Explain how knowledge of managerial accounting can assist a manager with regard to the following concerns: He is deciding whether to push through with a project. He is determining whether a branch is profitable or not. He is deciding whether to process a certain product further before selling.
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- Explain how knowledge of managerial accounting can assist a manager with regard to the following concerns:
- He is deciding whether to push through with a project.
- He is determining whether a branch is profitable or not.
- He is deciding whether to process a certain product further before selling.
- He would like to show to the Board of Directors how the business is financially performing and how cash is being used.
- He would like to plan for the year so that he will be prepared to deal with shortage of cash fund.
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- Assume you have been hired by Cabelas Sporting Goods. As part of your new role in the accounting department, you have been tasked to set up a responsibility accounting structure for the company. As your first task, your supervisor has asked you to give an example of a cost center, profit center, and an investment center within the Cabelas organization. Your supervisor is a little unsure of the difference between a profit center and investment center and would like you to explain the difference.Taylor Speedy has prepared the following list of statements about managerial accounting, financial accounting, and the functions of management. Identify each statement as true or false. Financial accounting centers on providing information to internal users. Staff positions are directly involved in the companys primary revenue-generating activities. Preparation of budgets is part of financial accounting. Managerial accounting applies only to merchandising and manufacturing companies. Both managerial accounting and financial accounting deal with many of the same economic events.Assume you have been hired by Hilton Hotels and Resorts. As part of your new role in the accounting department, you have been tasked to set up a responsibility accounting structure for the company. As your first task, your supervisor has asked you to give an example of a cost center, profit center, and an investment center within the Hilton organization. Your supervisor is a little unsure of the difference between a profit center and investment center and would like you to explain the difference.
- Consider the dilemma you might someday face if you are the chief financial officer of a company that is struggling to maintain a positive cash flow, despite the fact that the company is reporting a substantial positive net income. Maybe the problem is so severe that there is often insufficient cash to pay ordinary business expenses, like utilities, salaries, and payments to suppliers. Assume that you have been asked to communicate to your board of directors about your companys year, in retrospect, as well as your vision for the companys future. Write a memo that expresses your insights about past experience and present prospects for the company. Note that the challenge of the assignment is to keep your integrity intact, while putting a positive spin on the situation, as much as is reasonably possible. How can you envision the situation turning into a success story?Carlita believes an important part of the planning process for managers is being sure to position the company to achieve its goals. She thinks that positioning is an extensive concept and can depend on the right information and that managerial accountants assist in positioning the company. Is she correct? Explain.Marvin has been thinking about the fields of managerial and financial accounting and the functions of management within an organization. He has the following list of statements to understand. Identify them as true or false. A. Managerial accounting reports are prepared only quarterly and annually. B. Financial accounting reports are general-purpose reports. C. Managerial accounting reports pertain to subunits of the business. D. Managerial accounting reports must comply with GAAP. E. The company treasurer reports directly to the vice president of operations.
- What should an organization do if performance measures change? A. Make sure that the manager being evaluated is aware of the measurement change, as this may affect his or her decision-making. B. Make sure that the manager benefits without the corporation also benefitting. C. Make sure that there are significant overriding opportunities for each manager, if the manager is unaware of the change. D. Obtain customer surveys on the change before communicating the change to the manager.Classify each of the following actions as either being associated with the financial accounting information system (FS) or the cost management information system (CMS): a. Determining the total compensation of the CEO of a public company b. Issuing a quarterly earnings report c. Determining the unit product cost using TDABC d. Calculating the number of units that must be sold to break even e. Preparing a required report for the SEC f. Preparing a sales budget g. Using cost and revenue information to decide whether to keep, or drop, a product line h. Preparing an annual statement of financial position that conforms to generally accepted accounting principles (GAAP) i. Using cost and revenue information to decide whether to invest in a new production system or not j. Reducing costs by improving the overall quality of a product k. Using a debt-equity ratio and liquidity ratios from a balance sheet to assess the likelihood of bankruptcy l. Using a public companys financial statements to decide whether or not to buy its stockThe following strategic objectives have been derived from a strategy that seeks to improve asset utilization by more careful development and use of its human assets and internal processes: a. Increase revenue from new products. b. Increase implementation of employee suggestions. c. Decrease operating expenses. d. Decrease cycle time for the development of new products. e. Decrease rework. f. Increase employee morale. g. Increase customer satisfaction. h. Increase access of key employees to customer and product information. i. Increase customer acquisition. j. Increase return on investment (ROI). k. Increase employee productivity. l. Decrease the collection period for accounts receivable. m. Increase employee skills. The heart of the strategy is developing the companys human resources. Management is convinced that empowering employees will lead to an increase in economic returns. Studies have shown that there is a positive relationship between employee morale and customer satisfaction. Furthermore, the more satisfied customers pay their bills more quickly. It was hypothesized that as employees became more involved and more productive, their morale would improve. Thus, the strategy incorporated key objectives that would lead to an increase in productivity and involvement. Required: 1. Classify the objectives by perspective, and suggest a measure for each objective. 2. Prepare a strategy map that illustrates the likely causal relationships among the strategic objectives.
- Consider the following conversation between Gary Means, manager of a division that produces industrial machinery, and his controller, Donna Simpson, a certified management accountant and certified public accountant: Gary: Donna, we have a real problem. Our operating cash is too low, and we are in desperate need of a loan. As you know, our financial position is marginal, and we need to show as much income as possibleand our assets need bolstering as well. Donna: I understand the problem, but I dont see what can be done at this point. This is the last week of the fiscal year, and it looks like well report income just slightly above breakeven. Gary: I know all this. What we need is some creative accounting. I have an idea that might help us, and I wanted to see if you would go along with it. We have 200 partially finished machines in process, about 20% complete. That compares with the 1,000 units that we completed and sold during the year. When you computed the per-unit cost, you used 1,040 equivalent units, giving us a manufacturing cost of 1,500 per unit. That per-unit cost gives us cost of goods sold equal to 1.5 million and ending work in process worth 60,000. The presence of the work in process gives us a chance to improve our financial position. If we report the units in work in process as 80% complete, this will increase our equivalent units to 1,160. This, in turn, will decrease our unit cost to about 1,345 and cost of goods sold to 1.345 million. The value of our work in process will increase to 215,200. With those financial stats, the loan would be a cinch. Donna: Gary, I dont know. What youre suggesting is risky. It wouldnt take much auditing skill to catch this one. Gary: You dont have to worry about that. The auditors wont be here for at least 6 to 8 more weeks. By that time, we can have those partially completed units completed and sold. I can bury the labor cost by having some of our more loyal workers work overtime for some bonuses. The overtime will never be reported. And, as you know, bonuses come out of the corporate budget and are assigned to overheadnext years overhead. Donna, this will work. If we look good and get the loan to boot, corporate headquarters will treat us well. If we dont do this, we could lose our jobs. Required: 1. Should Donna agree to Garys proposal? Why or why not? To assist in deciding, review the corporate code of ethics standards described in Chapter 1. Do any apply? 2. Assume that Donna refuses to cooperate and that Gary accepts this decision and drops the matter. Does Donna have any obligation to report the divisional managers behavior to a superior? Explain. 3. Assume that Donna refuses to cooperate; however, Gary insists that the changes be made. Now what should she do? What would you do? 4. Suppose that Donna is 63 and that the prospects for employment elsewhere are bleak. Assume again that Gary insists that the changes be made. Donna also knows that his supervisor, the owner of the company, is his father-in-law. Under these circumstances, would your recommendations for Donna differ?Each of the following scenarios requires the use of accounting information to carry out one or more of the following managerial activities: (1) planning, (2) control and evaluation, (3) continuous improvement, or (4) decision making. a. MANAGER: At the last board meeting, we established an objective of earning an after-tax profit equal to 20 percent of sales. I need to know the revenue that we need to earn in order to meet this objective, given that we have 250,000 to spend on the promotional campaign. Once I have estimated sales in units, we then need to outline a promotional campaign that conforms to our budget and that will take us where we want to be. However, to compute the targeted sales revenue, I need to know the unit sales price, the unit variable cost, and the associated fixed production and support costs. I also need to know the tax rate. b. MANAGER: We have problems with our procurement process. Our accounts payable department is spending 80 percent of its time resolving discrepancies between the purchase order, receiving order, and suppliers invoice. Incorrect part numbers on the purchase orders, incorrect quantities ordered, and wrong parts sent (or the incorrect quantity) are just a few examples of sources of discrepancies. A complete redesign of the process has been suggested, which will allow us to eliminate virtually all of the errors and, at the same time, significantly reduce the number of clerks needed in purchasing, receiving, and accounts payable. This redesign promises to significantly reduce costs, decrease lead time, and increase customer satisfaction. c. MANAGER: This overhead cost report indicates that we have spent significantly more on inspection, purchasing, and production than was budgeted. An investigation has revealed that the source of the problem is faulty components from suppliers. A supplier evaluation has revealed that by selecting five suppliers with the best quality records (out of 15 currently used), the number of defective components will be dramatically reduced, thus producing significant overhead savings by reducing the demand for inspections, reordering, and rework. d. MANAGER: A large local firm has approached me and has offered to sell us one of the components used in our small enginesa component that we are currently producing internally. I need to know costs that we would avoid if this component is purchased so that I can assess the economic merits of this offer. e. MANAGER: Currently, our deluxe lawn mower is losing money. We need to increase profits. I would like to know how much our profits would be if we reduce our variable costs by 50 per mower while maintaining our current sales volume. Also, marketing claims that if we increase advertising expenditures by 1,000,000 and cut prices by 15 percent, we can increase the number of mowers sold by 25 percent. I would like to know which approach offers the most profit, or if a combination of the approaches may be best. f. MANAGER: We are implementing a major quality improvement program. We will be increasing the investment in prevention and detection activities with the expectation of driving down both internal and external failure costs. I expect to see trend reports for all categories of quality costs. I want to see if improving quality really does reduce costs and improve profitability. g. MANAGER: Our engineering design department has proposed a new design for our product. The new design promises to reduce post-purchase costs and, as a consequence, increase market share. I need to know the cost of producing this new design because it uses some new components and requires some different manufacturing processes. I would then like to have a projected income statement based on the new market share and new production costs. The planned selling price will be the same, or maybe even 10 percent lower. Projections based on the two price scenarios would be needed. h. MANAGER: My engineers have said that by redesigning our two main production processes, we can reduce move time by 90 percent and wait time by 85 percent. This would decrease cycle time and virtually eliminate the need to carry finished goods inventories. On-time deliveries would also increase dramatically. This would produce cost savings of nearly 20,000,000 per year. Market share and revenues would also increase. Required: 1. Describe each of the four managerial responsibilities. 2. Identify the managerial activity or activities applicable for each scenario, and indicate the role of accounting information in the activity.When managerial accountants design an evaluation system that is based on criteria for which a manager is responsible, and it is structured to encourage managers to make decisions that will meet the goals of the company as well as their own personal job goals, the framework used is _______. A. a controllable factors framework B. an uncontrollable factors framework C. a strategic plan framework D. a responsibility accounting framework
