Fundamentals of Cost Accounting 6th Edition

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 3 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 4 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 5 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 6 13) A cost can be considered a differential cost for one particular course of action but not for another course of action. Answer: TRUE Explanation: This statement is true. A differential cost is a cost that changes in response to a particular course of action. A cost may change in response to one course of action but not in response to a different course of action. 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 14) A responsibility center can be a department, division, or segment, but not a subsidiary of the parent company. Answer: FALSE Explanation: A responsibility center is a specific unit of an organization assigned to a manager who is held accountable for its operations and resources. As such, a department, division, segment, or subsidiary could be considered a responsibility center. Difficulty: 2 Medium 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: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 15) It is important that the manager assigned to lead a responsibility center be held accountable for its operations. Answer: TRUE Explanation: The statement is true. Responsibility does not work without accountability. 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