CHAPTER 6 – STRATEGIC MANAGEMENT

FALSE 1. Customers who are treated as rational players must be treated as irrational as well because in the end, the
customers make the decisions which are not the main purpose of the business.
FALSE 2. Activities-based costing (ABC) involves performing activities more efficiently, eliminating the need to perform
certain activities that do not add value to customers, improving the design of products, and developing better
relationships to customers and suppliers.
TRUE 3. During the modern business environment, direct labor is one of the affected parts of the production because
it becomes a lesser component of total production cost as processes are reengineered.
TRUE 4. Customer profitability analysis is a technique of understanding and analyzing the contribution of each
customer or group of customers to the overall profitability of an enterprise.
FALSE 5. Costs should then be accumulated by functional occurrences and by activity groupings and influences.
TRUE 6. Benchmarking is a process where standards are set at the current level of the highest performance, also
known as “best-in-class practices”, analyzing the strategies and techniques employed for such performance,
developing models for the adoption or improvement of such benchmarked strategies, and executing plans to meet and
beat the standards set.
FALSE 7. The customer says fashionability while the seller says durability, so the quality says durability. It is because
this will also lead to what the customer wants.
TRUE 8. The American Society for Quality Costs (ASQC) states that quality is the totality of features and characteristics
of a product made/service performed according to specifications, to satisfy customers at the time of purchase and
during use.
TRUE 9. To avoid the irritating occurrence of repairs, an efficient and effective equipment maintenance program should
be in place.
TRUE 10. Re-engineering is a micro-approach to process improvement. It needs a new paradigm of doing the process.
TRUE 11. In cases where defects are detected on a product before delivery to customers, internal failure costs will be
incurred.
TRUE 12.A process is a collection of activities that takes one or more kinds of input and creates an output. It is the
processes that are subject to fundamental and radical changes to achieve dramatic improvements.
TRUE 13. External failure costs include product warranty, liability to damages, parts replacement, and incremental
costs of addressing and correcting the complaint such as decommissioning costs.
TRUE 14. There is an observed inverse relationship between conformance costs and non-conformance costs.
FALSE 15. According to Hammer, one of the principles of BPR is that processes should be designed to focus on
existing tasks rather achieve than desired outcome.
TRUE 16. Balanced Scorecard is a system used to effectively communicate strategies into concrete terms to all
personnel of the organization.
FALSE 17. Strategy relates to the enterprise’s awareness and efforts to reduce its costs and expenses through means
and measures that would result in the least possible cost of producing goods and services.
FALSE 18. The Balanced Scorecard has four important perspective performances. These are the customer
perspective, external business perspective, innovation and learning perspective, and financial perspective.
TRUE 19. Kaizen is a Japanese term which refers to the process of continuously improving systems, interrelationships,
processes, set-ups, policies, and other details of activities.
TRUE 20. Manufacturing Resource Planning 2 integrates all facets of a manufacturing business, including production,
sales, inventories, schedules, and cash flows.

1. The combination of the two gives meaning to quality and excellence:

a. Speed and durability b. Accuracy and design c. Accuracy and speed d. Precision and design
2. From the comparison between traditional and strategic management, which among the changes in the business
environment transitioned to the lean-and-mean organizational system?
a. Business Relationship b. Employees c. Activities d. Methods
3. This relates to the level by which customers‟ orders, wants and needs are satisfied by receiving repeat orders or
initiating orders from new customers; quality may also be manifested by customers' responses such as return orders
and complaints.
a. Cost b. Quality c. Time d. Volume
4. It is a technique of understanding and analyzing the contribution of each customer or group of customers to the
overall profitability of an enterprise.
a. Business process re-engineering b. Customer profitability analysis c. Benchmarking d. None of the above
5. From the comparison between traditional and strategic management, which among the changes in the business
environment transitioned from individualism?
a. Business Relationship b. Employees c. Activities d. Methods
6. All of these are the changes made to managerial terms except:
a. Kaizen b. Balanced score-card c. Activity-based costing d. Production is technology-oriented
7. The following are the non-value-added activity except:
a. Process time b. Inspection time c. Wait time d. Move time
8. Which ABM process set the operational control environment?
a. First b. Second c. Third d. Fourth
9. The authors identified the following principles practiced by excellent companies except:
a. Productivity through people. c. Handling of customer complaints.
b. Hands-on, value driven. d. Autonomy and entrepreneurship.
10. This includes the internal failure costs and external failure costs.
a. Conformance costs b. Nonconformance costs c. Appraisal costs d. Quality costs
11. Costs that are accumulated from the initial point of research and development through the post-customer services
phase.
a. Conformance costs b. Nonconformance costs c. Appraisal costs d. Quality costs
12. This refers to the careful selection of vendors to ensure that materials will arrive on time and in accordance with
specifications.
a. Strategic Management b. Supplier’s Management c. System Development d. Sustainability Management
13. Balanced Scorecard can act as a powerful
a. Development Framework b. Operations Framework c. Service Framework d. Organizing Framework
14. The complexity of the reporting system depends on the organizational
a. Activity b. Reporting c. Performance d. Structure
15. Balanced Scorecard measures with benchmark for performance in
a. Financial areas b. Non-Financial areas c. Development areas d. Structural areas
16. Comparing one’s own product, service, or practice with the best-known similar activity is
a. Actual costing b. Benchmarking c. Backflush costing d. Budgeting
17. In which form of benchmarking is direct comparison with competitor done of a product, service, process, or method?
a. Internal benchmarking b. Competitive benchmarking c. Functional benchmarking d. Generic benchmarking
18.It is used to model business processes.
a. Activity-based costing b. Reporting-based costing c. Performance-based costing d. Structure-based costing
19.It is prevalent where people work as a whole team, recognizing team’s responsibility on the task at hand, resolving
interdepartmental issues in a team’s level requiring less managerial intervention, and allowing lines of communications
to “naturally” develop around business processes.
a. Hierarchical b. Flat Organization c. Round Organization d. Interdependent
20.It should be included in the work which produces the information. This eliminates the differentiation between
information gathering and information processing.
a. Information processing b. Information gathering c. Information medium d. Information system

CHAPTER 7 – STRATEGIC MANAGEMENT ACCOUNTING

TRUE 1. Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing
and other marketing decisions.
TRUE 2. If products are uniform and customers are similar in their demands, activitybased costing may not offer a
significant advantage over machine hours when assigning overhead.
TRUE 3. Manufacturing costs are often organized in the general ledger by function and department. When applying
activity-based costing, these manufacturing costs will be sorted by activities.
FALSE 4. The cost to set up production equipment is best allocated directly to products via machine hours.
FALSE 5. When using machine hours for allocating manufacturing overhead (instead of activity-based costing), a low-
volume item requiring a significant amount of special handling will be assigned too much manufacturing overhead.
FALSE 6. Activity-based costing will provide greater accuracy when allocating costs than a manufacturer's machine
hours when its products and customers are not diverse.
FALSE 7. Activity based costing is considered to be a traditional costing method.
TRUE 8. Strategy describes how an organization matches its own capabilities with the opportunities in the marketplace
to accomplish its overall objectives.
TRUE 9. The cost leadership strategy is for products and services that are similar to competitor’s products and
services.
FALSE10. When a product is new to the market, and a competitor has already established a rival product in the market,
a company may be able to choose its pricing strategy for the new product.
FALSE 11. Product differentiation is the creation of real product differences to convince the potential purchaser to buy
the product.
TRUE 12. Market modification is a technique used to extend the life cycle of mature products by finding users in a new
market segment.
TRUE 13. Backflush costing records costs until after the events have taken place, then costs are worked backwards
to “flush” out the manufacturing costs
FALSE 14. There are four events that trigger the records kept in backflush accounting systems.
TRUE 15. The use of just in time inventory system has brought the development of backflush costing
FALSE 16. In a true JIT system where there are absolutely no raw materials held on hand, this trigger point is relevant.
FALSE 17. The concept of the theory of constraints was first formulated and developed by Goldratt and Carter.
TRUE 18. The aim of the Theory of Constraint increase throughput contribution while decreasing conversion costs and
investment.
TRUE 19. Direct labor is not considered as a variable cost but rather as a fixed cost and direct materials as the only
pure variable cost.
FALSE 20. The higher the return per bottleneck minute would mean the more prioritized the product is in terms of
using the limiting time.

1. Which would be the most favorable basis for allocating manufacturing overhead for a factory with automated
equipment and a significant variation of services by its indirect labor?
a. ABC b. Direct Labor Hours c. Machine Hours d. Product Life Costing
2. Assigning overhead using ABC often:
a) Shifts overhead costs from high-volume products to low-volume products
b) Shifts overhead costs from low-volume products to high-volume products
c) Provides the same results as traditional costing
d) Requires one predetermined overhead rate
3. Plant depreciation is an example of which activity-level group?
a) Unit-level activity b) Facility-level activity c) Batch-level activity d) Product-level activity
4. Which of the following characteristics would be an indicator that a company would benefit from switching to activity-
based costing?
a) Only one homogenous product is produced on a continuous basis
b) The existing cost system is reliable and predictable
c) Overhead costs are high and increasing with no apparent reason
d) The costs of implementing ABC outweigh the benefits
5. Strategic Management Company uses activity-based costing for Product B and Product D. The total estimated
overhead cost for the parts administration activity pool was Php 1,150,000 and the expected activity was 3600 part
types. If Product D requires 2100 part types, the amount of overhead allocated to product D for parts administration
would be:
a) Php 275,000 b) Php 300,000 c) Php 330,000 d) Php 690,000
6. Which of the following is/are not the main benefits of product life costing cycle?
i. It results in earlier action to generate revenue or lower costs than otherwise might be considered. There are a number
of factors that need to be managed in order to maximize return in a product.
ii. Better decision should follow from a more accurate and realistic assessment of revenues and costs within a particular
life cycle stage.
iii. It can promote long term rewarding in contrast to short term rewarding.
iv. It provides an overall framework for considering total incremental costs over the entire span of a product.
v. All of the above
vi. None of the above
7. It is one of the main stages of product life cycle costing that established what product the customer wants, how
much he is prepared to pay for it and how much he will buy. Which of the following is being described?
a. Specification b. Market Research c. Development d. Tooling
8. ___________ is a tool to evaluate the success of a business in generating profit from the implementation of its
strategy.
a. SWOT Analysis b. Performance Evaluation c. Strategic Profitability Analysis d. Corrective Action
9. In response to challenges arisen by competitors and new entrants, the strategy which must be considered by the
company does include
a. Cost Leadership b. Demand Inelasticity c. Differentiated products d. Both a and c
10.An organization’s ability to offer market offerings at lower prices, in comparison with its competitors is known as
what?
a. Inelastic Demand b. Product Differentiation c. Cost Leadership d. Elastic Demand
11. This is the true trigger point because satisfying customers initially happens when the right goods are promptly
delivered to them.
a) Completion of production b) Sale of goods c) Purchase of Materials
12.This is only a secondary trigger point in a true backflush costing system because the quality of the JIT system is
measured on the date the goods are delivered to the customers and not on the date of production.
a) Completion of production b) Sale of goods c) Purchase of Materials
13.Records costs until after the events have taken place, then costs are worked backwards to “flush” out the
manufacturing costs.
a) Trigger point b) Backflush costing c) Just-in-time
14.Statement I: In just-in-time, the trigger point is traced from the date a customer made an order.
Statement II: Backflush costing records costs until after the events have taken place, then costs are worked backwards
to “flush” out the manufacturing costs.
a) Statement I: False, Statement II: True c) Statement I: False, Statement II: False
b) Statement I: True, Statement II: True d) Statement I: True, Statement II: False
15.Which is not a Trigger Points in Backflush Costing?
a. Sale of goods b. Completion of production c. Purchase of materials d. None of these
16.In the applications of technology would be inevitable if:
Statement I: This brings direct labor costs to the minimum and becomes indirect to the product being produced.
Statement II: It does not makes direct labor cost more of a fixed cost rather than a variable cost.
a. Statement I: False, Statement II: True c. Statement I: False, Statement II: False
b. Statement I: True, Statement II: True d. Statement I: True, Statement II: False
17.This theory focuses on constraints or bottlenecks which hinders a speedy production in which the binding constraint
in the production process dictates the pace of the manufacturing throughput rate.
A. Theory of Choices B. Theory of Concern C. Theory of Constraint D. Theory of Collaboration
18.It is the difference between the revenues and completely variable costs which refer to direct materials costs only.
A. Throughput or Throughput Contribution B. Conversion Cost C. Operating Expenses D. Investments
19.Order on the emphasis of throughput accounting
I. Cost Control
II. Stock Minimization
III. Throughput
A. I, II, III B. II,III,I C. III,I,II D. III, II, I
20.This measures the value of transactions with customers by detailing the related price and costs in order to know
the level of profitability and take needed managerial actions to improve the overall performance of an enterprise.
A. Customer Benefit Analysis C. Customer Satisfaction Analysis
B. Customer Profitability Analysis D. Customer Service Analysis

CHAPTER 8 - FINANCIAL STATEMENT ANALYSIS

TRUE 1. Prior capital charged is a capital employed in the business which has the right to receive interest on preference
dividends before any distribution is made to ordinary or common shareholders.
TRUE 2. Horizontal analysis presents the differences in absolute amount and in percentage between two periods, two
companies, actual or budgeted data, and other bases of analyses.
TRUE 3. The statement of cash flows, statement of financial position and statement of profit or loss are major sources
of financial information. These financial statements reflect the financing, investing and operating activities of an
enterprise.
__________ 4. A ratio greater than 1 show that the company expects to receive more cash inflows from liquidation of
current assets than it expects to pay on account of current liabilities in next 10 months.
__________ 5. Profit margin measure the ability of the business to generate profit in relation to sales, investments,
assets, equities or ordinary shares outstanding.
FALSE 6. Quick assets ratio measures the number of days defensive assets are available to meet daily cash
expenses.
TRUE 7. Return on equity measures the effectiveness of management in generating wealth from the normal business
operations in relation to the investment of the owners.
FALSE 8. Investing refers to the amount of money raised primarily from owners and creditors in order to fund investors
activities and strategies of the business.
TRUE 9. Quick ratio is also called acid test ratio.
TRUE 10. Gearing ratios measure the financial risk of a company‟s financial structure.
FALSE 11. The right side of the statement of financial position comprises the assets of the organization.
FALSE 12. When the Return on Equity is greater than Return on Assets, it indicates the unsuccessful use of financial
leverage.
FALSE 13. The inventory-conversion cycle measures the number of days it takes for the company to collect its base
receivable.
TRUE 14. The profit margin is computed as Profit margin = Profit / Sales.
TRUE 15. The higher the interest earned, the more the business should use debt to finance its activities.
TRUE 16. In the horizontal, trend, and vertical analyses, each financial statement is considered a stand-alone report.
FALSE 17. The vertical or comparative analysis gets the proportional component of each of the variables in the
financial statements in relation to a chosen base.
TRUE 18. Income less expense is profit.
__________ 19. Net income percentage takes sales growth a step further by showing profit after subtracting operating
costs.
FALSE 20. In the horizontal, trend, and vertical analyses, each financial statement is cannot be considered a stand-
alone report.

1. These are sometimes referred to as activity ratios or effectiveness ratios EXCEPT one:
A. Inventory Turnover B. Days‟ Sales in Inventory C. Growth Ratios D. Receivable Turnover
2. How to find equity multiplier?
A. ROE-Profit B. Total Assets/Shareholder‟s Equity C. Profit/Total Assets D. Total Debt/Shareholder‟s Equity
3. The basic four (4) classification of financial mix ratio analysis are as follows except __________.
A. Sales ratio B. Liquidity ratio C. Leverage ratio D. Growth ratio
4. Measures the adequacy and effective use of working capital; indicates reasonableness of the amount of current
assets.
A. Days to pay operating expenses C. Assets turnover
B. Working capital turnover D. Current assets turnover
5. _______ are indicative of the organization's potential and attractiveness as an investment option.
A. Ordinary shareholders‟ equity B. Profit margin C. Growth ratios D. Profitability ratio
6. Formula for ROA is ___________.
A. ROE-Profit B. Total Assets/Shareholder’s Equity C. Profit/Total Assets D. Total Debt/Shareholder‟s Equity
7. It indicates how generous management is in distributing its earnings to owners.
A. Payout ratio B. Profitability ratio C. Yield ratio D. Dividend ratio
8. This refers to the interests of the ordinary shareholders including that of the share capital share premium and
retained earnings.
A. Prior capital charged B. Total capital employed C. Equity capital D. Financial Gearing Ratio
9. It effectively compares cash and cash equivalents balance with current liabilities.
A. Cash Ratios B. Secondary Liquidity Ratios C. Growth Ratios D. Liquidity Ratios
10. These are the following terms that can also called as horizontal analysis except __________ analysis.
A. Comparative B. Common size C. Cross-period D. Inter-company
CHAPTER 9 - SHORT-TERM BUDGETING
FALSE 1. Sales of noncurrent assets and acquisition of noncurrent assets is both an inflow under operating activities.
FALSE 2. The Chief Operating Officer has to devise strategies to win people and optimize other resources in the
organization.
FALSE 3. Responsibility budget is a system of establishing financial plans beginning with an assumption of no-activity
and justifying each program or activity level.
FALSE 4. A good plan must be S.M.A.R.T (i.e. specific, miserable, attainable, realistic, and time-bounded.
TRUE 5. Flexible budget is also known as variable budget.
6. A budget is an orderly and systematic plan covering the future activities of an organizations, business firm
or entity for a definite period of time based on expected income and expenses.
7. Sales forecasting deals with trends in business environment.
FALSE 8. Feedback controls anticipate and prevent problems.
TRUE 9. The budgetary process is reliant on the organizational structure and purposes.
TRUE 10. Fixed or static budgeting does not segregate costs into fixed and variable components.
11.Master budget summarizes that variances can be computed even if a formal standard cost accounting
system is not used for product costing purposes.
12.A budget is an orderly and systematic plan covering the future activities of an organizations, business firm
or entity for a definite period of time based on expected income and expenses.
FALSE 13. Governmental budgeting is only a financial plan.
14.An effective body to oversee preparation and administration of the budget is a budget committee with
representations from different departments such as marketing, production, finance, and administration.
15.There are few budgeting models used by organizations and these are flexible, fixed, continuous, zero-
based, etc.
16.The difference between current assets and current liabilities is called the working capital.
17.A budget not only assists management in planning operations, but also serves as an important factor in the
control of operations.
18.Under life-cycle budgeting, it is estimated that 80% of all costs are already committed before the business
begins.
FALSE 19. Budgeted direct materials purchases equals desired beginning direct materials inventory plus direct
materials usage minus the ending materials inventory.
TRUE 20. The raw materials budget is based on budget production.

1. Which of the following statement is true about production budget?

a. It indicates meeting customers‟ wants, demands, needs, and desires.
b. An inventory policy which is the basis of budget production is normally centered on the number of units to
be sold in the following period.
c. Budget production is only based on inventory policies.
d. It should be budgeted separately for the fixed overhead in the variable overhead components.
2. Refers to the plans for the conduct of business for the planning period; it includes the budgeted income statement
and all its supporting budgets.
a. Operating budget b. Physical budget c. Participative budget d. Sales budget
3. Which of the following is/are the outflow/s of financing activities?
I. Issuance of shares of stock III. Long-term borrowing
II. Re-issuance of treasury IV. Dividends paid
a. I and II only b. I, II, and III c. IV only d. None of the above
4. This is the control which refers to ongoing processes.
a. Feedback control b. Feedforward control c. Concurrent control d. Current control
5. If a manufacturing company is planning to increase the amount of inventory on hand,
a. Production should exceed sales. c. Production should equal sales.
b. Sales should exceed production. d. Production should equal inventory.
6. When preparing the direct labor budget, the starting point should be:
a. Actual direct labor hours from the previous year. c. Budgeted production
b. Budgeted sales. d. Budgeted cost of direct labor
7. The G Company makes and sells a single product called a Clop. Each Clop requires 1.1 direct labor-hours at $8.20
per direct labor-hour. The direct labor workforce is fully adjusted each month to the required workload. The
company is preparing a Direct Labor Budget for the first quarter of the year. If the company has budgeted to produce
20,000 Clops in January, then the budgeted direct labor cost for January is:
a. $164,000 b. $180,400 c. $172,200 d. $195,600
8. The direct or raw materials purchases budget should begin with
a. Actual materials purchase from the previous year. c. Budgeted production.
b. Budgeted sales. d. Budgeted cost of raw materials.
9. Which of the following is not part of the cash budget?
a. Budgeted cash collections b. Budgeted cash payments c. Depreciation expense d. Cash borrowed or repaid
10.The starting point for preparing the master budget is the
a. Inventory policy b. Sales budget c. Production budget d. Budgeted balance sheet
11. This budget represents a comprehensive expression of management's plan for the future and how these plans are
to be accomplished.
a. Master budget b. Program budget c. Participative budget d. Flexible budget
12. The budgetary process starts from the ______.
a. Production Budget b. Sales Budget c. Financial budget d. Cash budget
13. It contains the schedule of activities for the development and production of the budget.
a. Budget process b. Budget manual c. Budget Committee d. Budget planning calendar
14. The financial budgets include the
a. Cash budget and the selling and administrative expense budget.
b. Cash budget and the budgeted balance sheet.
c. Budgeted balance sheet and the budgeted income statement.
d. Cash budget and the production budget.
15. Which one of the following organizational policies is most likely to result in undesirable managerial behavior?
a. Joe Walk, the CEO of Eagle Rock Brewery, wrote a memorandum to his executive stating, “Operating plans
are contracts and they should be met without fail.”
b. The budgeting process at Madsen manufacturing starts with operating managers providing goals for their respective
departments
c. Fullbright Lighting holds a quarterly meeting of departmental managers to consider possible changes in the budgeted
targets due to changing conditions
d. At Fargo Transportation, managers are expected to provide explanations for variances from the budget in their
departments.
16. Which of the following is true of capital budgeting decisions?
a. They define a firm's lines of business and its inherent business risk.
b. They create value for a firm when the value of the selected productive assets is worth more than their cost.
c. All of these.
d. They can involve substantial cash outlays, which once made are not easily reversed.
17. Which of the following is NOT part of the operating budget?
a. direct labor budget b. cost of goods sold budget c. production budget
d. capital budget e. selling and administrative expense budget
18. Which of the following is needed to prepare the production budget?
a. Direct materials needed for production d. Units of materials in ending inventory
b. Direct labor needed for production e. None of these
c. Expected unit sales
19. The cash budget serves which of the following purposes?
a. Documents the need for liberal inventory policies c. Reveals the amount lost due to uncollectible accounts
b. Reveals the amount of depreciation expense d. Provides information about the ability to repay loans
e. None of these
20. A budget manual, which enhances the operation of a budget system, is most likely to include
a. a chart of accounts d. documentation of the accounting system
b. distribution instructions for budget schedule e. Company policies regarding the authorization of transactions
c. employee hiring policies