STRATEGIC COST MANAGEMENT

1st Term., A.Y. 2020 - 2021

NAME: (surname first)________________________________ SCORE: __________________

GENERAL DIRECTION:
Read and analyze the following questions and type your answer in the space provided for each items.

Part I. True/False
Indicate whether the statement is true or false.

____ 1. Managerial accounting places less emphasis on precision and more emphasis on flexibility and relevance
than financial accounting.

____ 2. Managerial accounting is not governed by generally accepted accounting principles (GAAP).

____ 3. Financial accounting and managerial accounting reports must be prepared in accordance with generally
accepted accounting principles (GAAP).

____ 4. When carrying out their directing and motivating activities, managers mobilize the organization's human and
other resources so that the organization's plans are carried out.

____ 5. When carrying out planning activities, managers rely on feedback to ensure that the plan is actually carried
out and is appropriately modified as circumstances change.

____ 6. When carrying out their directing and motivating activities, managers select a course of action and specify
how the action will be implemented.

____ 7. Persons occupying staff positions provide support and assistance to other parts of the organization.

____ 8. Staff departments generally have direct authority over line departments in an organization.

____ 9. Informal relationships and channels of communication often develop that do not appear on the organization
chart.

____ 10. The controller's position in a retail company is considered a line position rather than a staff position.

____ 11. The Chief Financial Officer of an organization should present facts and refrain from offering advice and
personal opinion.
____ 12. A strategy is a game plan that enables a company to attract customers by distinguishing itself from
competitors.

____ 13. A strategy requires effective use of Six Sigma improvement techniques.

____ 14. A customer value proposition is essentially a reason for customers to choose a company's products over its
competitors' products.

____ 15. Customer value propositions tend to fall into three broad categories--customer intimacy, operational
excellence, and product leadership.

____ 16. Companies that adopt a customer intimacy strategy are in essence saying to their target customers, “The
reason you should choose us is because we understand and respond to your individual needs better than our
competitors.”

____ 17. Companies that choose an operational excellence strategy are in essence saying to their customers, “Choose
us rather than our competitors because we strive for zero defects.”

____ 18. A value chain consists of the major business functions that add value to the company's products and services.

____ 19. Efforts designed to increase the rate of output should generally be applied to the workstation that is the
constraint.

____ 20. The lean thinking model is a five step management approach that organizes resources such as people and
machines around the flow of business processes and that pulls units through these processes in response to
customer orders.

____ 21. Supply chain management involves acquiring and bringing inside the company all of the processes that bring
value to customers.

____ 22. An enterprise system integrates data across an organization into a single software system that enables all
employees to have simultaneous access to a common set of data.

____ 23. Corporate governance is the legal framework that allows managers to control and direct lower-level workers
on the job.

____ 24. The Sarbanes-Oxley Act of 2002 was intended to protect the interests of those who invest in publicly traded
companies by improving the reliability and accuracy of corporate financial reports and disclosures.

____ 25. The Standards of Ethical Conduct promulgated by the Institute of Management Accountants specifically
states, among other things, that management accountants have a responsibility to disclose fully all relevant
information that could be reasonably be expected to influence an intended user's understanding of the
reports, comments and recommendations presented.

____ 26. The sum of all costs of manufacturing costs except direct materials is called manufacturing overhead.

____ 27. Conversion cost is the sum of direct labor and manufacturing overhead.
____ 28. Prime cost is the sum of direct labor and manufacturing overhead.

____ 29. Thread used in the production of mattresses, an indirect material, is classified as manufacturing overhead.

____ 30. Period costs are also known as inventoriable costs.

____ 31. All costs in a merchandising company are period costs.

____ 32. The cost of goods sold of a manufacturing company equals beginning finished goods inventory + cost of
goods manufactured - ending finished goods inventory.

____ 33. A variable cost is constant if expressed on a per unit basis but the total dollar amount changes as the number
of units increases or decreases.

____ 34. As activity increases within the relevant range, fixed costs remain constant on a per unit basis.

____ 35. Direct costs are often difficult to trace to the specific cost object under consideration.

____ 36. All of the following are examples of opportunity costs: salary given up to start a business; rental income given
up when you live in a house you own; interest income that could be earned on money spent for a car.

____ 37. The amount that was paid by a company for a building to house its operations is an example of a sunk cost.

____ 38. The most effective way to minimize quality costs while maintaining high quality is to avoid having quality
problems in the first place. This is the reason for incurring appraisal costs.

____ 39. External failure costs are limited to the costs of repairing defective products that are under warranty.

____ 40. The costs of lost sales arising from poor quality are always included in quality cost reports.
STRATEGIC COST MANAGEMENT
Answer Section

TRUE/FALSE

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