Test Bank for Management Accounting Information for
Decision-Making and Strategy Execution 6th Edition

Which of the following best represents the Do step in the Plan-Do-Check-Act
(PDCA) cycle?.

1. A) Take actions to lower costs, change resource allocations, improve the
quality, cycle time and flexibility of processes, modify the product mix,
change customer relationships, and redesign and introduce new products.
2. B) Measure and monitor ongoing performance and take short-term actions
based on the measured performance.
3. C) Define the organization`s purpose and select the focus and scope of its
strategy.


4. D) Implement the chosen course of action.
Which of the following best represents the Check step in the Plan-Do-CheckAct (PDCA) cycle?

1. A) Take actions to lower costs, change resource allocations, improve the
quality, cycle time and flexibility of processes, modify the product mix,
change customer relationships, and redesign and introduce new products.
2. B) Measure and monitor ongoing performance and take short-term actions
based on the measured performance.
3. C) Define the organization`s purpose and select the focus and scope of its
strategy.
4. D) Implement the chosen course of action.
Which of the following best represents the Act step in the Plan-Do-Check-Act
(PDCA) cycle?

1. A) Take actions to lower costs, change resource allocations, improve the
quality, cycle time and flexibility of processes, modify the product mix,

change customer relationships, and redesign and introduce new products.
2. B) Measure and monitor ongoing performance and take short-term actions
based on the measured performance.
3. C) Define the organization`s purpose and select the focus and scope of its
strategy.
4. D) Implement the chosen course of action.
How the customer is treated at the time of the purchase is an example of the
__________ element of the value proposition.

1. A) functionality and features
2. B) industry standards
3. C) quality


4. D) service
Managers of service departments need all of the following information
EXCEPT:

1. A) efficiency data on work performance.
2. B) quality data on work performance.
3. C) profitability data of the whole company.
4. D) profitability data of the service department.
A national company manufactures a line of modern furniture. Information
MOST useful to the employee who assembles the furniture includes:

1. A) a daily report comparing the actual time it took to assemble a piece of
furniture to the standard time allowed.
2. B) a monthly report on the proportion of furniture pieces assembled with
defects.
3. C) the number of furniture pieces sold this month.

4. D) revenue per employee.
A national company manufactures a line of modern furniture. Information
MOST useful to the top executive includes:

1. A) individual job summaries of materials used.
2. B) monthly financial reports on the company`s profitability by product line.
3. C) time reports submitted by each employee.
4. D) scheduled downtime for routine maintenance on machines.


A quarterly report disclosing declining market share information is MOST
useful to:

1. A) a front-line employee.
2. B) the manager of operations.
3. C) the chief executive officer.
4. D) the accounting department.
A weekly report comparing machine time used to available machine time is
information LEAST useful to:

1. A) a front-line employee.
2. B) the manager of operations.
3. C) the chief executive officer.
4. D) the accounting department.
A daily report on the number of quality units assembled by each employee is
information MOST useful to:

1. A) a front-line assembly worker.
2. B) the accounting department.
3. C) the chief executive officer.

4. D) the personnel department.
Which of the following would be MOST helpful for a top manager of a
company?

1. A) profitability report of the company


2. B) information to monitor hourly and daily operations
3. C) number of customer complaints
4. D) operating expense summary reported by department
A law firm would use management accounting information for all of the
following decisions EXCEPT:

1. A) staffing needs.
2. B) performance evaluation of staff.
3. C) budgeted purchases of supplies.
4. D) location of annual holiday party.
Management accounting can play a critical role in the service industry
because of all the following reasons EXCEPT:

1. A) firms must be especially sensitive to the timeliness and quality of
customer service.
2. B) many employees have very little contact with customers.
3. C) customers immediately notice defects and a delay in service.
4. D) dissatisfied customers may never return.
What is the return on investment for the Chemical Division?

1. A) 1.25%
2. B) 2.25%
3. C) 25.0%

4. D) 50.00%


Which division is more profitable based on ROI?

1. A) Chemical
2. B) Retail paint
3. C) Industrial
4. D) Both Chemical and Retail paint are more profitable than Industrial.
What is the Return on Sales for the Retail paint division?

1. A) 2%
2. B) 4.5%
3. C) 20%
4. D) 45%
For improving operational efficiencies and customer satisfaction, nonfinancial
information is:

1. A) critical.
2. B) moderate.
3. C) infrequently used.
4. D) unnecessary.
Nonfinancial information might be used for all of the following EXCEPT:

1. A) improve product quality.
2. B) reduce cycle times.
3. C) satisfy customers` needs.


4. D) All of the above are used.

The act of simply measuring and reporting information on certain
processes:

1. A) focuses the attention of employees on those processes that are being
measured.
2. B) diverts the employee`s attention to other activities that are not being
measured.
3. C) disproves the saying `What gets measured gets managed.`
4. D) has no effect on employee behavior.
Which statement below is FALSE?

1. A) `What gets measured gets managed.`
2. B) People react to measurements.
3. C) Employees spend more attention on those variables that are not getting
measured.
4. D) `If I can`t measure it, I can`t manage it.`
When a change is introduced, employees tend to:

1. A) embrace the change.
2. B) be indifferent to the change.
3. C) exhibit no change in behavior.
4. D) resist the change.


The introduction of a new management accounting system is MOST likely to
motivate UNWANTED employee behavior when it is used for:

1. A) evaluation.
2. B) planning.
3. C) decision making.

4. D) coordinating individual efforts.
Management accountants are MOST likely to feel outside pressure to
influence the numbers favorably when the information is used for:

1. A) budgeting.
2. B) compensation and promotions.
3. C) continuous improvement.
4. D) product costing.
Fostering a culture of high ethical standards includes all of the following
EXCEPT:

1. A) following the good example set by senior management.
2. B) communicating to employees a belief system that inspires and promotes
commitment to the organization`s core values.
3. C) following the general examples set by front-line employees.
4. D) communicating to all employees a boundary system that states what
actions will not be tolerated.
The Institute of Management Accountants (IMA):

1. A) is a professional organization of management accountants.


2. B) is a professional organization of financial accountants.
3. C) issues standards for management accounting.
4. D) a professional organization of management accountants that issues
standards for management accounting.

Which of the following best represents the Do step in the Plan-Do-Check-Act
(PDCA) cycle?.


1. A) Take actions to lower costs, change resource allocations, improve the
quality, cycle time and flexibility of processes, modify the product mix,
change customer relationships, and redesign and introduce new products.
2. B) Measure and monitor ongoing performance and take short-term actions
based on the measured performance.
3. C) Define the organization`s purpose and select the focus and scope of its
strategy.
4. D) Implement the chosen course of action.
Which of the following best represents the Check step in the Plan-Do-CheckAct (PDCA) cycle?

1. A) Take actions to lower costs, change resource allocations, improve the
quality, cycle time and flexibility of processes, modify the product mix,
change customer relationships, and redesign and introduce new products.
2. B) Measure and monitor ongoing performance and take short-term actions
based on the measured performance.
3. C) Define the organization`s purpose and select the focus and scope of its
strategy.
4. D) Implement the chosen course of action.


Which of the following best represents the Act step in the Plan-Do-Check-Act
(PDCA) cycle?

1. A) Take actions to lower costs, change resource allocations, improve the
quality, cycle time and flexibility of processes, modify the product mix,
change customer relationships, and redesign and introduce new products.
2. B) Measure and monitor ongoing performance and take short-term actions
based on the measured performance.
3. C) Define the organization`s purpose and select the focus and scope of its
strategy.

4. D) Implement the chosen course of action.
How the customer is treated at the time of the purchase is an example of the
__________ element of the value proposition.

1. A) functionality and features
2. B) industry standards
3. C) quality
4. D) service
Managers of service departments need all of the following information
EXCEPT:

1. A) efficiency data on work performance.
2. B) quality data on work performance.
3. C) profitability data of the whole company.
4. D) profitability data of the service department.


A national company manufactures a line of modern furniture. Information
MOST useful to the employee who assembles the furniture includes:

1. A) a daily report comparing the actual time it took to assemble a piece of
furniture to the standard time allowed.
2. B) a monthly report on the proportion of furniture pieces assembled with
defects.
3. C) the number of furniture pieces sold this month.
4. D) revenue per employee.
A national company manufactures a line of modern furniture. Information
MOST useful to the top executive includes:

1. A) individual job summaries of materials used.

2. B) monthly financial reports on the company`s profitability by product line.
3. C) time reports submitted by each employee.
4. D) scheduled downtime for routine maintenance on machines.
A quarterly report disclosing declining market share information is MOST
useful to:

1. A) a front-line employee.
2. B) the manager of operations.
3. C) the chief executive officer.
4. D) the accounting department.


A weekly report comparing machine time used to available machine time is
information LEAST useful to:

1. A) a front-line employee.
2. B) the manager of operations.
3. C) the chief executive officer.
4. D) the accounting department.
A daily report on the number of quality units assembled by each employee is
information MOST useful to:

1. A) a front-line assembly worker.
2. B) the accounting department.
3. C) the chief executive officer.
4. D) the personnel department.
Which of the following would be MOST helpful for a top manager of a
company?

1. A) profitability report of the company

2. B) information to monitor hourly and daily operations
3. C) number of customer complaints
4. D) operating expense summary reported by department
A law firm would use management accounting information for all of the
following decisions EXCEPT:

1. A) staffing needs.


2. B) performance evaluation of staff.
3. C) budgeted purchases of supplies.
4. D) location of annual holiday party.
Management accounting can play a critical role in the service industry
because of all the following reasons EXCEPT:

1. A) firms must be especially sensitive to the timeliness and quality of
customer service.
2. B) many employees have very little contact with customers.
3. C) customers immediately notice defects and a delay in service.
4. D) dissatisfied customers may never return.
What is the return on investment for the Chemical Division?

1. A) 1.25%
2. B) 2.25%
3. C) 25.0%
4. D) 50.00%
Which division is more profitable based on ROI?

1. A) Chemical
2. B) Retail paint

3. C) Industrial
4. D) Both Chemical and Retail paint are more profitable than Industrial.


What is the Return on Sales for the Retail paint division?

1. A) 2%
2. B) 4.5%
3. C) 20%
4. D) 45%
For improving operational efficiencies and customer satisfaction, nonfinancial
information is:

1. A) critical.
2. B) moderate.
3. C) infrequently used.
4. D) unnecessary.
Nonfinancial information might be used for all of the following EXCEPT:

1. A) improve product quality.
2. B) reduce cycle times.
3. C) satisfy customers` needs.
4. D) All of the above are used.
The act of simply measuring and reporting information on certain
processes:

1. A) focuses the attention of employees on those processes that are being
measured.



2. B) diverts the employee`s attention to other activities that are not being
measured.
3. C) disproves the saying `What gets measured gets managed.`
4. D) has no effect on employee behavior.
Which statement below is FALSE?

1. A) `What gets measured gets managed.`
2. B) People react to measurements.
3. C) Employees spend more attention on those variables that are not getting
measured.
4. D) `If I can`t measure it, I can`t manage it.`
When a change is introduced, employees tend to:

1. A) embrace the change.
2. B) be indifferent to the change.
3. C) exhibit no change in behavior.
4. D) resist the change.
The introduction of a new management accounting system is MOST likely to
motivate UNWANTED employee behavior when it is used for:

1. A) evaluation.
2. B) planning.
3. C) decision making.
4. D) coordinating individual efforts.


Management accountants are MOST likely to feel outside pressure to
influence the numbers favorably when the information is used for:

1. A) budgeting.

2. B) compensation and promotions.
3. C) continuous improvement.
4. D) product costing.
Fostering a culture of high ethical standards includes all of the following
EXCEPT:

1. A) following the good example set by senior management.
2. B) communicating to employees a belief system that inspires and promotes
commitment to the organization`s core values.
3. C) following the general examples set by front-line employees.
4. D) communicating to all employees a boundary system that states what
actions will not be tolerated.
The Institute of Management Accountants (IMA):

1. A) is a professional organization of management accountants.
2. B) is a professional organization of financial accountants.
3. C) issues standards for management accounting.
4. D) a professional organization of management accountants that issues
standards for management accounting.


Management accounting information can be used for all of the following
EXCEPT:

1. A) calculate the cost of a product or service.
2. B) evaluate the performance of a company.
3. C) project materials needs.
4. D) evaluate the market price of the stock.
Which of the following types of information are used in management
accounting?


1. A) financial information
2. B) nonfinancial information
3. C) information focused on the long term
4. D) All of the above are correct.
Management accounting:

1. A) is both retrospective, providing feedback about past operations, and also
prospective, incorporating forecasts and estimates about future events.
2. B) is primarily oriented to external stakeholders.
3. C) must be consistent with rules formulated by the Financial Accounting
Standards Board (FASB).
4. D) provides information that is generally available only on a quarterly or
annual basis.


Which of the following descriptors refer to management accounting
information?

1. A) It is only retrospective, reporting and summarizing in financial terms the
results of past decisions and transactions.
2. B) It is driven by rules.
3. C) It is prepared for shareholders.
4. D) It is oriented to meeting the decision making needs of employees and
managers inside the organization.
Which of the following would be considered management accounting
information?

1. A) Budgeted production for the year 2011.
2. B) Budgeted Balance Sheet.

3. C) Analysis of trend in stock prices.
4. D) Both budgeted production for the year of 2011, and the budgeted balance
sheet.
Management accounting information includes all of the following EXCEPT:

1. A) tabulated results of customer satisfaction surveys.
2. B) the cost of producing a product.
3. C) the percentage of units produced that is defective.
4. D) market price of the stock.
Management accounting reports might include information about:

1. A) customer complaints.


2. B) net income for the year on budgeted income statement.
3. C) total assets on budgeted balance sheet.
4. D) All of the above are correct.
The person MOST likely to use management accounting information is
a(n):

1. A) banker evaluating a credit application.
2. B) shareholder evaluating a stock investment.
3. C) governmental taxing authority.
4. D) assembly department supervisor.
Which of the following is NOT a function of a management accounting
system?

1. A) strategic development
2. B) financial reporting
3. C) control

4. D) product costing
Financial accounting:

1. A) focuses on the future and includes activities such as preparing next year`s
operating budget.
2. B) does not need to comply with GAAP (generally accepted accounting
principles).
3. C) is primarily oriented to external stakeholders, such as investors, creditors,
regulators and tax authorities.
4. D) is prepared for the use of department heads and other employees.


The person MOST likely to use ONLY financial accounting information is a:

1. A) factory shift supervisor.
2. B) vice president of operations.
3. C) current shareholder.
4. D) department manager.
Historically, management accounting innovations have been developed
by:

1. A) the International Accounting Standards Board.
2. B) the Cost Accounting Standards Board.
3. C) Academic accountants.
4. D) Managers.
In general, it was not until the 1970s that management accounting
systems:

1. A) were improved because of demands by the FASB and the SEC.
2. B) stagnated and proved inadequate.

3. C) started to develop innovations in costing and performance-measurement
systems due to intense pressure from overseas competitors.
4. D) started to address the decision-making needs of managers.
Financial accounting information:

1. A) provides a signal that something is wrong.
2. B) identifies what is wrong.


3. C) explains what is wrong.
4. D) simply summarizes information but gives no indication that anything is
wrong.
The regulatory authority responsible for formulating rules of United States
GAAP is:

1. A) the Financial Accounting Standards Board.
2. B) the Cost Accounting Standards Board.
3. C) the Federal Accounting Standards Advisory Board.
4. D) the International Accounting Standards Board.
Management accounting information is BEST described as:

1. A) providing a signal that something is wrong.
2. B) identifying and helping to explain what is wrong.
3. C) simply summarizing information, but giving no indication that anything is
wrong.
4. D) measuring overall organizational performance.
The first modern industry to develop and use large quantities of financial
statistics to assess and monitor organizational performance was:

1. A) steel companies.

2. B) lumber companies.
3. C) the railroads.
4. D) automobile companies.


Which of the following companies is a service company?

1. A) Lands` End
2. B) Schwinn Bicycles
3. C) Orkin Pest Control
4. D) British Petroleum
Historically, service companies have:

1. A) operated in less competitive environments than manufacturing companies.
2. B) enjoyed global customer demand.
3. C) used management accounting information in much the same way as
manufacturing companies.
4. D) competed by managing costs to provide the best service at the lowest
price.
The Hawthorne study revealed that:

1. A) individuals alter their behavior when they know they are being studied.
2. B) groups alter their behavior when they know they are being studied.
3. C) People react when they are being measured.
4. D) All of the above are correct.
_______ helped develop the Plan-Do-Check-Act (PDCA) cycle.

1. A) Hawthorne
2. B) Deming.



3. C) Carnegie
4. D) Ford
Planning activities include all of the following EXCEPT:

1. A) estimate the cost and profit consequences from a course of action.
2. B) evaluating the quality of the service provided.
3. C) projecting labor requirements.
4. D) budgeting.
The most important factor in successful organizations is:

1. A) weaknesses.
2. B) competition.
3. C) strategy.
4. D) definition of quality.
A key element of any organization's strategy is identifying:

1. A) its potential shareholders.
2. B) its target customers.
3. C) competitor`s products.
4. D) employee needs.


Which of the following best represents the Plan step in the Plan-Do-Check-Act
(PDCA) cycle?

1. A) Take actions to lower costs, change resource allocations, improve the
quality, cycle time and flexibility of processes, modify the product mix,
change customer relationships, and redesign and introduce new products..
2. B) Measure and monitor ongoing performance and take short-term actions

based on the measured performance.
3. C) Define the organization`s purpose and select the focus and scope of its
strategy. .
4. D) Implement the chosen course of action.
Many organizations start the planning stage by re-affirming or updating its
mission statement.

1. True
2. False
Operating profit is an example of nonfinancial information.

1. True
2. False
Quality expert, W. Edwards Deming, helped develop and disseminate the
plan-do-check-act (PDCA) cycle.

1. True
2. False


Management accounting information allows managers to compare actual and
planned costs and to identify areas and opportunities for process
improvement.

1. True
2. False
Management accounting can provide information on customer
satisfaction.

1. True

2. False
Quality is the degree of conformance between what the customer is promised
and what the customer receives.

1. True
2. False
Government and nonprofit organizations, as well as profit-seeking
enterprises, are feeling the pressures for improved performance.

1. True
2. False
Management accounting innovations are usually developed by
academics.

1. True
2. False