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ch13 - Cost Accounting 13e(Horngren et al Chapter 13 1...

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Unformatted text preview: Cost Accounting, 13e (Horngren et al.) Chapter 13 1 Strategy, Balanced Scorecard, and Strategic Profitability Analysis 1) Strategy how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its overall describes objectives. Answer: TRUE Diff: 1 Terms: strategy Objective: 1 AACSB: Reflective thinking 2) One of the five forces of industry analysis is understanding the bargaining power of your customers. Answer: TRUE Diff: 1 Terms: five force industry analysis Objective: 1 AACSB: Reflective thinking 3) One of the two basic strategies is achieving market leadership. Answer: FALSE Explanation: Achieving cost leadership is one of the basic strategies. Diff: 1 Terms: cost leadership Objective: 1 AACSB: Reflective thinking 4) A product differentiation strategy includes offering unique and superior products for increased prices. Answer: TRUE Diff: 1 Terms: product differentiation Objective: 1 AACSB: Reflective thinking 5) The cost leadership strategy is for products and services that are similar to competitor's products and services. Answer: TRUE Diff: 1 Terms: cost leadership Objective: 1 AACSB: Reflective thinking 6) The product differentiation strategy is probably best for a company if the engineering staff is more skilled at making process improvements than at creatively designing new products. Answer: FALSE Explanation: The cost leadership strategy is probably best for a company if the engineering staff is more skilled at making process improvements than at creatively designing new products. Diff: 2 Terms: product differentiation Objective: 1 AACSB: Reflective thinking 7) In general, profit potential increases with greater competition, stronger potential entrants, products that are similar, and tougher customers and suppliers. Answer: FALSE Explanation: In general, profit potential decreases with greater competition, stronger potential entrants, products that are similar, and tougher customers and suppliers. Diff: 1 Terms: five force industry analysis Objective: 1 AACSB: Reflective thinking 8) Reengine the fundamental rethinking and redesign of business processes to achieve improvements in critical measures of ering is performance such as cost, quality, service, speed, and customer satisfaction. Answer: TRUE Diff: 1 Terms: reengineering Objective: 2 AACSB: Reflective thinking 9) Reengine benefits are most significant when they focus on one business function rather than crossing functional lines of the business ering process. Answer: FALSE Explanation: Reengineering benefits are most significant when they cut across functional lines to focus on the entire business process. Diff: 2 Terms: reengineering Objective: 2 AACSB: Reflective thinking 10) Successfu l reengineering efforts generally involve changing the roles and responsibilities of employees. Answer: TRUE Diff: 2 Terms: reengineering Objective: 2 AACSB: Reflective thinking 11) The scorecard translates an organization's mission and strategy into a set of performance measures that provides the framework balanced for implementing its strategy. Answer: TRUE Diff: 2 Terms: Balanced Scorecard Objective: 2 AACSB: Reflective thinking 12) The balanced scorecard uses only financial performance measuresto evaluate short-run and long-run performance. Answer: FALSE Explanation: The balance scorecard uses financial and nonfinancial performance measures. Diff: 2 Terms: Balanced Scorecard Objective: 2 AACSB: Reflective thinking 13) The primary purpose of the balanced scorecard is to obtain increased operating profits for the current year. Answer: FALSE Explanation: The primary purpose of the balanced scorecard is to implement both shortrun and long-run strategies. Diff: 2 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 14) To achieve success, it is important to set nonfinancial objectives as well as financial objectives. Answer: TRUE Diff: 2 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 15) One valuable measure of the customer perspective of the balanced scorecard is market share. Answer: TRUE Diff: 2 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 16) The learning and growth perspective of the balanced scorecard evaluates the profitability of the strategy. Answer: FALSE Explanation: The financial perspective Diff: 1 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 17) Employee satisfaction is a measure of the internal business perspective of the balanced scorecard. Answer: FALSE Explanation: Employee satisfaction is a measure of the learning and growth perspective. Diff: 2 Terms: Balanced Scorecard Objective: 3 AACSB: Communication 18) The perspective of the balanced scorecard identifies targeted customers and market segments and measures the company's customer success in these segments. Answer: TRUE Diff: 2 Terms: Balanced Scorecard Objective: 3 AACSB: Communication 19) The customer perspective under the balanced scorecard approach would include measures on cost reduction. Answer: FALSE Explanation: The financial perspective under the balanced scorecard approach would include measures on cost reduction. Diff: 2 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 20) When implementing a balanced scorecard, the cause-and-effect linkages are always precise. Answer: FALSE Explanation: When implementing a balanced scorecard, the cause-and-effect linkages are seldom precise. Diff: 2 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 21) When evaluating managers and employees under the balanced scorecard approach, only financial measures should be considered. Answer: FALSE Explanation: When implementing a balanced scorecard, the cause-and-effect linkages are seldom precise. Diff: 2 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 22) An increase of operating income from one year to the next indicates a company's strategy was successful. Answer: FALSE Explanation: Operating income could have increased simply because the entire market expanded and have nothing to do with the implementation of a company's strategy. Diff: 3 Terms: Balanced Scorecard Objective: 4 AACSB: Reflective thinking 23) To the success of its strategy, a company can subdivide the change in operating income into growth, price-recovery, and evaluate productivity components. Answer: TRUE Diff: 2 Terms: growth component, price-recovery component, productivity component Objective: 4 AACSB: Reflective thinking 24) The productivity component of operating income focuses exclusively on revenues. Answer: FALSE Explanation: The productivity component of operating income focuses exclusively on costs. Diff: 2 Terms: productivity component Objective: 4 AACSB: Reflective thinking 25) The price- recovery component measures the increase in operating income from selling more units of a product. Answer: FALSE Explanation: The growth component Diff: 1 Terms: price-recovery component Objective: 4 AACSB: Reflective thinking 26) Companie have been successful at cost leadership will show large favorable price-recovery and growth components when analyzing s that profitability. Answer: FALSE Explanation: Companies that have successfully differentiated their products will show large favorable price-recovery and growth components when analyzing profitability. Diff: 3 Terms: cost leadership, price-recovery component, growth component Objective: 4 AACSB: Reflective thinking 27) The price- component of a change in operating income from one year to the next measures the increase in operating income from recovery selling more units of the product. Answer: FALSE Explanation: The growth component of a change in operating income from one year to the next measures the increase in operating income from selling more units of the product. Diff: 2 Terms: price-recovery component Objective: 4 AACSB: Reflective thinking 28) The price- recovery component of a change in operating income measures the effect of price changes on revenues and costs. Answer: TRUE Diff: 2 Terms: price-recovery component Objective: 4 AACSB: Reflective thinking 29) Unused is the amount of productive capacity available over and above the productive capacity employed to meet customer demand capacity in the current period. Answer: TRUE Diff: 2 Terms: unused capacity, discretionary costs Objective: 5 AACSB: Reflective thinking 30) Engineere d costs have no measurable cause-and-effect relationship between output and resources used. Answer: FALSE Explanation: Discretionary costs have Diff: 2 Terms: engineered costs Objective: 5 AACSB: Reflective thinking 31) Discretion ary costs arise from periodic (usually yearly) decisions regarding the maximum amount to be incurred. Answer: TRUE Diff: 1 Terms: discretionary costs Objective: 5 AACSB: Reflective thinking 32) Engineere d costs contain a higher level of uncertainty than discretionary costs. Answer: FALSE Explanation: Discretionary costs contain a higher level of uncertainty than engineered costs. Diff: 2 Terms: engineered costs, discretionary costs Objective: 5 AACSB: Reflective thinking 33) Engineere d costs may be variable or fixed in the short run. Answer: TRUE Diff: 2 Terms: engineered costs Objective: 5 AACSB: Reflective thinking 34) Research and development cost is an example of an engineered cost. Answer: FALSE Explanation: Research and development cost is an example of a discretionary cost. Diff: 2 Terms: engineered costs, discretionary costs Objective: 5 AACSB: Reflective thinking 35) It is relatively easy to identify unused capacity for discretionary costs. Answer: FALSE Explanation: It is difficult to identify Diff: 2 Terms: unused capacity, discretionary costs Objective: 6 AACSB: Reflective thinking 36) One way to eliminate unused capacity is to downsize. Answer: TRUE Diff: 1 Terms: downsizing, unused capacity Objective: 6 AACSB: Reflective thinking 37) Downsizi ng discretionary costs is easier than downsizing engineered costs. Answer: FALSE Explanation: Downsizing discretionary costs is more difficult because the unused capacity of discretionary costs is generally unknown. Diff: 2 Terms: downsizing, discretionary costs, engineered costs Objective: 6 AACSB: Reflective thinking 38) Downsizi ng often means eliminating jobs, which can have an adverse effect on employee morale. Answer: TRUE Diff: 2 Terms: downsizing Objective: 6 AACSB: Reflective thinking 39) Productivi ty measures the relationship between actual inputs used (both quantities and costs) and standard outputs produced. Answer: FALSE Explanation: Productivity measures the relationship between actual inputs used (both quantities and costs) and actual outputs produced. Diff: 1 Terms: productivity Objective: A AACSB: Reflective thinking 40) Partial productivity equals quantity of output produced divided by quantity of individual input used. Answer: TRUE Diff: 1 Terms: partial productivity Objective: A AACSB: Reflective thinking 41) Total factor productivity (TFP) is the ratio of the quantity of output produced to the costs of all inputs used, where the inputs are combined on the basis of current period prices. Answer: TRUE Diff: 1 Terms: total factor productivity (TFP) Objective: A AACSB: Reflective thinking 42) Although factor productivity (TFP) measures are comprehensive, operations personnel find financial TFP measures more difficult to total understand and less useful than physical partial productivity measures in performing their tasks. Answer: TRUE Diff: 1 Terms: total factor productivity (TFP) Objective: A AACSB: Reflective thinking 43) ________ how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its overall describes objectives. A) Strategy B) Planning C) Learning and growth perspective D) Customer perspective Answer: A Diff: 1 Terms: strategy Objective: 1 AACSB: Reflective thinking 44) In general, profit potential ________ with greater competition, stronger potential entrants, products that are similar, and moredemanding customers and suppliers. A) increases B) stays constant C) decreases D) increases exponentially Answer: C Diff: 1 Terms: five force industry analysis Objective: 1 AACSB: Reflective thinking 45) Which of the following is NOT a force that shapes an organization's profit potential? A) Competitors B) Equivalent C) products Bargaining D) power of input suppliers All of these answers are correct. Answer: D Diff: 2 Terms: five force industry analysis Objective: 1 AACSB: Reflective thinking 46) Which of the following is a force that shapes an organization's profit potential? A) Investors B) Potential C) entrants into the market Creditors D) Research and development Answer: B Diff: 2 Terms: five force industry analysis Objective: 1 AACSB: Reflective thinking 47) ________ organization's ability to offer products or services that are perceived by its customers as being superior and unique relative is an to those of its competitors. A) Strategy B) Product C) differentiation Cost leadership D) The balanced scorecard Answer: B Diff: 1 Terms: product differentiation Objective: 1 AACSB: Reflective thinking 48) ________ organization's ability to achieve low costs relative to competitors through productivity and efficiency improvements, is an elimination of waste, and tight cost control. A) Strategy B) Product C) differentiation Cost leadership D) The balanced scorecard Answer: C Diff: 1 Terms: cost leadership Objective: 1 AACSB: Reflective thinking 49) An organization that is using the product differentiation approach would: A) focus on tight cost control B) carefully C) cultivate their brands provide D) products that are similar to competitors offer products at a lower cost than competitors Answer: B Diff: 2 Terms: product differentiation Objective: 1 AACSB: Reflective thinking 50) An organization that is using the cost leadership approach would: A) incur costs for innovative R&D B) provide C) products at a higher cost than competitors focus on D) productivity through efficiency improvements bring products to market rapidly Answer: C Diff: 2 Terms: cost leadership Objective: 1 AACSB: Reflective thinking 51) ________ fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance is the such as cost, quality, service, speed, and customer satisfaction. A) Strategy B) Customer C) perspective Learning and growth perspective D) Reengineering Answer: D Diff: 1 Terms: reengineering Objective: 2 AACSB: Reflective thinking 52) Successfu l reengineering involves: A) cutting across functional lines to focus on the entire business process B) redefining the roles and responsibilities of employees C) using D) information technology All of these answers are correct. Answer: D Diff: 2 Terms: reengineering Objective: 2 AACSB: Reflective thinking 53) The balanced scorecard measures an organization's performance from all of the following perspectives EXCEPT: A) financial B) government C) customer D) learning and growth Answer: B Diff: 2 Terms: Balanced Scorecard Objective: 2 AACSB: Reflective thinking 54) ________ an organization's mission and strategy into a comprehensive set of performance measures that provide the framework for translates implementing its strategy. A) Productivity B) component Product C) differentiation Cost leadership D) The balanced scorecard Answer: D Diff: 1 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 55) The purpose of the balanced scorecard is BEST described as helping an organization: A) develop B) customer relations mobilize C) employee skills for continuous improvements in processing capabilities, quality, and response times introduce D) innovative products and services desired by target customers translate an organization's mission and strategy into a set of performance measures that help to implement the strategy Answer: D Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 56) The FIRST step to successful balanced scorecard implementation is clarifying the: A) organization's vision and strategy B) elements that C) pertain to value-added aspects of the business owner's D) expectations about return on investment objectives of all four balanced scorecard measurement perspectives Answer: A Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 57) The balanced scorecard is said to be "balanced" because it measures: A) short-term and long-term objectives B) financial and C) nonfinancial objectives internal and D) external objectives All of these answers are correct. Answer: D Diff: 2 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 58) Balanced scorecard objectives are in balance when: A) debits equal B) credits financial C) performance measurements are less than the majority of measurements the D) measurements are fair the measurements reflect an improvement over the previous year Answer: B Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 59) The internal business processes perspective of the balanced scorecard comprises three subprocesses that address all of the following EXCEPT: A) innovative B) processes used to create new products, services, and processes motivating C) current employees providing D) service and support to the customer after the sale delivering existing products and services to best meet the needs of customers Answer: B Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 60) Identify the BEST description of the balanced scorecard's financial perspective. To achieve our firm's vision and strategy: A) how can we B) obtain greater profits for the current year? how can we C) increase shareholder value? how will we D) obtain continuous improvements? how can we secure greater customer satisfaction? Answer: B Diff: 2 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 61) Identify description of the balanced scorecard's internal business processes perspective. To achieve our firm's vision and strategy: the BEST A) how do we B) lower costs? how do we C) motivate employees? how can we D) obtain greater profits? what processes will increase value to customers? Answer: D Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 62) All of the following relate to the balanced scorecard's learning and growth perspective EXCEPT: A) How do we B) achieve greater employee satisfaction? What new C) products do we create? How do we D) provide information systems with updated technology? How will we motivate and empower our employees? Answer: B Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 63) Measures of the balanced scorecard's financial perspective include: A) information B) system availability number of new patents C) revenue growth D) defect rates Answer: C Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 64) Measures of the balanced scorecard's financial perspective include all of the following EXCEPT: A) operating B) income customer C) satisfaction gross profit D) percentage cost reductions Answer: B Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 65) Measures of the balanced scorecard's customer perspective include: A) market share B) number of on- time deliveries C) number of D) process improvements revenue growth Answer: A Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 66) Measures of the balanced scorecard's customer perspective include all of the following EXCEPT: A) market share B) customer C) satisfaction number of new customers D) customer training on new products Answer: D Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective thinking 67) Measures of the balanced scorecard's internal-business-process perspective include: A) market share B) new product C) development time employee D) education return on investment Answer: B Diff: 3 Terms: Balanced Scorecard Objective: 3 AACSB: Reflective th...
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