Deck 1: The Changing Role of Managerial Accounting in a Dynamic Business Environment

Question 1

Taurus Company 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.

Answer 1

D

Question 2

Which of the following perspectives is normally absent in a balanced scorecard?

A) Financial.
B) Customer.
C) Internal operations.
D) Learning and innovation/growth.
E) None of these.

Answer 2

E

Question 3

Which of the following involves the coordination of daily business functions within an organization?

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

Answer 3

C

Question 4

Employee empowerment involves encouraging and authorizing workers to take initiatives to:

A) improve operations.
B) reduce costs.
C) improve product quality.
D) improve customer service.
E) All of the other answers are correct.

Question 5

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 6

Measuring the performance of managers and subunits is not an objective of managerial accounting.

Question 7

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 8

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 9

Which of the following business models considers financial, customer, internal operating, and other measures in the evaluation of performance?

A) Deterministic simulation.
B) Balanced scorecard.
C) Payoff matrix.
D) Decision tree.
E) Chart of operating performance (COP).

Question 10

All of the following entities would have a need for managerial accounting information except:

A) the state of Michigan.
B) Google.
C) Abercrombie & Fitch.
D) H&R Block.
E) None of these responses is correct, as all of these entities would use managerial accounting information.

Question 11

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 12

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.

Question 13

Middle-level managers would likely be considered internal users of accounting information rather than external users.

Question 14

The upper limit on the production of goods and services if everything works perfectly is known as practical capacity.

Question 15

A controller is normally involved with preparing financial statements.

Question 16

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) personnel aggressiveness.
D) decision making.
E) problem recognition and solution.

Question 17

Which of the following statements about managerial accountants is false?

A) Managerial accountants more and more are considered "business partners."
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 18

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

A) Providing information for decision making and planning.
B) Assisting in directing and controlling operations.
C) Maximizing profits and minimizing costs.
D) Measuring the performance of managers and subunits.
E) Motivating managers toward the organization's goals.

Question 19

Controlling involves the coordination of daily business functions within an organization.

Question 20

The role of managerial accounting information in assisting management is a(n):

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

Question 21

Which of the following choices correctly depicts whether McDonald's, the University of Wisconsin, and Apple Inc. would have a need for managerial accounting? $\begin{array}{llll}&&\text { University of }\\&\text { McDonald's}&\text { Wisconsin }&\text {Apple Inc. }\\\text { A. } & \text { Yes } & \text { Yes } & \text { No } \\\text { B. } & \text { Yes } & \text { No } & \text { Yes } \\\text { C. } & \text { Yes } & \text { Yes } & \text { Yes } \\\text { D. } & \text { No } & \text { Yes } & \text { No } \\\text { E. } & \text { No } & \text { Yes } & \text { Yes }\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question 22

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 an entity's credit policy.
E) Raising capital.

Question 23

A restaurant's value chain includes:

A) only the restaurant.
B) only upstream contributors.
C) only downstream contributors.
D) all of the other answers.
E) both up and downstream contributors.

Question 24

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 financial institutions.
E) for financial institutions.

Question 25

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 26

Which if the following would not be part of a value chain for a fast food restaurant?

A) All of the answers are a part of the value chain.
B) Buying produce.
C) Mopping the floor.
D) Refilling the napkin dispensers.
E) Hiring new cooks.

Question 27

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

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

Question 28

Strategic cost management is:

A) the process of determining cost drivers.
B) the recognition of the importance of cost relationships among the activities in the value chain.
C) the process of managing cost relationships to the firm's advantage.
D) two of the other answers are correct.

Question 29

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

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

Question 30

The capacity concept that allows for normal occurrences such as machine downtime and employee fatigue is known as:

A) practical capacity.
B) theoretical capacity.
C) utilized capacity.
D) management capacity.
E) capacity maximization.

Question 31

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 32

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

A) Exxon Corporation's vice-president for government relations.
B) The controller of General Motors.
C) A secretary employed by Verizon Communications.
D) The manager of food and beverage services at Disney's Magic Kingdom.
E) None of the other answers are correct.

Question 33

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

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

Question 34

Managerial accountants:

A) often work on cross-functional teams.
B) are located throughout an organization.
C) are found primarily at lower levels of the organizational hierarchy.
D) are found primarily at higher levels of the organizational hierarchy.
E) often work on cross-functional teams and are located throughout an organization.

Question 35

The upper limit on the production of goods and services if everything works perfectly is known as:

A) practical capacity.
B) theoretical capacity.
C) utilized capacity.
D) management capacity.
E) capacity maximization.

Question 36

Which of the following employees at Delta 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 37

In order for a company to achieve a sustainable competitive advantage, it must:

A) perform one or more activities in the value chain at the same quality level as its competitors.
B) perform all activities in the value chain at the same quality level as its competitors.
C) perform its value chain activities at a higher quality level than one of its competitors.
D) two of the answers are correct.

Question 38

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

A) A controller supervises the accounting department.
B) A controller safeguards an organization's assets.
C) A controller oversees the preparation of reports required by governmental authorities.
D) A controller normally assumes a narrow role within the organization, often preventing the individual's rise to top management ranks.
E) A controller safeguards an organization's assets and a controller normally assumes a narrow role within the organization, often preventing the individual's rise to top management ranks.

Question 39

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

A) The company's chief operating officer (COO).
B) The manager of a store located in Kansas City, Missouri.
C) The company's lead, in-house attorney.
D) The company's chief financial officer (CFO).
E) The company's lead, in-house attorney and the company's chief financial officer (CFO).

Question 40

Which of the following characteristic(s) relate(s) 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 is relevant for planning, decision making, directing, and control.
E) A focus on reporting to personnel within an organization and a focus on providing information that is relevant for planning, decision making, directing, and control.

Question 41

Given the following information, what is the cost of unused capacity? Cost of material supplied is $3,200; Cost of material used is $3,000; Cost of material used per cake is $3; Cost of material supplied per cake is $3.20.

A) $0.20.
B) $200.
C) $2,000.
D) $1,000.
E) There is no unused capacity.

Question 42

Which of the following can be linked to a wave of corporate scandals that took place not too long ago?

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

Question 43

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

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

Question 44

Which of the following acts strives to improve corporate governance and the quality of corporate accounting/reporting?

A) Robinson-Patman.
B) Taft-Hartley.
C) Sarbanes-Oxley.
D) Bush-Cheney.
E) Franks-Ashcroft.

Question 45

Which of the following statements about the ethical climate of business is false?

A) Greedy corporate executives are, in part, to blame for the rash of corporate scandals that occurred not too long ago.
B) Unethical business behavior can have a negative impact on our economy.
C) The Sarbanes-Oxley Act strives to improve the overall quality of corporate reporting.
D) The Robinson-Patman Act strives to improve the overall quality of corporate reporting.
E) Corporate scandals have served as the accounting profession's wake-up call to pay increased attention to ethical issues in the conduct of business.

Question 46

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.
Note: Many correct answers are possible.

Question 47

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 (SMP).

Question 48

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 behavior.

Question 49

Tae Franklin is the sales manager of Darius 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.
Darius has a policy 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 Darius'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 50

Which of the preceding activities would likely not be considered part of The Gap clothing company's value chain?

A) Designing a new product line.
B) Locating and then negotiating terms with a clothing manufacturer.
C) Marketing an existing product line.
D) Distributing goods from regional warehouses to local stores.
E) All of these activities would be an element in the company's value chain.

Question 51

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 52

Borders Overnight operates an overnight package delivery service that competes with Federal Express and United Parcel Service (UPS). Top management is considering the use of a balanced scorecard to evaluate operations.
A. What is a balanced scorecard and other than customer-satisfaction measures, what are its typical key components?
B. List four customer-satisfaction measures that Borders might use to evaluate performance.

Question 53

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

Question 54

Given the following information, what is the cost of unused capacity? Cost of material supplied is $8,600; Cost of material used is $8,000; Cost of material used per shelf is $8; Cost of material supplied per shelf is $8.60.

A) $600.
B) $6,000.
C) $0.60.
D) $1,000.
E) There is no unused capacity.

Question 55

Which of the following choices correctly depicts activities that would be included in a manufacturer's value chain? $\begin{array}{llll}&\text { Research and }\\&\text { Development }&\text {Marketing }&\text {Distribution }\\\text { A. } & \text { Yes } & \text { Yes } & \text { No } \\\text { B. } & \text { Yes } & \text { No } & \text { Yes } \\\text { C. } & \text { Yes } & \text { Yes } & \text { Yes } \\\text { D. } & \text { No } & \text { Yes } & \text { No } \\\text { E. } & \text { No } & \text { Yes } & \text { Yes }\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question 56

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

A) manufacturing.
B) research and development.
C) product design.
D) marketing.
E) All of the other answers are correct.

Question 57

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 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 58

Consider the descriptors that follow.
1. Is heavily involved with the recordkeeping 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.
Required:
Determine whether the descriptors are most closely associated with financial accounting or managerial accounting.

Question 59

Many professions have adopted a series of ethical standards to provide guidance for their memberships. The Institute of Management Accountants (IMA), 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 IMA's standards if appropriate.

Question 60

The cost of resources supplied but unused is known as:

A) practical capacity costs.
B) the cost of theoretical capacity.
C) the cost of unused capacity.
D) the cost of resources supplied.
E) capacity cost.

Question 61

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 62

Unused or excess capacity is a key component of contemporary management accounting. Define the term "excess capacity" and explain how it would relate to a coffee shop.