ACCT526 Ch 1

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Which of the following is a standard of ethical conduct for managerial accountants as per the Institute of Management Accountants? a) Competence b) Confidence c) Performance d) Respect for others

a) Competence

Customer Value, Strategic Positioning Adriana Alvarado has decided to purchase a personal computer. She has narrowed the choices to two: Drantex and Confiar. Both brands have the same processing speed, 6.4 gigabytes of hard-disk capacity, two USB ports, and a DVDRW drive, and each comes with the same basic software support package. Both come from mail-order companies with good reputations. The selling price for each is identical. After some review, Adriana discovers that the cost of operating and maintaining Drantex over a 3-year period is estimated to be $300. For Confiar, the operating and maintenance cost is $600. The sales agent for Drantex emphasized the lower operating and maintenance costs. The agent for Confiar, however, emphasized the service reputation of the product and the faster delivery time (Confiar can be purchased and delivered 1 week sooner than Drantex). Based on all the information, Adriana has decided to buy Confiar. 3. CONCEPTUAL CONNECTION When asked why she decided to buy Confiar, Adriana responded, "I think that Confiar offers more value than Drantex." What are the possible sources of this greater value? What implications does this have for the managerial accounting information system? The _________ service component and its delivery time appear to be better than _________. Thus, the realization of these features appears to outweigh the additional sacrifice (the additional operating and maintenance cost) associated with the Confiar PC. The implications for management accounting are straightforward. The management accounting _______________ should collect and report information about customer realization and sacrifice. Much of this information is external to the firm but clearly needed by management.

Confiar, Drantex's, information system

Customer Value, Strategic Positioning Adriana Alvarado has decided to purchase a personal computer. She has narrowed the choices to two: Drantex and Confiar. Both brands have the same processing speed, 6.4 gigabytes of hard-disk capacity, two USB ports, and a DVDRW drive, and each comes with the same basic software support package. Both come from mail-order companies with good reputations. The selling price for each is identical. After some review, Adriana discovers that the cost of operating and maintaining Drantex over a 3-year period is estimated to be $300. For Confiar, the operating and maintenance cost is $600. The sales agent for Drantex emphasized the lower operating and maintenance costs. The agent for Confiar, however, emphasized the service reputation of the product and the faster delivery time (Confiar can be purchased and delivered 1 week sooner than Drantex). Based on all the information, Adriana has decided to buy Confiar. 2. CONCEPTUAL CONNECTION How does the strategic positioning differ for the two companies? ______________ is emphasizing low costs, and _____________ is attempting to differentiate its PC by offering faster delivery and higher-quality service.

Drantex, Confiar

Ethical failures no longer occur in businesses across the globe. T/F

False

Managerial accounting follows the same rules as financial accounting. T/F

False

Managerial accounting is the provision of accounting for a company's external users. T/F

False

Ethical Behavior Manager: If I can reduce my costs by $40,000 during this last quarter, my division will show a profit that is 10% above the planned level, and I will receive a $10,000 bonus. However, given the projections for the fourth quarter, it does not look promising. I really need that $10,000. I know of one way that I can qualify. All I have to do is lay off my three most expensive salespeople. After all, most of the orders are in for the fourth quarter, and I can always hire new sales personnel at the beginning of the next year. Required: CONCEPTUAL CONNECTION What is the right choice for the manager to make? Why did the ethical dilemma arise? Is there any way to redesign the accounting reporting system to discourage the type of behavior that the manager is contemplating? A manager has a responsibility to the company as well as society. If the manager lays off the employees, he or she ___________ both of these responsibilities. In effect, the manager would be pursuing _________ at the expense of the company and the salespeople. While pursuit of self-interest is not necessarily unethical, it can be if it harms others. In this case, the manager's action could result in ________ profits for the company because sales may _________ in the long-term and unnecessary training costs will be incurred when the positions are refilled the following year. Similarly, it is unjust to penalize productive employees simply to earn a bonus. The right choice is to _________ the three salespeople. In ethical terms, the manager is not behaving with integrity. The ____________, in part, encouraged this behavior. Apparently, the manager is paid a bonus if profits exceed 10% of planned profits. By basing rewards on a measure such as short-run profits, the company has given the manager an incentive to manipulate earnings in the short run. One way of manipulating annual earnings is to reduce or defer discretionary expenditures. This type of behavior can be discouraged by proper matching of expenses with revenues and by expanding the performance measures to include long-run factors like market share, productivity, and personnel development. The accounting system can also be used to track trends (e.g., training costs over time). Moreover, managers can be required to provide extensive justification for significant changes in discretionary expenses.

Ignores Self-Interest lower decrease retain reward system

Ethical Issues Bedron Company is a closely held investment service group that has been quite successful over the past 5 years, consistently providing most members of the top management group with 50% bonuses. In addition, both the chief financial officer and the chief executive officer have received 100% bonuses. Bedron expects this trend to continue. Recently, Bedron's top management group, which holds 35% of the outstanding shares of common stock, has learned that a major corporation is interested in acquiring Bedron. The other corporation's initial offer is attractive and is several dollars per share higher than Bedron's current share price. One member of management told a group of employees under him about the potential offer. He suggested that they might want to purchase more Bedron stock at the current price in anticipation of the takeover offer. Required: Conceptual Connection: Do you think that the employees should take the action suggested by their boss? Suppose the action is prohibited by Bedron's code of ethics. Y/N Now suppose that it is not prohibited by Bedron's code of ethics. Is the action acceptable in that case? Y/N

No, No

Customer Value, Strategic Positioning Adriana Alvarado has decided to purchase a personal computer. She has narrowed the choices to two: Drantex and Confiar. Both brands have the same processing speed, 6.4 gigabytes of hard-disk capacity, two USB ports, and a DVDRW drive, and each comes with the same basic software support package. Both come from mail-order companies with good reputations. The selling price for each is identical. After some review, Adriana discovers that the cost of operating and maintaining Drantex over a 3-year period is estimated to be $300. For Confiar, the operating and maintenance cost is $600. The sales agent for Drantex emphasized the lower operating and maintenance costs. The agent for Confiar, however, emphasized the service reputation of the product and the faster delivery time (Confiar can be purchased and delivered 1 week sooner than Drantex). Based on all the information, Adriana has decided to buy Confiar. 1. What is the total product purchased by Adriana?

The product, its features, services, and delivery speed.

Ethical behavior involves choosing actions that are right, proper, and just. T/F

True

Managerial accountants need to understand their company's strategy and key business processes for accurate analysis of data which will result in smooth strategy execution by business executives. T/F

True

Providing an analysis for a company regarding adding a particular product line, retracting sales markets, or dealing with risks or opportunities are some of the responsibilities of managerial accountants. T/F

True

Customer Value, Strategic Positioning Adriana Alvarado has decided to purchase a personal computer. She has narrowed the choices to two: Drantex and Confiar. Both brands have the same processing speed, 6.4 gigabytes of hard-disk capacity, two USB ports, and a DVDRW drive, and each comes with the same basic software support package. Both come from mail-order companies with good reputations. The selling price for each is identical. After some review, Adriana discovers that the cost of operating and maintaining Drantex over a 3-year period is estimated to be $300. For Confiar, the operating and maintenance cost is $600. The sales agent for Drantex emphasized the lower operating and maintenance costs. The agent for Confiar, however, emphasized the service reputation of the product and the faster delivery time (Confiar can be purchased and delivered 1 week sooner than Drantex). Based on all the information, Adriana has decided to buy Confiar. 4. CONCEPTUAL CONNECTION Suppose that Adriana's decision was prompted mostly by the desire to receive the computer quickly. Informed that it was losing sales because of the longer time to produce and deliver its products, the management of the company producing Drantex decided to improve delivery performance by improving its internal processes. These improvements decreased the number of defective units and the time required to produce its product. Consequently, delivery time and costs both decreased, and the company was able to lower its prices on Drantex. Explain how these actions translate into strengthening the competitive position of the Drantex PC relative to the Confiar PC. Also discuss the implications for the managerial accounting information system. Better quality and shorter delivery time increase the _________ of what the customer receives, while lowering the _________ decreases the amount paid. In total, customer value has increased, and presumably, this should make the ____________ PC much more competitive. This example illustrates how quality, time, and costs are essential competitive weapons. It also illustrates how critical it is for the management accounting system to collect and report data concerning these three dimensions.

Value, price, Drantex

Which of the following is true of lean accounting? a) It organizes costs according to the value chain and collects both financial and nonfinancial information. b) It is the accounting process in which all business transactions are recorded when cash is exchanged. c) It is the accounting process in which business transactions are recorded when expenses are incurred and revenue is generated. d) It records all financial and nonfinancial business transactions in accordance with US GAAP.

a) It organizes costs according to the value chain and collects both financial and nonfinancial information.

Which of the following is a difference between financial accounting and managerial accounting? a) Financial accounting focuses on providing information for internal users, while managerial accounting focuses on providing information for external users. b) Financial accounting has a historical orientation, while managerial accounting emphasizes on the future. c) Financial accounting includes various disciplines and is broad in scope, while managerial accounting is more self-containing. d) Financial accounting does not follow externally imposed rules, while managerial accounting must follow externally imposed rules.

b) Financial accounting has a historical orientation, while managerial accounting emphasizes on the future.

Which of the following officers is responsible for the finance function? a) Chief operating officer b) Treasurer c) Controller d) Chief accounting officer

b) Treasurer

The provision of accounting information for internal users is known as a. financial accounting. b. managerial accounting. c. accounting for planning and control. d. information provision. e. accounting.

b. managerial accounting.

The set of activities required to design, develop, produce, market, and deliver products and services, as well as provide support services to customers is termed as a: a) strategic positioning. b) supply chain. c) value chain. d) product differentiation.

c) value chain.

The objective of profit maximization should be constrained by the requirement that profits be achieved through a. legal means only b. ethical means only c. both legal and ethical means d. any means possible e. None of these.

c. both legal and ethical means

The Statement of Ethical Professional Practice is issued by the: a) U.S. Congress. b) Securities and Exchange Commission. c) New York Stock Exchange. d) Institute of Management Accountants.

d) Institute of Management Accountants.

Which of the following is true of financial accounting? a) It is primarily concerned with producing information for internal users. b) It does not follow any externally imposed rules. c) It strongly emphasizes providing information about future events. d) It focuses on overall firm performance, providing a more aggregated viewpoint.

d) It focuses on overall firm performance, providing a more aggregated viewpoint.

Which of the following is true of line positions? a) Line positions account for less than 40% of the workforce for any corporations. b) Line positions include critical business functions such as auditing and supply chain. c) Line positions are supportive in nature. d) Line positions have direct responsibility for the basic objectives of an organization.

d) Line positions have direct responsibility for the basic objectives of an organization.

Platanus Inc. was one of the largest manufacturers of automobile engines and fixtures. Platanus Inc.'s management created an automated process of improving efficiency and minimizing human error in its production process so that the company produced zero-defect engines. Employees were monetarily rewarded when their units were free from defects. It also maintained relevant managerial accounting information regarding the cost of existing poor quality and efforts to improve future quality. Based on the information, which of the following is the most likely conclusion? a) The management of Platanus Inc. has adopted the philosophy of strategic positioning. b) The management of Platanus Inc. has adopted the philosophy of customer orientation. c) The management of Platanus Inc. has adopted the philosophy of value chain management. d) The management of Platanus Inc. has adopted the philosophy of total quality management

d) The management of Platanus Inc. has adopted the philosophy of total quality management

Which of the following is a characteristic of managerial accounting? a. Subjective information may be used. b. There is an internal focus. c. It is broad-based and multidisciplinary. d. There is an emphasis on the future. e. All of these.

e. All of these.


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