Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
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Textbook Question
Chapter 1, Problem 11E
The Managerial Process
Each of the following scenarios requires the use of accounting information to carry out one or more
- a. Laboratory Manager: An HMO approached me recently and offered us its entire range of blood tests. It provided a price list revealing the amount it is willing to pay for each test. In many cases, the prices are below what we normally charge. I need to know the costs of the individual tests to assess the feasibility of accepting its offer and perhaps suggest price adjustments on some of the tests.
- b. Operating Manager: This report indicates that we have 30% more defects than originally targeted. An investigation into the cause has revealed the problem. We were using a lower-quality material than expected, and the waste has been higher than normal. By switching to the quality level originally specified, we can reduce the defects to the planned level.
- c. Divisional Manager: Our market share has increased because of higher-quality products. Current projections indicate that we should sell 25% more units than last year. I want a projection of the effect that this increase in sales will have on profits. I also want to know our expected cash receipts and cash expenditures on a month-by-month basis. I have a feeling that some short-term borrowing may be necessary.
- d. Plant Manager: Foreign competitors are producing goods with lower costs and delivering them more rapidly than we can to customers in our markets. We need to decrease the cycle time and increase the efficiency of our manufacturing process. There are two proposals that should help us accomplish these goals, both of which involve investing in computer-aided manufacturing. I need to know the future cash flows associated with each system and the effect each system has on unit costs and cycle time.
- e. Manager: At the last board meeting, we established an objective of earning a 25% return on sales. I need to know how many units of our product we need to sell to meet this objective. Once I have the estimated sales in units, we need to outline a promotional campaign that will take us where we want to be. However, in order to compute the targeted sales in units, I need to know the expected unit price and a lot of cost information.
- f. Manager: Perhaps the Harrison Medical Clinic should not offer a full range of medical services. Some services seem to be having a difficult time showing any kind of profit. I am particularly concerned about the mental health service. It has not shown a profit since the clinic opened. I want to know what costs can be avoided if I drop the service. I also want some assessment of the impact on the other services we offer. Some of our patients may choose this clinic because we offer a full range of services.
Required:
Select the managerial accounting objective(s) that are applicable for each scenario: planning, controlling (including performance evaluation), or decision making.
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The Managerial ProcessEach of the following scenarios requires the use of accountinginformation to carry out one or more managerial accounting objectives.a. Laboratory Manager: An HMO approached me recently andoffered us its entire range of blood tests. It provided a price listrevealing the amount it is willing to pay for each test. In manycases, the prices are below what we normally charge. I need toknow the costs of the individual tests to assess the feasibility ofaccepting its offer and perhaps suggest price adjustments on someof the tests.b. Operating Manager: This report indicates that we have 30% moredefects than originally targeted. An investigation into the cause hasrevealed the problem. We were using a lower-quality material thanexpected, and the waste has been higher than normal. Byswitching to the quality level originally specified, we can reducethe defects to the planned level.
c. Divisional Manager: Our market share has increased because ofhigher-quality products. Current…
Each of the following scenarios requires the use of accounting information to carry out one ormore managerial accounting objectives.a. Laboratory Manager: An HMO approached me recently and offered us its entire rangeof blood tests. It provided a price list revealing the amount it is willing to pay for each test
The following situations describe decision scenarios that could use managerial accounting information:
The manager of High Times Restaurant wishes to determine the price to charge for various lunch plates.
By evaluating the cost of leftover materials, the plant manager of a precision tool facility wishes to determine how effectively the plant is being run.
The division controller of West Coast Supplies needs to determine the cost of products left in inventory.
The manager of the Maintenance Department of a large manufacturing company wishes to plan next year’s anticipated expenditures. For each situation, discuss how managerial accounting information could be used.
b) What are the major differences between managerial accounting and financial accounting?
Chapter 1 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 1 - Prob. 1DQCh. 1 - What are the three broad objectives of managerial...Ch. 1 - Prob. 3DQCh. 1 - Should a managerial accounting system provide both...Ch. 1 - What is meant by controlling?Ch. 1 - Describe the connection between planning,...Ch. 1 - Prob. 7DQCh. 1 - Explain the role of financial reporting in the...Ch. 1 - Explain the meaning of customer value. How is...Ch. 1 - Prob. 10DQ
Ch. 1 - Explain why todays managerial accountant must have...Ch. 1 - Briefly explain the practice of enterprise risk...Ch. 1 - Prob. 13DQCh. 1 - The controller should be a member of the top...Ch. 1 - What is ethical behavior? Is it possible to teach...Ch. 1 - Prob. 16DQCh. 1 - Prob. 17DQCh. 1 - The provision of accounting information for...Ch. 1 - The use and importance of managerial accounting is...Ch. 1 - Setting objectives and identifying methods to...Ch. 1 - The process of choosing among competing...Ch. 1 - Prob. 5MCQCh. 1 - An effective managerial accounting system should...Ch. 1 - Prob. 7MCQCh. 1 - Prob. 8MCQCh. 1 - Prob. 9MCQCh. 1 - Prob. 10MCQCh. 1 - The Managerial Process Each of the following...Ch. 1 - Differences between Managerial Accounting and...Ch. 1 - Customer Value, Strategic Positioning Adriana...Ch. 1 - The following describes the job responsibilities...Ch. 1 - Ethical Behavior Consider the following scenario...Ch. 1 - Manager: If I can reduce my costs by 40,000 during...Ch. 1 - Ethical Issues The following statements have...Ch. 1 - Prob. 18ECh. 1 - Prob. 19E
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