Chapter 01
Cost Accounting: Information for Decision Making
True / False Questions
1. The value chain comprises activities from research and development through the
production process, but does not include activities related to the distribution of
products or services.
True False
2. Administrative functions are not included as part of the value chain because they are
implicitly included in every business function.
True False
3. Under the value chain concept, instead of perceiving whether individual activities in
the chain add value, customers only consider the overall utility of the goods or
services they purchase.
True False
4. A cost driver is a factor that causes costs.
True False
5. A cost can be considered a differential cost for one particular course of action but not
for another course of action.
True False
6. A responsibility center can be a department, division, or segment, but not a subsidiary
of the parent company.
True False
7. It is important that the manager assigned to lead a responsibility center be held
accountable for its operations.
True False
8. Budgeting is primarily used to determine year-end bonuses based on managerial and
organizational performance.
True False
9. Managers are usually responsible for the revenues needed to achieve the targets set
during the budgeting process, but not the resources consumed to achieve those
targets.
True False
1-1
,10. Cost data can be used for one managerial decision but not for another managerial
decision.
True False
11. Financial accounting information is designed for decision-makers who are directly
involved in the daily management of the firm.
True False
12. It is more important for financial accounting information to be comparable between
firms than to be useful for managerial decision-making.
True False
13. Cost accounting information developed for managers to use in making decisions must
comply with generally accepted accounting principles (GAAP) and international
financial reporting standards (IFRS).
True False
14. Cost accounting information can be used by managers to defraud customers,
creditors, and owners.
True False
15. Benchmarking is a continuous process of measuring a company's products, services,
or activities against competitors' performance.
True False
16. Activity-based costing (ABC) is a management tool that focuses on the continuous
improvement of all dimensions of a business.
True False
17. Customer satisfaction is an example of a non-financial performance measure.
True False
18. Managers face ethical situations on a daily basis, while accountants face them
infrequently.
True False
19. A person who makes unethical decisions in their personal life is likely to make
unethical decisions in their professional life.
True False
20. Ethical behavior depends more on a firm's code of conduct than the individual's
personal beliefs.
True False
1-2
,21. The Value chain is comprised of the activities that take place during the production
process.
True False
22. Cost accounting plays a significant role in management decision making.
True False
23. Cost accounting provides information only for cost accounting purposes.
True False
24. Cost accounting is broader in scope than financial accounting.
True False
25. Financial accounting receives information only from cost accounting activity.
True False
26. Financial accounting provides financial and nonfinancial information that helps
managers in the decision making process.
True False
27. A value chain consists of the major subassemblies that add value to a product.
True False
28. The lean thinking model focuses on reducing defects to as close to zero as possible.
True False
Multiple Choice Questions
29. The set of activities that transforms raw resources into the goods and services of an
organization is called:
A. Value
chain.
B. Supply
chain.
C. Demand
chain.
D. Cost-benefit
analysis.
1-3
, 30. Which of the following activities would not be considered a value-added activity?
A. Productio
n
B. Marketin
g
C. Accountin
g
D. Distributi
on
31. Which of the following statements is false?
A. In essence, the value chain and the supply chain are similar; each creates
something for which the customer is willing to pay.
B. Accounting systems are important because they provide all the information for
decisions commonly made by managers.
C. The supply or distribution chain is a linked set of organizations that exchange goods
and services in combination to provide a final product or service to the customer.
D. Eliminating nonvalue-added activities always reduces costs without affecting the
value of the product to customers.
32. Managers do not make decisions about future events based on:
A. Perfect
information.
B. Estimated
information.
C. Actual
information.
D. Financial
information.
33. Which of the following is a nonvalue-added activity?
A. Product
design
B. Customer
service
C. Research and
development
D. Rework of defective
items
1-4
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