Test Bank for Managerial Accounting, 8e

Test Bank for Managerial Accounting, 8e Hartgraves Morse Chapter 1

Managerial Accounting:

Tools for Decision Making

Learning Objectives – Coverage by Question

True/False Multiple Choice Exercises Problems Essays LO1 – Contrast the different uses of financial and managerial accounting information.1 1-3,

22, 23, 25-27,

60, 61

LO2 – Describe the three themes of strategic cost management and illustrate how strategic cost management can be used to create a long-term competitive advantage.

2 4, 5, 24 1

LO3 – Examine how an organization’s mission, goals, and strategies affect managerial accounting.3, 4

6-12, 28-37,

64-69 2, 3 LO4 – Analyze how trends in the business environment impact the role of management accounting.

5 13, 14, 38-42 4

LO5 – Assess the nature of the ethical dilemmas managers and accountants confront.9, 10

20, 21,

50-59,

62, 63

6 1 / 4

LO6 – Demonstrate the use of structural, organizational, and activity cost drivers.6-8

15-19, 43-49,

70, 71

5

Chapter 1: Managerial Accounting: Tools for Decision Making

True/False

Topic: Role of Managerial Accounting

LO: 1

• A primary goal of managerial accounting is to provide information to investment managers who

analyze a company’s stock for external investors.

Answer: False

Rationale: Providing information for external users is the role of financial accounting, not managerial accounting. The role of managerial accounting is to provide information useful to internal managers.

Topic: Value Chain Analysis

LO: 2

• Value chain analysis concerns the study of value-producing activities, stretching from basic raw

materials to the final consumer of a product or service.

Answer: True

Rationale: Value chain analysis involves all of the activities that affect the conversion of raw materials into a final product or service.

Topic: Organization’s Mission

LO: 3

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

Answer: True

Rationale: As opposed to an organization’s goals and strategies, its mission statement addresses the broad purposes for which the organization exists.

Topic: Cost Leadership Strategy

LO: 3

• One of the companies to first employ a successful cost leadership strategy was Carnegie Steel

Company.

Answer: True

Rationale: Carnegie’s operating strategy was to push its own direct costs below those of competitors so that it could charge prices that would always ensure enough demand to keep its plants running at full capacity.

Topic: Competition

LO: 4

• Competition among companies normally takes place only on the dimension of price/cost. 2 / 4

Answer: False

Rationale: Competition occurs not only on the basis of price/cost, but also on the dimensions of quality and service.

• / 4

Topic: Cost Drivers

LO: 6

• The decision to use both full-time and part-time employees during the holiday season is an example

of a structural cost driver.

Answer: False

Rationale: The decision to use part-time employees instead of only full-time employees would be an example of an organizational cost driver, not a structural cost driver. Structural cost drivers involve fundamental choices about the size and scope of operations and technologies employed in delivering products or services to customers.

Topic: Cost Drivers

LO: 6

• All costs have at least one primary cost driver.

Answer: True

Rationale: Every cost is driven by either an activity, a structural or an organizational choice.

Topic: Cost Drivers

LO: 6

• Most costs are actually incurred as a result of activity cost drivers.

Answer: True

Rationale: Strategic and organizational choices give rise to specific activities that drive costs.

Topic: Ethics

LO: 5

• 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.

Answer: False

Rationale: Ethics goes beyond legality, which refers to what is permitted under the law, to consider the moral quality of an action.

Topic: Ethics in Managerial Accounting

LO: 5

• Managers who prepare and/or have responsibility for managerial accounting information rarely

encounter choices that have questionable ethical dimensions or overtones.

Answer: False

Rationale: While some choices that managers face are clearly ethical or unethical, many choices pose ethical dilemmas for managers. For example, when setting budgets for the next period, one may be tempted to be unduly cautious so as to make it easier to meet the budget and receive a favorable performance report (and possibly a larger bonus) for the next period.

• / 4