Test bank for managerial accounting 6th edition by hartgraves

Test Bank for Managerial Accounting 6th Edition by
Hartgraves
True-False Questions
Most costs are actually incurred as a result of activity cost
drivers.
1.

True

2.

False

Value Chain Analysis concerns the study of value-producing
activities, stretching from basic raw materials to the final
consumer of a product or service.
1.

True

2.

False

The best criterion for determining if a given action or choice is
ethical is to determine if it is legal, because all legal
actions are inherently ethical.
1.

True

2.

False

A primary goal of managerial accounting is to provide
information to investment managers who analyze a
company’s stock for external investors.
1.

True

2.

False

An organization’s mission is best described as the basic
purpose toward which activities are directed.
1.

True

2.

False


The decision to use both fulltime and part time employees
during the holiday season is an example of a strategic
cost driver.
1.

True

2.

False

All costs have at least one primary cost driver.
1.

True

2.

False

Competition among companies normally takes place only on
the dimension of price/cost.
1.

True

2.

False

Managers who prepare and/or have responsibility for
managerial accounting information rarely encounter
choices that have questionable ethical dimensions or
overtones.

1.

True

2.

False

One of the companies to first employ a successful cost
leadership strategy was Carnegie Steel Company.
1.

True

2.

False

Multiple Choice Questions-Page 1
Which of the following departments often found in a
merchandising organization would be classified as a line
department?
1.

A) Maintenance

2.

B) Human Resources

3.

C) Payroll

4.

D) Home Furnishings

Which of the following phrases is most descriptive of
managerial accounting?
1.

A) Often used to state corporate goals

2.

B) May be subjective

3.

C) Typically prepared quarterly or annually

4.

D) Keeps records of assets and liabilities

This is an organizational cost driver for a discount department
store chain:
1.

A) The decision to price lower than a key competitor

2.

B) The decision to rearrange merchandise within a store

3.

C) The decision to issue a purchase order for raw materials

4.

D) The decision to sale product globally versus only domestically

Product or service differentiation involves:
1.

A) Any changes made to a product or service

2.

B) The use of new technologies in manufacturing

3.

C) Shifting sales to growing markets

4.

D) Creating something that is perceived as unique and worth a premium price

According to Michael Porter, which of the following is an
example of cost leadership as a business strategy?
1.

A) A regional beer brewer that caters to local tastes

2.

B) A glass manufacturer utilizing research and development to identify new applications
for glass and ceramics

3.

C) An online bookseller utilizing the Internet to differentiate itself from traditional
booksellers

4.

D) A manufacturer focused on designing and building corporate jet aircraft


The process of making the organization into a well-ordered
whole is referred to as:
1.

A) Organizing

2.

B) Controlling

3.

C) Motivating

4.

D) Planning.

_______________ are fundamental choices about the size and
scope of operations and about technologies employed in
delivering products or services to customers.
1.

A) Activities

2.

B) Management systems

3.

C) Organizational strategies

4.

D) Structural cost drivers

Which of the following statements best defines a goal for an
organization?
1.

A) Increase next year’s sales by 10 percent over current year sales

2.

B) Providing high quality products and services to customers

3.

C) Adopt a cost effective plan for providing new products and services to customers

4.

D) Become the world’s largest provider of consumer goods

Delegating responsibility and authority to employees in an
organization is an example of:
1.

A) Planning

2.

B) Organizing

3.

C) Controlling

4.

D) Motivating

Examples of activity cost drivers include all of the following
except:
1.

A) Inspecting incoming raw materials

2.

B) Machine time spent working on a product

3.

C) Deciding how to arrange raw materials inventory within the warehouse


4.

D) Receiving (loading) raw materials into the warehouse

Strategic Position Analysis is best defined as:
1.

A) The process of making the organization into a well ordered whole

2.

B) Fundamental choices about the size and scope of operations and technologies

3.

C) The formulation of a program for a specific goal

4.

D) An organization’s basic way of competing to sell products and services

Which of the following statements best defines a strategy for an
organization?
1.

A) Increase next year’s sales by 10 percent over current year sales

2.

B) Providing high quality products and services to customers

3.

C) Adopt a cost effective plan for providing new products and services to customers

4.

D) Become the world’s largest provider of consumer goods

Managerial accounting must conform to which of the following
standards?
1.

A) Generally Accepted Accounting Principles (GAAP)

2.

B) International Financial Reporting Standards (IFRS)

3.

C) Internal Revenue Service tax code

4.

D) None of the above

Which of the following descriptions best describes the process
of controlling?
1.

A) Comparing the budget with actual results

2.

B) Preparing a budget for an organization that meets sales goals for the upcoming year

3.

C) Delegating authority to employees to address customer complaints

4.

D) Assigning managers to different regional centers to facilitate distribution of goods to
customers

In order to be useful to managers, management accounting
reports:
1.

A) Should be prepared according to the stated Institute of Management Accounting
guidelines


2.

B) Should be prepared according to Generally Accepted Accounting Principals

3.

C) Should be prepared to meet the specific needs of decision makers

4.

D) Should not be prepared prior to the end of a fiscal reporting period

Financial accounting information is least useful in providing:
1.

A) Aggregate information about an organization’s assets, obligations and performance

2.

B) Information for stating corporate wide goals

3.

C) Information for internal decision makers

4.

D) Periodic reports for shareholders

According to Michael Porter, which of the following is an
example of product or service differentiation as a
business strategy?
1.

A) A regional beer brewer that caters to local tastes

2.

B) An automobile manufacturer that focuses on the rapid introduction of technological
change in new automobile design

3.

C) An online bookseller utilizing the Internet to differentiate itself from traditional
booksellers

4.

D) A manufacturer focused on designing and building corporate jet aircraft

_______________ are specific units of work performed to serve
customer needs that consume costly resources.
1.

A) Activity cost drivers

2.

B) Customer cost drivers

3.

C) Organizational cost drivers

4.

D) Structural cost drivers

Managerial accounting is primarily focused on:
1.

A) Providing information for internal and external users

2.

B) Providing general purpose financial statements

3.

C) Providing special-purpose information and reports

4.

D) Following generally accepted accounting principles


Managerial accounting is primarily focused on:
1.

A) Providing creditors information on the status of their loans

2.

B) Providing investors with useful information for valuing securities

3.

C) Providing the Internal Revenue Service with information to determine the amount of
taxes owed

4.

D) Providing managers with relevant information to help achieve organizational goals

Which of the following is not one of the three strategic positions

that Porter views as leading to business success?
1.

A) Market niche

2.

B) Cost leadership

3.

C) All things to all people

4.

D) Product or service differentiation

Which of the following statements best defines the mission of
an organization?
1.

A) Increase next year’s sales by 10 percent over current year sales

2.

B) Become the world’s largest provider of consumer goods

3.

C) Adopt cost effective plan for providing new products and services to customers

4.

D) Providing high quality products and services to customers

Which of the following is not a component of strategic cost
management?
1.

A) Ratio analysis

2.

B) Value chain analysis

3.

C) Cost driver analysis

4.

D) Strategic position analysis

The process of ensuring that results agree with plans is referred
to as:
1.

A) Controlling

2.

B) Decision making

3.

C) Organizing


4.

D) Planning

The process of selecting strategies to achieve goals is often
referred to as:
1.

A) Controlling

2.

B) Organizing

3.

C) Motivating

4.

D) Planning

Ethics deals with:
1.

A) The propriety of a course of action

2.

B) The fitness of a course of action

3.

C) The moral quality of a course of action

4.

D) All of the above

Financial accounting is primarily focused on:
1.

A) Providing the Internal Revenue Service with information to determine the amount of
taxes owed

2.

B) Providing managers with relevant information to help achieve organizational goals

3.

C) Providing investors with useful information for valuing securities

4.

D) Providing information for internal users

A decision to work closely with a limited number of suppliers
for the purpose of ensuring that the proper materials are
available at the optimal time is an example of:
1.

A) A batch level cost driver

2.

B) An activity cost driver

3.

C) An organizational cost driver

4.

D) A structural cost driver

The act of delegating authority for implementing plans to other
managers and employees can be viewed as an aspect of:
1.

A) Controlling

2.

B) Decision making


3.

C) Organizing

4.

D) Planning

To compete on the basis of price, the seller must most carefully
manage:
1.

A) Service

2.

B) Product development

3.

C) Cost

4.

D) Quality

Ethical behavior:
1.

A) Always involves choosing between actions that are clearly right or wrong

2.

B) Is best guided by a policy of placing corporate performance above individual ends

3.

C) Is best described as any actions that are permitted by law

4.

D) Is not guided by well-defined rules and is often subjective

A goal is best defined as:
1.

A) The mission of an organization

2.

B) The implementation of specific ideas

3.

C) The fundamental purpose of an organization

4.

D) A definable and measurable objective

Which of the following phrases is most descriptive of financial
accounting?
1.

A) May measure time or customer satisfaction

2.

B) Future oriented

3.

C) Subject to cost-benefit analysis

4.

D) Highly aggregated statements

World-class companies must continuously struggle to improve
performance in the dimension(s) of:
1.

A) Price/cost

2.

B) Service

3.

C) Quality


4.

D) All of the above

The three analyses that comprise strategic cost management
include each of the following except:
1.

A) Ratio analysis

2.

B) Cost driver analysis

3.

C) Strategic position analysis

4.

D) Value chain analysis

Which of the following descriptions best describes the process
of planning?
1.

A) Comparing the budget with actual results

2.

B) Delegating authority to employees to address customer complaints

3.

C) Preparing a budget for an organization that meets sales goals for the upcoming year

4.

D) Assigning managers to different regional centers to facilitate distribution of goods to
customers

63 Free Test Bank for Managerial Accounting 6th Edition
by Hartgraves Multiple Choice Questions-Page 2
Which of the following best defines a structural cost driver?
1.

A) Fundamental choices about the size and scope of operations and technologies
employed in delivering products or services to customers

2.

B) Choices concerning the organization of activities and the involvement of persons

inside and outside the organization in decision making

3.

C) Specific units of work performed to serve customer needs that consume costly
resources

4.

D) The process of ensuring that results agree with plans

Which of the following phrases is primarily relevant to
managerial accounting as opposed to financial
accounting?
1.

A) Preparing periodic financial statements

2.

B) Calculating earnings per share for shareholders

3.

C) Helping managers make decisions


4.

D) Summarizing information about past events

Codes of ethics are limited to which of the following types of
organizations:
1.

A) Professional organizations and associations

2.

B) For-profit organizations

3.

C) Not-for-Profit organizations

4.

D) All of the above

Which of the following is an example of an organizational cost
driver?
1.

A) Deciding how to arrange raw materials inventory within a warehouse

2.

B) Inspecting incoming raw materials

3.

C) Determining the best location for a manufacturing facility

4.

D) Receiving raw materials into the warehouse

5.

E) None of the above

Corporate social responsibility would include all of the
following elements except:
1.

A) Providing quality daycare for young dependents of an organization

2.

B) Estimating the cost of environmental clean-up upon the ultimate disposal of an asset

3.

C) Limiting the return on investment to investors

4.

D) Donating employee time for community service

From a managerial accounting standpoint, which of the

following areas of the Sarbanes-Oxley Act of 2002 (SOX)
are most pertinent?
1.

A) External Auditing Standards

2.

B) Review of internal controls

3.

C) Codes of ethics for financial officers

4.

D) Penalties for fraud

Which of the following phrases is primarily relevant to financial
accounting as opposed to managerial accounting?
1.

A) Analyzing cost drivers


2.

B) Helping managers to make decisions

3.

C) Evaluating a company’s strategic position

4.

D) Conforming to external standards

Which of the following best describes corporate governance?
1.

A) The system of policies, processes, laws, and regulations that affect the way a
company is directed and controlled

2.

B) The moral quality, fitness, or propriety of a course of action that can injure or benefit
people

3.

C) What is permitted under the law

4.

D) Understanding the difference between right and wrong

Which of the following best describes ethics?
1.

A) The system of policies, processes, laws, and regulations that affect the way a

company is directed and controlled

2.

B) The moral quality, fitness, or propriety of a course of action that can injure or benefit
people

3.

C) What is permitted under the law

4.

D) Understanding the difference between right and wrong

To stay competitive in the express delivery business, both
Federal Express and United Parcel Service most compete
against each other based on which of the following?
1.

A) Price/Cost

2.

B) Service

3.

C) Quality

4.

D) All of the above

Ethics deals will all of the following except:
1.

A) The fitness of a course of action

2.

B) The moral quality of a course of action

3.

C) The legal responsibility under law

4.

D) The propriety of a course of action


Which of the following can be considered to be unethical
behavior?
1.

A) Forecasting the amount of ending inventory on hand at the end of a budgetary
period

2.

B) Transferring ending inventory to another warehouse in another geographic location

3.

C) Keeping inventory that is unlikely to be used so as to avoid recording a loss

4.

D) Building up inventory in anticipation of increased sales in the next accounting period

Which of the following can be considered to be unethical
behavior?
1.

A) Assigning direct labor costs to Contract A and Contract B using different rates for
different employees

2.

B) Assigning different direct material costs to Contract A and Contract B based on
usage

3.

C) Assigning overhead costs to Contract A based on labor hours and Contract B based
on machine hours

4.

D) Assigning costs of Contract A to Contract B to avoid an unfavorable performance
report on Contract A

A code of ethics should include which of the following
elements?
1.

A) Definition

2.

B) Purpose

3.

C) Enforcement

4.

D) All of the above

Which of the following can be considered to be unethical
behavior?
1.

A) Forecasting raw material requirements for next months production forecast

2.

B) Purchasing raw materials from a relative or friend rather than seeking bids

3.

C) Inspecting incoming raw materials from a supplier

4.

D) Working closely with a limited number of suppliers


Which of the following employees often found in a
manufacturing organization would be classified as part of
a line department?
1.

A) Production Manager

2.

B) Treasurer

3.

C) Chief Information Officer (CIO)

4.

D) Controller

All of the following are examples of activity cost drivers except:

1.

A) Placing a purchase order for raw materials

2.

B) Inspecting incoming raw materials

3.

C) Hiring and training a new employee

4.

D) Providing employees with cost information and authorizing them to make decisions

To compete on the basis of service, the seller must carefully
manage:
1.

A) The degree to which products or services meet customer’s needs

2.

B) Timely delivery and customer support

3.

C) Communications between buyer and seller

4.

D) Operating and maintenance costs

Which of the following best defines an organizational cost
driver?
1.

A) Fundamental choices about the size and scope of operations and technologies
employed in delivering products or services to customers.

2.

B) Choices concerning the organization of activities and the involvement of persons
inside and outside the organization in decision making

3.

C) Specific units of work performed to serve customer needs that consume costly
resources

4.

D) The process of ensuring that results agree with plans

Which of the following is an example of a structural cost
driver?
1.

A) Deciding how to arrange raw materials inventory within a warehouse

2.

B) Moving items being manufactured between workstations

3.

C) Determining the best location for a manufacturing facility

4.

D) Placing a purchase order for raw materials

5.

E) None of the above

Which of the following can be considered to be unethical
behavior?
1.

A) Accelerating or decelerating shipments at the end of the quarter to meet current
earnings forecasts

2.

B) Allocating overhead costs to a product based on labor hours

3.

C) Estimating sales in order to prepare the annual budget for the company

4.

D) Ordering more raw materials that forecast in anticipation of uncertain demand

Which of the following best defines an activity cost driver?
1.

A) Fundamental choices about the size and scope of operations and technologies
employed in delivering products or services to customers

2.

B) Choices concerning the organization of activities and the involvement of persons
inside and outside the organization in decision making

3.

C) Specific units of work performed to serve customer needs that consume costly
resources

4.

D) The process of ensuring that results agree with plans

Which of the following performance factors is least relevant for
a “world-class” company to compete globally?
1.

A) Price/Cost

2.

B) Location

3.

C) Service

4.

D) Quality

Ethical behavior:
1.

A) Is guided by well-defined rules of conduct

2.

B) Involves choosing between actions that are either right or wrong

3.

C) Is best guided by placing corporate performance above individual ends


4.

D) Is often subjective and based on the moral quality, fitness, or propriety of a course
of action.

Which of the following is an example of an activity cost driver?
1.

A) Deciding how to arrange raw materials inventory within a warehouse

2.

B) Designing components of a product so they can fit together only in the correct
manner

3.

C) Determining the best location for a manufacturing facility

4.

D) Receiving raw materials into the warehouse

5.

E) None of the above

To compete on the basis of quality, the seller must carefully
manage:
1.

A) The degree to which products or services meet customer’s needs

2.

B) Timely delivery and customer support

3.

C) Communications between buyer and seller

4.

D) Operating and maintenance costs

To compete on the basis of price, the seller must carefully
manage:
1.

A) The degree to which products or services meet customer’s needs.

2.

B) Timely delivery and customer support.

3.

C) Communications between buyer and seller.

4.

D) Operating and maintenance costs.

Free Text Questions
Briefly discuss the planning, organizing, and controlling
functions of management.
Answer Given

The three functions of management are planning, organizing, and controlling. Planning
is the formulation of a scheme or program for the accomplishment of a specific
purpose or goal. A distinction is often made between long-range planning and short-


range planning. Long-range planning emphasizes the selection of programs to move
the organization toward its goals over the next several years. Short-range planning is
based on the organization's long-range plan, as well as on its current situation, and
focuses on specific near-term activities to move the organization from its current
situation toward its long-range goals. Short-range planning involves the interpretation
of goals and long-range plans to establish performance objectives for the coming year
and the selection of specific actions to achieve these objectives. Organizing is the
process of making the organization into a well-ordered whole as management
attempts to structure and divide the tasks that need to be done. Specific people are
assigned specific tasks. Within a formal structure established to show the relationships
among organization members, authority is delegated to managers and other
employees who are subsequently held accountable for the activities they control.
Controlling is the process of ensuring that results agree with plans. In the process of
controlling operations, management compares actual performance with plans. If actual
results deviate significantly from plans, management either attempts to bring
operations into line with the original plan or adjusts the plan. The original plan is
adjusted if management determines that it is no longer appropriate because of
changed circumstances. Hence, the process of controlling feeds back into the process

of planning to form a continuous cycle.

Define strategic cost management and briefly discuss the three
themes that make up strategic cost management.
Answer Given

Strategic cost management is defined as making decisions concerning specific cost
drivers within the context of an organization’s business strategy, internal value chain,
and position in a larger value chain stretching from the development and use of
resources to final customers. Strategic cost manageme nt has emerged from a
blending of three themes: 1. Cost driver analysis—the study of factors that cause or
influence costs. 2. Strategic position analysis—an organization’s basic way of
competing to sell products or services. 3. Value chain analysis—the study of valueproducing activities, stretching from basic raw materials to the final consumer of the
product or service.


Identify and describe the three strategic positions that lead to
business success.
Answer Given

The three strategic positions are: (1) cost leadership, (2) product or service
differentiation, and (3) focus on a market niche. Cost leadership requires aggressive
construction of efficient-scale facilities, vigorous pursuit of cost reductions from
experience, tight cost and overhead control, avoidance of marginal customer
accounts, and cost minimization in areas like R & D, service, sales force, advertising,
and so on. Product and service differentiation involves creating something that is
perceived as being unique and worth a premium price. The strategic position of
focusing on a specific market niche (such as a buyer group, segment of the product
line, or geographic market) rests on the premise that the firm will be able to serve its
narrow target more effectively and efficiently than will competitors.

Briefly explain the nature of the ethical dilemmas that managers
and accountants confront, giving examples.
Answer Given

Most ethical dilemmas appear as small short-term compromises that can be corrected
in the long term. They involve decisions that are viewed as grey areas – they are not
clearly ethical or unethical. Examples include (a) accelerating shipments at the end of
the quarter to improve current profits, (b) keeping inventory that is unlikely to be used
so as to avoid recording a loss, (c) basing a budget on an overly optimistic sales
forecast, and (d) assigning some costs of one contract to another contract to avoid an
unfavorable performance report on the first contract.

Identify and briefly discuss the three dimensions on which
competition takes place.
Answer Given

Competition takes place on the dimensions of (1) price/cost, (2) service, and (3)
quality. Well-informed buyers routinely search the world for the product or service that
best fits their needs on the three interrelated dimensions. To compete on the basis of
price, the seller must carefully manage costs. Otherwise, reduced prices might
squeeze product margins to such an extent that a sale becomes unprofitable. Quality
refers to the degree to which products or services meet the customer’s needs. Service


includes such things as timely delivery, helpfulness of sales personnel, and
subsequent support.

Differentiate among structural, organizational, and activity cost
drivers.

Answer Given

Structural cost drivers are fundamental choices about the size and scope of operations
and about technologies employed in delivering products or services to customers.
Organizational cost drivers are choices concerning the organization of activities and
choices concerning the involvement of persons inside and outside the organization in
decision making. Activity cost drivers are specific units of work (activities) performed to
serve customer needs that consume costly resources.