Provided by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
1. According to Johnson and Kaplan, management accounting developed because of an increased need
d. to evaluate internalized processes.
2. The matching concept was developed because of the need
e. all of the above.
3. According to Johnson and Kaplan, the economic model of the firm contributed to the lost of relevance for management accounting because it emphasizes
b. the single activity firm.
4. Decomposing, or separating ROI into two parts provides the
d. sales to investment ratio and net income to sales ratio.
5. DuPont used Return on Investment mainly to
c. evaluate alternative uses of capital.
6. Which investment basis (or bases) for the ROI calculation tend(s) to cause managers to dispose of assets too soon?
a. gross book value.
7. Which investment basis (or bases) for the ROI calculation tend(s) to cause managers to keep assets too long?
b. net book value.
8. Residual income is
e. income after subtracting a minimum desired amount of income.
9. Which measurement(s) below would tend to favor large divisions over small divisions if the divisions were ranked?
e. b and c.
10. The main argument for the use of residual income (RI) as a measure of performance for investment centers, as opposed to the ROI, is that
a. RI will not cause managers to reject investment alternatives that generate a return greater than the cost of capital, but lower than the divisions average ROI.
11. In Chapter 1 of Relevance Lost, Johnson and Kaplan indicate that the information produced by traditional management accounting is too late for decisions concerning
c. process control.
12. In Chapter 10 of Relevance Lost, Kaplan and Johnson discuss the need for three cost systems: product costing, financial reporting and process control. According to Kaplan and Johnson, which of the following combinations is needed for the product costing requirement?
a. annual or life cycle costs, long run variable costs, and disaggregated overhead cost allocations.
13. In reference to the cost systems mentioned in the question above, which combination is more appropriate for process control?
e. Hourly or daily costs, separate fixed and variable costs, minimum overhead allocations.
14. According to Johnson and Kaplan, which of the following deficiencies of traditional cost systems does (do) not relate to using product costs for strategic decisions such as pricing, outsourcing etc.?
a. too late.
15. Which of the following describes what Johnson and Kaplan refer to as the fundamental flaw in the financial accounting model?
e. Accounting performance reports may be improved by sacrificing the firm's long term health.