Cost Management

Financial accountants use estimates of financial value differently than either cost or management accountants.

Identify two differences in use. A. Management accountants use financial accounting information to make an analysis or a report using techniques that are appropriate to the management decision. Your answer is correct. B. Financial accountants classify transactions according to CPA standards and GAAP. Your answer is correct. C. Management accountants classify transactions according to CPA standards and GAAP. They report this information to external parties. D. The goal of financial accounting is to​ measure, analyze, and report financial and nonfinancial information to internal managers.

Of what importance for management accountants are corporate governance, codes of conduct, and ethics?

Management accountants must comply with all legislation, civil and criminal. This is a profession that must also comply with well-publicized codes of conduct and ethics. Laws are enforced by the relevant jurisdiction, but professional codes are enforced by the profession itself. Management accountants have ethical responsibilities that are related to competence, confidentiality, integrity, and objectivity.

g. Persuading carriers to accept merchandise for shipment in December of the current year although they normally would not have done so.

Possible Violation

b. Extending the close of the current fiscal year beyond December 31 so that some sales of next year are included in the current year.

Violation

c. Altering dates of shipping documents of next January's sales to record them as sales in December of the current year.

Violation

f. Deferring the current period's reported advertising costs by having Gourmet Foods' outside advertising agency delay billing December advertisements until January of next year or by having the agency alter invoices to conceal the December date.

Violation

What guidelines do manage-ment accountants use?

Three guidelines that help management accountants increase their value to man· agers are (a) employ a cost-benefit approach, (b) recognize behavioural as well as technical considerations, and (c) identify different costs for different purposes. Management accounting is an integral part of the controller's function in an organization. In most organizations, the controller reports to the chief financial officer, who is a key member of the top management team.

Identify similarities among accountants.

A. All accountants are required to produce reports that provide crucial information to upper management. Your answer is not correct. B. All accountants are required to not materially misstate the economic value of the company. This is the correct answer. C. All accountants are bound to report estimates of financial outcomes from conducting business. Your answer is correct. D. All accountants are bound to their trade organization and must follow their regulations.

How do companies add value?

Companies add value through R&D; design of products, services, or processes; production; marketing; distribution; and customer service. Managers in all busi- ness functions of the value chain use management accounting information about the value chain. Customers expect companies to deliver performance through cost, efficiency, quality, timeliness, and innovation.

What information does cost accounting provide?

Cost accounting measures, analyzes, and reports financial and nonfinancial information related to the cost of acquiring or using resources in an organiza- tion. Cost accounting provides information for both management and financial accounting. Management accountants contribute to both operating and strategic decisions by providing information about the sources of competitive advantage.

End-of-Year Action Violation? a. Deferring December's routine monthly maintenance on packaging equipment by an independent contractor until January of next year.

No Violation

d. Giving salespeople a double bonus to exceed December sales targets.

No Violation

e. Deferring the current period's advertising by reducing the number of television spots run in December and running more than planned in January of next year.

No Violation

What role does relevant accounting information play in the five steps of decision making?

Planning is undertaken prior to action while control is an evaluation of how well plans have been implemented. Different reports and presentations of the same information are used to identify a problem, gather additional relevant information, predict the future, decide among alternatives, implement the deci- sion, and evaluate results. This information identifies and is used to respond to strategic and operating problems.

Explain the term supply chain and its importance to cost management.

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.

1. Potential reasons why the​ snack-foods division president might want to take these​ end-of-year actions​ include:

​(a) Management incentives. Gourmet Foods may have a division bonus scheme based on​ one-year reported division earnings. Efforts to front-end revenue into the current year or transfer costs into the next year can increase this bonus. ​(b) Promotion opportunity and job security. Top management of Gourmet Foods likely will view those division managers that deliver high reported earnings growth rates as being the best prospects for promotion. ​(c) Retain division autonomy. If top management of Gourmet Foods adopts a "management by exception" ​approach, divisions that report sharp reductions in their earnings growth rates may attract a sizable increase in top management supervision.