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1 Copyright © 2020 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written onsent of McGraw-Hill Education.Fundamentals of Cost Accounting, 6e (Lanen)
Chapter 1 Cost Accounting: Information for Decision Making
1) The value chain comprises activities from research and development through the production process but does not include activities related to the distribution of products or services.
Answer: FALSE
Explanation: The value chain comprises activities from research and development (R&D) through the production process and including distribution and customer service.
Difficulty: 1 Easy
Topic: Value Creation in Organizations
Learning Objective: 01-01 Describe the way managers use accounting information to create value in organizations.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
2) Administrative functions are not included as part of the value chain because they are implicitly included in every business function.
Answer: TRUE
Explanation: This statement is true. Administrative expenses are not included as part of the value chain because they are included instead in every business function of the value chain.
Difficulty: 1 Easy
Topic: Value Creation in Organizations
Learning Objective: 01-01 Describe the way managers use accounting information to create value in organizations.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3) Under the value chain concept, value-added activities are those that firms perform and that customers perceive as adding utility to the goods they purchase.
Answer: TRUE
Explanation: The statement is true. Under the value chain concept, the value-added activities are those that the customer perceives as adding utility to the goods or services they purchase.
Difficulty: 2 Medium
Topic: Value Creation in Organizations
Learning Objective: 01-01 Describe the way managers use accounting information to create value in organizations.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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2 Copyright © 2020 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written onsent of McGraw-Hill Education.4) The value chain is comprised of the activities that take place only during the production process.
Answer: FALSE
Explanation: This statement is false. The value chain comprises activities from research and development through the production process to customer service.
Difficulty: 1 Easy
Topic: Value Creation in Organizations
Learning Objective: 01-01 Describe the way managers use accounting information to create value in organizations.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
5) If a poor facility layout exists and work-in-process inventory must be moved during the production process, the company is likely to be performing some nonvalue-added activities.
Answer: TRUE
Explanation: The statement is true. If a poor facility layout exists and work-in-process inventory must be moved during the production process, the company is likely to be performing nonvalue-added activities.
Difficulty: 1 Easy
Topic: Our Framework for Assessing Cost Accounting Systems
Learning Objective: 01-03 Explain how cost accounting information is used for decision making and performance evaluation in organizations.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) Cost information itself is a product with its own customers.
Answer: TRUE
Explanation: The statement is true. Cost information itself is a product with its own customers, who are managers that need to control and improve operations.
Difficulty: 1 Easy
Topic: Accounting Systems
Learning Objective: 01-02 Distinguish between the uses and users of cost accounting and financial accounting information.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
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3 Copyright © 2020 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written onsent of McGraw-Hill Education.7) Financial accounting information is sufficient for making operational decisions.
Answer: FALSE
Explanation: The statement is false. Financial accounting information is not sufficient for making operational decisions.
Difficulty: 1 Easy
Topic: Accounting Systems
Learning Objective: 01-02 Distinguish between the uses and users of cost accounting and financial accounting information.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
8) Cost accounting information is commonly used in developing financial accounting information.
Answer: TRUE
Explanation: The statement is true. Cost accounting information is commonly used in developing financial accounting information.
Difficulty: 1 Easy
Topic: Accounting Systems
Learning Objective: 01-02 Distinguish between the uses and users of cost accounting and financial accounting information.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
9) Financial accounting information is designed for decision-makers who are directly involved in the daily management of the firm.
Answer: FALSE
Explanation: This statement is false. Financial accounting is designed for external parties; cost accounting is designed for managers.
Difficulty: 1 Easy
Topic: Accounting Systems
Learning Objective: 01-02 Distinguish between the uses and users of cost accounting and financial accounting information.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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4 Copyright © 2020 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written onsent of McGraw-Hill Education.10) It is more important for financial accounting information to be comparable between firms than to be useful for managerial decision-making.
Answer: TRUE
Explanation: Important criteria for financial accounting include comparability and decision relevance (for investors); decision relevance (for managers) and timeliness are the important criteria for cost accounting.
Difficulty: 2 Medium
Topic: Accounting Systems
Learning Objective: 01-02 Distinguish between the uses and users of cost accounting and financial accounting information.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
11) Cost accounting information developed for managers to use in making decisions must comply with generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS).
Answer: FALSE
Explanation: This statement is false. In contrast to cost data for financial reporting to shareholders, cost data for managerial use (that is, within the organization) need not comply with GAAP or IFRS.
Difficulty: 2 Medium
Topic: Accounting Systems
Learning Objective: 01-02 Distinguish between the uses and users of cost accounting and financial accounting information.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
12) A cost driver is a factor that causes costs.
Answer: TRUE
Explanation: This statement is true. A cost driver is a factor that causes costs
Difficulty: 1 Easy
Topic: Cost Data for Managerial Decisions
Learning Objective: 01-03 Explain how cost accounting information is used for decision making and performance evaluation in organizations.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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