ACC 222 EXAM 1 QUESTIONS AND ANSWERS
4 Step Decision Making Framework (S.I.M.M.) - CORRECT ANSWER✅✅1. Specify problem and goals
2. Identify options
3. Measure costs and benefits of each option to determine its value
4. Make the decision
option value equation - CORRECT ANSWER✅✅option value = benefits - costs
opportunity costs - CORRECT ANSWER✅✅value of the next best option or value we give up by making a
decision
The best option... - CORRECT ANSWER✅✅maximizes profit or minimizes costs
Incentive Alignment Problem - CORRECT ANSWER✅✅Organizations don't make decisions, individuals
do. Individuals may choose decisions that benefit themselves over the org. We need to motivate
individuals to focus on the org's goals
Managerial Accounting purposes: - CORRECT ANSWER✅✅1) *Planning decisions:* how to acquire and
use resources to deliver products/services
2) *Control decisions:* how to motivate, monitor, and evaluate performance
Planning and control cycle (P.I.E.R.) - CORRECT ANSWER✅✅*Plan*
- products/services, prices, customers, resources
*Implement*
- use resources to make products/services, motivate employees, set performance targets
*Evaluate*
- actual results, achievement of targets, reasons for deviations
*Revise*
- best mix of products/services, resources necessary, targets
,Financial vs Managerial accounting - CORRECT ANSWER✅✅financial: for users OUTSIDE the org, GAAP
rules, always historical orientation, aggregated info, narrower breadth
Managerial: for users INSIDE the organization, past & future orientation, more disaggregated, broader
breadth
Ethics - CORRECT ANSWER✅✅common principle
(T/F?) The planning and control cycle includes planning, implementing, evaluating, and revising -
CORRECT ANSWER✅✅True. The planning and control cycle involves planning, then implementing the
plan, then evaluating how well it worked (or didn't), and revising as needed to make the next plan
better.
(T/F?) Planning decisions relate to choices about acquiring and using resources to deliver products and
services to customers - CORRECT ANSWER✅✅True.
Which of the following is not one of the four steps in the decision-making process?
a) Specify the decision problem, including the decision maker's goals
b) Identify options
c) Separate routine decision problems from non-routine decision problems
d) Measure benefits and costs to determine the value of each option
e) Make the decision, choosing the option with the highest value - CORRECT ANSWER✅✅c) Separate
routine decision problems from non-routine decision problems
The value of an option equals its...
a) Benefits plus its costs
b) Benefits less its costs
c) Costs
, d) Profit
e) None of the above - CORRECT ANSWER✅✅b) Benefits less its costs
The opportunity cost of any decision option is:
a) The value to the decision maker of the least-best option
b) The total profit associated with the best option
c) The total costs associated with the least profitable option
d) The value to the decision maker of the next best option
e) None of the above - CORRECT ANSWER✅✅d) The value to the decision maker of the next best option
The concepts of value and opportunity cost emphasize that every decision involves:
a) Eliminating any risks of making the decision
b) Estimating the time value of money
c) Trading off what the decision maker gets with what the decision maker gives up
d) Comparing the current period's opportunity costs with the previous period's opportunity costs
e) None of the above - CORRECT ANSWER✅✅c) Trading off what the decision maker gets with what the
decision maker gives up
Managerial accounting is an area of accounting which:
a) Provides financial information to creditors and stockholders
b) Summarizes financial information
c) Assists in predicting future profits
d) Assists in making business decisions
e) None of the above - CORRECT ANSWER✅✅d) Assists in making business decisions
4 Step Decision Making Framework (S.I.M.M.) - CORRECT ANSWER✅✅1. Specify problem and goals
2. Identify options
3. Measure costs and benefits of each option to determine its value
4. Make the decision
option value equation - CORRECT ANSWER✅✅option value = benefits - costs
opportunity costs - CORRECT ANSWER✅✅value of the next best option or value we give up by making a
decision
The best option... - CORRECT ANSWER✅✅maximizes profit or minimizes costs
Incentive Alignment Problem - CORRECT ANSWER✅✅Organizations don't make decisions, individuals
do. Individuals may choose decisions that benefit themselves over the org. We need to motivate
individuals to focus on the org's goals
Managerial Accounting purposes: - CORRECT ANSWER✅✅1) *Planning decisions:* how to acquire and
use resources to deliver products/services
2) *Control decisions:* how to motivate, monitor, and evaluate performance
Planning and control cycle (P.I.E.R.) - CORRECT ANSWER✅✅*Plan*
- products/services, prices, customers, resources
*Implement*
- use resources to make products/services, motivate employees, set performance targets
*Evaluate*
- actual results, achievement of targets, reasons for deviations
*Revise*
- best mix of products/services, resources necessary, targets
,Financial vs Managerial accounting - CORRECT ANSWER✅✅financial: for users OUTSIDE the org, GAAP
rules, always historical orientation, aggregated info, narrower breadth
Managerial: for users INSIDE the organization, past & future orientation, more disaggregated, broader
breadth
Ethics - CORRECT ANSWER✅✅common principle
(T/F?) The planning and control cycle includes planning, implementing, evaluating, and revising -
CORRECT ANSWER✅✅True. The planning and control cycle involves planning, then implementing the
plan, then evaluating how well it worked (or didn't), and revising as needed to make the next plan
better.
(T/F?) Planning decisions relate to choices about acquiring and using resources to deliver products and
services to customers - CORRECT ANSWER✅✅True.
Which of the following is not one of the four steps in the decision-making process?
a) Specify the decision problem, including the decision maker's goals
b) Identify options
c) Separate routine decision problems from non-routine decision problems
d) Measure benefits and costs to determine the value of each option
e) Make the decision, choosing the option with the highest value - CORRECT ANSWER✅✅c) Separate
routine decision problems from non-routine decision problems
The value of an option equals its...
a) Benefits plus its costs
b) Benefits less its costs
c) Costs
, d) Profit
e) None of the above - CORRECT ANSWER✅✅b) Benefits less its costs
The opportunity cost of any decision option is:
a) The value to the decision maker of the least-best option
b) The total profit associated with the best option
c) The total costs associated with the least profitable option
d) The value to the decision maker of the next best option
e) None of the above - CORRECT ANSWER✅✅d) The value to the decision maker of the next best option
The concepts of value and opportunity cost emphasize that every decision involves:
a) Eliminating any risks of making the decision
b) Estimating the time value of money
c) Trading off what the decision maker gets with what the decision maker gives up
d) Comparing the current period's opportunity costs with the previous period's opportunity costs
e) None of the above - CORRECT ANSWER✅✅c) Trading off what the decision maker gets with what the
decision maker gives up
Managerial accounting is an area of accounting which:
a) Provides financial information to creditors and stockholders
b) Summarizes financial information
c) Assists in predicting future profits
d) Assists in making business decisions
e) None of the above - CORRECT ANSWER✅✅d) Assists in making business decisions
