Ch.

1 Cost Management and Strategy

Multiple Choice Questions

1. Management accountants play a role in the planning and control functions. An action that
would be involved in the control function is

A) Identifying alternatives for furthering the organization’s objectives.

B) Preparing a variance analysis report.
C) Preparing a cost-benefit analysis for a project proposal.
D) Preparing a five-year budget.
E) Participating in the formulation of the organization’s mission.

Source: Canada CMA Entrance Exam, Part 1, June 2004, MCQ 2

ANSWER: B

2. Which of the following actions committed by a management accountant is ethically

questionable?

A) Near the end of a fiscal year with lower than expected profits, suggesting that an
expensive advertising campaign be delayed until the next fiscal year.
B) Recommending that the highest quality and least expensive bid for a certain supply
be rejected on the basis that the supplier’s practices have a detrimental effect on the ecological
environment.
C) At the request of the division manager, using the most favourable projections to
support a proposal without drawing any attention to the potentially unfavourable
projections.
D) Reporting to the controller a suspicion that a line manager is providing incorrect
production data in an effort to increase his year-end bonus.
e. Near the end of a fiscal year with lower than expected profits, suggesting that
performance incentives to sales staff for the fourth quarter be increased.

Source: Canada CMA Entrance Exam, Part 1, June 2004, MCQ 3

ANSWER: C

3. Upon which of the following does managerial accounting place considerable weight?

A) Generally accepted accounting principles.

B) The financial history of the entity
C) Ensuring that all transactions are properly recorded
D) Detailed segment reports about department, products, and customers

Source: John Molson School of Business COMM 305: Managerial Accounting Mid-term Exam,
Fall 2004, MCQ 1
ANSWER: D
4. What broad functions does the management of an organization perform?

A) Directing, manufacturing, and controlling

B) Planning, directing, and controlling
C) Planning, directing, and selling
D) Planning, manufacturing, and controlling

Source: John Molson School of Business COMM 305: Managerial Accounting Mid-term Exam,
Fall 2005, MCQ 1
Answer: B

5. The major reporting standard for management accountants is

A) The Standards of Ethical Conduct for Practitioners of Management Accounting and Financial
Management.
B) The Sarbanes-Oxley Act of 2002.
C) Relevance to the decisions
D) Generally accepted accounting principles

Source: John Molson School of Business COMM 305: Managerial Accounting Mid-term Exam,
Fall 2005, MCQ 3
Answer: A

6. Strategic management can be defined as the development of a sustainable:

A) Chain of command
B) Competitive position
C) Cash flow
D) Business entity
E) Company image

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 1
Answer: B

7. Which of the following is an example of a management accountant performing the

problem-solving function as opposed to the scorekeeping and attention-directing
function?

A) Interpreting why a manufacturing plant did not adhere to its production schedule.
B) Explaining the assembly department’s performance report.
C) Preparing a variance report on the sales department’s performance during the third
quarter.
D) Preparing the annual budget for the maintenance department.
E). Analyzing the impact of a proposed new product on net income.
Source: Canada CMA Entrance Exam, Part 1, Sample #1, June 2005, MCQ 1
ANSWER: E

8. Cost management information:

A) Is the information the manager needs to effectively manage the firm or not-for-profit
organization.
B) Includes only financial information
C) Is not needed for strategic management
D) Is used only for management and operational control.
E) Is not needed to provide accurate accounting for inventory

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 2
Answer: A

9. Which of the following isn’t one of the issues facing the contemporary business world?

A) The increase in global business environment

B) The decrease in the privatization of firms
C) The effects of information technology and e-commerce
D) A renewed focus on the customer

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 3
Answer: B

10. The process for creating competitive advantage in which a firm reorganizes its operating and
management functions, often with the results that jobs are modified, combined, or eliminated, is
known as what?

A) Total quality management

B) Activity-based costing
C) Theory of constraints
D) Reengineering

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 4
Answer: D

11. A process by which a firm identifies its critical success factors, studies the best practices of
other firms for these critical success factors, and then implements improvements in the firm's
processes to match or beat the performance of these competitors is termed:

A) Continuous improvement
B) Reengineering
C) Strategic management
D) Benchmarking
E) Total quality management

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 5
Answer: D

12. Which of the following determines the desired cost for a product based upon a given
competitive price?

A) Benchmarking
B) Target costing
C) Reengineering
D) life-cycle costing
E) activity-based costing

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 6
Answer: B

13. Which contemporary management practices involves using a variety of financial and non-
financial performance measures to assess the overall performance of the firm?

A) The balanced scorecard

B) Mass customization
C) Continuous improvement
D) Life-cycle costing

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 7
Answer: A

14. __________ is a set of policies, procedures, and approaches to business that produces long-
term success.

A) Theory of constraints
B) Total quality management
C) Strategy
D) IMA
E) Critical success factors

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 8
Answer: C
15. __________ is a competitive strategy in which a firm succeeds in producing products or
services at the lowest cost in the industry.

A) TQM
B) Cost leadership
C) Differentiator
D) Critical success factors
E) CMA

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 9
Answer: B

16. All of the following are private sector professional accounting organizations, except the:
A) Financial Accounting Standards Board (FASB).
B) Securities and Exchange Commission (SEC)
C) American Institute of Certified Public Accountants (AICPA)
D) Institute of Management Accountants (IMA)
E) Financial Executive Institute (FEI).

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 10
Answer: B

17. Which professional accounting certification is considered to be the most relevant when
regarding issues discussed in this class?
A) The Certified Management Accountant.
B) The Certified Financial Manager.
C) The Certified Public Accountant.

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 11
Answer: A

18. The following statement would be under which main section of the IMA Code of Ethics?
Perform professional duties in accordance with relevant laws, regulations, and technical
standards.

A) Competence
B) Confidentiality
C) Integrity
D) Objectivity

Source: Cost Management: A Strategic Emphasis, 3e by Blocher/Chen/Cokins/Lin, Online Quiz,

Chapter 1, MCQ 12
Answer: A

19. Managerial and cost accounting:

A) Must follow generally accepted accounting principles.

B) Provide information to aid management in planning and controlling business operations.
C) Are directed at reporting aggregate on the company as a whole.
D) Information is widely available to all interested parties.

Source: Fundamental Accounting Principles, 9th Canadian edtion, by

Larson/Wild/Chiappetta/Nelson/Carroll/Zin, Online Learning Center, Quiz 1, Chapter 21, MCQ
1
Answer: B

20. State whether each of the following most likely describes financial accounting (FA) or
managerial accounting (MA):

A) Its practice tends to be flexible.

B) Its users are managers of the corporation.
C) Its primary focus is on the organization as a whole.
D) Its information is available only after the audit is complete.
E) It is directed at external users in making investment, credit and other decisions.

Source: Fundamental Accounting Principles, 9th Canadian edtion, by

Larson/Wild/Chiappetta/Nelson/Carroll/Zin, Online Learning Center, Quiz 1, Chapter 21,
Question 2
Answer:

A. Managerial accounting
B. Managerial accounting
C. Financial accounting
D. Financial accounting
E. Financial accounting

Match each of the new production management concepts with the phrase that best describes it by
filling in the blank with the appropriate letter:

___ 21. Customer orientation

___ 22. Total quality management
___ 23. Just-in-time manufacturing
___ 24. Theory of constraints
___ 25. Continuous improvements

a. Focuses on factors that limit the operations of a business.

b. Inventory is acquired or produced only as it is needed.
c. Calls for flexible designs that can be modified to accommodate customer choices.
 d. Every manager and employee constantly looks for ways to improve company operations.
e. Focuses on quality throughout the entire production process.

Source: Fundamental Accounting Principles, 9th Canadian edtion, by

Larson/Wild/Chiappetta/Nelson/Carroll/Zin, Online Learning Center, Quiz 1, Chapter 21,
Question 7
Answer:

1. c
2. e
3. b
4. a
5. d

26. Managerial accounting places greater emphasis on the future than does financial accounting
which is primarily concerned with the past.

A) True
B) False

Source: BUSI 2013 – Managerial Accounting, by Alex Cunningham, Chapter Self-Testing

Quizzes, Chapter 1, Question 14
Answer: True

27. Management accounting primarily is concerned with providing information to

A) Managers inside the organization as well as information to shareholders, creditors, and others
outside the organization
B) Information to shareholders, creditors, and others outside the organization.
C) Information to managers inside the organization.
D) Information to governmental regulatory agencies.

Source: BUSI 2013 – Managerial Accounting, by Alex Cunningham, Chapter Self-Testing

Quizzes, Chapter 1, Question 17
Answer: C

28. The four broad managerial functions of planning, organizing and directing, controlling, and
decision making typically are

A) Approached precisely in the order given with very infrequent deviations.

B) Carried out simultaneously with decision making as an inseparable part of the other functions.
C) Carried out independently of each other with the possibility that one or more of the four
functions may be omitted in any given situation.
D) Conducted only by the managers of profit-oriented entities.
Source: BUSI 2013 – Managerial Accounting, by Alex Cunningham, Chapter Self-Testing
Quizzes, Chapter 1, Question 20
Answer: B

29. Managers must direct day-to-day operations, plan for the future, solve problems, and make
numerous routine and non-routine decisions, all of which may require

A) Only the balance sheet and income statement prepared for shareholders, creditors, and other
external users.
B) Information based on estimates and projections of the future.
C) Only the statement of cash flows prepared for shareholders, creditors, and other external
users.
D) Only information based on the past since such information is completely objective and
verifiable.

Source: BUSI 2013 – Managerial Accounting, by Alex Cunningham, Chapter Self-Testing

Quizzes, Chapter 1, Question 34
Answer: B