Chapter 1 Practice
"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?
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."
Demonstrate 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.
How can management accountants help improve quality and achieve timely product deliveries?
Management accountants analyze and evaluate the costs and benefits of both financial andMa non-financial information, to suggest new quality initiatives such as TQM or providing faster customer service.
"Management accounting should not fit the straitjacket of financial accounting." Explain and give an example.
Management accounting does not have to comply with the same standards of financial accounting such as generally accepted accounting principles.
How does management accounting differ from financial accounting?
Management accounting measures and reports financial and non financial 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).
"Management accounting deals only with costs." Do you agree? Explain.
No. Management accountingNo measures, analyzes, and reports financial and non-financial information that helps managers define the organization's goals, and make decisions to fulfill them.
Distinguish planning decisions from control decisions.
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.
A management accountant can help formulate a strategy by
Providing information about the sources of competitive advantage, such as the cost, productivity, or efficiency advantage of their company relative to competitors.
The business functions in the value chain include:
Research and development, Design of products, services or processes, Production, Marketing, Distribution, and Customer service.
Explain the term "supply chain" and its importance to cost management.
Supply chain describes the flow ofSu 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.
Where does the management accounting function fit into an organization's structure?
The controller is the chief management accounting executive. The corporate controller reports to the chief financialTh 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.
Pfizer, a pharmaceutical company, incurs the following costs: a. Payment of booth registration fee at a medical conference to promote new products to physicians b. Cost of redesigning an insulin syringe to make it less painful c. Cost of a toll-free telephone line used for customer inquiries about drug usage, side effects of drugs, and so on d. Equipment purchased to conduct experiments on drugs yet to be approved by the government e. Sponsorship of a professional golfer f. Labor costs of workers in the packaging area of a production facility g. Bonus paid to a salesperson for exceeding a monthly sales quota h. Cost of Federal Express courier service to deliver drugs to hospitals Requirement Classify each of the cost items (a-h) as one of the business functions of the value chain.
a. Marketing b. Design c. Customer Service d. Research and Development e. Marketing f. Production g. Marketing h. Distribution
Tadeski Foods makes frozen dinners that it sells through grocery stores. Typical products include turkey, pot roast, fried chicken, and meatloaf. The managers at Tadeski have recently proposed a line of frozen chicken pies. They take the following actions to help decide whether to launch the line. a. Tadeski's test kitchen prepares a number of possible recipes for a consumer focus group. b. Sales managers estimate they will sell more chicken pies in their northern sales territory than in their southern sales territory. c. Managers discuss the possibility of introducing a new chicken pie. d. Managers compare actual costs of making chicken pies with their budgeted costs. e. Costs for making chicken pies are budgeted. f. The company decides to introduce a new chicken pie. g. To help decide whether to introduce a new chicken pie, the company researches the costs of potential ingredients. Requirement Classify each of the actions (a-g) as a step in the five-step decision-making process (identify the problem and uncertainties, obtain information, make predictions about the future, make decisions by choosing among alternatives; implement the decision, evaluate performance, and learn). The actions are not listed in the order they are performed.
a. Obtain information b. Make predictions about the future c.
Compaq Computer incurs the following costs: a. Electricity costs for the plant assembling the Presario computer line of products b. Transportation costs for shipping the Presario line of products to a retail chain c. Payment to David Kelley Designs for design of the Armada Notebook d. Salary of computer scientist working on the next generation of minicomputers e. Cost of Compaq employees' visit to a major customer to demonstrate Compaq's ability to interconnect with other computers f. Purchase of competitors' products for testing against potential Compaq products g. Payment to television network for running Compaq advertisements h. Cost of cables purchased from outside supplier to be used with Compaq printers Requirement Classify each of the cost items (a-h) into one of the business functions of the value chain.
a. Production b. Distribution c. Design d. Research and Development e. Customer Service or Marketing f. Design or Research and Development g. Marketing h. Production
What three guidelines help management accountants provide the most value to managers?
(1) Employ a cost-benefit approach, (2) Recognize behavioral and technical considerations, and (3) Apply the "different costs for different purposes" notion
Name the four areas in which standards of ethical conduct exist for management accountants in the United States. What organization sets forth these standards?
(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:
(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.
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 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.