Chapter 1
Strategic cost management
Describes cost management that specifically focuses on strategic issues.
Chief Financial Officer (CFO)
Executive responsible for overseeing the financial operations of an organization. Also called finance director.
Marketing
Promoting and selling products or services to customers or prospective customers.
Customer service
Providing after-sale support to customers.
budget
Quantitative expression of a proposed plan of action by management for a specified period and an aid to coordinating what needs to be done to execute that plan.
Which of the following is not a primary function of the management accountant? A. Communicates financial results and position to external parties. B. Uses information to develop and implement business strategy. C. Aids in the decision making to help an organization meet its goals. D. Provides input into an entity's production and marketing decisions.
A. Communicates financial results and position to external parties.
Design of products and processes
The detailed planning, engineering, and testing of products and processes
Sustainability
The development and implementation of strategies to achieve long-term financial, social, and environmental goals.
Supply chain
The flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations.
Customer relationship management (CRM)
A strategy that integrates people and technology in all business functions to deepen relationships with customers, partners, and distributors.
What three guidelines help management accountants provide the most value to managers? A. (1) Employ a cost-benefit approach, (2) Recognize behavioral and technical considerations, and (3) Apply the "different costs for different purposes" notion B. (1) Decision-making, (2) Planning, and (3) ControlC. (1) Understand the organization structure, (2) Employ a cost-benefit approach, and (3) Maintain integrity and credibility in every aspect of the job D. (1) Planning, (2) Control, and (3) Performance evaluation and learning
A. (1) Employ a cost-benefit approach, (2) Recognize behavioral and technical considerations, and (3) Apply the "different costs for different purposes" notion
"Management accounting deals only with costs." Do you agree? Explain. A. No. Management accounting measures, analyzes, and reports financial and non-financial information that helps managers define the organization's goals, and make decisions to fulfill them. B. No. Management accounting does not use cost information, it only records financial activities of the company in accordance with GAAP. C. Yes. Management accounting only measures, analyzes, and reports financial and nonfinancial information relating to the costs of acquiring or using resources in an organization. D. No. Management accounting only analyzes the manufacturing of products for customers in order to assess product and customer profitability.
A. No. Management accounting measures, analyzes, and reports financial and non-financial information that helps managers define the organization's goals, and make decisions to fulfill them.
A management accountant can help formulate a strategy by A. providing information about the sources of competitive advantage, such as the cost, productivity, or efficiency advantage of their company relative to competitors. B. measuring business transactions that are based on generally accepted accounting principles (GAAP), which will then determine financial figures that effect managers' compensation. C. providing information about the cost of a product which will help to determine which products to offer. D. providing information about historical financial results.
A. providing information about the sources of competitive advantage, such as the cost, productivity, or efficiency advantage of their company relative to competitors.
Production
Acquiring, storing, coordinating, and assembling resources to produce a product or deliver a service.
Total quality management (TQM)
An integrative philosophy of management for continuously improving the quality of products and processes.
Cost-benefit approach
Approach to decision making and resource allocation based on a comparison of the expected benefits from attaining company goals and the expected costs.
"Knowledge of technical issues such as computer technology is a necessary but not sufficient condition to becoming a successful management accountant." Do you agree? Why? A. Disagree. Virtually all of the management accountant's role is technical-based. Thus, knowledge of technical issues such as computer technology is a necessary and sufficient condition to becoming a successful management accountant. B. Agree. A successful management accountant requires general business skills and people skills as well as technical skills. C. Agree. A successful management accountant requires a CMA certificate and a CFA certificate in addition to proficient technical skills. D. Agree. A successful management accountant requires a CMA certificate as well as technical skills.
B. Agree. A successful management accountant requires general business skills and people skills as well as technical skills.
As a new controller, reply to this comment by a plant manager: "As I see it, our accountants may be needed to keep records for shareholders and Uncle Sam, but I don't want them sticking their noses in my day-to-day operations. I do the best I know how. No bean counter knows enough about my responsibilities to be of any use to me." A. Reply by explaining to the plant manager the importance of keeping tabs on production personnel to be sure they are following all the generally accepted accounting principles. B. Respond by demonstrating to the plant manager a good knowledge of the technical aspects of the plant and spend some time on the plant floor speaking to plant personnel to get a better understanding of the facility. C. Reply by emphasizing that the plant manager cannot make accurate decisions without a controller to provide the proper guidance. D. Reply by suggesting that the plant manager review the plant controllers resume and explain about the success with assisting of budgets and making sure plant managers do not exceed their budgets.
B. Respond by demonstrating to the plant manager a good knowledge of the technical aspects of the plant and spend some time on the plant floor speaking to plant personnel to get a better understanding of the facility.
Where does the management accounting function fit into an organization's structure? A. The external auditor is the chief management accounting executive. The external auditor reports to the internal auditor, a staff function. Companies also have business unit auditors or regional auditors who support regional managers in major geographic regions. B. The controller is the chief management accounting executive. The corporate controller reports to the chief financial officer, a staff function. Companies also have business unit controllers who support business unit managers or regional controllers who support regional managers in major geographic regions. C. The internal auditor is the chief management accounting executive. The internal auditor is the highest position within an organization. The internal auditor does not report to anyone. D. The internal auditor is the chief management accounting executive. The internal auditor reports to the external auditor, a staff function. Companies also have business unit auditors or regional auditors who support regional managers in major geographic regions.
B. The controller is the chief management accounting executive. The corporate controller reports to the chief financial officer, a staff function. Companies also have business unit controllers who support business unit managers or regional controllers who support regional managers in major geographic regions.
What steps should a management accountant take if established written policies provide insufficient guidance on how to handle an ethical conflict? A. Discuss the problem only with the immediate superior. The management accountant need not take any further action if the supervisor does not take appropriate action. B. (a) Discuss the problem with any manager. (b) Clarify relevant ethical issues by public discussions with the board of directors. (c) Consult local law enforcement officials. C. (a) Discuss the problem with the immediate superior (except when it appears that the superior is involved). (b) Clarify relevant ethical issues by confidential discussion with an IMA Ethics Counselor or other impartial advisor. (c) Consult your own attorney as to legal obligations and rights concerning the ethical conflicts. D. The management accountant need not take any further action if established written policies provide insufficient guidance on how to handle an ethical conflict.
C. (a) Discuss the problem with the immediate superior (except when it appears that the superior is involved). (b) Clarify relevant ethical issues by confidential discussion with an IMA Ethics Counselor or other impartial advisor. (c) Consult your own attorney as to legal obligations and rights concerning the ethical conflicts.
How can management accountants help improve quality and achieve timely product deliveries? A. Management accountants can help improve quality and achieve timely product deliveries by analyzing and evaluating the costs of only financial information, to correct any irregularities and provide faster customer service. B. Management accountants can improve quality by only reporting an organization's current quality controls and correct any irregularities. C. Management accountants can help improve quality and achieve timely product deliveries by recording and reporting an organization's current quality and timeliness levels and by analyzing and evaluating the costs and benefits of both financial and non-financial information, to suggest new quality initiatives such as TQM or providing faster customer service. D. Management accountants can help improve quality and achieve timely product deliveries by focusing on reporting to external parties such as investors, government agencies, banks, and suppliers.
C. Management accountants can help improve quality and achieve timely product deliveries by recording and reporting an organization's current quality and timeliness levels and by analyzing and evaluating the costs and benefits of both financial and non-financial information, to suggest new quality initiatives such as TQM or providing faster customer service.
How does management accounting differ from financial accounting? A. Management accounting measures, analyzes, and reports financial and nonfinancial information relating to the costs of acquiring or using resources in an organization. Financial accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. B. Management accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Financial accounting measures, analyzes, and reports financial and nonfinancial information relating to the costs of acquiring or using resources in an organization. C. Management accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Financial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP). D. Management accounting measures, analyzes, and reports financial and nonfinancial information relating to the costs of acquiring or using resources in an organization. Financial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP).
C. Management accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Financial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP).
Explain the term supply chain and its importance to cost management. A. Supply chain describes the sequence of business functions in which customer usefulness is added to products or services. Cost management is most effective when it integrates and coordinates activities across each business function in an individual company's value chain. B. Supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers within an individual organization. Cost management is most effective when it integrates and coordinates activities across each business function in an individual company's value chain. C. Supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations. Cost management is most effective when it integrates and coordinates activities across all companies in the supply chain as well as across each business function in an individual company's value chain. D. Supply chain describes the sequence of business functions in which customer usefulness is added to products or services. Cost management is most effective when it integrates and coordinates activities across all companies in the supply chain as well as across each business function in an individual company's value chain.
C. Supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations. Cost management is most effective when it integrates and coordinates activities across all companies in the supply chain as well as across each business function in an individual company's value chain.
Name the four areas in which standards of ethical conduct exist for management accountants in the United States. What organization sets these standards? A. (1) Competence, (2) Confidentiality, (3) Honesty, and (4) Fairness. These standards are set by Generally Accepted Auditing Standards (GAAS). B. (1) Honesty, (2) Fairness, (3) Integrity, and (4) Objectivity. These standards are set by the Council of Management Accountants (CMA). C. (1) Honesty, (2) Fairness, (3) Objectivity, and (4) Responsibility. These standards are set by the Institute of Management Accountants (IMA). D. (1) Competence, (2) Confidentiality, (3) Integrity, and (4) Credibility. These standards are set by the Institute of Management Accountants (IMA).
D. (1) Competence, (2) Confidentiality, (3) Integrity, and (4) Credibility. These standards are set by the Institute of Management Accountants (IMA).
The five-step decision-making process includes: A. (1) Research and development, (2) Making decisions by choosing among alternatives, (3) Production, (4) Distribution, and (5) Customer service. B. (1) Research and development, (2) Production, (3) Marketing, (4) Distribution, and (5) Customer service. C. (1) Identifying the problem and uncertainties, (2) Research and development, (3) Making decisions by choosing among alternatives, and (4) Implementing the decision, evaluating performance and learning, and (5) Customer service. D. (1) Identifying the problem and uncertainties, (2) Obtaining information, (3) Making predictions about the future, (4) Making decisions by choosing among alternatives, and (5) Implementing the decision, evaluating performance and learning.
D. (1) Identifying the problem and uncertainties, (2) Obtaining information, (3) Making predictions about the future, (4) Making decisions by choosing among alternatives, and (5) Implementing the decision, evaluating performance and learning.
"Management accounting should not fit the straitjacket of financial accounting." Explain and give an example. A. Management accounting cannot include assets or liabilities with nicknames that are developed internally, which is allowed under GAAP. B. Management accounting does not allow managers to charge interest on owners' capital to help judge a division's performance, even though such a charge is required under GAAP. C. Management accounting and financial accounting can use asset or liability measurement rules, such as present values or resale prices, whichever is more reasonable at the time. D. Management accounting does not have to comply with the same standards of financial accounting such as generally accepted accounting principles.
D. Management accounting does not have to comply with the same standards of financial accounting such as generally accepted accounting principles.
Distinguish planning decisions from control decisions. A. Planning decisions are budget oriented, where control decisions focus on financial reporting. B. Planning decisions focus on organizational goals without consideration of past performance. Control decisions focus on predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and deciding how to evaluate performance. C. Planning decisions focus on examining past performance and systemically exploring alternative ways to make better-informed decisions and plans in the future. Control decisions focus on taking actions that implement the planning decisions, deciding how to evaluate performance, and what related feedback to provide that will help future decision making. D. Planning decisions focus on selecting organization goals, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to attain them to the entire organization. Control decisions focus on taking actions that implement the planning decisions, deciding how to evaluate performance, and what related feedback to provide that will help future decision making.
D. Planning decisions focus on selecting organization goals, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to attain them to the entire organization. Control decisions focus on taking actions that implement the planning decisions, deciding how to evaluate performance, and what related feedback to provide that will help future decision making.
The business functions in the value chain include: A. Identifying the problem and uncertainties, Obtaining information, Making predictions about the future, Making decisions by choosing among alternatives, and Implementing the decision. B. Manufacturing, Packaging, and Distribution. C. Research and development, Making decisions by choosing among alternatives, Production, Distribution, and Customer service. D. Research and development, Design of products and processes, Production, Marketing, Distribution, and Customer service.
D. Research and development, Design of products and processes, Production, Marketing, Distribution, and Customer service.
Research and development (R&D)
Generating and experimenting with ideas related to new products, services, or processes.
Learning
Involves managers examining past performance and systematically exploring alternative ways to make better-informed decisions and plans in the future.
Line management
Managers (for example, in production, marketing, or distribution) who are directly responsible for attaining the goals of the organization.
Financial accounting
Measures and records business transactions and provides financial statements that are based on generally accepted accounting principles. It focuses on reporting to external parties such as investors and banks.
Cost accounting
Measures, analyzes, and reports financial and nonfinancial information relating to the costs of acquiring or using resources in an organization. It provides information for both management accounting and financial accounting.
Management accounting
Measures, analyzes, and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. It focuses on internal reporting.
Distribution
Processing orders and delivering products or services to customers.
Finance director
See chief financial officer (CFO). Executive responsible for overseeing the financial operations of an organization. Also called finance director.
Planning
Selecting organization goals, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to achieve them to the entire organization.
Strategy
Specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.
Staff management
Staff (such as management accountants and human resources managers) who provide advice, support, and assistance to line management.
Control
Taking actions that implement the planning decisions, evaluating past performance, and providing feedback and learning that will help future decision making.
Cost management
The approaches and activities of managers to use resources to increase value to customers and to achieve organizational goals
Controller
The financial executive primarily responsible for management accounting and financial accounting. Also referred to as chief accounting officer.
Value chain
The sequence of business functions by which a product is made progressively more useful to customers.
