Question & Answer

If production were at a point on the production possibility curve below point S, describe the process whereby market forces would return the economy to point S.

If MC_X/MC_Y were greater than P_X/P_Y how would firms behave? What would bring production back into equilibrium where MC_X/MC_Y = P_X/P_Y?

If MU_X/MU_Y were greater than P_X/P_Y, how would consumers behave? What would bring consumption back to equilibrium where MU_X/MU_Y = P_X/P_Y?

(Threshold Concept 11) 1. Why might consumers not always make efficient consumption decisions?

(Threshold Concept 11) 2. Explain the meaning of social efficiency using the concept of Pareto optimality.

1. Trace through the effects in both factor and goods markets of the following:

               (a) An increase in the productivity of a particular type of labour.

               (b) An increase in the supply of a particular factor.

2. Show in each case how initially social efficiency will be destroyed and then how market adjustments will restore social efficiency.

1.      Match each primary value chain activity with its definition.

a.       Marketing and sales activities

b.      Service activities

c.       Operations

d.      Outbound logistics

e.       Inbound logistics

1.      Order the following primary value chain activities in the correct sequence.

a.       Marketing and sales activities

b.      Service activities

c.       Operations

d.      Outbound logistics

e.       Inbound logistics

1.       Give five examples of business processes at Tesla.  How do they create business value for Tesla and its shareholders?

1.      Describe the primary activities in the value chain for an accounting firm that issues audit reports. In your opinion, which primary activities create the most value?

Describe the primary activities in the value chain for your college or university. In your opinion, which primary activities create the most value?

1.      Which component of the AMPS model addresses the question of the best way for management accountants to communicate their analyses with decision-makers?

a.       Ask the question

b.      Master the data

c.       Perform the analysis

d.      Share the story

2.      (LO 1.5) Which of the following is considered discretionary information for a company’s accountants to provide?

a.       The break-even level of a new product

b.      The annual report submitted to shareholders detailing financial performance

c.       The federal tax return

d.      Sales information as part of the sales tax return

3.      (LO 1.1) Which of the following value chain activities is considered to be a primary activity?

a.       Procurement

b.      Inbound logistics

c.       Human resources management

d.      Information technology

4.      (LO 1.2) What requires context to create information?

a.       Knowledge

b.      Data

c.       Facts

d.      Data stores

5.      (LO 1.4) The analysis of variances (e.g., actual performance is different from budgeted performance) is most often associated with which type of analytics?

a.       Descriptive analytics

b.      Diagnostic analytics

c.       Predictive analytics

d.      Prescriptive analytics

6.      (LO 1.4) Summary statistics are most often associated with which type of analytics?

a.       Descriptive analytics

b.      Diagnostic analytics

c.       Predictive analytics

d.      Prescriptive analytics

7.      (LO 1.4) Time series analysis is most often associated with which type of analytics?

a.       Descriptive analytics

b.      Diagnostic analytics

c.       Predictive analytics

d.      Prescriptive analytics

8.       (LO 1.6) Which of the following is not one of the four overarching ethical principles mentioned in the 2017 IMA Statement of Ethical Professional Practice?

a.       Competence

b.      Honesty

c.       Confidentiality

d.      Credibility

9.      (LO 1.3) Which questions aim to more clearly understand why net income is decreasing when revenues are increasing?

a.       What happened? What is happening?

b.      Why did it happen? What are the root causes of past results?

c.       Will it happen in the future? What is the probability something will happen? Is it forecastable?

d.      What should we do based on what we expect will happen? How do we optimize our performance based on potential constraints?

10.  (LO 1.3) What type of visualization is used to track overtime labor on a continuous, real-time basis?

a.       Dashboard with static display

b.      Dashboard with dynamic display

c.       Conditional formatting

d.      Bar chart for the past 10 months

11.  (LO 1.3) Which management accounting question will require predictive analytics?

a.       Why did labor expenses increase over the past year as compared to prior years?

b.      Should the company rent or lease its headquarters office building?

c.       Can we forecast future sales for this company?

d.      Why did our cost structure (fixed and variable costs) change over the past year?

12.  (LO 1.3) Which management accounting question will require prescriptive analytics?

a.       Why did the company perform worse this year than last year?

b.      Should the company manufacture its product, or should it outsource the production of its products to an outside contractor?

c.       Can we forecast future sales, earnings, and cash flows for this company?

d.      What was the total revenue last quarter?

13.   (LO 1.2) A ________ is a person who analyzes accounting-related data to help an organization make effective business decisions.

a.       management accountant

b.      financial accountant

c.       data scientist

d.      computer programmer

14.  (LO 1.2) A ________ is a person employed to acquire, maintain, curate, access, manipulate, and statistically test data to address business questions.

a.       management accountant

b.      financial accountant

c.       data scientist

d.      computer programmer

15.  (LO 1.2) If a manager is a decision-maker, and a data scientist is a developer, then what best describes a management accountant?

a.       An interpreter

b.      An expert at investments

c.       An intermediary

d.      A broker

16.  (LO 1.5) Which of the following is mandatory information that a company’s accountants is required to maintain?

a.       The cost drivers used to allocate overhead

b.      The calculation of the difference between actual and budgeted performance

c.       The product price that should be charged to maximize profits

d.      The amount of dividends paid to shareholders

17.  (LO 1.5) Which entity sponsors the certification of management accountants as a CMA?

a.       Institute of Management Accountants

b.      Institute of Certified Public Accountants

c.       American Institute of Management Accountants

d.      Association of Certified Management Accountants

18.   (LO 1.5) Which of the following applies to management accounting?

a.       There are required audits of management accounting information.

b.      Management accounting works to minimize the cost of compliance with regulatory entities.

c.       A source of management accounting data comes from a cost accounting system.

d.      Common output is the income statement.

19.  (LO 1.3) Performing a regression falls into which of the following components of the AMPS model?

a.       Ask the question

b.      Master the data

c.       Perform the analysis

d.      Share the story

20.  (LO 1.3) Which data visualization is used to evaluate trends of values over time?

a.       Bar Chart

b.      Pie Chart

c.       Scatterplot

d.      Line Graph

3. Why will marginal social benefit not equal marginal social costs in the labour market if there exists

(a) union monopoly power and/or

(b) firms with monopsony power?

1. If monopoly power existed in an industry, would production be above or below the socially efficient level (assuming no externalities)? Which would be greater, MSB or P?

2. Assuming perfect competition and no externalities, social efficiency will also be achieved in factor markets. Demonstrate that this will be where:

                    MSB_f = MRP_f = P_f = MDU_f = MSC_f

(where MRP is the marginal product of a factor, MDU is the marginal disutility of supplying it and f is any factor – see section 10.1).

(Threshold Concept 10) 1. If general equilibrium is achieved when all markets have responded to a change and its knock-on effects, and if such changes are constantly occurring, will general equilibrium actually be achieved? Does your answer have any implications for policy?

(Threshold Concept 10) 2. If social efficiency is seen as desirable (a normative issue), should policy necessarily be geared to achieving this?

Assume that the price of a good falls. How will an ‘efficient’ level of consumption be restored?

Do you agree that, if some people gain and if no one loses, then this will be an ‘improvement’ in the well-being of society? Does it depend on who gains? Would it be possible for there to be an improvement in the well-being of society without there being a Pareto improvement?

1. A key policy objective of the UK Coalition government, achieved in April 2014, was to raise the personal income tax allowance to £10 000. This has been accompanied by the gradual removal of the same allowance from those earning over £100 000 (see Table 11.3). Evaluate these policies.

2. What would the effects be of cuts in (i) the basic rate of tax; (ii) the top rate of tax?

3. What tax changes (whether up or down) will have a positive incentive effect and also redistribute incomes more equally?

1. Who is likely to work harder as a result of a cut in income tax rates, a rich person or a poor person? Why? Would your answer be different if personal allowances were zero?

2. How will tax cuts affect the willingness of married women to return to employment after having brought up a family?

1. Do poor people gain more from a cut in income tax with an elastic or an inelastic supply of labour? Is the supply of unskilled workers likely to be elastic or inelastic?

2. Draw two diagrams like Figure 11.13, one with a steep demand curve and one with a shallow demand curve. How does the elasticity of demand affect the incidence of the income tax?

Why may a steeply progressive income tax which is designed to achieve greater vertical equity lead to a reduction in horizontal equity?

1. If a person earning £10 000 per year pays £1000 in a given tax and a person earning £20 000 per year pays £1600, is the tax progressive or regressive?

2. A proportional tax will leave the distribution of income unaffected. Why should this be so, given that a rich person will pay a larger absolute amount than a poor person?

To what extent do (a) income tax, (b) VAT and (c) a poll tax meet the various requirements for a good tax system?

How can the market distortions argument be used to justify putting excise duties on specific goods such as petrol, alcohol and tobacco? Is this the only reason why excise duties are put on these particular products?

1. Does the benefit principle conflict with either vertical or horizontal equity?

2. Would this be a good principle to apply in the case of health care?

Is it horizontally equitable for smokers and drinkers to pay more tax than non-smokers and non-drinkers?