[1] Objectives, Role, and Scope of Management Accounting

A staff authority (rather than line authority) prevails between

A. Controller and assistant controller.

B. VP for Production and controller

C. controller and shipping clerk.

D. VP for Finance and treasurer.

B. VP for Production and controller

The answer is B. VP for Production and controller because of how line vs. staff authority works:

• Line authority: Authority to make decisions and give orders that directly affect the core operations of the business (e.g., production, sales).

• Staff authority: Advisory or support authority; provides expertise, recommendations, and guidance but cannot compel line managers to act.

✅ So B is correct because it shows a line manager (VP Production) being advised by a staff function (controller), not directly controlled by them.

A, C, D — they have direct authority over their subordinate → LINE

In comparing financial and management accounting information, which of the following more accurately describes management accounting information?

A. Budgeted, informative, adaptable

B. Compatible, verifiable, monetary

C. Historical, precise, useful.

D. Required, estimated, internal.

A. Budgeted, informative, adaptable

Other options:

• C. Historical, precise, useful → Describes financial accounting more than management accounting.

• D. Required, estimated, internal → Only partially fits; “required” is more a feature of financial reporting.

✅ So A fits because management accounting is forward-looking, flexible, and tailored to managerial needs, unlike financial accounting which is backward-looking and standardized.

Financial accounting and cost accounting are both highly concerned with

A. Determining product costs

B. Preparing budgets

C. Providing managers with information necessary for control purposes

D. Determining performance standards

A. Determining product costs

The answer is A. Determining product costs because both financial accounting and cost accounting deal with the measurement and reporting of costs related to products or services. Here’s why:

• Financial accounting focuses on reporting cost of goods sold and inventory valuation for external users. To do this accurately, it needs product cost information.

• Cost accounting is specifically designed to determine and analyze product costs to help management with pricing, budgeting, and cost control.

The other options:

• B. Preparing budgets → That’s mostly management accounting, not financial accounting.

• C. Providing managers with information for control → Primarily management accounting, not financial accounting.

• D. Determining performance standards → That’s management control, not financial reporting.

✅ So A is correct because product costing is the one area where financial and cost accounting overlap: financial accounting needs it for reporting, and cost accounting develops it for analysis.

If you want, I can make a tiny diagram showing where financial, cost, and management accounting overlap—it makes these “tricky overlaps” super clear. Do you want me to do that?

To meet decision-making needs, the process of gathering and analyzing information about a company and its competitive environment is known as

A. business process reengineering.

B. process elimination.

C. benchmarking

D. business intelligence.

D. business intelligence.

Management accounting is an integral part of the management process. As such it provides essential information for the following objectives except:

A. Maintaining the current level of resource utilization as well as internal and external communication.

B. Planning strategies and controlling current activities of the organization.

C. Enhancing objectivity in decision-making.

D. Measuring and evaluating performance.

C. Enhancing objectivity in decision-making.

• Management accounting focuses on providing relevant information for planning, controlling, and evaluating performance within an organization (options A, B, and D).

• While the information can help managers make better decisions, objectivity itself isn’t guaranteed—management accounting often involves estimates, forecasts, and judgments, so decisions may still be subjective.

In short:

• A, B, D → Direct objectives of management accounting.

• C → More of a potential benefit, not a formal objective.

✅ So C is correct because management accounting supports decision-making but doesn’t inherently make decisions more “objective.”