Exam 1: The Role of Accounting Information in Management Decision Making

Cost-benefit analysis means that all decisions will provide a financial benefit to the organisation.

A vision statement is a theoretical description of what an organisation should become.

An example of cost accounting information that is used in financial accounting is:

Cost objects are the same as cost drivers.

Organisational strategies are the same as operating plans.

Technological advances have allowed management accountants to develop previously infeasible cost and management accounting systems.

Organisational information systems only collect accounting information.

Opportunity costs are the benefits forgone when we choose one alternative over the next best alternative.

The routine measuring, monitoring and feedback processes to managers relating to operations is:

Consider the following activities, which could be undertaken by managers at Air New Zealand. Indicate whether each item is most likely part of: S - organisational strategies P - operating plans A - actual operations or M - measuring, monitoring and motivating. Each item has only one correct response. 1. comparing actual revenues with budgeted revenues 2. developing processes for handling customer complaints 3. handling customer complaints 4. hosting an annual employee picnic 5. maintaining high quality customer service 6. negotiating contracts with the flight attendant union over the next six months 7. opening a new route to Perth 8. implementing a new luggage tracking system 9. valuing training for employees to increase organisational competence 10. reporting periodic financial results

One way of classifying cost drivers is as structural or equivalent.

Irrelevant information may be: I Useful in decision making II Internally-generated III Accurate

Customers are prepared to pay for value added activities.

Influences on the nature of the management accounting system include all of the following except:

Research and development would be considered a downstream activity in value chain analysis.

Most organisations have one stakeholder.

Structural costs drivers relate to the underlying economic structure of the organisational.

Cost accounting information is used for both management accounting and financial accounting activities.

Only large established organisations require a management accounting function.

The central feature of the value chain is its focus on activities and processes rather than functions or departments.