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Hansen & Mowen

Cost Management Accounting


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_______________ is devoted to providing information for external users.
Management accounting
Financial accounting
Internal accounting
Project accounting
None of the above
CMA5e01 Ch 1 #1 (MC #1)
OBJ: 1
Financial accounting is primarily concerned with providing to all of the following EXCEPT
creditors such as banks and other financial institutions.
creditors such as suppliers.
stockholders of the company.
bondholders of the company.
management of the firm.
CMA5e01 Ch 1 #2 (MC #2)
OBJ: 1
Management accounting and financial accounting differ in that management accounting
information
is prepared following prescribed rules.
is prepared using whatever methods the company finds beneficial.
is prepared for stockholders.
is prepared for the Internal Revenue Service.
is prepared following Generally Accepted Accounting Principles.
CMA5e01 Ch 1 #3 (MC #3)
OBJ: 1
The primary objective of management accounting is
to provide stockholders and potential investors with useful information for decision
making.
to provide banks and other creditors with information useful in making credit decisions.
to provide management with information useful for planning and control of operations.
to provide the Internal Revenue Service with information about taxable income.
to provide the Security and Exchange Commission with annual reports.
CMA5e01 Ch 1 #4 (MC #4)
OBJ: 1
Management accounting is the branch of accounting concerned with reporting to
internal managers.
stockholders.
creditors.
bankers.
the government.
CMA5e01 Ch 1 #5 (MC #5)
OBJ: 1
Which of the following characteristics does NOT pertain to management accounting?
provides information to internal users
generates specific purpose financial statements and reports
covers a relatively short period of time
has no externally imposed standards
required by law
CMA5e01 Ch 1 #6 (MC #6)
OBJ: 1

Which of the following does NOT describe management accounting?


internally focused
emphasis on the future
externally focused
detailed information
no prescribed rules to follow
CMA5e01 Ch 1 #7 (MC #7)
OBJ: 1
Management accounting
reports are always objective.
provides information to external users.
generates general purpose financial statements and reports.
is required by law.
has few externally imposed standards.
CMA5e01 Ch 1 #8 (MC #8)
OBJ: 1
Management accounting reports are prepared
to meet the needs of decision makers within the firm.
whenever stockholders request them.
according to guidelines prepared by the Securities and Exchange Commission.
by CPAs.
according to financial accounting standards.
CMA5e01 Ch 1 #9 (MC #9)
OBJ: 1
Fra Lucas Pacioli, an Italian monk, is credited with
the cost of goods manufactured statement.
the cash basis income statement.
the invention of double-entry bookkeeping.
the invention of the first Apple computer.
the statement of cash flows.
CMA5e01 Ch 1 #10 (MC #10) OBJ: 2
The history of accounting systems extends back at least
25 years.
100 years.
200 years.
500 years.
10,000 years.
CMA5e01 Ch 1 #11 (MC #11) OBJ: 2
Most of the product-costing and internal accounting procedures used in the twentieth
century were developed between
1400 and 1500.
1500 and 1600.
1880 and 1925.
1970 and 1980.
1980 and 1990.
CMA5e01 Ch 1 #12 (MC #12) OBJ: 2
Which of the following emerging themes in cost accounting deals with the firm
concentrating on the delivery of value to the customer?
service industry growth
global competition

time as a competitive element


advances in information technology
customer orientation
CMA5e01 Ch 1 #13 (MC #13) OBJ: 3
Which of the following emerging themes in cost accounting deals with managers striving to
create an environment which will enable workers to manufacture perfect (zero-defect)
products?
customer orientation
time as a competitive element
global competition
total quality management
advances in information technology
CMA5e01 Ch 1 #14 (MC #14) OBJ: 3
In JIT manufacturing, each operation produces
only what is necessary for the succeeding operations.
all that it can to offset fixed costs.
a fixed percentage in excess of orders to ensure adequate quality stock.
all that it can in order to build inventories.
both a and c.
CMA5e01 Ch 1 #15 (MC #15) OBJ: 3
Total quality management emphasizes
zero defects.
continual improvement.
elimination of waste.
all of the above.
both a and c.
CMA5e01 Ch 1 #16 (MC #16) OBJ: 3
Automation of the manufacturing process increases
the quantity of information.
the timeliness of information.
the number of production employees.
both a and b.
both a and c.
CMA5e01 Ch 1 #17 (MC #17) OBJ: 3
Which of the following are advances in the manufacturing environment?
theory of constraints
computer-integrated manufacturing
JIT manufacturing
all of the above
both a and b
CMA5e01 Ch 1 #18 (MC #18) OBJ: 3
Which of the following statements is true?
The service sector comprises approximately 75 percent of the United States' economy and
employment.
The service sector comprises approximately 20 percent of the United States' economy and
employment.
Traditional smokestack industries have increased in importance in recent years.

The service sector has decreased in importance in recent years.


Both b and d are true.
CMA5e01 Ch 1 #19 (MC #19) OBJ: 3
JIT manufacturing emphasizes
large amounts of inventory on hand so that the company does not run out of it.
small amounts of inventory on hand resulting in lower quality goods because production is
rushed.
reducing investment in inventory and increasing the emphasis on quality.
both b and c.
none of the above.
CMA5e01 Ch 1 #20 (MC #20) OBJ: 3
Which of the following statements is NOT true?
Individuals with the ability to think cross-functionally can shift perspectives, expanding
their own understanding of the problems and their solutions.
A cross-functional systems approach lets us see the forest, not just one or two of the trees.
Marketing, management, and finance are interrelated.
All of the above are true.
Only a and b are true.
CMA5e01 Ch 1 #21 (MC #21) OBJ: 5
The setting of objectives and the identification of methods to achieve those objectives is
called
planning.
controlling.
auditing.
decision making.
performance evaluation.
CMA5e01 Ch 1 #22 (MC #22) OBJ: 6
Which of the following is a staff position?
vice-president of production
vice-president of finance
vice-president of marketing
plant foreman
both b and c
CMA5e01 Ch 1 #23 (MC #23) OBJ: 6
Analyzing cost overruns to determine their cause is an example of
planning.
control.
decision making.
both a and c.
none of the above.
CMA5e01 Ch 1 #24 (MC #24) OBJ: 6
Monitoring the number of defects produced is an example of the management function of
planning.
control.
decision making.
both a and c.
none of the above.

CMA5e01 Ch 1 #25 (MC #25) OBJ: 6


The chief accounting officer of an organization is
the vice-president of finance.
the internal auditor.
the treasurer.
the controller.
the CEO.
CMA5e01 Ch 1 #26 (MC #26) OBJ: 6
Comparing actual quality costs with planned quality costs is an example of
planning.
controlling.
decision making.
performance evaluation.
both b and d.
CMA5e01 Ch 1 #27 (MC #27) OBJ: 6
Performance reports are accounting reports that compare
planned data with actual data.
audited data with actual data.
managers' bonuses with performance ratings by supervisors.
actual data with industry standards.
none of the above.
CMA5e01 Ch 1 #28 (MC #28) OBJ: 6
Which of the following statements correctly distinguishes between financial and
management accounting?
Management accounting reports on the whole organization.
Financial accounting is oriented toward the future.
Financial accounting is primarily concerned with providing information for internal users.
Management accounting is oriented more toward the planning and control aspects of
management.
Management accounting is required by law.
CMA5e01 Ch 1 #29 (MC #29) OBJ: 6
Setting the company's profit targets for the upcoming year is an example of the
management function of
planning.
control.
variance analysis.
internal auditing.
product costing.
CMA5e01 Ch 1 #30 (MC #30) OBJ: 6
Setting the selling price of a company's product is an example of
planning.
control.
decision making.
all of the above.
none of the above.
CMA5e01 Ch 1 #31 (MC #31) OBJ: 6
Developing a company strategy for responding to anticipated new markets is an example of

planning.
control.
decision making.
all of the above.
none of the above.
CMA5e01 Ch 1 #32 (MC #32) OBJ: 6
The internal auditor performs
a line function.
a staff function.
a production function.
a marketing function.
none of the above.
CMA5e01 Ch 1 #33 (MC #33) OBJ: 6
The planning process includes
setting objectives.
identifying means of achieving the objectives.
making decisions.
all of the above.
both a and c.
CMA5e01 Ch 1 #34 (MC #34) OBJ: 6
Investigating production variances and adjusting the production process is an example of
planning.
control.
internal auditing.
both a and c.
none of the above.
CMA5e01 Ch 1 #35 (MC #35) OBJ: 6
Evaluating the performance of a segment of the company is an example of
planning.
control.
internal auditing.
both a and c.
none of the above.
CMA5e01 Ch 1 #36 (MC #36) OBJ: 6
Determining the bid your company should submit on a construction contract is an example
of
planning.
control.
decision making.
both a and b.
none of the above.
CMA5e01 Ch 1 #37 (MC #37) OBJ: 6
The formulation of a scheme or program for the accomplishment of a specific purpose or
goal is referred to as
managing.
motivating.
organizing.

planning.
controlling.
CMA5e01 Ch 1 #38 (MC #38) OBJ: 6
The manager has to decide what tasks are needed and how they should be accomplished.
The manager then assigns these tasks to other people and ensures that they are properly
completed. These statements describe
the organization chart.
planning.
organizing.
controlling.
both b and d.
CMA5e01 Ch 1 #39 (MC #39) OBJ: 6
Which of the following positions would most likely be a line manager?
personnel department manager
controller
treasurer
purchasing department manager
president
CMA5e01 Ch 1 #40 (MC #40) OBJ: 6
Which of the following positions would most likely be a staff manager?
executive vice president
president
manager of clothing division
controller
manager of Sears store
CMA5e01 Ch 1 #41 (MC #41) OBJ: 6
All of the following would be considered staff functions EXCEPT
the vice-president of finance.
the vice-president of corporate planning.
the vice-president of marketing.
the vice-president of research and development.
the controller.
CMA5e01 Ch 1 #42 (MC #42) OBJ: 6
Which of the following would be considered a line function?
production
maintenance
public relations
administrative services
treasurer
CMA5e01 Ch 1 #43 (MC #43) OBJ: 6
Accounting
always has an external orientation.
always has an internal orientation.
information assists in planning and controlling.
terms serve as a model of the organization.
is of little importance to modern management.
CMA5e01 Ch 1 #44 (MC #44) OBJ: 6

Which of the following duties is usually assigned to the controller?


receiving, maintaining custody of, and disbursing monies and securities
directing the granting of credit to clients
investing the organization's funds
tax planning
independently evaluating the firm's financial statements
CMA5e01 Ch 1 #45 (MC #45) OBJ: 6
A person in a staff position
is directly involved in production.
provides support for the line function.
is not actually an employee of the company.
all of the above.
both a and b.
CMA5e01 Ch 1 #46 (MC #46) OBJ: 6
Accounting activities within an organization are usually under the overall supervision of the
Certified Public Accountant.
controller.
Chartered Accountant.
treasurer.
Certified Financial Accountant.
CMA5e01 Ch 1 #47 (MC #47) OBJ: 6
In a performance report
differences between actual costs and allowed costs are always undesirable.
expenditures of less than allowed amounts are undesirable.
expenditures of more than allowed amounts are not permitted to occur.
differences between actual costs and allowed costs are never undesirable.
expenditures of less than allowed amounts are desirable.
CMA5e01 Ch 1 #48 (MC #48) OBJ: 6
Which of the following job positions is a line function?
Financial Vice-president
Controller
Production Supervisor
Treasurer
none of the above
CMA5e01 Ch 1 #49 (MC #49) OBJ: 6
Which of the following job positions is a staff position?
Controller
Production Vice-president
Production Supervisor
Assembly Foreman
all of the above
CMA5e01 Ch 1 #50 (MC #50) OBJ: 6
Which of the following statements is NOT TRUE about world-class firms?
World-class firms are firms that are poor in customer support.
World-class firms know their market and their products.
World-class firms strive continually to improve product design, manufacture, and delivery.
World-class firms can compete with the best of the best in a global environment.

All of the above are true.


CMA5e01 Ch 1 #51 (MC #51) OBJ: 6
The monitoring of a plan's implementation is called
planning.
controlling.
decision making.
budgeting.
both a and d.
CMA5e01 Ch 1 #52 (MC #52) OBJ: 6
Inspecting units produced to determine if they meet specifications is an example of
planning.
control.
decision making.
both a and c.
none of the above.
CMA5e01 Ch 1 #53 (MC #53) OBJ: 6
The ____________ is the officer responsible for money management and serves chiefly as
the custodian of the organization's funds.
Certified Public Accountant
controller
Chartered Accountant
treasurer
Certified Financial Accountant
CMA5e01 Ch 1 #54 (MC #54) OBJ: 6
Currently, the activity found LEAST often within the controller's department is
updating the general ledger.
budget preparation.
maintaining accounts receivable records.
performance report preparation.
establishing and maintaining a market for the organization's debt and equity securities.
CMA5e01 Ch 1 #55 (MC #55) OBJ: 6
Core values essential to an ethical life include
integrity.
respect for others.
accountability.
all of the above.
both a and c.
CMA5e01 Ch 1 #56 (MC #56) OBJ: 7
Which of the following is NOT a core value essential to an ethical life?
fidelity
fairness
respect for others
willingness to cheat
pursuit of excellence
CMA5e01 Ch 1 #57 (MC #57) OBJ: 7
The primary objective of an organization should be to
maximize the firm's net worth.

maximize profits using whatever means necessary.


maximize the firm's profit as long as the means used are legal.
maximize the firm's profit using legal and ethical means.
minimize costs using legal means.
CMA5e01 Ch 1 #58 (MC #58) OBJ: 7
Persons in the United States who perform independent evaluations are designated as
Certified Public Accountants.
controllers.
Chartered Accountants.
treasurers.
Certified Management Accountants.
CMA5e01 Ch 1 #59 (MC #59) OBJ: 8
The IMA has a program to recognize professional competence and educational attainment
in the field of management accounting. The program leads to designation as a
Certified Public Accountant.
controller.
Chartered Accountant.
treasurer.
Certified Management Accountant.
CMA5e01 Ch 1 #60 (MC #60) OBJ: 8
An accountant certified to possess the minimal professional qualifications for an external
auditor is a
all of the above.
both a and b.
CMA5e01 Ch 1 #61 (MC #61) OBJ: 8
The certification sponsored by the Institute of Management Accountants that emphasizes
economics, finance, management, financial accounting and reporting, management
reporting, and decision analysis is the
all of the above.
both a and b.
CMA5e01 Ch 1 #62 (MC #62) OBJ: 8
Which of the following topics is NOT a separate part of the CMA examination?
economics, finance, and management
financial accounting and reporting
external auditing
management reporting, analysis, and behavioral issues
decision analysis and information systems
CMA5e01 Ch 1 #63 (MC #63) OBJ: 8
Briefly discuss financial and management accounting. Discuss the differences between
them.
Management accounting differs from financial accounting in the following major ways: (1)
an internal focus, (2) emphasis on the future, (3) freedom from GAAP and other mandatory
rules, (4) multidisciplinary and broader in scope, (5) evaluates individual segments within
the firm, and (6) provides more detailed information.
CMA5e01 Ch 1 #64 (PR #1)
OBJ: 1
PCs significantly increase a manager's capabilities to process and use accounting
information. Do you agree? Explain.

Yes. PCs allow managers to access accounting data and to build their own reports and to
perform many of their own analyses.
CMA5e01 Ch 1 #65 (PR #2)
OBJ: 3
Identify and discuss the emerging themes that are affecting the way cost accounting is
practiced.
Seven emerging themes affecting cost accounting are: customer orientation, total quality
management, time as a competitive element, advances in information technology, advances
in the manufacturing environment, service industry growth, and global competition.
Customer orientation, total quality management, and time as a competitive element require
the accountant to create and track nonfinancial measures of customer satisfaction such as
quality improvement and responsiveness. The advances in information technology have led
to the creation of relationship data bases which allow a variety of users to develop their
own reports based on their particular needs. Advances in the manufacturing environment
are characterized by activity-based costing and the emergence of the JIT philosophy.
Service industry growth has led to the need for increased management accounting
information to improve productivity and quality. Finally, global competition means that
companies are now competing with the best of the best. Accurate, timely, and relevant
accounting data are crucial in appropriately managing cost.
CMA5e01 Ch 1 #66 (PR #3)
OBJ: 3
What is the difference between a staff position and a line position?
A line position has direct responsibility for carrying out the basic objectives of an
organization. A staff position has indirect responsibility for the basic objectives and
provides a supportive role for line activities.
CMA5e01 Ch 1 #67 (PR #4)
OBJ: 6
Describe the connection between planning, controlling, and feedback.
Planning establishes performance standards, feedback compares actual performance with
planned performance, and control uses feedback to evaluate deviations from plans.
CMA5e01 Ch 1 #68 (PR #5)
OBJ: 6
What is the role of the controller in an organization? Describe some of the activities over
which he or she has control.
The controller is responsible for both internal and external accounting. These
responsibilities usually include such diverse activities as taxes, SEC reports, cost
accounting, budgeting, internal auditing, financial accounting, and systems accounting.
CMA5e01 Ch 1 #69 (PR #6)
OBJ: 6
You are a management accountant for the Eugene Division of Lowden Company. Your
longtime friend, David Orth, is the Eugene Division manager. David was instrumental in
helping you obtain your current position. Because David's annual bonus is based on the
amount of profit the Eugene Division reports for the year, David has asked you to "massage
the numbers" to make the Eugene Division appear more profitable.
Considering the Standards of Ethical Conduct for Management Accountants, how would
you respond to David Orth's request?
According to the Standards of Ethical Conduct for Management Accountants, management
accountants have a responsibility to "perform their professional duties in accordance with
relevant laws, regulations, and technical standards." Therefore, if "massaging the numbers"
involves violating any laws, regulations, or technical standards, it would violate the
Standards of Ethical Conduct for Management Accountants. In addition, the Standards of

Ethical Conduct for Management Accountants indicate that management accountants have
a responsibility to communicate information fairly and objectively and to communicate
unfavorable as well as favorable information.
CMA5e01 Ch 1 #70 (PR #7)
OBJ: 7
Discuss how the goal of profit maximization is affected by ethical considerations. What
incentives are there for managers to manipulate accounting data in unethical ways in order
to increase profits?
The objective of profit maximization should be constrained by the requirement that profits
are achieved through legal and ethical means. Because performance evaluation and rewards
for managers often are linked to reported profits, managers might manipulate accounting
data to increase profit in order to increase their own bonuses. The evaluation and reward
system should be designed to discourage unethical behavior.
CMA5e01 Ch 1 #71 (PR #8)
OBJ: 7
You are a management accountant for Burn's Corporation. Ruth Hamilton, the sales
representative for one of Burn's suppliers, invited you to attend a professional sporting
event. Because you are an avid sports fan, you accepted Ruth's invitation.
At the sporting event, Ruth begins talking about Burn's upcoming contract renewals with
suppliers. Because there is intense competition and because it is the first bid she has
submitted to Burn's Corporation, she asks you to review her bid to make sure "it is good
enough" before she submits it to the company. In addition, because you are knowledgeable
about costs, especially regarding this contract, she asks you to tell her if her bid is "in the
ballpark" or needs "improvement." If she wins the contract, she indicates that you will be
provided with season tickets for the rest of the year.
Considering the Standards of Ethical Conduct for Management Accountants, how would
you respond to Ruth's request?
According to the Standards of Ethical Conduct for Management Accountants, management
accountants have a responsibility to "refrain from using or appearing to use confidential
information acquired in the course of their work for unethical or illegal advantage either
personally or through a third party." If you agreed to review Ruth's bid and tell her if the bid
needs improvement so that she wins the contract, this could be viewed as using confidential
information for your personal advantage (season tickets). In addition, management
accountants have a responsibility to refuse any gift, favor, or hospitality that would
influence their actions.
CMA5e01 Ch 1 #72 (PR #9)
OBJ: 7
Discuss the three forms of accounting certification. Which form of certification do you
believe is best for management accountants? Why?
The three forms of certification are the CPA, the CMA, and the CIA. Although each
certification can prove to be valuable for management accountants, the CMA is tailored to
fit the needs of management accountants. The CPA has a public-accounting orientation and
the CIA has an internal-auditing orientation. Only the CMA specifically addresses the
professional requirements of a management accountant.
CMA5e01 Ch 1 #73 (PR #10) OBJ: 8