Test bank cost and management accounting 4e by barfield ch01

CHAPTER INTRODUCTION TO COST AND MANAGEMENT ACCOUNTING IN A GLOBAL BUSINESS ENVIRONMENT MULTIPLE CHOICE In comparing financial and management accounting, which of the following more accurately describes management accounting information? a b c d historical, precise, useful required, estimated, internal budgeted, informative, adaptable comparable, verifiable, monetary ANSWER: EASY Management and financial accounting are used for which of the following purposes? a b c d Management accounting internal external internal external ANSWER: c a Financial accounting external internal internal external EASY One major difference between financial and management accounting is that a b c d financial accounting reports are prepared primarily for users external to the company management accounting is not under the jurisdiction of the Securities and Exchange Commission government regulations not apply to management accounting all of the above are true ANSWER: d EASY 1–1 1–2 Environment Chapter Which of the following statements about management or financial accounting is false? a b c d Financial accounting must follow GAAP Management accounting is not subject to regulatory reporting standards Both management and financial accounting are subject to mandatory recordkeeping requirements Management accounting should be flexible ANSWER: EASY is more concerned with the future than is financial accounting is less concerned with segments of a company than is financial accounting is more constrained by rules and regulations than is financial accounting all of the above are true ANSWER: a EASY Modern management accounting can be characterized by its a b c d flexibility standardization complexity precision ANSWER: c Management accounting a b c d Introduction to Cost and Management Accounting In A Global Business a EASY To meet decision-making needs, the process of gathering and analyzing information about a company and its competitive environment is known as a b c d business process reengineering process elimination business intelligence planning ANSWER: c MEDIUM Chapter Introduction to Cost and Management Accounting In A Global Business Environment 1–3 In a global economy, a b c d the trade of goods and services is focused on trade between or among countries on the same continent the international movement of labor is prohibited except for multilingual persons the international flows of capital and information are common all of the above happen in a global economy ANSWER: Racketeer Influenced and Corrupt Organizations Act Foreign Illegal Activities Act Foreign Corrupt Practices Act Federal Bribery and Corrupt Practices Act ANSWER: c EASY Which of the following is not a valid method for determining product cost? a b c d arbitrary assignment direct measurement systematic allocation cost-benefit measurement ANSWER: 11 EASY Which of the following U.S legislation relates to bribes being offered to foreign officials? a b c d 10 c d MEDIUM Broadly speaking, cost accounting can be defined as a(n) a b c d external reporting system that is based on activity-based costs system used for providing the government and creditors with information about a company’s internal operations internal reporting system that provides product costing and other information used by managers in performing their functions internal reporting system needed by manufacturers to be in compliance with Cost Accounting Standards Board pronouncements ANSWER: c EASY 1–4 Environment 12 Chapter Cost accounting is directed toward the needs of a b c d regulatory agencies external users internal users stockholders ANSWER: 13 b c d EASY are legal standards set by the Institute of Management Accountants for use in all manufacturing and professional businesses are set by the Cost Accounting Standards Board and are legally binding on all manufacturers, but not service organizations not exist except for those legal pronouncements for companies bidding or pricing cost-related contracts with the government are developed by the Cost Accounting Standards Board, issued by the Institute of Management Accountants, and are legally binding on CMAs ANSWER: c MEDIUM Cost accounting is necessitated by a b c d the high degree of conversion found in certain businesses regulatory requirements for manufacturing companies management’s need to be aware of all production activities management’s need for information to be used for planning and controlling activities ANSWER: 15 c Cost accounting standards a 14 Introduction to Cost and Management Accounting In A Global Business a MEDIUM The process of _ causes the need for cost accounting a b c d conversion sales controlling allocating ANSWER: a EASY Chapter 16 Introduction to Cost and Management Accounting In A Global Business Environment 1–5 Financial accounting a b c d is primarily concerned with internal reporting is more concerned with verifiable, historical information than is cost accounting focuses on the parts of the organization rather than the whole is specifically directed at management decision-making needs ANSWER: 17 preparing budgets determining product cost providing managers with information necessary for control purposes determining performance standards ANSWER: b EASY Which of the following topics is of more concern to management accounting than to cost accounting? a b c d generally accepted accounting principles inventory valuation cost of goods sold valuation impact of economic conditions on company operations ANSWER: 19 EASY Financial accounting and cost accounting are both highly concerned with a b c d 18 b d MEDIUM Cost and management accounting a b c d require an entirely separate group of accounts than financial accounting uses focus solely on determining how much it costs to manufacture a product or provide a service provide product/service cost information as well as information for internal decision making are required for business recordkeeping as are financial and tax accounting ANSWER: c EASY 1–6 Environment 20 Chapter The Institute of Management Accountants issues a b c d Statements on Accounting Research for Managers Statements on Management Accounting Statements on Managerial and Cost Accounting Cost Accounting Standards ANSWER: 21 b EASY The organization whose primary function is to provide a means to share information among cost and management accountants in the United States is the a b c d Internal Revenue Service American Institute of CPAs Institute of Management Accountants Institute of Certified Management Accountants ANSWER: c EASY The ethical standards established for management accountants are in the areas of a b c d competence, licensing, reporting, and education budgeting, cost allocation, product costing, and insider trading competence, confidentiality, integrity, and objectivity disclosure, communication, decision making, and planning ANSWER: 24 EASY is a legally enforceable contract with all management accountants should be viewed as a goal for professional behavior is a legally enforceable contract with all CPAs provides ways to measure departures from ethical behavior ANSWER: 23 b The Institute of Management Accountants’ Code of Ethics a b c d 22 Introduction to Cost and Management Accounting In A Global Business c MEDIUM Which of the following statements is true? a b c d Management accounting is a subset of cost accounting Cost accounting is a subset of both management and financial accounting Management accounting is a subset of both cost and financial accounting Financial accounting is a subset of cost accounting ANSWER: b MEDIUM Chapter 25 Introduction to Cost and Management Accounting In A Global Business Environment 1–7 Which of the following statements is false? a b c d A primary purpose of cost accounting is to determine valuations needed for external financial statements A primary purpose of management accounting is to provide information to managers for use in planning, controlling, and decision making The act of converting production inputs into finished products or services necessitates cost accounting Two primary hallmarks of cost and management accounting are standardization of procedures and use of generally accepted accounting principles ANSWER: 26 management style strategy mission statement operational mission ANSWER: b EASY Strategy integrates which of the following? a b c d Planning yes yes yes no ANSWER: 28 MEDIUM A long-term plan that fulfills the goals and objectives of an organization is known as a(n) a b c d 27 d c Controlling yes no yes no Decision making no no yes no EASY Which of the following is/are not considered by management in determining strategies for the organization? a b c d core competencies environmental constraints organizational structure accounting basis ANSWER: d EASY 1–8 Environment 29 Chapter Which of the following is not a generic mission for organizational segments? a b c d build harvest hold save ANSWER: 30 MEDIUM save mission harvest mission build mission hold mission ANSWER: c EASY Protecting current market share and competitive position is the major concern of the a b c d save mission harvest mission build mission hold mission ANSWER: 32 d Increasing market share, even if short-term earnings and cash flow suffer, is the major concern of the a b c d 31 Introduction to Cost and Management Accounting In A Global Business d EASY Maximizing short-term earnings and cash flow, even at the expense of current market share, is the primary concern of the a b c d save mission harvest mission build mission hold mission ANSWER: b EASY Chapter 33 Introduction to Cost and Management Accounting In A Global Business Environment 1–9 The organizational units that require the highest level of strategic planning are those with a mission a b c d hold harvest product life cycle build ANSWER: 34 product life cycle target costing employee empowerment intellectual capital ANSWER: a EASY To effectively use employee empowerment, an organization’s structure would likely reflect a b c d strategic resource management centralized management decentralized management contract management ANSWER: 36 EASY Segment mission is directly related to a b c d 35 d c MEDIUM An organizational structure in which all decision making is held by top managers is known as management a b c d centralized decentralized strategic resource activity-based ANSWER: a EASY 1–10 Environment 37 Chapter An organizational structure in which decision making is spread throughout different levels of management is known as management a b c d centralized decentralized strategic resource activity-based ANSWER: 38 EASY internal functions crucial to the success and survival of a company attributes that keep a firm from competing different for every organization considered influences on corporate strategies ANSWER: b EASY Which of the following are potential constraints on organizational strategies being considered by management? a b c d Core competencies yes no yes yes ANSWER: 40 b Core competencies are not a b c d 39 Introduction to Cost and Management Accounting In A Global Business d Technology availability yes yes no yes Monetary capital resources no yes yes yes EASY The intangible assets of skill, knowledge, and information are also known as a b c d intellectual capital business intelligence kaizen knowledge management style ANSWER: a EASY Chapter 41 Introduction to Cost and Management Accounting In A Global Business Environment 1–11 The norms of a company as they impact internal and external, as well as formal and informal, transactions reflect a b c d operational plans organizational culture organizational strategy strategic resource management ANSWER: 42 environmental constraints operational constraints organizational constraints budgeting constraints ANSWER: a EASY The manner in which managers react and interact with stakeholders in the organization is a b c d strategic resource management the organizational value chain management style responsibility accounting ANSWER: 44 EASY Limitations on strategy options based on political barriers, legal, fiscal, and regulatory are a b c d 43 b c EASY The key link between managing resources and managing change in an organization is a b c d responsibility accounting information strategies conversion activities ANSWER: b EASY 1–12 Environment 45 Chapter Which of the following defines the details that are necessary to maintain and accomplish the strategies of an organization? a b c d Responsibility accounting yes yes no no ANSWER: 46 Value chain yes yes no yes MEDIUM decentralization centralization strategic resource management value chain ANSWER: c MEDIUM Strategic resource management does not concerns itself with a b c d the deployment of resources to support strategies how resources are to be deployed and redeployed over time how resources are used or recovered from changing processes how resource disposition will decrease customer and shareholder value ANSWER: 48 c Operational plans yes no yes no Organizational planning for disposition of resources to create value for customers and shareholders is known as a b c d 47 Introduction to Cost and Management Accounting In A Global Business d MEDIUM The set of processes that convert inputs into services and products that consumers use is called a b c d a core competency an operational plan the value chain the product life cycle ANSWER: c EASY Chapter 49 Introduction to Cost and Management Accounting In A Global Business Environment 1–13 The world has essentially become smaller because of a b c d improved technology trade agreements better communications systems all of the above ANSWER: 50 Introduction of the Internet Introduction of the first consumer charge card Introduction of wireless money transfers Deregulation of the communications industry ANSWER: c MEDIUM Which of the following would most commonly reflect the highest e-commerce cost to a large, global business? a b c d Web site development Internal network shutdowns from e-mail complaints Losses from sales of pirated goods Development of appropriate passwords for users ANSWER: 52 EASY Which of the following was the earliest event of importance to the beginning of e-commerce? a b c d 51 d a MEDIUM Which of the following would most commonly be viewed as the greatest negative for ecommerce customers? a b c d Possibility for purchasing counterfeit goods Privacy issues Legal issues of redress Site “friendliness” issues ANSWER: b EASY 1–14 Environment 53 Chapter At the start of Web site development, a U.S company would probably be least concerned with which of the following? a b c d Site maintenance Multiple languages Data encryption Site search function ANSWER: 54 EASY North American Foreign Trade Agreement New Age Free Trade Amendment North American Free Trade Agreement North Atlantic Federated Trade Agreement ANSWER: c EASY Which of the following statements is true? a b c d Prior to economic integration, consumer choices were often made on the basis of production location The General Agreement on Tariffs and Trade was established to reduce tariffs among businesses in Europe and North America The majority of trade agreements currently in place emphasize the need for consumers to purchase quality goods International trade agreements, while increasing availability of goods to consumers, have decreased the need for international laws governing transactions ANSWER: 56 b NAFTA refers to which of the following? a b c d 55 Introduction to Cost and Management Accounting In A Global Business a MEDIUM A U.S manufacturer of which of the following goods would be likely to face the most cultural risks in operating globally? a b c d Furniture Automobiles Clothing Food ANSWER: d MEDIUM Chapter 57 Introduction to Cost and Management Accounting In A Global Business Environment 1–15 A U.S manufacturer of which of the following goods would be likely to face the fewest cultural risks in operating globally? a b c d Toys Food Clothing Furniture ANSWER: 58 Asset expropriation Inflation Workplace diversity All of the above ANSWER: a EASY Most American laws are a b c d ethical foundations for living codified societal rules that have changed over time concerned with regulating public service companies designed to restrict foreign business competition ANSWER: 60 MEDIUM Which of the following would be considered a political risk in doing business globally? a b c d 59 d b MEDIUM The Foreign Corrupt Practices Act is directed at a b c d U.S businesses operating overseas foreign businesses operating in the U.S all businesses dealing with U.S consumers U.S businesses operating in developed nations ANSWER: a MEDIUM 1–16 Environment 61 Chapter The behavioral norms in a company’s code of ethics should a b c d be specific to the countries in which the company operates vary depending on an employee’s job level and global location engender consistent actions in all geographical segments require employees to act in accordance with local customs and traditions when in non-domestic situations ANSWER: 62 b c d MEDIUM Determination of whether there are local business practices that will impact interactions with other parts of the world Determination of whether some business practices need to be adapted to fit local laws in a specific locale Determination of whether there is compliance with all legal requirements on a local level Determination of whether the “tone at the top” is appropriate in all organizational segments ANSWER: d MEDIUM A company may choose to avoid competition by selecting a b c d Differentiation strategy no no yes yes ANSWER: 64 c Texas Instruments has adopted a three-level approach to ethical integrity on a global level Which of the following is not part of that approach? a 63 Introduction to Cost and Management Accounting In A Global Business c Business intelligence analysis no yes no yes Cost leadership no no yes yes MEDIUM A company establishing a position of cost leadership would a b c d emphasize the value of its product’s distinguishing features stress the cost efficiencies in its production processes match all competitors’ price changes all of the above are possible tactics ANSWER: b MEDIUM Chapter 65 Introduction to Cost and Management Accounting In A Global Business Environment 1–17 A company engaging in a confrontation strategy recognizes that a b c d such a strategy is less profitable than attempting to avoid competition its products and services will always be priced higher than those of its competitors competitors will be exploiting temporary opportunities for advantage and, thus, the company must retain the advantage of low price the need for competitor analysis is much greater than the need for business intelligence ANSWER: 66 competitor analysis competitive intelligence business intelligence confrontation analysis ANSWER: b MEDIUM The business intelligence system should provide management with a b c d organizational strengths and weaknesses external markets, technologies, and competitors future trends and an environmental scan all of the above ANSWER: 68 MEDIUM In gathering information about the environment in which the organization operates, which level of intelligence is most likely to provide an early warning of opportunities and threats? a b c d 67 a d MEDIUM A business intelligence system provides information for management to use in a b c d Decision-making yes no no yes ANSWER: a EASY Strategic planning yes yes yes no Tactical planning yes yes no no 1–18 Environment 69 Chapter The first step in the planning process is for managers to analyze the threats and opportunities of the customers, competition, and environment in relationship to the entity’s a b c d strategic objectives financial goals strengths and weaknesses equity stakeholders ANSWER: 70 MEDIUM strategic plans tactical plans wealth maximization strategies organizational cash flows ANSWER: b MEDIUM To provide appropriate management incentives, accounting measurements should be tied to the a b c d generation of annual profits organization’s mission ability to rapidly develop new products business intelligence system ANSWER: 72 c Organizational budgets typically reflect a b c d 71 Introduction to Cost and Management Accounting In A Global Business b EASY Which of the following statements is true? a b c d All segments of an organization will have the same mission An organization’s products will not affect the determination of segment mission Product life cycle is affected by segment mission Segment mission is affected by product life cycle ANSWER: d MEDIUM Chapter 73 Introduction to Cost and Management Accounting In A Global Business Environment 1–19 Which of the following types of performance measurements are most appropriate for each of the following segment misssions? a b c d Build Long-term Long-term Short-term Short-term ANSWER: 74 strategic resource management value chain analysis cost-benefit analysis activity-based costing ANSWER: d MEDIUM Strategic resource management is directly concerned with a b c d strategy development resource deployment resource acquisition product life cycle management ANSWER: 76 MEDIUM Which of the following is generally viewed as improving organizational cost data? a b c d 75 b Harvest Long-term Short-term Long-term Short-term b MEDIUM Strategic resource management issues a b c d are primarily measurable by financial accounting data have few costs and benefits can that be ascertained often relate to nonmonetary benefits create current monetary costs and nonmonetary benefits ANSWER: c MEDIUM 1–20 Environment 77 Chapter The value chain a b c d reflects the production of goods within an organizational context is concerned with upstream suppliers, but not downstream customers results when all non-value-added activities are eliminated from a production process is the foundation of strategic resource management ANSWER: 78 Introduction to Cost and Management Accounting In A Global Business d MEDIUM The agents of change in a business are the a b c d employees members of the organizational value chain managers organizational stakeholders ANSWER: c MEDIUM SHORT ANSWER/PROBLEMS What four areas are covered by the Standards of Ethical Conduct for Certified Management Accountants? How are these areas defined? ANSWER: The four areas covered by the Standards of Ethical Conduct for Certified Management Accountants are: competence, confidentiality, integrity, and objectivity Competence means having the capacity to function in a particular manner Confidentiality means having the ability to maintain or keep information undisclosed Integrity is defined as adherence to a code of moral values Objectivity is defined as expressing or using facts without distortion by personal feelings or prejudices MEDIUM On what needs (1) management accounting and (2) financial accounting focus? ANSWER: Management accounting focuses on the needs of users inside an organization Managers need information related to planning, controlling, decision making, and performance evaluation Their needs are satisfied through the providing of information designed for their particular uses Financial accounting focuses on the needs of users outside the organization, such as stockholders, creditors, and regulatory agencies These users require information that is in conformity with generally accepted accounting principles and, thus, is standardized in the form of general purpose financial statements MEDIUM Chapter Introduction to Cost and Management Accounting In A Global Business Environment 1–21 List and discuss the three missions for organization segments ANSWER: The three missions are build, hold, and harvest The build mission is concerned with increasing market share, regardless of whether short-term earnings and cash flow suffer A segment that operates under this mission will be a major user of organizational cash Segments that have low market shares in “high growth industries” will typically be in a build mode The hold mission is concerned with maintaining current market share and market position In most instances, cash inflows will equal cash outflows The harvest mission is concerned with increasing short-term earnings and cash flow, even at the expense of current market share A business segment that follows a harvest mission will be supplying cash to the organization MEDIUM What is strategic resource management and with what issues is it concerned? ANSWER: Strategic resource management involves the organizational planning for the deployment of resources to create value for customers and shareholders Key variables in SRM success are the management of information and of change in responding to threats and opportunities SRM is concerned with the following issues: (1) how to deploy resources to support organizational strategies, (2) how resources are used in or recovered from changing processes, (3) how customer and shareholder value will serve as guides in the effective use of those resources, and (4) how to deploy and redeploy resources over time MEDIUM List and discuss three organizational constraints with which management must deal when making strategic decisions for the firm ANSWER: Although there are more than three constraints, the following provide brief examples of possible constraints faced by management: (1) capital, (2) structure, and (3) core competencies Capital or the lack of capital is a major constraint for most organizations Organizations must decide where and how the spend the money that they currently have access to and then decide if they can or want to borrow additional funds Structure is a short-term (for many firms) constraint that can be overcome by additions to the equipment base and/or employee training Thirdly, core competencies are the internal functions that management has decided are important to the overall success and survival of the organization These competencies represent the potential competitive advantages of the firm MEDIUM 1–22 Environment Chapter Introduction to Cost and Management Accounting In A Global Business You are going to start a new e-commerce business Discuss at least three positive factors and three negative factors of such a business from your (the merchant’s) point of view ANSWERS will all differ, but should be based on information in Exhibit 1-5 MEDIUM You are going to start a new e-commerce business Discuss at least three positive factors and three negative factors of such a business from your customer’s point of view ANSWERS will all differ, but should be based on information in Exhibit 1-5 MEDIUM Every business, whether domestic or global, must operate under conditions of risk Discuss four types of operating risks involved in business and how these risks might change when a business expands to global operations ANSWERS will all differ, but should be based on information in Exhibit 1-6 MEDIUM Every business, whether domestic or global, must operate under conditions of risk Discuss three types of financial risks involved in business and how these risks might change when a business expands to global operations ANSWERS will all differ, but should be based on information in Exhibit 1-6 MEDIUM 10 Every business, whether domestic or global, must operate under conditions of risk Discuss three types of information risks involved in business and how these risks might change when a business expands to global operations ANSWERS will all differ, but should be based on information in Exhibit 1-6 MEDIUM Chapter 11 Introduction to Cost and Management Accounting In A Global Business Environment 1–23 Most people would agree that a “moral free space” must exist relative to some business decisions Discuss the concept of “moral free space.” ANSWER: Because all business practices cannot be categorized as either ethical or unethical and because business practices may change over time, there must be a “moral free space” that allows managers and employees to make decisions within the bounds of reason Decisions should be guided by an understanding of basic values and principles of integrity—preferably shared within and supported by the organization MEDIUM 12 Define value chain and provide a graphic of the interacting flows of information within the value chain ANSWER: The value chain is the set of processes that convert inputs into products and services for a firm’s customers It includes both internal and external processes It encompasses both upstream and downstream entities A depiction of the value chain and its information flows is shown in Exhibit 1-12 MEDIUM ... subset of cost accounting Cost accounting is a subset of both management and financial accounting Management accounting is a subset of both cost and financial accounting Financial accounting. .. of Management Accountants issues a b c d Statements on Accounting Research for Managers Statements on Management Accounting Statements on Managerial and Cost Accounting Cost Accounting Standards... production activities management s need for information to be used for planning and controlling activities ANSWER: 15 c Cost accounting standards a 14 Introduction to Cost and Management Accounting In