Management Accounting — Part 1 MCQs with Explanations

In value chain analysis, coordination, acquiring and assembling of resources to produce a product is classified as production. Value chain analysis is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide competitive advantage.

Examining of past performance, exploring alternative and planning future is learning. Learning is the process of acquiring new, or modifying existing, knowledge, behaviors, skills, values, or preferences.

Time that a company takes to create and produce a new product is classified as time factor.

Purpose of management accounting is to help managers make decisions. Management accounting helps organizations improve their ability to control costs and plan for the future through financial forecasts. It also focuses on providing reports to ensure comprehensive management oversight.

An accounting approach, in which expected benefits exceed expected cost is classified as cost-benefit approach. A cost-benefit analysis is a process businesses use to analyze decisions. The business or analyst sums the benefits of a situation or action and then subtracts the costs associated with taking that action.

Flow of goods and services, from start of gathering materials until delivery of products, is known as supply chain analysis. Supply chain analysis is the process of evaluating every stage of a supply chain starting from the time the business acquires raw materials or supplies from its suppliers to the delivery of final products to the customers.

Step by step business functions, in which product or services must have customer usefulness is classified as value chain. A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product (i.e., good and/or service) for the market.

Decisions regarding usage of material, kind and changes in plant processing are a part of cost management. Cost management is the process of planning and controlling the budget of a business. Cost management is a form of management accounting that allows a business to predict impending expenditures to help reduce the chance of going over budget.

Function of management accountant, who works as business partner comes under category of staff function. A staff function is a secondary business activity that supports the line functions of a business to achieve the objectives. In business management, staff functions are usually defined as all functions that are not line functions. The nature of this function is advisory.

An officer responsible for financial operations of organization is considered as chief financial officer. A Chief Financial Officer is an executive who is in charge of monitoring cash flow, financial planning and other financial activities within an organization.

Decision making step, which consists of organization goals, predicting alternatives and communicating goals is called planning. Planning is also a management process, concerned with defining goals for a company's future direction and determining the missions and resources to achieve those targets. To meet objectives, managers may develop plans, such as a business plan or a marketing plan.

An availability of financial information, to oversee operations and system of accounting is known as controllership. A financial controller is responsible for ensuring that all accounting allocations are appropriately made and documented.

An availability of after sale support, to existing or potential customers in value chain analysis is known as customer services. Customer service is the act of taking care of the customer's needs by providing and delivering professional, helpful, high quality service and assistance before, during, and after the customer's requirements are met.

Quantitative expression of decided plan and coordination, for plan implementation is known as budget. A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis.

In management accounting, an emphasis and focus must be future oriented. Management Accounting is the presentation of accounting information in order to formulate the policies to be adopted by the management and assist its day-to-day activities.

Strategy that interlinks technology and people, to enhance relationships in all business functions is classified as customer relationship management. Customer relationship management (CRM) refers to the principles, practices, and guidelines that an organization follows when interacting with its customers.

Experimentation and generation of ideas related to new product or services are included in research and development. Research and development (R&D) refers to the activities companies undertake to innovate and introduce new products and services. It is often the first stage in the development process.

Philosophy, in which management works to improve value chain of products, to exceed customer expectations is classified as quality. Quality means "the totality of features and characteristics of a product or service that bears its ability to satisfy stated or implied needs."

Cash management, investments, long and short term financing are included in treasury. Treasury management is defined as 'the corporate handling of all financial matters, the generation of external and internal funds for business, the management of currencies and cash flows and the complex strategies, policies and procedures of corporate finance.'

In financial accounting, investors, banks, suppliers and government agencies are classified as external parties. An external party can be an individual or organization that is a legal entity. If the external party is an individual, the individual may or may not be a contact for an organization.

Marketing, production and management of distribution comes under category of line management. Line management is the universal term which refers to the style of administrative management of a businesses employees.

Function of plant manager, in which he is responsible for new assets investment is termed as line function. Line function is the one which is directly involved in the core work of an organization. It involves the primary activities such as manufacturing, selling, purchasing etc which are required to meet the business objectives.

Process of analyzing and reviewing financial records to check integrity of company financial reports is an internal audit. An internal audit offers risk management and evaluates the effectiveness of a company's internal controls, corporate governance, and accounting processes.

Type of accounting, which reports financial and non-financial data about cost of material and acquiring of resources is classified as cost accounting. Cost accounting is a form of managerial accounting that aims to capture a company's total cost of production by assessing the variable costs of each step of production as well as fixed costs, such as a lease expense.

An approach in which managers use resources to increase customer value is classified as cost management. Cost management is the process of planning and controlling the budget of a business. Cost management is a form of management accounting that allows a business to predict impending expenditures to help reduce the chance of going over budget.

An engineering of products or detailed planning of products or services is called product design. Product design is the process of creating a new product to be sold by a business to its customers. A very broad concept, it is essentially the efficient and effective generation and development of ideas through a process that leads to new products.

Type of accounting which measures, reports and analysis non-financial and financial information to help in decision making is called management accounting. Management Accounting is the presentation of accounting information in order to formulate the policies to be adopted by the management and assist its day-to-day activities.

Type of accounting which reports to external parties of organization is known as financial accounting. Financial accounting is a specific branch of accounting involving a process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time.

Human resource management, IT management and management accountants are categorized under staff management. STAFF MANAGEMENT is the function of managing all employees in the organization, including the development of staff skills through training and other forms of staff development as well as the identification, development and implementation of training needs and programs available for staff.

In cost benefit approach, type of costs include cost of ongoing operations, investments in physical assets and training of managers. A cost-benefit analysis is a process businesses use to analyze decisions. The business or analyst sums the benefits of a situation or action and then subtracts the costs associated with taking that action.

In financial accounting, an emphasis and focus is considered as past oriented. They tend to be conservative in management and slow to change those things that are tied to the past.

In value chain analysis, selling and promotion to prospective customers is classified as marketing. Value chain analysis is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide competitive advantage.

In value chain analysis, delivery of services or products to end customers is classified as distribution. Value chain analysis is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and which ones could be improved to provide competitive advantage.

An implementation of planning decisions and evaluating performance is classified as control. Planning can be defined as the process of selecting a future course of action. Decision-making defined as the process of selecting a course of action from the alternatives. They need to be accurate for the welfare of the organization.

Continuous pressure of reducing cost of products to be sold is classified as cost and efficiency. It is the act of saving money by making a product or performing an activity in a better way.

Cost management technique which specially addresses strategic issues is classified as strategic cost management. Strategic cost management is the process of reducing total costs while improving the strategic position of a business. This goal can be accomplished by having a thorough understanding of which costs support a company's strategic position and which costs either weaken it or have no impact.

Purpose of financial accounting is communicating company position to investors. The purpose of accounting is to provide the information that is needed for sound economic decision making. The main purpose of financial accounting is to prepare financial reports that provide information about a firm's performance to external parties such as investors, creditors, and tax authorities.

An accounting which records and measures business transactions and is followed by general accepted accounting principles is classified as financial accounting. Financial accounting is a specific branch of accounting involving a process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time.

Formal way of differentiating, between non-random and random variations, in manufacturing process is classified as statistical process control. Statistical process control (SPC) is a method of quality control which employs statistical methods to monitor and control a process.

Cycle manufacturing time = Value added manufacturing time ÷ Total manufacturing time = 65 minutes ÷ 80 minutes = 0.8125