New Era University

College of Accountancy

COST ACCOUNTING
Introduction to Cost and Management Accounting

1. Which of the following largely necessitates cost accounting?

a. Management's need for information to be used for planning and controlling activities
b. The act of converting production inputs into finished products or services
c. Management's need to be aware of all production activities
d. Regulatory requirements for manufacturing companies

2. Cost and management accounting:

a. are required for business recordkeeping as are financial and tax accounting.
b. provide product/service cost information as well as information for internal decision making.
c. require an entirely separate group of accounts than financial accounting uses.
d. focus solely on determining how much it costs to manufacture a product or provide a service.

3. All of the following actions are associated with cost management information system, except:
a. Preparing a performance report that compares actual costs with budgeted costs
b. Determining the future cash flows of a proposed flexible manufacturing system
c. Reporting a large contingent liability to current and potential shareholders
d. Reducing costs by eliminating activities that do not add value

4. Which of the following statements refers to management accounting information?

a. There are no regulations governing the reports.
b. The reports are generally delayed and historical.
c. The audience tends to be stockholders, creditors, and tax authorities.
d. The scope tends to be highly aggregate.

5. Financial accounting:
a. focuses on the future and includes activities such as preparing next year's operating budget.
b. data are expected to be objective and verifiable.
c. reports include detailed information on the various operating segments of the business.
d. is prepared for the use of department heads and other employees.

6. Which of the following statements concerning management accounting is false?

a. Managerial accounting information must be relevant and flexible.
b. Managerial accounting places less emphasis on precision than financial accounting.
c. Managerial accounting places more emphasis on non-monetary data than financial accounting.
d. Managerial accounting reports are usually prepared monthly, quarterly and annually.

7. Which of the following persons or groups would be least likely to receive detailed managerial
accounting reports?
a. Chief executive officer c. Sales managers
b. Current shareholders d. Plant managers

8. Individual managers often require the information in an accounting system to be presented or

reported differently. In the case of sales order information, the sales manager is most likely
interested in:
a. the sales order quantities by customer-requested delivery dates.
b. the sales order quantities by geographic region.
c. the quantities of various products and their desired delivery dates.
d. the total peso amount of sales.

9. A quarterly report disclosing declining market share information is most useful to:
a. the chief executive officer. c. the manager of operations.
b. the accounting department. d. a front-line employee.

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10. A national company manufactures a line of modern furniture. Information most useful to the
employee who assembles the furniture includes:
a. a daily report comparing the actual time it took to assemble a piece of furniture to the standard
time allowed.
b. a monthly report on the portion of furniture pieces assembled with defects.
c. the number of furniture pieces sold this month.
d. revenue per employee.

11. A key element of any organization's strategy is identifying:

a. its potential shareholders. c. employee needs.
b. competitor's products. d. its target customers.

12. Strategy is formulated by answering all of the following, except:

a. Who are our most important customers?
b. Is industry demand growing or shrinking?
c. How can we continue to reduce production costs?
d. How sensitive are purchasers to price, quality, and service?

13. A well-conceived plan allows managers the ability to:

a. not make decisions again until the next planning session.
b. keep lower-level managers from implementing change.
c. under-estimate costs so that actual operating results will be favorable when comparisons are
made.
d. take advantage of unforeseen opportunities.

14. Sweep Company makes and sells brooms and mops. Which of the following actions taken by the
company’s management is part of the control function?
a. Sweep asks its marketing team to consider ways to get back market share from its newest
competitor, Swiffer.
b. Sweep compares costs it actually incurred with costs it expected to incur for the production of
the new product.
c. Sweep’s design team proposes a new product to compete directly with Swiffer.
d. Sweep estimates the costs it will incur to sell 30,000 units of the new product in the first quarter
of next fiscal year.

15. To help evaluate management’s appropriate governance and strategic choices, organizations have
called on management accountants to develop:
a. internal control systems to protect assets from theft.
b. measures to monitor compliance with behavior that is consistent with the organization’s best
interests.
c. systems to evaluate profitability.
d. reports to highlight variances from amounts planned.

16. Which of following would normally be found on a manufacturing company's organizational chart?
I. layout of the factory assembly lines
II. flowcharts of manufacturing processes
III. formal lines of reporting and communication
IV. informal lines of reporting and communication
a. I, II, III and IV c. III only
b. III and IV only d. IV only

17. The value chain is the sequence of business functions in which:

a. value is deducted from the products or services of an organization.
b. value is proportionately added to the products or services of an organization.
c. products and services are evaluated with respect to their value to the supply chain.
d. usefulness is added to the products or services of an organization.

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18. Some of the costs incurred by Burger Queen, a hamburger fast food restaurant, are listed below.
Which one is part of the customer service business function in Burger Queen’s value chain?
a. Wages of the counter help who give customers the food they order
b. Cost of children’s toys given away free with kids’ meals
c. Salaries of the food specialists who create new sandwiches for the restaurant chain
d. Cost of “to-go” bags requested by customers who could not finish their meals in the restaurant

19. The balanced scorecard is a framework that translates an organization’s strategy into clear and
objective performance measures (both leading and lagging) that focus on four perspectives. A chain
of cause-and-effect relationships that appropriately link the four balanced scorecard perspectives is:
a. skilled production workers help to produce process quality that results in customer loyalty that
helps to increase return on investment.
b. a high return on investment causes customer loyalty that results in skilled production workers
that improve process quality.
c. customer loyalty results in a high return on investment that results in the ability to attract skilled
production workers that improve process quality.
d. improved process quality results in a high return on investment that causes customer loyalty that
results in the ability to attract skilled production workers.

20. Line and staff positions are most likely to be in conflict because:
a. staff managers consider line managers’ functional authority threatening to their own authority.
b. line managers believe that staff managers are resistant to their advice.
c. line managers have no authority over staff employees.
d. staff managers dislike relying on line expertise.

21. Your Phone, Inc. is a mobile phone manufacturer. The company is committed to make a difference
in the lives of Filipinos by developing new technologies, innovative products and creative solutions.
You examined its organizational chart and found the following positions. Which one is most likely
to have staff authority?
a. Vice President for Research and Development
b. National Sales and Marketing Head
c. Central Purchasing Manager
d. Production Manager

22. Old Era University is a large private school in Quezon City. The university is headed by a president
who has five vice presidents reporting to him. These vice presidents are responsible for auxiliary
services, admissions and records, academics, financial services and physical plant, respectively. In
addition, the university has managers over several areas who report to these vice presidents. These
include managers over central purchasing, the university press and the university bookstore, all of
whom report to the vice president for auxiliary services; managers over computer services and over
accounting and finance, who report to the vice president for financial services; and managers over
grounds and custodial services and over plant and maintenance, who report to the vice president for
physical plant. The university has five colleges – business administration, accountancy, arts and
sciences, nursing and engineering. Each of these units has a dean who is responsible to the academic
vice president. Which of the aforementioned functions would have line authority?
a. Vice president for admissions and records
b. Dean of college of accountancy
c. Vice president for financial services
d. University bookstore manager

23. Tony Parker is the controller at Spurs Sports, a manufacturer of sports equipment. He is being
considered for a promotion to chief financial officer. If he gets the promotion, he would be primarily
responsible for all of the following activities, except:
a. Evaluating the costs and benefits of a new product design
b. Strategic review of different lines of businesses
c. Communicating with investors
d. Negotiating fees with auditors

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24. Which of the following is not a controllership function?
a. Financial reporting c. Tax administration
b. Insurance d. Economic appraisal

25. Which of the following are not among the daily activities of the treasurer?
a. Sale of shares and bonds
b. Credit management
c. Inventory control
d. Receipt and disbursement of funds

26. A packaging supplier, bidding for a new contract, offers the management accountant of the
purchasing company an all-expenses-paid trip to Spain for the 2014 FIBA Basketball World Cup.
The supplier does not mention the new contract when extending the invitation. The accountant is not
a personal friend of the supplier. The accountant knows cost issues are critical in approving the new
contract and is concerned that the supplier will ask for details about bids by competing packaging
companies. What are the two ethical standards that should be considered by the management
accountant in this case?
a. Integrity and credibility
b. Credibility and confidentiality
c. Competence and integrity
d. Integrity and confidentiality

27. Which ethical standard is most clearly violated if a management accountant failed to recognize and
communicate professional limitations or other constraints that would preclude responsible judgment
or successful performance of an activity?
a. Competence c. Confidentiality
b. Credibility d. Integrity

28. Credibility is an ethical requirement for management accountants. One aspect of credibility requires:
a. performance of professional duties in accordance with relevant laws, regulations and standards.
b. abstinence from engaging in or supporting any activity that might discredit the profession.
c. disclosure of all relevant information that could reasonably be expected to influence an intended
user’s understanding of the reports, analyses or recommendations.
d. refraining from using confidential information for unethical or illegal advantage.

29. Honesto Galang is a managerial accountant in the accounting department of Katapatan, Inc. Honesto
has just discovered evidence that some of the corporation's marketing managers have been
wrongfully inflating their expense reports in order to obtain higher reimbursements from the firm.
According to the Institute of Management Accountants' Standards of Ethical Conduct, what should
Honesto do upon discovering this evidence?
a. Notify the marketing managers involved.
b. Notify the president of the corporation.
c. Notify outside authorities.
d. Notify the controller.

30. The Institute of Management Accountants (IMA) is a professional organization that provides
certification, the Certified Management Accountant (CMA), for internal financial management
responsibilities. To be a CMA, a candidate must fulfill all of the following requirements, except:
a. Completion of the CMA examination
b. Certification in public accounting
c. Bachelor’s degree from an accredited college or university
d. Two continuous years of professional experience in management accounting or financial
management

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