Chapter 1

Three broad categories of customer value propositions:

1. customer intimacy 2. operational excellence 3. product leadership

Managerial Accounting help managers perform three vital activities:

1. planning 2. controlling 3. decision making

A process used by a company to identify its risks and develop responses to them that enable it to be reasonably assured of meeting its goals.

Enterprise risk management

The phase of accounting that is concerned with reporting historical financial information to external parties, such as stockholders, creditors, and regulators.

Fnancial accounting

A strategy helps a company distinguish itself from which of the following? a) Competitors b) Customers c) Stockholders

a) Competitors

Giving employees a bonus for meeting a specific goal is an example of a(n) ___________ incentive.

extrinsic

Companies have a corporate social responsibility to provide ____________ with competent management and easy access to complete and accurate financial information.

investors

The Statement of Ethical Professional Practice describes the ethical responsibilities of ________________ accountants

management

Part of the control process is

preparing performance reports

The Sarbanes-Oxley Act of 2002 was intended to protect the interests of those who invest in ________ traded companies by improving the reliability and accuracy of corporate financial reports and disclosures.

publicly

Second step in planning

specifying how to achieve the goal by answering numerous questions

_______________ risk management is a process used by a company to proactively identify and manage risks.

Enterprise

A process used by a company to identify those risks and develop responses to them that enable it to be reasonably assured of meeting its goals.

Enterprise risk management

The lubricant that keeps the economy running. Without fundamental trust in the integrity of business, the economy would operate much less efficiently.

Ethical behavior

A detailed plan for the future that is usually expressed in formal quantitative terms.

Budget

A series of steps that are followed in order to carry out some task in a business.

Business process

Distorted thought processes that can adversely affect planning, controlling, and decision making.

Cognitive bias

The process of gathering feedback to ensure that a plan is being properly executed or modified as circumstances change.

Controlling

This process would involve gathering, evaluating, and responding to feedback to ensure that this year's recruiting process meets expectations. It would also include evaluating the feedback in search of ways to run a more effective recruiting campaign next year.

Controlling

____________ includes gathering feedback needed to ensure that expectations are being met.

Controlling

A concept whereby organizations consider the needs of all stakeholders when making decisions.

Corporate social responsibility

A concept whereby organizations consider the need of all stakeholders when making decisions. It extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations.

Corporate social responsibility (CSR)

_________________ ________________ propositions are the essence of strategy.

Customer value

Emphasizes the financial consequences of past activities, objectivity and verifiability, precision, and companywide performance

Financial Accounting

A part of activity of an organization about which managers would like cost, revenue, or profit data.

Segment

A part of activity of an organization about which managers would like cost, revenue, or profit data. Examples include product lines, customer groups, geographic territories, divisions, plants, and departments.

Segment

Which of the following statements is correct? a) Management accounting skills are most important to those who are seeking a CPA designation. b) Managerial accounting skills are useful in a variety of careers and industries. c) Managerial accounting skills are only needed if your career goal is to become a Certified Management Accountant.

b) Managerial accounting skills are useful in a variety of careers and industries.

Which of the following apply t managerial accounting (check all that apply)? a) Not mandatory b) Emphasizes segment reports c) Mandatory for external reports d) Reports to managers inside the organization e) Must follow GAAP/IFRS f) Emphasizes the future

a) Not mandatory b) Emphasizes segment reports d) Reports to managers inside the organization f) Emphasizes the future

Which strategy is a company employing when it says to customers, "You should choose us because we offer higher quality products than our competitors"? a) Customer intimacy strategy b) Product leadership c) Operational excellence

b) Product leadership

Without ethical behavior the quality of products and services a) would increase b) would decrease c) would not be affected

b) would decrease

A series of steps that are followed in order to carry out some task in a business. These steps often span departmental boundaries, thereby requiring managers to cooperate across functional departmets.

business process

A management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders. It is often called just-in-time production (JIT) because products are only manufactured in response to customer orders and they are completed just-in-time to be shipped to customers. It differs from traditional manufacturing methods, which organize work departmentally and encourage departments to maximize their output even if it exceeds customer demand and bloats inventories.

Lean Production or Lean Thinking

Because it only allows production in response to customer orders, the number of units produced tends to equal the number of units sold, thereby resulting in minimal inventory. It also results in fewer defects, less wasted effort, and quicker customer response times than traditional production methods.

Lean Thinking / Lean Production / Just-in Time (JIT)

Emphasizes decisions affecting the future, relevance, timelines, and segment performance.

Managerial Accounting

The phase of accounting that is concerned with providing information to managers for use within the organization.

Managerial accounting

Examples of Corporate Social Responsibilities: Companies should provide stockholders with:

1) Competent management. 2) Easy access to complete and accurate financial information. 3) Full disclosure of enterprise risks. 4) Honest answers to knowledgeable questions.

_____________ motivation comes from within.

Intrinsic

Motivation that comes from within us.

Intrinsic motivation

A management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders.

Lean Production

First step in planning

establishing a goal

Examples of business risks: 1) Intellectual assets being stolen from computer files 2) Products harming customers 3) Losing market share due to the unforeseen actions of competitors 4) Poor weather conditions shutting down operations 5) A website malfunctioning

1) Create firewalls that prohibit computer hackers from corrupting or stealing intellectual property 2) Develop a formal and rigorous new product testing program. 3) Develop an approach for legally gathering information about competitors' plans and practices 4) Develop contingency plans for overcoming weather-related disruptions 5) Thoroughly test the website before going "live" on the internet.

Examples of Business Risks: 1) A supplier strike halting the flow of raw materials 2) A poorly designed incentive compensation system causing employees to make bad decisions 3) Financial statements inaccurately reporting the value of inventory 4) An employee stealing assets 5) An employee accessing unauthorized information

1) Establish a relationship with two companies capable of providing needed raw materials 2) Create a balanced set of performance measures that motivates the desired behavior 3) Count the physical inventory on hand to make sue that it agrees with the accounting records 4) Segregate duties so that the same employee does not have physical custody of an asset and the responsibility of accounting for it 5) Create password-protected barriers that prohibit employees from obtaining information not needed to do their jobs

Examples of Corporate Social Responsibilities: Companies should provide suppliers with:

1) Fair contract terms and prompt payments. 2) Reasonable time to prepare orders. 3) Hassle-free acceptance of timely and complete deliveries. 4) Cooperative rather than unilateral actions.

Examples of Corporate Social Responsibilities: Companies should provide environmental and human rights advocates with:

1) Greenhouse gas emissions data. 2) Recycling and resource conservation data. 3) Child labor transparency. 4) Full disclosure of suppliers located in developing countries.

Examples of Business Risks: 1) Inaccurate budget estimates causing excessive or insufficient production 2) Failing to comply with equal employment opportunity laws

1) Implement a rigorous budget review process 2) Create a report that tracks key metrics related to compliance with the laws

Examples of Corporate Social Responsibilities: Companies should provide communities with:

1) Payment of fair taxes. 2) Honest information about plans such as plant closings. 3) Resources that support charities, schools, and civic activities. 4) Reasonable access to media sources.

Business Functions Making Up the Value Chain

1) Research and Development 2) Product Design 3) Manufacturing 4) Marketing 5) Distribution 6) Customer Service

Examples of Corporate Social Responsibilities: Companies and their suppliers should provide employees with:

1) Safe and humane working conditions 2) Nondiscriminatory treatment and the right to organize and file grievances 3) Fair compensation 4) Opportunities for training, promotion, and personal development

Examples of Corporate Social Responsibilities: Companies should provide customers with:

1) Safe, high-quality products that are fairly priced. 2) Competent, courteous, and rapid delivery f products and services. 3) Full disclosure of product-related risks. 4) Easy-to-use information systems for shopping and tracking orders.

Steps in making decisions:

1. Define your alternative courses of action. 2. Identify all of the parties that will be affected by your decision. 3. Define how each course of action will favorably or unfavorably impact each affected party. Once you have a complete understanding of the decision context, seek guidance from external sources such as the IMA Statement of Ethical Professional Practice.

Involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.

Controlling

Involves selecting a course o action from competing alternatives.

Decision making

Selecting a course of action from competing alternatives.

Decision making

Which of the following is an area in which a management accountant has ethical responsibilities? a) Maintaining a high level of professional competence. b) Not disclosing any information about the business or customers to anyone outside the organization. c) Performing professional duties in accordance with personal standards.

a) Maintaining a high level of professional competence. * If information is authorized to be disclosed or legally required, hen a management accountant can disclose information.

Which strategy is a company employing when it says, "You should choose us because we can deliver products and services faster, more conveniently and at a lower price than our competitors"? a) Operational excellence b) Customer intimacy c) Product leadership

a) Operational excellence

Which of the following are preventive controls? a) authorizations b) reconciliations c) segregation of duties d) performance reviews

a) authorizations c) segregation of duties

A performance report: (Check all that apply.) a) is one example of feedback b) is often used as part of the planning function c) suggests areas of the organization that may need improvement d) represents management's plans in specific, quantitative terms

a) is one example of feedback c) suggests areas of the organization that may need improvement

Companies have a corporate social responsibility to serve (check all that apply): a) suppliers b) customers c) competitors d) communities e) employees

a) suppliers b) customers d) communities e) employees

Companies should provide _________ with nondiscriminatory treatment, the right to organize and file grievances, and fair compensation.

employees

This compares budgeted data to actual data in an effort to identify and learn from excellent performance and to identify and eliminate sources of unsatisfactory performance. It can also be used as one of many inputs to help evaluate and reward employees.

Performance Report

A report that compares budgeted data to actual data to highlight instances of excellent and unsatisfactory performance.

Performance report

Involves establishing goals and specifying how to achieve them.

Planning

The process of establishing goals and specifying how to achieve them.

Planning

The Institute of Management Accountants (IMA) of the United States has adopted this ethical code that describes in some detail the ethical responsibilities of management accountants. It consist of two parts. The first part provides general guidelines for ethical behavior. In a nutshell, a management accountant has ethical responsibilities in four broad areas: fist, to maintain a high level of professional competence; second, to treat sensitive matters with confidentiality; third, to maintain personal integrity; and fourth, to disclose information in a credible fashion. The second part of the standards specifies what should be done if an individual finds evidence of ethical misconduct.

Statement of Ethical Professional Practice

A "game plan" that enables a company to attract customers by distinguishing itself from competitors. The focal point of this should be the target customers.

Strategy

A company's "game plan" for attracting customers by distinguishing itself from competitors.

Strategy

A part of an organization that managers want to gather cost, revenue or profit data about is known as a: a) strategy b) business process c) segment d) department

c) segment

True or false: Extrinsic incentives can produce dysfunctional results.

True

True or false: If investors could not rely on a company's financial statements, they would likely reduce the amount they invest, leaving the company with less money for productive investments.

True

True or false: Personal humility towards others' contributions is an important attribute of a leader who is respectful of co-workers' value to the organization.

True

Is often used to describe how an organization's functional departments interact with one another to form business processes. It consists of the major business functions that add value to a company's products and services.

Value chain

The major business functions that add value to a company's products and services, such as research and development, product design, manufacturing, marketing, distribution, and customer service.

Value chain

Which of the following statements is true? a) A company cannot accept risk. b) A company cannot eliminate risk. c) A company cannot take steps to avoid risk. d) A company cannot take steps to reduce risk.

b) A company cannot eliminate risk.

Which of the following should companies provide to environmental and human rights advocates in relation to corporate social responsibility? a) Resources that support charities b) Full disclosure of suppliers located in developing countries c) Reasonable time to prepare orders d) Honest information about plans such as plant closings

b) Full disclosure of suppliers located in developing countries

How does the Sarbanes-Oxley Act help companies avoid a conflict of interest between the auditor and the company being audited? a) It will not let a auditing firm audit certain companies because of location. b) It prohibits accounting firms from providing non-auditing services to an audit client.

b) It prohibits accounting firms from providing non-auditing services to an audit client.

Which of these managerial accounting functions are relevant to business majors, such as marketing and human resource management (check all that apply)? a) Filing tax returns b) Planning c) Controlling d) Decision making

b) Planning c) Controlling d) Decision making

A ________ is a series of steps that are followed in order to carry out some task in a business. a) constraint b) business process c) lean thinking model d) value chain

b) business process

Management accountants are responsible for maintaining a high level of professional competence, treating sensitive matters with confidentiality, maintaining personal integrity, and: a) keeping all information confidential in all circumstances b) disclosing information in a credible fashion

b) disclosing information in a credible fashion

Controlling involves: a) preparing annual budgets b) utilizing information to ensure that company plans are being followed c) establishing goals for the company d) determining where to focus marketing efforts for the next year

b) utilizing information to ensure that company plans are being followed

Plans are often accompanied by a

budget.

What of the following is the most important thing companies should provide to customers in terms of social responsibility? a) Honest information about plans such as plant closings b) Fair contract terms and prompt payments c) Full disclosure of product-related risks

c) Full disclosure of product-related risks

What should companies provide suppliers with in relation to corporate social responsibility? a) Fair compensation b) Honest answers to knowledgeable questions c) Hassle-free acceptance of timely and complete deliveries

c) Hassle-free acceptance of timely and complete deliveries

Which of the following is NOT required to be viewed as a credible leader? a) Technical competence b) Personal integrity c) Strong mentoring skills d) Strong communication skills

c) Strong mentoring skills

Which of the following consists of major business functions that add value to a company's products and services? a) Value process b) Value proposition c) Value chain

c) Value chain

What is a benefit of the lean thinking model? a) higher inventories b) slower customer response c) fewer defects

c) fewer defects

To meet the goal of corporate social responsibility, companies should provide communities with: a) opportunities for training, promotion, and persona development b) easy access to complete and accurate financial information c) resources that support charities, schools, and civic activities

c0 resources that support charities, schools, and civic activities

Distorted thought processes, that can adversely affect planning, controlling, and decision making are referred to as ________ _________

cognitive bias

When a company says to its targeted customers, "You should choose us because we understand and respond to your individual needs better than our competitors, "the company is following the customer value proposition called ____________ ______________ strategy.

customer intimacy

Which of the following is not one of the basic questions asked during the decision making process? a) How should we execute? b) What should we be selling? c) Who should we be serving? d) When should we be selling?

d) When should we be selling?

Lower inventories, fewer defects, less wasted effort, and quicker customer response time are all benefits of the: a) value chain b) theory of constraints c) customer intimacy strategy d) lean production approach

d) lean production approach