Managerial Accounting: Making Decisions and Motivating Performance (Datar/Rajan)
Chapter 1 The Manager and Management Accounting
Learning Objective 1-1
1) Managers use management accounting information to do all of the following except:
A) collect.
B) analyze.
C) perform.
D) categorize.
E) summarize.
Answer: C
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-28
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
2) Managers make cost management decisions to increase the value of products and services they provide to customers and to achieve organizational goals. Which of the following is not an example of an effective cost management decision?
A) The decision to enter a new market.
B) A decision to change the design of a product.
C) The decision to implement new organizational processes.
D) Information and the accounting systems themselves.
E) Decisions to use the information from accounting systems.
Answer: D
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-21
AACSB: Analytic Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
3) Management accounting:
A) focuses on measuring, analyzing, and reporting financial and nonfinancial information to help managers estimate future revenue, costs, and other measures to forecast activities and formulate strategies to increase the competitive advantage of the organization.
B) financial-information purpose is to communicate organization's financial position to investors, banks, regulators, and suppliers.
C) focus and emphasis is on past-oriented reports.
D) rules of measurement reporting require financial statements to be prepared in accordance of GAAP.
E) behavioral information primarily reports economic events, but also influences behavior because manager's compensation is often based on reported financial data.
Answer: A
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-21
AACSB: Analytic Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
4) Financial accounting:
A) focuses on reporting financial information to managers of the organization.
B) financial statements must comply with Generally Accepted Accounting Principles (GAAP).
C) focus and emphasis is on future-oriented reports.
D) rules of measurement are internal measures and reports do not have to follow GAAP, but are based on cost-benefit analysis.
E) behavioral implications are designed primarily to influence the behavior of managers and other employees.
Answer: B
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-1
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
5) An Enterprise Resource Planning (ERP) system is:
A) a cost-management system that specifically focuses on strategic issues.
B) a single database that collects data and feeds it into applications that support each of the company's business activities, such as purchasing, production, distribution, and sales.
C) a sequence of business functions in which customer usefulness is added to products.
D) a strategy that integrates people and technology in all business functions to deepen relationships with customers, partners, and distributors.
E) an integrated philosophy of management for continuously improving the quality of products and processes.
Answer: B
Diff: 2 Page Ref: 2
LO: 1-1
EOC: E1-15
AACSB: Use of Information Technology
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
6) Users of management accounting information include:
A) banks.
B) investors.
C) suppliers.
D) regulators.
E) managers of the organization.
Answer: E
Diff: 1 Page Ref: 3
LO: 1-1
EOC: E1-7
AACSB: Analytic Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
7) Financial accounting managers are more concerned about:
A) future-oriented budgets.
B) past-oriented reports.
C) reports that do not follow GAPP.
D) reports that are based on cost-benefit analysis.
E) utilizing information to help managers make decisions to achieve organizational goals.
Answer: B
Diff: 3 Page Ref: 3
LO: 1-1
EOC: E1-15
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
8) ______measures, analyzes and reports financial information and nonfinancial information that helps managers make decisions to fulfill the goals of an organization.
A) Financial Accounting
B) Management Accounting
C) Cost Accounting
D) Cost Management
E) Account Auditing
Answer: B
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-14
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
9) Financial accounting reports financial information to internal parties.
Answer: FALSE
Explanation: External users such as investors, banks, regulators, and suppliers use financial accounting reports.
Diff: 1 Page Ref: 3
LO: 1-1
EOC: E1-1
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
10) There is no difference in the goals of financial accounting and management accounting.
Answer: FALSE
Explanation: Financial accounting and management accounting have different goals. Financial accounting focuses on reporting financial information to external parties, for example investors, government, agencies, banks and suppliers. Management accounting measures analyzes, and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization.
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-2
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts and principles.
MA-1: Describe the basics of managerial accounting and its function within an organization.
11) Managers use management accounting information to develop, communicate, and implement strategy.
Answer: TRUE
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-14
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
12) Managers use management accounting information to develop, communicate, and implement strategy.
Answer: TRUE
Diff: 1 Page Ref: 2
LO: 1-1
EOC: E1-14
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
13) The purpose of information in financial accounting is to communicate the organization's financial position to investors, banks, regulators, and other outside parties.
Answer: TRUE
Diff: 1 Page Ref: 3
LO: 1-1
EOC: E1-21
AACSB: Communication Abilities
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
14) Discuss the major differences between management accounting and financial accounting. In your analysis, discuss who benefits from the reports or statements and discuss the differences between the individuals that use the accounting information. Be specific.
Answer: Management accounting data is typically used by the internal employees within the organization. For example, the managers, supervisors, and employees benefit from the reports because these internal reports could be used to implement new processes, other planning and control decisions, or the development of goals.
Financial accounting data is typically used by individuals or groups outside of the company that has an interest in the financial position at the company. For example, banks, stockholders, or regulatory agencies could use this information to make a decision about the organization.
Diff: 2 Page Ref: 3
LO: 1-1
EOC: E1-18
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts and principles.
MA-1: Describe the basics of managerial accounting and its function within an organization.
Learning Objective 1-2
1) Strategic cost management describes cost management that:
A) is not consistent with organizational goals.
B) does not relate to ethical practices.
C) has no focus on the organization.
D) specifically focuses on strategic issues.
E) does not specifically focus on strategic issues.
Answer: D
Diff: 2 Page Ref: 4
LO: 1-2
EOC: E1-21
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
2) Which of the following is not one of the six primary business functions that managerial accountants use to create value for their customers?
A) Research and development (R&D).
B) Design of products and processes.
C) Production and marketing.
D) Distribution and customer service.
E) Profit focus versus customer service.
Answer: E
Diff: 1 Page Ref: 3
LO: 1-2
EOC: E1-11; E1-12; E1-13
AACSB: Analytic Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
3) Which of the following statements concerning an organization's strategy is not true?
A) A strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.
B) Management accountants provide input to help managers formulate strategy.
C) A good strategy will always overcome poor implementation.
D) Businesses usually follow one of two broad strategies: (1) offering a quality product at a low price, and (2) offering a unique product or service priced higher than the competition.
E) None of these are true.
Answer: C
Diff: 2 Page Ref: 3
LO: 1-2
EOC: E1-22
AACSB: Analytic Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
4) Management accountants work closely with other managers to develop strategies. Which of the following is not a source of competitive advantage they share to develop those strategies?
A) Share company interdepartmental costs at meetings.
B) Share productivity reports.
C) Share best practices at meetings so other managers learn new and innovative strategies.
D) Share and understand the efficiency advantage relative to their competitors.
E) Share only time to attend luncheons and meetings, but never discuss interdepartmental information.
Answer: E
Diff: 2 Page Ref: 4
LO: 1-2
EOC: E1-22
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
5) Some managerial accountants at companies choose to focus on a product differentiation strategy. Which of the following is not a characteristic of this strategy?
A) Offer unique products.
B) Offer different services.
C) Offer lower-priced products or services.
D) Offer less-popular products or services.
E) Offer higher-priced products or services.
Answer: C
Diff: 1 Page Ref: 3
LO: 1-2
EOC: E1-13; E1-23
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
6) The managers at Apple are successful because they offer consumers unique and different products. Which strategy do they use to attract and retain customers?
A) A cost leadership strategy.
B) A product differentiation strategy.
C) A low-cost leadership strategy.
D) A low-product leadership strategy.
E) That is what they do, there is no strategy.
Answer: B
Diff: 1 Page Ref: 3
LO: 1-2
EOC: E1-22
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
7) The managers at Vanguard follow a cost leadership strategy. Which of the following is a characteristic of their strategy?
A) Provide consumers unique products.
B) Provide consumers different products.
C) Provide consumers quality products or services at low prices by effective cost management.
D) Products are higher priced and less popular products or services than their competitors.
E) Provide budgets versus strategies and make more money by charging higher prices.
Answer: C
Diff: 3 Page Ref: 3
LO: 1-2
EOC: E1-21
AACSB: Analytic Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
8) A ______is used to specify how a managerial accountant at an organization matches the capabilities with opportunities in the marketplace to accomplish their objectives. It also helps managers gain a competitive advantage at their company.
A) goal
B) ethic
C) focus
D) strategy
E) production
Answer: D
Diff: 2 Page Ref: 3
LO: 1-2
EOC: E1-21
AACSB: Analytic Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
9) The best-designed strategies and the best-developed capabilities are useless unless they are effectively executed.
Answer: TRUE
Diff: 1 Page Ref: 4
LO: 1-2
EOC: E1-22
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
10) The term strategy describes how an organization will compete and it describes the opportunities that managers should pursue.
Answer: TRUE
Diff: 1 Page Ref: 3
LO: 1-2
EOC: E1-22
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
11) List and discuss the two broad strategies that managers use to achieve organizational goals. Provide an example of each strategy.
Answer: The two broad strategies include (1) cost leadership strategy, and (2) product differentiation strategy. An example of the cost leadership strategy is evident at Southwest Airlines because they offer their consumers products at prices that are lower than the competitor prices. An example of an organization that implements the product differentiation strategy is Apple. The managers at the organization offer consumers products that are unique and different than the products at a competitor.
Diff: 1 Page Ref: 3
LO: 1-2
EOC: E1-14
AACSB: Analytic Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
12) Define strategy and explain why strategic decisions are important to a management accountant.
Answer: The organization's strategy describes how it will compete in the marketplace. It is also important to a management accountant because it permits them to discover opportunities its managers should seek and pursue. Strategy specifies how an organization matches its own capabilities with the opportunities in the company to accomplish its objectives.
Diff: 1 Page Ref: 3
LO: 1-1
EOC: E1-21; E1-22
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
Learning Objective 1-3
1) Which of the following is not a way for a company to improve customer response time?
A) An increase in capacity of bottleneck operations.
B) Decrease in response time to consumer requests.
C) Faster delivery procedures.
D) Produce the product quicker.
E) Effective management accounting information.
Answer: B
Diff: 2 Page Ref: 7
LO: 1-3
EOC: E1-14
AACSB: Analytic Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
2) Trader Joe's is known for delivering unique products to consumers at reasonable prices. Which of the following is not one of the strategies they use to attract and retain consumers?
A) Delivers unique products at reasonable prices.
B) Offers low-cost, high-end staples to attract and retain consumers.
C) Minimize cost to attract and retain consumers with brand items.
D) Maximize cost to attract and retain consumers with brand items.
E) Implements precise, just-in-time ordering with daily distribution trips.
Answer: D
Diff: 3 Page Ref: 7
LO: 1-3
EOC: E1-14
AACSB: Analytic Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
3) Which of the following is not a key success factor that managerial accountants use to promote sustainability in their organizations?
A) Cost.
B) Efficiency.
C) Quality.
D) Time.
E) Relevance.
Answer: E
Diff: 2 Page Ref: 8
LO: 1-3
EOC: E1-14; E1-15
AACSB: Analytic Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
4) Sustainability:
A) is the development of employment opportunities to decrease the national job deficit.
B) is a political term that corporate controllers use only at global manufacturing operations when they refer to ethical standards of production.
C) is the development and implementation of strategies to achieve long-term financial, social, and environmental performance.
D) is a technique that is used only when the organization outsources operations in global operations.
E) is a step in the decision-making process that managers only use to enhance ethical standards in their organizations.
Answer: C
Diff: 3 Page Ref: 8
LO: 1-3
EOC: E1-4
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
5) Which of the following is not a way that a manager at a manufacturing firm can improve the performance level in the organization?
A) A focus on the value-chain.
B) A focus on supply-chain operations.
C) A focus only on budgeting to improve all performance levels in the organization.
D) A focus on customer service and the distribution channels to enhance operations.
E) A focus on marketing strategies to develop new products and services.
Answer: C
Diff: 1 Page Ref: 8-9
LO: 1-3
EOC: E1-17
AACSB: Reflective Thinking Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
6) When managers generate and experiment with ideas related to new products, services or processes. this is:
A) research and development.
B) design of products and processes.
C) production.
D) marketing.
E) distribution.
Answer: A
Diff: 2 Page Ref: 5
LO: 1-3
EOC: E1-21
AACSB: Analytic Skills
Learning Outcome: FA-1: Define accounting terms, accounting concepts, and principles.
7) Processing orders and shipping products or services to customers is:
A) marketing.
B) production.
C) distribution.
D) research and development.
E) design of products and processes.
Answer: C
Diff: 1 Page Ref: 5
LO: 1-3
EOC: E1-13; E1-14; E1-15
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
8) To lower costs and increase efficiency at Nike, the decision makers moved its operations to China and Mexico. This is known as:
A) outsourcing.
B) managing.
C) controlling.
D) developing.
E) implementing.
Answer: A
Diff: 1 Page Ref: 6
LO: 1-3
EOC: E1-29
AACSB: Dynamics of the Global Economy
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
9) The ______contains six primary business functions in modern organizations.
A) value chain
B) design chain
C) product chain
D) production chain
E) organizational chain
Answer: A
Diff: 1 Page Ref: 4
LO: 1-3
EOC: E1-11; E1-12; E1-13
AACSB: Reflective Thinking Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
10) The time it takes for companies to develop new products and services and bring them to market is:
A) delay.
B) new-product development time.
C) distribution time.
D) important dimension.
E) increased pace.
Answer: B
Diff: 2 Page Ref: 7
LO: 1-3
EOC: E1-14
AACSB: Analytic Skills
Learning Outcome: MA-1: Describe the basics of managerial accounting and its function within an organization.
11) The ______is an administration function that includes the human resource management function of training front-line workers.
A) design function
B) distribution function
C) production function
D) marketing function