower levels of the organizational hierarchy.
E)are found primarily at higher levels of the organizational hierarchy.

Question 35

Which of the following is not normally considered to be an element of e-business?

A)E-budgeting.
B)Supply-chain management.
C)E-commerce.
D)Balanced scorecards.
E)E-accounting

Question 36

Cost management systems tend to focus on an organization's:

A)machines.
B)employees.
C)activities.
D)customers.
E)rules and regulations.

Question 37

Managerial accounting has not changed in recent years because of:

A)a growing service economy in Canada.
B)the growing popularity of cross-functional teams.
C)the need to focus on product quality.
D)the shortening of product life cycles due to changes in technology.
E)the lengthening of product life cycles due to changes in technology.

Question 38

Augusta Corporation recently implemented a just-in-time (JIT) production system along with a series of continuous improvement programs. If the firm is now considering adopting a total quality management (TQM) program, it would likely find that TQM:

A)is consistent with both JIT and continuous improvement.
B)is consistent with JIT but inconsistent with continuous improvement.
C)is consistent with continuous improvement but inconsistent with JIT.
D)is inconsistent with both JIT and continuous improvement.
E)is an antiquated management technique.

Question 39

The value chain of a manufacturer would tend to exclude activities related to:

A)manufacturing.
B)research and development.
C)product design.
D)marketing.
E)travel arrangements for acting talent.

Question 40

Which of the following typically does not relate to the role of a controller?

A)A controller supervises the personnel in the accounting department.
B)A controller safeguards an organization's assets.
C)A controller oversees the preparation of reports used in both financial and managerial accounting.
D)A controller participates as an integral member of the management team.
E)A controller is involved in planning and decision-making at all levels and across functional areas of the organization.

Question 41

The process of managing the various activities in the value chain, along with the associated costs, is commonly known as:

A)activity-based costing.
B)strategic cost management.
C)total quality management.
D)computer-integrated costing.
E)sound management practices.

Question 42

Which of the following can be linked to a wave of corporate scandals that took place in the recent past?

A)Greedy corporate executives.
B)Managers who made over-reaching business deals.
C)Lack of oversight by companies' audit committees and boards of directors.
D)Shoddy work by external auditors.
E)All the answers are correct.

Question 43

Consider the descriptors that follow:
1. Is heavily involved with the record keeping and reporting of assets, liabilities, and stockholders' equity.
2. Focuses on planning, decision-making, directing, and control.
3. Is heavily regulated.
4. A field that is becoming more "cross-functional" in nature.
5. Much of the field is based on costs and benefits.
6. Is involved almost exclusively with past transactions and events.
7. Much of the information provided is directed toward stockholders, financial analysts, creditors, and other external parties.
8. Tends to focus more on subunits within an entity rather than the organization as a whole.
9. May become involved with measures of customer satisfaction, and the amount of actual cost incurred vs. budgeted targets.
10. Information produced is intended for Managers within the organization.
Required:
Determine whether the descriptors are most closely associated with financial accounting or managerial accounting.

Question 44

Present several examples of managerial accounting information that could help a manager make each of the following decisions:
A. A manufacturing company is currently making a part that is a production headache. The firm is deciding whether to abandon production and buy the part from an outside supplier.
B. An operator of fast-food restaurants is deciding whether to open a new store in Dallas.

Question 45

In order for a company to achieve a sustainable competitive advantage, it must perform value chain activities:

A)at the same quality level as competitors, at the same cost.
B)at the same quality level as competitors, but at a lower cost.
C)at a higher quality level than competitors, at a higher cost.
D)at a higher quality level than competitors, but at no greater cost.
E)at either the same quality level as competitors, but at a lower cost, or at a higher quality level than competitors, but at no greater cost.

Question 46

Which of the preceding activities would likely not be considered a major step in the value chain of Roots Canada?

A)Research and development.
B)Production.
C)Product design.
D)Distribution and sales.
E)Activity-based costing.

Question 47

The activities performed by a manufacturing organization could be categorized as pre-production (such as research and development and product design), production-related, and post-production (such as marketing and customer service). Which activities should the firm focus on if management understands the value chain concept and desires to meet organizational goals?

A)Pre-production activities.
B)Production-related activities.
C)Post-production activities.
D)Pre-production, production-related, and post-production activities.
E)Pre-production and production-related activities only.

Question 48

Which of the following is not an element of competency?

A)To develop appropriate knowledge about a particular subject.
B)To perform duties in accordance with relevant laws.
C)To perform duties in accordance with relevant technical standards.
D)To refrain from engaging in an activity that would discredit the accounting profession.
E)To prepare clear reports after an analysis of relevant and reliable information.

Question 49

Many professions have adopted a series of ethical standards to provide guidance for their memberships. The Society of Management Accountants (CMA), for example, has published standards that focus on competence, confidentiality, integrity, and credibility. In light of these standards, consider the three cases that follow:
Case A-Leston Corporation has experienced serious financial difficulties in recent years. John Young, the company's chief financial officer, has just learned that a major competitor was likely to file for bankruptcy; however, he failed to disclose this information at a board meeting held later that day when a plant closure decision was being discussed. The board evaluated several proposals during the session that focused on improving Leston's financial position.
Case B-QBX Company manufactures fertilizer from various raw materials, including a raw material know as Felstar. Paul Kelly, the firm's purchasing manager, purposely acquired a lower grade of Felstar than normal because of a very attractive price. The lower-grade product resulted in increased usage during the manufacturing process but had no effect on the fertilizer's overall quality. An end-of-period report showed that QBX profited from Kelly's actions, with the overall savings in purchase price more than offsetting the cost of added consumption.
Case C-Central Distributing has a participative budgeting process, allowing employees to have a say in projected sales targets for the upcoming period. These targets are reflected in a series of performance reports that compare actual sales achieved against targeted amounts. Hillary Baxter submitted very low sales targets because, as she confided in a colleague, "I always want to look good in terms of meeting targets, even if anticipated sales and closures don't materialize."
Required:
Evaluate the three cases and determine the ethical issues, if any, that are involved. Cite the CMA's standards if appropriate.

Question 50

Assume that a managerial accountant regularly communicates with business associates to avoid conflicts of interest and advises relevant parties of potential conflicts. In so doing, the accountant will have applied the ethical standard of:

A)objectivity.
B)confidentiality.
C)integrity.
D)credibility.
E)unified behaviour.

Question 51

Cross-functional teams and continuous improvement are two themes of contemporary management accounting. Briefly explain these two concepts:

Question 52

All three major professional accounting groups in Canada require their members to undertake professional development and/or continuing education. This practice is intended to directly satisfy which of these rules of ethical conduct?

A)Integrity.
B)Objectivity.
C)Competence.
D)Confidentiality.
E)Due Care.

Question 53

Which of the following is not an ethical standard of managerial accounting?

A)Competence.
B)Confidentiality.
C)Efficiency.
D)Integrity.
E)Credibility.

Question 54

A key use of managerial accounting information is the management of an organization's capacity and capacity costs. Define capacity in this context and describe the 2 concepts of an organization's capacity as discussed in Chapter 1. What important questions must the managerial accounting system address with respect to an organization's capacity?

Question 55

North of Seven Company has a bottleneck operation that slows production. Which of the following tools or approaches could the firm use to determine the most cost-effective ways to eliminate this problem?

A)Linear programming.
B)Theory of constraints.
C)Decision-tree diagrams.
D)Payoff matrices.
E)Strategic path analysis (SPA).

Question 56

DreamWorks Pictures produces both motion pictures for theaters as well as a variety of television series. Consider the seven activities that follow:
1. Auditions for actors and actresses
2. Development of promotional materials for use by local newspapers
3. Focus groups to evaluate ideas for potential television comedy series
4. Production of DVDs for release to Best Buy and Blockbuster Video
5. On-location shooting of scenes
6. Fine-tuning and rewrites of scripts
7. Set design and construction for new a medical drama
Required:
A. Evaluate the seven activities as upstream (pre-production), production, or downstream (post-production) in nature.
B. Generally speaking, which activities (upstream, production, or downstream), if any, can management ignore if the company is to be successful in achieving its key strategic goals?

Question 57

The value chain is a key component of contemporary management accounting. Define the term "value chain" and explain how it would relate to an airline:

Question 58

Ken Franklin is the sales manager of Davidson Enterprises, a very profitable distributor of office furniture to local businesses. A recent economic downturn has created an extremely tight cash position, and the company has been hurt by the bankruptcy of two key customers.
In late October, anticipating an economic recovery, Franklin began an extensive remodeling of the company's sales floor. Construction costs, decorating, and equipment purchases are projected to cost $250,000.
Davidson has a policy that states that individual expenditures in excess of $200,000 must be approved by the firm's Board of Directors. Franklin, unfortunately, missed the deadline to have the board consider this project at its regular September meeting. Not wanting to wait until the next meeting in December, he subdivided the project in two parts-construction and decorating ($190,000) and equipment purchases ($60,000)-neither of which needed board approval because of the dollar amounts involved.
The project was recently completed and sales have begun to recover. Customers have raved about the new sales area, noting that it is far superior to those of Davidson's competitors.
Required:
A. Would Franklin's approach of subdividing the project in two parts have any effect on the company's financial statements? Briefly explain.
B. Briefly discuss whether Franklin behaved in an ethical manner.
C. Which, if any, of the following standards of conduct would have applicability to Franklin's conduct: competence, confidentiality, integrity, or credibility? Briefly explain.

Question 59

Briefly distinguish between managerial accounting and financial accounting. Be sure to comment on the general focus, users, and regulation related to the two fields: