Management Management Accounting, Accounting, 6e (Atkinson 6e (Atkinson et al.) Chapter 1 How Management Accounting Information Supports Decision Making
Objective 1 1) Management accounting is subject to the rules formulated by standard setters such as the Financial Accounting Standards Board (FASB). (FASB). Anser! FA"S# #$%lanation! Financial accounting is subject to the the rules of the FASB. FASB. &iff! 1 'erms! 'erms! management accounting Objective! 1 AASB! eflective thin*ing +) Management accounting information is %rimarily oriented to e$ternal sta*eholders, such as investors, creditors, regulators, and ta$ authorities. Anser! FA"S# #$%lanation! Management accounting information information is %rimarily oriented to management. &iff! 1 'erms! 'erms! management accounting Objective! 1 AASB! eflective thin*ing -) 'he nternational Accounting Standards Board sets the guidelines used for management accounting. Anser! FA"S# #$%lanation! Financial accounting must be consistent ith the rules of the ASB. &iff! 1 'erms! 'erms! nternational Accounting Standards Board Board Objective! 1 AASB! eflective thin*ing /) A good management accounting system can become a source of com%etitive advantage for a com%any. Anser! '0# &iff! 1 'erms! 'erms! management accounting Objective! 1 AASB! eflective thin*ing ) Management accounting information is sometimes %redictive and forard loo*ing. Anser! '0# &iff! 1 'erms! 'erms! management accounting Objective! 1 AASB! eflective thin*ing 1
2) Management accounting has no %rescribed rules about its content, ho the content is to be develo%ed, and ho the content is to be %resented. Anser! '0# &iff! + 'erms! 'erms! management accounting Objective! 1 AASB! eflective thin*ing 3) 'he Federal Accounting Standards Advisory Board sets cost accounting accoun ting standards for all federal government activities. Anser! '0# &iff! + 'erms! 'erms! 4overnment Accounting Accounting Standards Board Objective! 1 AASB! eflective thin*ing 5) Management accounting measures can %rovide advance arnings of %roblems. Anser! '0# &iff! 1 'erms! 'erms! management accounting Objective! 1 AASB! eflective thin*ing 6) nformation about customer satisfaction is an e$am%le of financial information. Anser! FA"S# #$%lanation! nformation about customer satisfaction satisfaction is an e$am%le of nonfinancial information. &iff! 1 'erms! 'erms! nonfinancial information Objective! 1 AASB! eflective thin*ing 17) Management accounting information can be used for all of the folloing #8#9'! A) calculate the cost of a %roduct or service. B) evaluate the %erformance of a com%any. ) %roject materials needs. &) evaluate the mar*et %rice of the stoc*. Anser! & &iff! + 'erms! 'erms! management accounting Objective! 1 AASB! eflective thin*ing
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11) :hich of the folloing ty%es of information are used in management accounting; A) financial information B) nonfinancial information ) information focused on the long term &) All of the above are correct. Anser! & &iff! 1 'erms! management accounting Objective! 1 AASB! eflective thin*ing 1+) Management accounting! A) is both retros%ective, %roviding feedbac* about %ast o%erations, and also %ros%ective, incor%orating forecasts and estimates about future events. B) is %rimarily oriented to e$ternal sta*eholders. ) must be consistent ith rules formulated by the Financial Accounting Standards Board (FASB). &) %rovides information that is generally available only on a
1) Management accounting information includes all of the folloing #8#9'! A) tabulated results of customer satisfaction surveys. B) the cost of %roducing a %roduct. ) the %ercentage of units %roduced that is defective. &) mar*et %rice of the stoc*. Anser! & &iff! + 'erms! management accounting Objective! 1 AASB! eflective thin*ing 12) Management accounting re%orts might include information about! A) customer com%laints. B) net income for the year on budgeted income statement. ) total assets on budgeted balance sheet. &) All of the above are correct. Anser! & &iff! + 'erms! management accounting Objective! 1 AASB! eflective thin*ing 13) 'he %erson MOS' li*ely to use management accounting information is a(n)! A) ban*er evaluating a credit a%%lication. B) shareholder evaluating a stoc* investment. ) governmental ta$ing authority. &) assembly de%artment su%ervisor. Anser! & &iff! + 'erms! management accounting Objective! 1 AASB! eflective thin*ing 15) :hich of the folloing is >O' a function of a management accounting system; A) strategic develo%ment B) financial re%orting ) control &) %roduct costing Anser! B &iff! + 'erms! management accounting Objective! 1 AASB! eflective thin*ing
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16) Financial accounting! A) focuses on the future and includes activities such as %re%aring ne$t year?s o%erating budget. B) does not need to com%ly ith 4AA9 (generally acce%ted accounting %rinci%les). ) is %rimarily oriented to e$ternal sta*eholders, such as investors, creditors, regulators and ta$ authorities. &) is %re%ared for the use of de%artment heads and other em%loyees. Anser! &iff! 1 'erms! financial accounting Objective! 1 AASB! eflective thin*ing +7) 'he %erson MOS' li*ely to use O>"@ financial accounting information is a! A) factory shift su%ervisor. B) vice %resident of o%erations. ) current shareholder. &) de%artment manager. Anser! &iff! + 'erms! financial accounting Objective! 1 AASB! eflective thin*ing +1) istorically, management accounting innovations have been develo%ed by! A) the nternational Accounting Standards Board. B) the ost Accounting Standards Board. ) Academic accountants. &) Managers. Anser! & &iff! + 'erms! management accounting Objective! 1 AASB! eflective thin*ing ++) n general, it as not until the 1637s that management accounting systems! A) ere im%roved because of demands by the FASB and the S#. B) stagnated and %roved inade
+-) Financial accounting information! A) %rovides a signal that something is rong. B) identifies hat is rong. ) e$%lains hat is rong. &) sim%ly summari=es information but gives no indication that anything is rong. Anser! A &iff! + 'erms! financial accounting Objective! 1 AASB! eflective thin*ing +/) 'he regulatory authority res%onsible for formulating rules of 0nited States 4AA9 is! A) the Financial Accounting Standards Board. B) the ost Accounting Standards Board. ) the Federal Accounting Standards Advisory Board. &) the nternational Accounting Standards Board. Anser! A &iff! 1 'erms! financial accounting, FASB Objective! 1 AASB! eflective thin*ing +) Management accounting information is B#S' described as! A) %roviding a signal that something is rong. B) identifying and hel%ing to e$%lain hat is rong. ) sim%ly summari=ing information, but giving no indication that anything is rong. &) measuring overall organi=ational %erformance. Anser! B &iff! 1 'erms! management accounting Objective! 1 AASB! eflective thin*ing
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+2) om%are and contrast the users and uses of management accounting and financial accounting. Anser! Management accounting %rovides information to internal decision ma*ers of the business such as line su%ervisors, division managers and to% e$ecutives. ts %ur%ose is to hel% managers %lan, organi=e, control and ma*e o%erating decisions by %redicting future results and evaluating %erformance. Financial accounting %rovides information to e$ternal decision ma*ers such as investors and creditors. ts %ur%ose is to %resent a fair %icture of the financial cond ition of the com%any for use by these %arties in ma*ing investing and credit decisions. &iff! + 'erms! management accounting, financial accounting Objective! 1 AASB! eflective thin*ing MA"! 'his
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-) Management accounting innovations are usually develo%ed by academics. Anser! FA"S# #$%lanation! Management accounting innovations are usually develo%ed by management accountants in the field. &iff! + 'erms! management accounting Objective! + AASB! eflective thin*ing /) 'he first modern industry to develo% and use large
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3) 'he athorne study revealed that! A) individuals alter their behavior hen they *no they are being studied. B) grou%s alter their behavior hen they *no they are being studied. ) 9eo%le react hen they are being measured. &) All of the above are correct. Anser! & &iff! + 'erms! nonfinancial information, athorne study Objective! + AASB! eflective thin*ing 5) CCCCCCC hel%ed develo% the 9lan&ohec*Act (9&A) cycle. A) athorne B) &eming. ) arnegie &) Ford Anser! & &iff! + 'erms! %landochec*act cycle Objective! + AASB! eflective thin*ing 6) &escribe the ste%s in the 9&A cycle. Anser! 'he 9lan ste% of the 9&A cycle defines the organi=ation?s %ur%ose and selects the focus and sco%e of its strategy. 'he &o ste% of the 9&A cycle involves the im%lementation of a chosen course of action. n this setting, management accounting information gets communicated to frontline and su%%ort em%loyees to inform their daily decisions and or* activities. 'he chec* ste% in the 9&A cycle includes to com%onents D measuring an d monitoring ongoing %erformance and ta*ing shortterm actions based on the measured %erformance. n the Act ste% of the 9&A cycle, managers ta*e actions to loer costs, change resource allocations, im%rove the
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17) :hat role has the increasingly com%etitive business environment %layed in the develo%ment of management accounting; Anser! 'he com%etitive environment has changed dramatically. 'here has been a deregulation movement in >orth America and #uro%e during the 1637s and 1657s that changed the ground rules under hich service com%anies o%erate. n addition, organi=ations encountered severe com%etition from overseas com%anies that offered highonfinancial information has become a critical feedbac* measure. Finally, the focus of many firms is no on measuring and managing activities. &iff! 'erms! financial accounting, management accounting Objective! + AASB! eflective thin*ing MA"! 'his
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/) Management accounting information allos managers to com%are actual and %lanned costs and to identify areas and o%%ortunities for %rocess im%rovement. Anser! '0# &iff! 1 'erms! management accounting Objective! AASB! eflective thin*ing ) Management accounting can %rovide information on customer satisfaction. Anser! '0# &iff! + 'erms! management accounting Objective! AASB! eflective thin*ing 2) 9lanning activities include all of the folloing #8#9' ! A) estimate the cost and %rofit conse
6) #$%lain the role of management accounting in hel%ing an enter%rise develo% and im%lement its strategy. Anser! 'he organi=ation needs management accounting information to hel% im%lement the strategy, allocate resources for the strategy, communicate the strategy, and lin* em%loyees and o%erational %rocesses to achieve the strategy. As the strategy gets e$ecuted, management accounting information %rovides feedbac* about here it is or*ing and here it is not, and guides actions to im%rove the %erformance from the strategy.. &iff! + 'erms! management accounting, strategy Objective! AASB! eflective thin*ing MA"! 'his
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) :hich of the folloing best re%resents the 9lan ste% in the 9lan&ohec*Act (9&A) cycle; A) 'a*e actions to loer costs, change resource allocations, im%rove the
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5) :hich of the folloing best re%resents the Act ste% in the 9lan&ohec*Act (9&A) cycle; A) 'a*e actions to loer costs, change resource allocations, im%rove the
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11) A national com%any manufactures a line of modern furniture. nformation MOS' useful to the employee who assembles the furniture includes! A) a daily re%ort com%aring the actual time it too* to assemble a %iece of furniture to the standard time alloed. B) a monthly re%ort on the %ro%ortion of furniture %ieces assembled ith defects. ) the number of furniture %ieces sold this month. &) revenue %er em%loyee. Anser! A &iff! + 'erms! financial information, nonfinancial information Objective! / AASB! eflective thin*ing 1+) A national com%any manufactures a line of modern furniture. nformation MOS' useful to the top executive includes! A) individual job summaries of materials used. B) monthly financial re%orts on the com%any?s %rofitability by %roduct line. ) time re%orts submitted by each em%loyee. &) scheduled dontime for routine maintenance on machines. Anser! B &iff! + 'erms! financial information, nonfinancial information Objective! / AASB! eflective thin*ing 1-) A
1) A daily re%ort on the number of
(amounts in millions)!
Sales O%erating ncome nvestment
Chemical Retail aint In!ustrial 12,777 -7,777 1+7,777 /,777 2,777 /7,777 -+7,777 227,777 +,777,777
16) :hat is the return on investment for the hemical &ivision; A) 1.+G B) +.+G ) +.7G &) 7.77G Anser! A &iff! + 'erms! return on investment Objective! / AASB! Analytical s*ills +7) :hich division is more %rofitable based on O; A) hemical B) etail %aint ) ndustrial &) Both hemical and etail %aint are more %rofitable than ndustrial. Anser! &iff! 'erms! return on investment Objective! / AASB! Analytical s*ills +1) :hat is the eturn on Sales for the etail %aint division; A) +G B) /.G ) +7G &) /G Anser! &iff! + 'erms! return on sales Objective! / AASB! Analytical s*ills
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++) For im%roving o%erational efficiencies and customer satisfaction, nonfinancial information is! A) critical. B) moderate. ) infreonfinancial information might be used for all of the folloing #8#9'! A) im%rove %roduct
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+) 4ive to e$am%les of financial information and nonfinancial information. Anser! Financial information includes amounts that can be e$%ressed in dollar amounts such as sales, net income, and total assets. t also includes ratios %re%ared using financial information such as the %ercentage increase in sales, returnonsales, and returnoninvestment. >onfinancial information includes measures that are not e$%ressed in dollar amounts. For e$am%le, nonfinancial measures of customer satisfaction include the number of re%eat customers or ran*ed estimates of satisfaction levels. >onfinancial measures of %roduction
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/) 'he act of sim%ly measuring and re%orting information on certain %rocesses! A) focuses the attention of em%loyees on those %rocesses that are being measured. B) diverts the em%loyee?s attention to other activities that are not being measured. ) dis%roves the saying I:hat gets measured gets managed.I &) has no effect on em%loyee behavior. Anser! A &iff! + 'erms! nonfinancial information Objective! AASB! eflective thin*ing ) :hich statement belo is FA"S#; A) I:hat gets measured gets managed.I B) 9eo%le react to measurements. ) #m%loyees s%end more attention on those variables that are not getting measured. &) If can?t measure it, can?t manage it.I Anser! &iff! + 'erms! financial information, nonfinancial information Objective! AASB! eflective thin*ing 2) :hen a change is introduced, em%loyees tend to! A) embrace the change. B) be indifferent to the change. ) e$hibit no change in behavior. &) resist the change. Anser! & &iff! 1 'erms! nonfinancial information Objective! AASB! eflective thin*ing 3) 'he introduction of a ne management accounting system is MOS' li*ely to motivate 0>:A>'#& em%loyee behavior hen it is used for! A) evaluation. B) %lanning. ) decision ma*ing. &) coordinating individual efforts. Anser! A &iff! + 'erms! nonfinancial information Objective! AASB! eflective thin*ing
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5) Management accountants are MOS' li*ely to feel outside %ressure to influence the numbers favorably hen the information is used for! A) budgeting. B) com%ensation and %romotions. ) continuous im%rovement. &) %roduct costing. Anser! B &iff! + 'erms! financial information, nonfinancial information Objective! AASB! #thical reasoning 6) Fostering a culture of high ethical standards includes all of the folloing #8#9'! A) folloing the good e$am%le set by senior management. B) communicating to em%loyees a belief system that ins%ires and %romotes commitment to the organi=ation?s core values. ) folloing the general e$am%les set by frontline em%loyees. &) communicating to all em%loyees a boundary system that states hat actions ill not be tolerated. Anser! &iff! + 'erms! nonfinancial information Objective! AASB! #thical reasoning 17) 'he nstitute of Management Accountants (MA)! A) is a %rofessional organi=ation of management accountants. B) is a %rofessional organi=ation of financial accountants. ) issues standards for management accounting. &) a %rofessional organi=ation of management accountants that issues standards for management accounting. Anser! & &iff! + 'erms! nstitute of Management Accountants Objective! AASB! eflective thin*ing
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11) &iscuss the %otential behavior im%lications of %erformance evaluation. Anser! As measurements are made on o%erations and, es%ecially, on individuals and grou%s, the behavior of the individuals and grou%s are affecte.& 9eo%le react to the measurements being made. 'hey ill focus on those variables or the behavior being measured and s%end less attention on variables and behavior that are not measured. Managers and em%loyees may ta*e une$%ected and undesirable actions to influence the score on %erformance measure. For e$am%le, managers may s*i% discretionary e$%enses in order to increase their bonus. &iff! 'erms! %erformance evaluation Objective! AASB! #thical reasoning MA"! 'his
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