TESTBANK&SOLUTION MANUAL FOR Managerial Accounting Tools for Business Decision Making, 6th Canadian Edition, Jerry Weygandt, Paul Kimmel, Ibrahim Aly

TESTBANK&SOLUTION MANUAL FOR Managerial AccountingTools for Business Decision Making, 6th Canadian Edition, Jerry Weygandt, Paul Kimmel, Ibrahim Aly CHAPTER 1 MANAGERIAL ACCOUNTING SUMMARY OF QUESTION TYPES BY LEARNING OBJECTIVE, BLOOM’S TAXONOMY, LEVEL OF DIFFICULTY, AACSB CODES, AND CPA CODES Item LOBTLODAACSB CPA Item LO BT LODAACSB CPA Item LO BT LODAACSB CPA True-False Statements 1. 1 C E AN MA 3. 2 K E AN MA 5. 4 K E AN MA 2. 1 C E AN MA 4. 2 K E AN MA Multiple Choice Questions 6. 1 K E AN MA 36. 2 K E AN MA 66. 4 C E AN MA 7. 1 K E AN MA 37. 2 C E AN MA 67. 4 K E AN MA 8. 1 K E AN MA 38. 2 K E AN MA 68. 4 K E AN MA 9. 1 C E AN MA 39. 2 K E AN MA 69. 4 C E AN MA 10. 1 K E AN MA 40. 3 C E E MA 70. 4 C E AN MA 11. 1 C E AN MA 41. 3 C E E MA 71. 4 K E AN MA 12. 1 K E AN MA 42. 3 K E AN MA 72. 4 K E AN MA 13. 1 K E AN MA 43. 3 K E AN MA 73. 4 C E AN MA 14. 1 C E AN MA 44. 3 K E AN MA 74. 4 K E AN MA 15. 1 K E AN MA 45. 3 K E AN MA 75. 4 C E AN MA 16. 1 C E AN MA 46. 3 C E AN MA 76. 4 C E AN MA 17. 1 C E AN MA 47. 3 K E AN MA 77. 4 C E AN MA 18. 1 K E AN MA 48. 3 K E AN MA 78. 4 AN M AN MA 19. 1 K E AN MA 49. 3 C E AN MA 79. 4 K E AN MA 20. 1 K E AN MA 50. 3 C E AN MA 80. 4 K E AN MA 21. 1 C E AN MA 51. 3 K E AN MA 81. 4 C E AN MA 22. 1 K E AN MA 52. 3 K E AN MA 82. 4 K E AN MA 23. 1 K E AN MA 53. 4 C E AN MA 83. 4 K E AN MA 24. 1 K E AN MA 54. 4 K E AN MA 84. 4 K E AN MA 25. 1 K E AN MA 55. 4 K E AN MA 85. 4 K E AN MA 26. 2 C E AN MA 56. 4 K E AN MA 86. 4 K E AN MA 27. 2 K E AN MA 57. 4 K E AN MA 28. 2 K E AN MA 58. 4 K E AN MA 29. 2 K E AN MA 59. 4 C E AN MA 30. 2 K E AN MA 60. 4 C E AN MA 31. 2 K E AN MA 61. 4 C E AN MA 32. 2 K E AN MA 62. 4 K E AN MA 33. 2 C E AN MA 63. 4 K E AN MA 34. 2 K E AN MA 64. 4 K E AN MA 35. 2 C E AN MA 65. 4 C E AN MA Bloom’s: AN = Analysis C = Comprehension K = Knowledge LOD: E = Easy M = Medium H = Hard AACSB: AN = Analytic E = Ethics CPA: MA = Management Accounting Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited 1 - 2 Test Bank for Managerial Accounting, Sixth Canadian Edition SUMMARY OF QUESTION TYPES BY LEARNING OBJECTIVE, BLOOM’S TAXONOMY, LEVEL OF DIFFICULTY, AACSB CODES, AND CPA CODES (CONT’D) Item LO BT LOD AACSB CPA Item LO BT LOD AACSB CPA Item LO BT LODAACSB CPA Brief Exercises 87. 1 C E AN MA 90. 3 C E E MA 93. 4 C E AN MA 88. 2 C E AN MA 91. 3 C E E MA 94. 4 K E AN MA 89. 2 C E AN MA 92. 4 K E AN MA 95. 4 C E AN MA Exercises 96. 1 C E AN MA 100. 2 K E AN MA 104. 1,4 AN M AN MA 97. 1,2 AN M AN MA 101. 3 C E AN MA 105. 4 AN M AN MA 98. 2 C E AN MA 102. 3 C E AN MA 99. 2 AN M AN MA 103. 3 C E AN MA Completion Statements 106. 1 K E AN MA 108. 1 K E AN MA 110. 2 K E AN MA 107. 1 K E AN MA 109. 2 K E AN MA 111. 2 K E AN MA Matching 112. 4 K E AN MA Short-Answer Essay 113. 1 C E AN MA 115. 3 AN M AN MA 117. 4 C E AN MA 114. 2 C E AN MA 116. 3 C E AN MA Bloom’s: AN = Analysis C = Comprehension K = Knowledge LOD: E = Easy M = Medium H = Hard AACSB: AN = Analytic E = Ethics CPA: MA = Management Accounting Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 3 SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE Item Type Item Type Item Type Item Type Item Type Item Type Item Type Learning Objective 1 1. TF 10. MC 16. MC 21. MC 96. Ex 113. SAE 2. TF 11. MC 17. MC 22. MC 97. Ex 6. MC 12. MC 18. MC 23. MC 104. Ex 7. MC 13. MC 19. MC 24. MC 106. C 8. MC 14. MC 20. MC 25. MC 107. C 9. MC 15. MC 21. MC 87. BE 108 C Learning Objective 2 3. TF 28. MC 32. MC 36. MC 88. BE 110. C 4. TF 29. MC 33. MC 37. MC 89. BE 111. C 26. MC 30. MC 34. MC 38. MC 97. Ex 114. SAE 27. MC 31. MC 35. MC 39. MC 109. C Learning Objective 3 40. MC 44. MC 48. MC 52. MC 102. Ex 41. MC 45. MC 49. MC 90. BE 103. Ex 42. MC 46. MC 50. MC 91. BE 115. SAE 43. MC 47. MC 51. MC 101. Ex 116. SAE Learning Objective 4 5. TF 59. MC 66. MC 73. MC 80. MC 92. BE 117. SAE 53. MC 60. MC 67. MC 74. MC 81. MC 93. BE 54. MC 61. MC 68. MC 75. MC 82. MC 94. BE 55. MC 62. MC 69. MC 76. MC 83. MC 95. BE 56. MC 63. MC 70. MC 77. MC 84. MC 104. Ex 57. MC 64. MC 71. MC 78. MC 85. MC 105. Ex 58. MC 65. MC 72. MC 79. MC 86. MC 112. Ma Note: TF = True-False C = Completion BE = Brief Exercise MC = Multiple Choice Ex = Exercise SAE = Short-Answer Essay Ma = Matching Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 4 Test Bank for Managerial Accounting, Sixth Canadian Edition CHAPTER LEARNING OBJECTIVES Explain the distinguishing features of managerial accounting. Managerial accounting is needed in all types of businesses—service, merchandising, and manufacturing. It also applies to all forms of business organization—proprietorships, partnerships, and corporations. Managerial accounting is needed in not-for-profit entities, as well as in profit-oriented enterprises. Managerial accounting provides tools that help management make decisions and evaluate the effectiveness of those decisions. The distinguishing features of managerial accounting are the primary users of reports—internal users, who are officers, department heads, managers, and supervisors in the company; the type and frequency of reports—internal reports that are issued as frequently as needed; the purpose of reports—to provide special-purpose information for a particular user for a specific decision; the content of reports—pertains to subunits of the business and may be very detailed and may extend beyond the double-entry accounting system; the reporting standard is relevantto the decision being made; and the verification of reports—no independent audits. Identify the three broad functions of management and the role of management accountants in an organizational structure. The three functions are planning, directing, and controlling. Planning requires management to look ahead and to establish objectives. Directing involves coordinating a company’s diverse activities and human resources to produce a smoothly running operation. Controlling is the process of keeping the activities on track. Management accountants serve as staff members in an organization and play an important role in providing the required information for decision making. Explain the importance of business ethics. All employees in an organization are expected to act ethically in their business activities. In Canada, the professional accounting organization promotes high standards of ethics in the accounting profession. These standards of ethics can be used as guidelines in dealing with the public and the organizations’ members. In the United States, the Institute of Management Accountants’ Statement of Ethical Professional Practice provides the codes of conduct. Moreover, companies are now evaluating their performance with regard to their corporate social responsibility. Identify changes and trends in managerial accounting. Managerial accounting has experienced many changes in recent years. Among these are a shift toward meeting the needs of service companies and improving practices to better meet the needs of managers. Improved practices include a focus on managing the value chain through techniques such as just-in-time inventory and technological applications such as enterprise resource planning (ERP). In addition, techniques have been developed to improve decisionmaking, such as the theory of constraints and activity-based costing (ABC). Finally, many companies now use the balanced scorecard and data analytics in order to have a more comprehensive view of the company’s operations. Data analytics is important in business to understand problems facing an organization, and to use data to both predict and influence customer behaviour. Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 5 In Canada, the accounting profession has recently been reorganized by the founding of CPA Canada (Chartered Professional Accountants of Canada) in 2013, into which the three legacy accounting bodies—Chartered Accountants (CA), Certified Management Accountants (CMA), and Certified General Accountants (CGA)—were merged. Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 6 Test Bank for Managerial Accounting, Sixth Canadian Edition TRUE-FALSE STATEMENTS Management accounting and financial accounting, while in the same field, are mutually exclusive disciplines. Given the decision to employ straight-line amortization or a usage-based amortization method, the management accountant’s need to report the most relevant economic information to external users will determine which method is used. Decision making is an integral part of the planning, directing, and motivating functions, but notof the controlling function. Employees with staff positions serve other employees, while those with line positions work directly in line with the company’s revenue generating goals. Activity-based costing is a method of allocating overhead costs to products. Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 7 ANSWERS TO TRUE-FALSE STATEMENTS Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. 1. F 2. F 3. F 4. T 5. T Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 8 Test Bank for Managerial Accounting, Sixth Canadian Edition MULTIPLE CHOICE QUESTIONS Managerial accounting information generally pertains to an entity as a whole and is very detailed. applies only to manufacturing companies. focuses primarily on reports for both internal and external users. provides tools that help management make decisions and evaluate the effectiveness of those decisions. Reports scrutinized by managerial accountants do not include those focused on business subunits. do not include non-financial data relevant to business decision making. are highly aggregated. are special purpose for specific decisions. Managerial accounting is concerned with costing products. is governed by generally accepted accounting principles. pertains to the entity as a whole and is highly aggregated. places emphasis on special-purpose information. Managerial accounting information is generally prepared for shareholders. managers. regulatory agencies. investors. Managerial accounting information pertains to the entity as a whole and is highly aggregated. must be prepared according to generally accepted accounting principles. pertains to subunits of the entity and may be detailed. is prepared only once a year. The major reporting standard for management accounting is the Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management. the Sarbanes-Oxley Act of 2002. relevance to decisions. generally accepted accounting principles. Managerial accounting applies to which of the following forms of business organizations? sole proprietorship partnership corporation Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 9 all forms of business organizations Which of the following is false in terms of the reason companies replace a CEO with a management committee? To enhance decision-making To improve collaboration. To avoid disruption associated with replacing a CEO. To reduce management continuity. Managerial accounting is also called inside reporting. cost accounting. management accounting. strategic management. Which of the following is not an internal user? corporate officers staff employees stockholders department manager Which of the following is not part of managerial accounting? determining whether planned goals are being met reporting financial information to the shareholders calculating product costs controlling costs Which of the following uses managerial accounting? manufacturing and service entities, but not merchandising profit-oriented businesses only service, manufacturing, and merchandising entities only manufacturing entities Which one of the following tasks would not be performed by a management accountant? being concerned with the impact of cost and volume on profits strategic cost management assisting in budget planning preparing reports primarily for external users How often are internal managerial reports communicated? as frequently as needed annually during every audit by the company’s CPA monthly Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 10 Test Bank for Managerial Accounting, Sixth Canadian Edition Which description identifies financial statements that are prepared for external users? external reports special purpose user-specific general-purpose Which term describes managerial accounting reports? GAAP reports special purpose general-purpose regulatory reports Which of the following statements about internal reports is true? Most internal reports are summarized rather than detailed. Internal reports focus on general-purpose needs of users. The content of internal reports extends beyond the double-entry accounting system. Internal reports are often very general. Which one of the following describes internal reports? They are often audited by CPAs. They must be prepared according to GAAP. They are aggregated. They are detailed. Which of the following reports would management find useful in decision making? monthly reports on activities to the Board of Directors quarterly reporting to the Toronto Stock Exchange specific purpose statements on services delivered audited financial information in the annual report to shareholders How often should management receive or prepare reports on its internal process activities? on a fixed time basis as often as is necessary never more than monthly weekly How often should management receive or prepare reports on its external business process activities? as they correspond to external financial reporting never more than monthly according to the company’s business cycle as often as is necessary A company must inform readers of its annual report of Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 11 all changes in financial accounting policies. results of any overseas activities. all changes in internal accounting information. changes to management’s bonus system. How could management information assist in motivating its employees? By keeping track of quality improvements. By highlighting the company’s percent of market share. By presenting the statistics on plant safety. All areas would benefit from providing internal management information. In establishing a good internal reporting system, a company should ensure that these reports agree to generally accepted accounting principles. have the Board of Directors agree to the information provided. establish clearly understood standards of performance. All of the above are valid reasons. What broad functions do the management of an organization perform? directing, manufacturing, and controlling planning, directing, and controlling planning, directing, and selling planning, manufacturing and controlling Which one of the following involves coordinating a company’s activities to produce a smooth-running operation? auditing controlling planning directing Which one of the following does the planning function involve? analyzing financial statements setting goals and objectives for an entity hiring the right people for a particular job coordinating the accounting information system Which one of the following is true concerning the managerial function of controlling? It includes performance evaluation by management. It is concerned mainly with operating a manufacturing segment. It is performed only by the controller of a company. It includes hiring and training employees. Which of the following represents two management functions? regulating and directing Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 12 Test Bank for Managerial Accounting, Sixth Canadian Edition controlling and directing controlling and auditing auditing and planning Which management function is a manager performing when objectives are being established? regulating planning motivating directing The organizational chart of a company shows the interrelationships of activities within a company. the delegation of authority within a company. the delegation of responsibility within a company. all of the above. Which function is achieved when a manager is determining whether planned goals are being met? controlling motivating planning directing What activities and responsibilities are not associated with management’s functions? planning accountability controlling directing Directing includes providing a criteria framework for management when needed, to assist in terminating employees. running a department under quality control standards that are universally accepted. coordinating a company’s diverse activities and human resources to produce a smoothrunning operation. developing a performance ranking system to give certain high performers substantial raises. Which of the following is true? Generally Accepted Accounting Principles (GAAP) form the backbone of managerial accounting conventions, and local and/or regional standards and professional judgment allow for variations among practitioners. Each province in Canada has its own code of ethics and rules and guidelines of professional conduct. The Sarbanes-Oxley Act in the U.S. and similar legislation in Canada aims to guide ethical Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 13 standards used in management accounting practices. Chartered Professional Accountants of Canada plays an important role in promoting high standards of ethics in the accounting profession, excluding managerial accounting. Corporate social responsibility only considers: profitability. sustainable business practices with regards to the environment. the triple bottom line including performance with regard to people, plant and profit. sustainable business practices with regards to employees. Which of the following is true? Managerial accountants are the employees who are principally responsible for ethical behaviour. Investment losses have been precipitated by lax ethical standards. Corporate fraud was found to have decreased between the years 1998 and 2003. Expense account abuse has been cited as one of the rarest forms of unethical employee behaviour. Choose the incorrect answer. While generally not encouraged, lapses in ethical behaviour are irrelevant to a company’s operating income. Proper incentives need to be implemented to foster an ethical business environment. Manufacturing companies need to establish effective and realistic production goals for their processes. As a result of the Sarbanes-Oxley Act, companies now pay more attention to the compositionof the board of directors. Which is the best definition of fraud? unknowingly misrepresenting the facts using business supplies for personal use the intentional misstatement of facts misappropriating funds for personal financial gain Which of the following is true? Dissatisfied employees cite a decline in ethical behaviour is a result of a change in corporate culture. Unethical corporate behaviour occurs only in the United States because of its capitalistic environment. Unethical behaviour rarely causes a decline in investor confidence. Unethical actions are reasonable in an environment wherein unreasonable budgets and targets have been set. The production manager at ABC Inc. is responsible for formulating the budget for his Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 14 Test Bank for Managerial Accounting, Sixth Canadian Edition department. He will be evaluated on his ability to control costs. After considerable thought, he arrives at his best estimate of costs, and then adds a further 10% to the projections. Chances are he has inflated the cost projections because that is the way it has always been done. conservative accounting practise requires that he not under report expenses. by overestimating expenses, it will make it easier for him to come in under budget and receive a favourable evaluation. none of the above. In Canada, which of the following professional accounting organizations play an importantrole in promoting high standards of ethics in the accounting profession? Chartered Professional Accountants of Canada (CPA Canada) The Financial Planning Standards Council (FPSC) The Canadian Institute of Financial Planning (CIFP) all of the above The Ontario Securities Commission introduced regulations governing the composition and duties of audit committees, as well as their members’ behaviour. The new rules are as robust as parallel rules required by the U.S. Sarbanes-Oxley Act. were adopted by all provincial and territorial securities regulators, except for British Columbia’s. were introduced in conjunction with the Canadian Securities Administrators. all of the above. A company acting ethically must adapt its external reports to any changes required instantly. as it is appropriate for its business cycle. as stipulated by the CPA Canada handbook and GAAP. if they are considered pertinent to its business activities. A company acting ethically must adapt its internal reports to any changes required instantly. as it is appropriate for its business cycle. as stipulated by the CPA Canada handbook and GAAP. if they are considered pertinent to its business activities. A recent survey of fraud by international accounting firm KPMG reported reported a 13% decrease in instances of corporate fraud compared with five years earlier. that employee fraud (such things as expense account abuse, payroll fraud, and theft of assets) represents 60% of all instances of fraud. financial reporting fraud (the intentional misstatement of financial reports) was the least costlyto companies. business scandals with large investment losses and few employee layoffs. The accounting professional bodies each have professional codes of ethical conduct. The code covers Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 15 competence, ethical behaviour, objectivity, confidentiality. integrity, credibility, competence, and confidentiality. competence, objectivity, credibility, integrity. credibility, integrity, confidentiality, objectivity. Data visualizations refer to the use of software to analyze data. do not help managers in acquiring an understanding of the relationships between variables. is the use of techniques to analyze data to make informed decisions. help managers in acquiring an understanding of business trends. The value chain is affected by technology through business-to-business on the Internet. refers to all the activities associated with providing a product with the exception of research and development. has not been enhanced by computerization and automation. refers to all the activities associated with providing a service with the exception of sales and marketing. Lean manufacturing is being used less often by manufacturing firms. is in contrast to traditional mass-production operations. is apt to be used by firms that use large amounts of direct labour to produce their products. sets out to minimize rather than eliminate waste. Which one of the following managerial accounting approaches attempts to allocate manufacturing overhead in a more meaningful fashion? theory of constraints just-in-time inventory activity-based costing total-quality management Which one of the following is not a main component of the value chain sequence? ERP sales and marketing production customer relations What is one primary benefit of an enterprise resource planning (ERP) system? It reduces inventory levels. It permits companies to be more streamlined in production. It replaces research and development in a company. It requires an increased emphasis on product quality. One of the advantages of a just-in-time inventory system is that it reduces inventory Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 16 Test Bank for Managerial Accounting, Sixth Canadian Edition quantities. Why is this considered to be a benefit? Carrying inventory incurs storage costs, hence reducing inventory quantities reduces costs. Carrying large inventory raises the risk that customers will want an item that you do not have. Carrying large inventory reduces the risk that customers will want an item that you do not have. none of the above What is “balanced” in the balanced scorecard approach? the number of products produced the emphasis on financial and non-financial performance measurements the amount of costs allocated to products the number of defects found on each product For what purpose is the theory of constraints used? to reduce product defects to balance performance measurement to identify and manage constraints that bottleneck operations to reduce inventory levels In Canada the three different professional accounting designations that merged into CPA Canada are CPA, CA, CMA. CMA, CGA, CPA. CA, CMA, CGA. MA, CPA, CA. Which of the following is a reason for the reorganization of the three accounting bodies in Canada into one, CPA Canada? There was conflict within the standard setting process between the three accounting bodies. Extensive competition between the three organizations was causing friction. The reorganization was mandated by the Canadian government. A larger unified profession would mean a more prominent and cohesive Canadian presence internationally. Choose the correct statement. CGA stands for Certified Generic Accountant. CMA stands for Certified Managing Accountant. CA stands for Chartered Accountant. CPA stands for Certified Professional Accountant. Which of the following statements is true? In recent decades, the Canadian economy in general has shifted toward an emphasis on providing services rather than goods. This trend has reduced the importance of managerial accounting. In recent decades, the Canadian economy in general has shifted toward an emphasis on Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 17 providing goods rather than services. This trend has reduced the importance of managerial accounting. In recent decades, the Canadian economy in general has shifted toward an emphasis on providing services rather than goods. This trend has not reduced the importance of managerial accounting. In recent decades, the Canadian economy in general has shifted toward an emphasis on providing goods rather than services. This trend has not reduced the importance of managerial accounting. Which of the following is an accounting question a service company may face? whether to purchase new equipment how much to charge for various services how efficient and productive individual staff members are all of the above For a manufacturing company, the activities in the value chain would not include research and development. purchase of raw materials. customer relations. performance evaluation. What term describes all activities associated with providing a product or service? the manufacturing chain the product chain the supply chain the value chain How do most companies manage their value chain? by using activity-based costing by creating enterprise resource planning systems using an action plan using total-quality management systems How have many companies significantly lowered inventory levels and costs? They use activity-based costing. They utilize an enterprise resource planning system. They have a just-in-time method. They focus on a total-quality management system. Some companies implement systems to reduce defects in finished products with the goal of achieving zero defects. What are these systems called? activity-based costing systems enterprise resource planning systems value chain systems total-quality management systems Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 18 Test Bank for Managerial Accounting, Sixth Canadian Edition In order to obtain more accurate product costs, how do many companies allocate overhead? By using activity-based costing. By using enterprise resource planning systems. By using just-in-time methods. By using total-quality management systems. Which one of the following characteristics would likely be associated with a just-in-time inventory method? ending inventory of work in process that allows for several production runs a backlog of inventory orders not yet shipped minimal finished goods inventory on hand an understanding with customers that they may come to the showroom and select from inventory on hand What is value chain management best defined as? a large chain that keeps the machines from falling on the production floor management decisions that affect how quickly the production run occurs the incremental value of costs associated with hiring a new production floor leader all activities associated with providing a product or service Which one of the following is an example of activity-based costing? monitoring the salaries of managers that do untimely quality control checks keeping close track of shrinkage associated with thefts off the showroom floor ensuring that management is diligently working with the local union on keeping labour costsin line allocating the set-up cost associated with getting a machine ready for a production run Bottlenecks are the point at which the finished product leaves the factory. constraints that limit the company’s potential profitability. the point at which a company’s plan is put into action. factors that consume a great deal of managers’ attention but have little impact on the company. For what reason is a product cost primarily tracked? to keep up with current cost trends to bring products to market to effectively allocate the cost of products to measure profitability to determine what amounts are necessary for allocating overhead to keep management’s bonuses increasing every year Which one of the following is an activity not associated with TQM? Tightening the bolts on a chassis so that the frame will not drop out. Redesigning the gas tank after learning fuel efficiency standards are not being met. Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 19 Verifying the 10 check points associated with producing the highest quality loaf of bread. Ensuring that the mattress just manufactured meets the standard of comfort of a random factory line worker. The theory of constraints is a theory that the benefit of making a change in a production process should be weighed against the cost of making that change. that even the best suggestions for improvement are likely to be rejected due to opposition from those who have to implement the changes. a specific approach used to identify and manage constraints in order to achieve the company’s goals. not applicable to service operations. What is ERP? efficient resource procurement earnings reporting policies enterprise resource planning effective resource procurement A balanced scorecard is a performance-measurement approach that uses both financial and non-financial measuresto evaluate a company’s operations in an integrated way. a tool used to measure the benefits and costs of implementing a new strategy. used only by small organizations that cannot afford more expensive methods of evaluating their operations. focuses on non-financial measures in order to balance the many other financial reports companies use to evaluate their operations. Which component of a company’s value chain would benefit most from internal management information? complaints from its customers over services offered bonuses paid to managers of the company the company’s efforts to develop new services All such components would benefit from internal management information. Managerial accounting has become more important in service industries due to the decline of the manufacturing sector has freed up many accountants. service delivery is extremely complex and requires proper monitoring. the economy has become more service-oriented recently. the increase in complexity in computer systems requires accounting specialists. The five steps in the lean thinking model, in order are: 1. Define value, 2. Identify the pull factors, 3. Identify the value stream, 4. Make the value stream flow, 5. Revise until perfection is achieved. 1. Define value, 2. Identify the value stream, 3. Make the value stream flow, 4. Implement a Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 20 Test Bank for Managerial Accounting, Sixth Canadian Edition pull system, 5. Strive for perfection. 1. Identify unproductive activities that need to be reduced, 2. Identify push factors causing those unproductive activities, 3. Develop operations so that the work flows smoothly, 4. Strive for perfection, 5. Evaluate the value that has been added. 1. Identify push factors, 2. Develop strategies to turn those factors into pull factors, 3. Assess the value added by steps one and two, 4. Strive for perfection, 5. Repeat the process on a regular basis. Step one in the lean thinking model requires target costing, that is determining the acceptable cost the customer is willing to pay. an assessment of the potential value that can be added to the firm by adopting the lean manufacturing concept. identifying processes that do not add value to the manufacturing process. identifying push factors that can be converted to pull factors. Step two in the lean thinking model deals with push and pull factors. is the central element in understanding how a company can evaluate what is value added and what is waste. is always the most time consuming. can be excluded if step one is done correctly. Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 21 ANSWERS TO MULTIPLE CHOICE QUESTIONS Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. 6. d 20. d 34. b 48. d 62. c 76. b 7. d 21. b 35. b 49. c 63. d 77. b 8. d 22. c 36. d 50. d 64. c 78. a 9. b 23. d 37. a 51. b 65. c 79. c 10. c 24. c 38. b 52. b 66. d 80. c 11. a 25. b 39. c 53. d 67. d 81. a 12. d 26. d 40. b 54. a 68. d 82. d 13. d 27. a 41. c 55. b 69. b 83. b 14. c 28. d 42. b 56. c 70. c 84. b 15. c 29. c 43. a 57. a 71. d 85. a 16. b 30. b 44. c 58. b 72. a 86. b 17. c 31.. b 45. a 59. a 73. c 18. d 32.. b 46. c 60. b 74. d 19. a 33.. a 47. a 61. c 75. d Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 22 Test Bank for Managerial Accounting, Sixth Canadian Edition BRIEF EXERCISES Brief Exercise 87 The Cheepencheerful Bakery Company produces muffins that it sells to hotel chains in the city. It generally breaks even at the end of the year but not always. It only knows this when the company’s external accountants prepare financial statements that are used by the bank and to file tax returns. The company does its best to keep its costs down and as a result does not pay its employees very much. When the president’s wife, who is the bookkeeper, decided to retire, the president advertised for her replacement. He thought he could find someone who would work for slightly more than minimum wage. This would be in line with his desire to keep costs down. Comment on the president’s desire to keep his costs down by hiring a poorly paid accountant for his organization. Solution 87 The president is being short-sighted in his desire to keep costs low in a critical area of his company. As president, he is responsible for planning, directing, and controlling the company’s activities. For a medium sized company, it is difficult for one person to accomplish all of these objectives effectively. A professionally trained accountant with the proper training and accreditation can assist the president in these areas. The accountant can help plan targets for profitability and return on assets used in the business. Once these targets are set, the accountant can then help direct the day-to-day activities to ensure the company’s internal procedures are operating efficiently. The accountant can also implement effective internal managerial accounting procedures to ensure that the organizations activities are properly controlled. Brief Exercise 88 Preparation of a budget at the beginning of a period entails looking at last year’s results, adjusting for any changes in prices and activity in the current year and anticipating consumer demand levels based on economic activity and historical trends. The process of preparing a budget is part of which management function? The process of comparing actual results to the budget is part of which other management function? Solution 88 The process of preparing a budget is part of planning while the process of comparing a budget to actual results is part of control. Brief Exercise 89 Activities in a warehouse may include materials and inventory handling, staffing and scheduling, setting up production runs, and managing quality. The management of these activities is part of which one of the key three management functions: planning, directing, or controlling? Solution 89 The management of these activities is part of directing. Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 23 Brief Exercise 90 Explain how systems to control and evaluate the actions of managers are circumvented when managers use budgetary slack. Solution 90 Because the budget is also used as an evaluation tool, some managers try to play a “game” by using budgetary slack; whereby, they build some slack into the budget by underestimating their division’s predicted performance so that it will be easier to meet their performance targets. Brief Exercise 91 Explain how setting unattainable levels in a budget may promote unethical actions by managers. Solution 91 If the budget is set at unattainable levels, managers sometimes take unethical actions to meet the targets to receive higher compensation or, in some cases, to keep their jobs. Brief Exercise 92 What are the eight steps in the value chain for a manufacturing company? Solution 92 The eight steps in the value chain include research and development, product design, acquisition of raw materials, sales and marketing, delivery, customer relations, and subsequent service. Brief Exercise 93 A manufacturing company produces a product that first must be cut into a specific size, then sanded, and finally painted. The cutting process can produce five units in an hour, the sanding process produces three units in an hour, and the painting process can produce ten units in an hour. Which process is the bottleneck? Solution 93 The sanding process. Brief Exercise 94 What is a balanced scorecard? Solution 94 A balanced scorecard is a performance-measurement approach that uses both financial and non-financial measures to evaluate all aspects of a company’s operations in an integrated way. Brief Exercise 95 Better Built Boats Ltd. Is a company that manufactures boats and sells them through a series of dealers nationwide. It is publicly traded and has always had a “clean bill of health” from its auditors. It prides itself on building high quality boats and considers that its customers view it as an “ethical” company. Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. 1 - 24 Test Bank for Managerial Accounting, Sixth Canadian Edition It also has good internal information that it uses to ensure that its cost per boat is within the appropriate guidelines in order to ensure profitability. Recently, the CPA handbook has instituted a change in accounting policy that would make it more expensive to offer such products as boats to the public. For the following users of the company’s financial information, describe how such changes could affect financial information provided: The Board of Directors of the company The Vice President of Sales The Production Manager of the company The company’s Finance Manager The company’s Corporate Controller Solution 95 The Board, through its Audit Committee, would have to ensure that all financial information reported to external stakeholders was consistent with the new changes. There would likely be little effect on the sales VP other than explaining to dealers why theremay have to be an increase in the price of the boats. Particularly if the boats become more expensive to manufacture because of the new regulations. The Production Manager would likely expect a modification to internal data provided on manufacturing processes to incorporate the changes required. The Finance Manager may be concerned with ensuring that there is sufficient capital available to adjust to the new changes. The Corporate Controller must ensure that both internal and external information is adjustedto reflect these changes on the company’s data systems. Copyright © 2021 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited. Managerial Accounting 1 - 25 EXERCISES Exercise 96 Financial accounting information and managerial accounting information have a number of distinguishing characteristics: 1. Reporting standard is relevant to the decision to be made 2. Classified financial statements 3. Reports generally pertain to the company as a whole 4. Reports generally pertain to subunits 5. Reports issued quarterly or annually 6. General-purpose reports 7. Reports are used internally 8. Prepared in accordance with generally accepted accounting principles 9. Special purpose reports 10. Limited to historical cost data Instructions For each of the characteristics listed, indicate which characteristics are more closely related to financial accounting by placing the letter