Deck 1: The Role of Accounting Information in Management Decision Making

Question 1

Cost accounting information, such as the valuation of ending inventory, is shown on external financial statements.

Answer 1

True

Question 2

A vision statement is one way to clarify an organisation's basic purpose and ideology.

Answer 2

True

Question 3

Accounting information is the only thing managers need to make financial decisions.

Answer 3

False

Question 4

Uncertainty and bias reduce decision quality.

Question 5

Uncertainties cause decision makers to ignore weaknesses in a preferred course of action.

Question 6

Accounting information cannot be used to motivate employee behavior.

Question 7

A vision statement helps employees understand how to deal with various stakeholder groups.

Question 8

Incremental cash flows are relevant for decision making.

Question 9

Cost accounting information is used for both external reporting and internal decision making.

Question 10

Accounting information is used to monitor operations by comparing actual results to planned results.

Question 11

Organisational core competencies are the tactics that managers use to take advantage of the vision.

Question 12

Because we can never completely remove biases and uncertainty from decision making, higher quality decision processes are often imprecise.

Question 13

Most managers follow a standard template and format when writing a vision statement.

Question 14

Few management decisions can be made with absolute certainty.

Question 15

Open-ended problems are not often seen in business.

Question 16

Uncertainties and biases do not affect external financial reports, because these reports are based on objective standards.

Question 17

When learning cost accounting, it is sufficient to learn the mechanics of applying cost accounting methods.

Question 18

Because accounting information is highly objective and quantitative in nature, it is not subject to uncertainties or management bias.

Question 19

Textbook costs are an opportunity cost of earning a university degree.

Question 20

Incremental cash flows are the same as unavoidable cash flows.

Question 21

Financial statements are

A) External reports produced from an organisation's information system
B) Never used for internal decision making
C) Only true when they are audited
D) Unimportant reports for most organisations

Question 22

Which of the following statements regarding organisational vision is false?

A) Organisational vision means the same as core competencies
B) Organisational vision is one tool for expressing an organisation's main purpose
C) Organisational vision should be communicated to all employees
D) Managers sometimes divide the organisational vision into one or more written statements

Question 23

Which of the following is a type of external report produced by an organisation's information system?

A) Cash flow plan
B) Analysis of potential acquisition
C) News release
D) Bonus computations

Question 24

Cost accounting information is used for

A) Financial reporting only
B) Management reporting only
C) Both financial and management reporting
D) Neither financial nor management reporting

Question 25

Which of the following is an element of an operating plan?

A) Developing an organisational mission
B) Preparing financial statements
C) Defining core values
D) Budgeting employee costs

Question 26

Which of the following is not true about information in an organisation's databases?

A) Information may be collected formally or informally
B) Access to database information is often restricted to specific individuals
C) Intellectual capital is usually captured in database information
D) The benefits of generating information should exceed the costs

Question 27

An organisational vision is sometimes broken down into I Mission statement
II Core values statement
III Code of conduct

A) I only
B) I and II only
C) I, II, and III
D) II and III only

Question 28

Which of the following influences organisational strategies?

A) Organisational vision
B) Financial statement results
C) Computer software
D) Number of employees

Question 29

How are organisational strategies related to core competencies?

A) Competencies are the tactics managers use to take advantage of strategies
B) Competencies and strategies are an integral part of organisational vision
C) Strategies help managers exploit competencies
D) Strategies and competencies are actually two ways of expressing the same idea

Question 30

Information gathered outside the organisation includes

A) Customer preferences
B) Product design specifications
C) Taxable income
D) Number of employees hired

Question 31

Organisational core competencies can include

A) A mission statement
B) Patents, copyrights and special legal protections
C) A code of conduct
D) An operating plan

Question 32

Organisational strategies

A) Are reconsidered on a daily basis
B) Should never be reconsidered once they are determined
C) Are reconsidered quarterly
D) Are reconsidered periodically in response to changes in the organisation or environment

Question 33

Relevant information for decisions can focus both on learning from the past and anticipating the future.

Question 34

The cost of your old car is relevant in the decision to purchase a new car.

Question 35

Which of the following is least likely to be an external report?

A) Credit report
B) Supplier's inventory report
C) Tax return
D) Analysis of supplier quality

Question 36

Which of the following is the best example of an internal report that might come from an organisation's information system?

A) Environmental Protection Agency regulatory report
B) Operating budget
C) Income tax returns
D) Credit rating agency report

Question 37

An organisation's value chain often includes suppliers and customers.

Question 38

The workforces' commitment to continual improvement is a executional rather than a structural cost driver.

Question 39

Activities in the value chain are classified as value-added or non-value-added in many organisations.

Question 40

Accounting information I Can be used to guide organisational vision
II Is a core competency for most companies
III Can be used to motivate performance

A) I only
B) I and II only
C) I, II, and III
D) I and III only

Question 41

Which of the following statement about biases is true?

A) Biases can affect management accounting information, but not financial accounting information
B) Managers cannot work toward eliminating their biases
C) Biases reduce the quality of decisions
D) Biased managers are more likely to explore alternatives before making a decision

Question 42

Higher quality decision making processes are less

A) Biased
B) Certain
C) Creative
D) Focused

Question 43

Biases may be

A) Intentional
B) Unintentional
C) Both intentional and unintentional
D) Beneficial to decision making

Question 44

Managers can make higher-quality decisions by relying on all of the following except

A) More complete information
B) Better decision-making processes
C) Irrelevant information
D) Information having less uncertainty

Question 45

How does the use of sophisticated information systems affect managerial decision making?

A) Sophisticated information systems always improve managerial decision making
B) Sophisticated information systems always provide better information
C) Managers may overlook potential uncertainties and bias in their information
D) The cost of sophisticated information systems may exceed their benefit

Question 46

Virgin Airlines flies several non-stop flights daily between Brisbane and Melbourne. Which of the following is an uncertainty associated with this operation?

A) The exact number of flights flown the previous day
B) The average number of passengers on each flight the previous week
C) The average number of empty seats for flights next month
D) The number of ticket agents scheduled for each shift for the next day

Question 47

Uncertainties and biases can affect I Organisational vision
II Core competencies
III Operating plans

A) I only
B) II only
C) I and III only
D) I, II, and III

Question 48

Analysing the strengths and weaknesses of different alternatives includes all of the following except

A) Recognising and evaluating assumptions
B) Drawing a conclusion about which alternative is best overall
C) Gauging the quality of information
D) Considering different viewpoints

Question 49

John is creating next year's budget for PDC Ltd. He estimates that next year's sales volume will be 5% higher than this year and that the selling price per unit will remain at $75 per unit. He estimates that cost of goods sold will be $40 per unit, based on a purchase agreement the company has signed with its supplier. The company has done business with the supplier for many years. In creating the budget, which of the following tasks is most likely to be open-ended?

A) Calculating budgeted sales volume
B) Determining that sales volume will grow by 5%
C) Calculating budgeted cost of goods sold
D) Determining that cost of goods sold per unit will be $75 per unit

Question 50

The process of making higher quality business decisions requires each of the following except

A) Distinguishing between relevant and irrelevant information
B) Recognising and evaluating assumptions
C) Considering organisational values and core competencies
D) Relying on preconceived notions to make decisions more quickly

Question 51

The Marriott Corporation operates hotels all over the world. Which of the following is the best example of a potential bias associated with its operations?

A) Managers assume that most travelers are interested in conducting business, rather than holidaying
B) Managers learn that guests rarely stay longer than a week
C) Managers find that last year's profits were below the industry average
D) Managers are concerned because employee turnover increased during the last year

Question 52

Which of the following adjectives describes higher quality information? I Complete
II Costly to develop
III Relevant

A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question 53

Uncertainty may hinder a manager's ability to: I Adequately define a problem
II Identify all potential solution options
III Predict the outcome of various solution options

A) I and III only
B) II and III only
C) I, II, and III
D) II only

Question 54

Higher quality reports are more I Relevant
II Understandable
III Available

A) I and II only
B) I and III only
C) II and III only
D) I, II, and III

Question 55

Which of the following statements about open-ended problems is true?

A) Open-ended problems cannot be solved with absolute certainty
B) It is not possible to find the best solution to an open-ended problem
C) Only one possible solution is possible for an open-ended problem
D) The best solution to an open-ended problem ensures the most favorable outcome

Question 56

Biases

A) Inhibit anticipating all future conditions
B) Assist in the identification of relevant information
C) Do not affect the ability to identify irrelevant information
D) Are not a problem in ethical decision making

Question 57

Biases

A) Are issues about which managers have doubts.
B) Do not impact accounting information, which is highly objective and reliable
C) Are preconceived notions developed without careful thought
D) Are rarely a problem in business decision making

Question 58

Which of the following is least likely to be an open-ended problem?

A) How to contribute as a team member
B) Choice of career
C) How to study for a course
D) Identification of required courses for a university degree

Question 59

Why is it necessary to identify whether a problem is open-ended?

A) Open-ended problems require less decision making effort than other types of problems
B) Decision maker biases are not important when addressing open-ended problems
C) More than one potential solution must be explored for open-ended problems
D) Few management decisions are open-ended

Question 60

Uncertainties

A) Are issues about which managers have doubts
B) Do not impact accounting information, which is highly objective and reliable
C) Are preconceived notions developed without careful thought
D) Are rarely a problem in business decision making

Question 61

Which of the following often prevents managers from adequately exploring information before making a decision?

A) The existence of many uncertainties
B) The need to distinguish between relevant and irrelevant information
C) The managers' biases
D) The organisation's values

Question 62

Indicate whether each of the following items is primarily:
I an internal report or
E an external report.
Each item has only one correct response.
1 analysis of potential acquisitions
2 analysis of product mix
3 capital budgets
4 cash flow plan
5 credit reports
6 financial statements
7 inventory reports for suppliers
8 news release
9 analysis of supplier quality
10 tax returns

Question 63

Frank is considering transportation modes to a client's office. He can drive his own car, at an incremental cost of $0.55 per kilometre, or take a company car. If he takes his own car, he can be reimbursed $0.45 per kilometre. If Frank makes his decision strictly from his personal economic point of view, what is the relevant net cost associated with driving his own car?

A) $0.10
B) $0.45
C) $0.55
D) Some other amount

Question 64

The supply chain:

A) does not include customers
B) does not include suppliers
C) a and b
D) a supply chain does include customers and suppliers

Question 65

As an accountant, you are responsible for I Your own behavior
II The behavior of any organisations you manage
III The behavior of outside vendors with whom you interact

A) I only
B) I and II only
C) I and III only
D) I, II, and III

Question 66

Relevant cash flows are

A) Avoidable
B) Incremental
C) Both of the above
D) None of the above

Question 67

In a decision to lease premises or to build office space in Melbourne, which of the following is relevant?

A) The cost of office space for sale in Sydney
B) The architect's fee for drawing up plans for the building
C) The age of the employees currently working for the company
D) The personal preferences of the decision maker

Question 68

Rick is an accountant. His boss has asked him to make a recommendation about buying or leasing new computer equipment for the accounting department. A decision has already been made to acquire a particular type of equipment. The only remaining decision is whether the equipment will be purchased or leased. Several pieces of information Rick might consider in his decision are listed below. Indicate whether each of the following items is:
R relevant or
I irrelevant to the decision.
1 cost of current computer equipment
2 interest rate for lease
3 employee feelings about the type of new computer equipment
4 cost of purchasing new equipment
5 depreciation on old equipment
6 future reliability of new equipment
7 independent quality ratings on new equipment
8 trade-in value of old equipment
9 tax incentives to lease
10 personal relationship with equipment vendor

Question 69

Which of these statements concerning the value chain is correct?

A) the value chain and the supply chain are different names for the same thing
B) the value chain essentially internalised an organisations' thinking
C) the value chain provides a sound foundation for exploring other initiatives such as activity based costing
D) all of the statements are correct
Essay/Matching

Question 70

The owner of a local restaurant is deciding whether to lease a company van. If the van is leased, the company would avoid paying its vendors to deliver the supplies and food purchases. The owner has negotiated a potential lease contract that would require a down payment plus a flat monthly rental payment. At the end of each year, an additional "contingency" rental payment would be required if the total number of kilometres driven exceeds 8,000. The owner has estimated that the van will be driven 600 kilometres per month for picking up supplies and food purchases, so she does not expect to incur a contingency annual payment. Based on these kilometres, the owner has calculated the expected amount of cost for fuel, repairs, and maintenance. She has received a quote from her insurance company for the next six months' insurance. She plans to hire a part-time employee at $10 per hour to drive the van. The employee will work a flexible schedule based on the deliveries required. Items 1 through 7 are relevant costs for this decision. Indicate whether the dollar amount of each relevant cost is most likely
C certain or
U uncertain.
Each item has only one correct response.
1 Lease down payment
2 Monthly lease rental payments
3 Contingency annual payment
4 Fuel, repairs, and maintenance
5 Van insurance for the next six months
6 Part-time employee wages
7 Reduction in vendor delivery charges

Question 71

Managers often break activities into four groups for value chain analysis. Which of the following is not an activity category among those four groups?

A) Unnecessary activities that cannot be eliminated
B) Necessary activities that could be changed to improve the process
C) Necessary activities that cannot be improved upon at this time
D) Unnecessary activities that can be eliminated quickly

Question 72

Irrelevant cash flows are

A) Avoidable
B) Unavoidable
C) Objective
D) Subjective

Question 73

Relevant cash flows are

A) Past cash flows
B) Future cash flows
C) Incremental cash flows
D) Unavoidable cash flows

Question 74

Consider the following activities, which could be undertaken by managers at Virgin Blue Airlines. Indicate whether each item is most likely part of:
S - organisational strategies
P - operating plans
A - actual operations or
M - measuring, monitoring and motivating.
Each item has only one correct response.
1 comparing actual revenues with budgeted revenues
2 developing processes for handling customer complaints
3 handling customer complaints
4 hosting an annual employee picnic
5 maintaining high quality customer service
6 negotiating contracts with the flight attendant union over the next six months
7 opening a new route to Perth
8 providing employees opportunities to buy stock at discounted prices
9 valuing training for employees to increase organisational competence
10 reporting periodic financial results

Question 75

Management decisions require monitoring over time for all of the following reasons except

A) The economic environment may change
B) New opportunities may become available
C) To motivate employees to follow plans exactly, even if the plan results in poor performance
D) Unforeseen threats may arise

Question 76

Irrelevant information may be I Useful in decision making
II Internally-generated
III Accurate

A) I only
B) I and II only
C) II and III only
D) I, II, and III

Question 77

A value chain is the sequence of business processes in which

A) Costs are determined with activity-based principles
B) Value is added to a product or service
C) All non-value-added activities are eliminated
D) Managers determine prices

Question 78

Choosing and implementing a solution to a business problem includes I Making trade-offs among alternatives
II Considering the organisation's strategies
III Motivating performance within the organisation

A) I only
B) I and II only
C) II and III only
D) I, II, and III

Question 79

Whether a given type of information is relevant or irrelevant depends on

A) Its accuracy
B) Its objectivity
C) Its relation to the decision to be made
D) Whether it is cash-basis or accrual-basis

Question 80

An organisation's value chain can incorporate its I Own customers
II Own suppliers
III Customers' customers
IV Suppliers' suppliers

A) I and II
B) I and III
C) II and IV
D) I, II, III, and IV