Strategic Cost Management

Part 1: Choose the word that would complete the statement.

1. A cost that is easily traceable to a cost object is known as _______. (indirect, variable, direct,
fixed)
2. A cost that is not easily traceable to a cost object is known as _______. (indirect, variable, direct,
fixed)
3. Which of the following terms is used to denote the response of a cost to the change in business
activity? (Cost behavior, Cost Trend, cost response, cost accumulation)
4. A cost that changes in total amount with the change in the level of activity is known as ____.
(fixed, mixed, variable, conversion)
5. A cost that does not change in per unit basis, regardless to activity is called _____. (fixed, mixed,
variable, conversion)
6. A cost that changes in per unit amount with the change in the level of activity is known as ____.
(fixed, mixed, variable, conversion)
7. A cost that does not change, in total, regardless to level of activity is called _____. (fixed, mixed,
variable, conversion)
8. Mixed-cost can also be called _____ cost. (Double cost, semi-variable, fluctuating, full)
9. ______ is not classified as a product cost. (Depreciation of Factory Equipment, Electricity cost
of office of factory foreman, cost of fuel for factory use, cost of shipping to customers)
10. ____ is not a period cost. (Advertising cost, Sales commission, Interest, Direct labor)
11. The cost incurred to acquire or manufacture a product is known as ______ cost. (period,
product, Administrative, Real)
12. ____ would least likely to receive detailed management accounting reports. (Stockholders, Sales
Representative, Production Supervisor, Managers)
13. ____ is a type of information used in management accounting. (Financial, Nonfinancial, Long-
term oriented information, All mentioned)
14. ____ is a set of policies, procedures and approaches to business that produce success. (Strategy,
Business Process, Internal Control)
15. ___ includes strategic, tactical and operating aspects. (Controlling, Communication, Planning,
Evaluating)
16. ____ is when a firm compares itself with the best practice of competitors or other comparable
organizations. (Benchmarking, Process Improvement, Empowerment, Total Quality Philosophy)
17. ____ is the financial executive primarily responsible for management accounting and financial
accounting. (controller, Treasurer, Internal auditor, Risk Manager)
18. ____ includes reviewing and analyzing financial and other records to attest to the integrity of
the organization’s financial reports and to adherence to its policies and procedures.
(Controllership, Treasury, Internal Audit, Risk Management)
19. ____ is the executive responsible for overseeing the financial operations of an organization.
(Chief Executive Officer, Controller, Chief Operating Officer, Chief Financial Officer)
20. ____ is concerned with the acquisition, financing and management of assets of a business
concern to maximize the wealth of the firms for its owners. (Controllership, Treasurership,
Internal Audit, Risk Management)
21. ____ is maintaining an appropriate level of professional competence by ongoing development of
their knowledge and skills. (Competence, Confidentiality, Integrity, Objectivity)
22. ____ is refraining from disclosing confidential information acquired in the course of their work
except when authorized, unless legally obligated to do so. (Competence, Confidentiality,
Integrity, Objectivity)
 23. ___ is avoiding actual or apparent conflicts of interest and advise all appropriate parties of any
potential conflict. (Competence, Confidentiality, Integrity, Objectivity)
24. ___ is disclosing all relevant information that could reasonably be expected to influence an
intended user’s understanding of the reports. (Competence, Confidentiality, Integrity,
Objectivity)
25. ___ is the practice of accounting in which the accountant develops and uses cost management
information. (Financial Management, Auditing, Cost Management, Consultancy)

Part 2: Write T if the statement is true and F if the statement is false.

1. Prime cost – Direct Labor = Direct Materials
2. Conversion cost – Direct Labor = Manufacturing overhead cost
3. Financial Accounting is historical while Management accounting is future-oriented.
4. The board of directors provides incentives and monitoring to shareholder’s to pursue the
objectives of Top management.
5. Corporate Governance is the system by which a company is directed and controlled.
6. Internal control is a process designed to provide reasonable assurance that objectives are being
achieved.
7. Preventive controls deter undesirable events.
8. Detective controls set undesirable events.
9. Well-designed internal control cannot be broken down. F
10. Enterprise Risk management is a series of step that are followed in order to carry out some task
in a business.
11. Corporate Social Responsibility Perspective is a concept whereby organizations consider the
needs of all stakeholders when making decisions.
12. Variable cost always vary whether in total or per unit.
13. Fixed cost is always fixed even at per unit basis.
14. In resolving ethical conflicts, always go straight to the court to avoid litigation.
15. Funds procurement is a function of the treasurer.
16. One qualification of an effective controller is the CPA license.
17. Planning involves identifying alternatives and selecting a course of action and specifying how the
action will be implemented.
18. Controlling involves the evaluation of whether actual performance conforms with planned goals.
19. Allotment involves determination of predictive information for making important business
decisions.
20. Strategic management involves the development of a sustainable competitive position in which
the firm’s competitive advantage spells continued success.
21. Line authority is the authority to command action or give orders to subordinates.
22. Staff authority is the authority to advise but not command others; it is exercised laterally or
upward.
23. Consult attorneys as to legal obligations and rights concerning ethical conflict.
24. A Certified Public Accountant is one who has passed the rigorous qualifying examination, has
met an experience requirement and participates in continuing education.
25. A Certified Management Accountant is one who has met the pre-qualification educational
requirement, passed the CPA licensure examinations given by the Professional Regulatory Board
of Accountancy.
Intermediate Accounting
Identification:
1. ________ is an asset that is intended to be sold in the ordinary course of business.
2. The inventory cost flow assumption where the cost of the most recent purchase is matched first
against sales revenues is _______.
3. The inventory cost flow assumption where the cost of the most recent purchases are likely to
remain in inventory ______.
4. The inventory cost flow assumption where the oldest cost of inventory items is likely to remain
on the balance sheet is ________.
5. The account Inventory will appear on the balance sheet as a current asset at an amount that
often reflects the __________ of the merchandise on hand.
6. The inventory system that does NOT update the Inventory account automatically at the time of
each purchase or sales is the _______________ method/system.
7. The inventory system that updates the Inventory account automatically at the time of each
purchase or sales is the _______________ method/system.
8. The difference between the Cost of Goods Available and the Cost of Goods Sold is __________.
9. Net Purchases is Gross Purchases minus Purchase Returns and Allowances and __________.
10. A ________ liability is an obligation that is payable within one year.
11. These are expenses not yet payable to a third party, but already incurred.
12. These are payments made by customers in advance of the completion of their orders for goods
or services.
13. These are the trade payables due to suppliers, usually as evidenced by supplier invoices.
Account payable
14. The current portion of a long-term liability is classified as ______.
15. _______ are long-term obligations expected to be settled beyond one year.

True or False:
1. A liability arises from a past transaction or event. They arise from selling of inventory to be
purchased, purchase of office supplies and other assets, use of electricity, labor from
employees, etc.
2. A liability is a past obligation of a particular entity.
3. The settlement of a liability requires an inflow of resources from the entity. The entity loses
resources in paying the obligation. The most common form of settlement is cash payment.
4. Current liabilities are those that entity expects to settle within the entity's normal operating
cycle or 1 year, whichever is longer.
5. A retailer's inventory cost should include freight-in on the merchandise purchased with terms
FOB shipping point.
6. To record the sale of goods for cash in a perpetual inventory system only one journal entry is
necessary to record the reciept of cash and the sales revenue.
7. In a perpetual inventory system, a company determines the cost of goods sold each time a sale
occurs.
8. In a periodic inventory system, companies keep detailed inventory records of the goods on hand
throughout the period.
9. FOB destination means that the seller places the goods free on board the common carrier and
the buyer pays the freight costs.
10. The FIFO method assumes that the earlies goods purchased are the first to be sold.