Answered: An external party receives information…

An external party receives information about past performance from Question 7 options: planning reports. financial statements. budget reports. internal managerial accounting reports.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Completing A Quality Audit

Section: Chapter Questions

Problem 30RQSC

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For each of the following situations, two scenarios are described, labeled A and B. Choose which scenario is descriptive of a setting corresponding to activity-based responsibility accounting and which is descriptive of financial-based responsibility accounting. Provide a brief commentary on the differences between the two systems for each situation, addressing the possible advantages of the activity-based view over the financial-based view. Situation 1 A: The purchasing manager, receiving manager, and accounts payable manager are given joint responsibility for procurement. The charges given to the group of managers are to reduce costs of acquiring materials, decrease the time required to obtain materials from outside suppliers, and reduce the number of purchasing mistakes (e.g., wrong type of materials or the wrong quantities ordered). B: The plant manager commended the manager of the Grinding Department for increasing his departments machine utilization ratesand doing so without exceeding the departments budget. The plant manager then asked other department managers to make an effort to obtain similar efficiency improvements. Situation 2 A: Delivery mistakes had been reduced by 70 percent, saving over 40,000 per year. Furthermore, delivery time to customers had been cut by two days. According to company policy, the team responsible for the savings was given a bonus equal to 25 percent of the savings attributable to improving delivery quality. Company policy also provided a salary increase of 1 percent for every day saved in delivery time. B: Bill Johnson, manager of the Product Development Department, was pleased with his departments performance on the last quarters projects. They had managed to complete all projects under budget, virtually assuring Bill of a fat bonus, just in time to help with this years Christmas purchases. Situation 3 A: Harvey, dont worry about the fact that your department is producing at only 70 percent capacity. Increasing your output would simply pile up inventory in front of the next production department. That would be costly for the organization as a whole. Sometimes, one department must reduce its performance so that the performance of the entire organization can improve. B: Susan, I am concerned about the fact that your departments performance measures have really dropped over the past quarter. Labor usage variances are unfavorable, and I also see that your machine utilization rates are down. Now, I know you are not a bottleneck department, but I get a lot of flack when my managers efficiency ratings drop. Situation 4 A: Colby was muttering to himself. He had just received last quarters budgetary performance report. Once again, he had managed to spend more than budgeted for both materials and labor. The real question now was how to improve his performance for the next quarter. B: Great! Cycle time had been reduced and, at the same time, the number of defective products had been cut by 35 percent. Cutting the number of defects reduced production costs by more than planned. Trends were favorable for all three performance measures. Situation 5 A: Cambry was furious. An across-the-board budget cut! How can they expect me to provide the computer services required on less money? Management is convinced that costs are out of control, but I would like to know whereat least in my department! B: After a careful study of the Accounts Payable Department, it was discovered that 80 percent of an accounts payable clerks time was spent resolving discrepancies between the purchase order, receiving document, and the suppliers invoice. Other activities such as recording and preparing checks consumed only 20 percent of a clerks time. A redesign of the procurement process eliminated virtually all discrepancies and produced significant cost savings. Situation 6 A: Five years ago, the management of Breeann Products commissioned an outside engineering consulting firm to conduct a time-and-motion study so that labor efficiency standards could be developed and used in production. These labor efficiency standards are still in use today and are viewed by management as an important indicator of productive efficiency. B: Janet was quite satisfied with this quarters labor performance. When compared with the same quarter of last year, labor productivity had increased by 23 percent. Most of the increase was due to a new assembly approach suggested by production line workers. She was also pleased to see that materials productivity had increased. The increase in materials productivity was attributed to reducing scrap because of improved quality. Situation 7 A: The system converts materials into products, not people at work stations. Therefore, process efficiency is more important than labor efficiencybut we also must pay particular attention to those who use the products we produce, whether inside or outside the firm. B: I was quite happy to see a revenue increase of 15 percent over last year, especially when the budget called for a 10 percent increase. However, after reading the recent copy of our trade journal, I now wonder whether we are doing so well. I found out that the market expanded by 30 percent, and our leading competitor increased its sales by 40 percent.
An effective managerial accounting system should track information about an organizations activities in which of the following areas? a. Development b. Marketing c. Production d. Design e. All of these.
Organizational charts _____. A. list the salaries of all employees B. outline the strategic goals of the organization C. show the structure of an organization D. help management measure financial performance
Managerial accounting produces information: to meet the needs of external users that is often focused on the future to meet the needs of investors that follows the rules of GAAP
A responsibility center in which managers are held accountable for both revenues and expenses is called a ______. A. discretionary cost center B. revenue center C. cost center D. profit center
Should a managerial accounting system provide both financial and nonfinancial information? Explain.
Identify the following as True or False: Managerial accounting reports must comply with the rules set in place by the FASB. Financial accounting reports are typically general-purpose reports. Financial accounting reports pertain to the entity as a whole, whereas managerial accounting focuses more on subunits of the organization. The main users of the financial accounting information are the internal users. Managerial reports are prepared on an as-needed basis. Financial accounting reports often must be audited at least annually by an independent auditor.
Goal congruence in well-designed performance measurement systems best explains a congruence between ________. A. employees and the company B. strategic plans and the future C. decisions and outcomes D. feedback and measurement
All of the following are examples of managerial accounting activities except ________. A. preparing external financial statements in compliance with GAAP B. deciding whether or not to use automation C. making equipment repair or replacement decisions D. deciding whether or not to use automation
ORGANIZATION STRUCTURE AND SPAN OF CONTROL Refer to the organization charts labeled Structure A and Structure B in the figure for problem 11. Required a. For organizational structure A, describe the 1. advantages and disadvantages of this structure. 2. impact of the resulting span of control. 3. possible effect on employee behavior. b. For organizational structure B, describe the 1. advantages and disadvantages of this structure. 2. impact of the resulting span of control. 3. effect on employee behavior. c. When determining the appropriate span of control, discuss the factors that should be considered.
An important goal of a responsibility accounting framework is to help ensure which of the following? A. decision-making is made by the top executives. B. investments made by each segment are minimized. C. identification of operating segments that should be closed. D. segment and company financial goals are congruent.
The following comment was made by the CEO of a company that recently implemented the Balanced Scorecard: Responsibility in a strategic-based performance management system differs on the three Ds: Direction, Dimension, and Diffusion. Required: Explain how this comment describes differences in responsibility between an activity-based and a strategic-based performance management system.