Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 10, Problem 10.6BYP
Ethics Case
American Products Corporation participates in a highly competitive industry. In order to meet this competition and achieve profit goats, the company has chosen the decentralized form of organization. Each manager of a decentralized investment center is measured on the basis of profit contribution, market penetration, and return on investment. Failure to meet the objectives established by corporate management for these measures has not been acceptable and usually has resulted in demotion or dismissal of an investment center manager.
An anonymous survey of managers in the company revealed that the managers feel the pressure to compromise their personal ethical standards to achieve the corporate objectives. For example, at certain plant locations there was pressure to reduce quality control to a level which could not assure that all unsafe products would be rejected. Also, sales personnel were encouraged to use questionable sales tactics to obtain orders, including gifts and other incentives to purchasing agents.
The chief executive officer is disturbed by the survey findings. In his opinion, such behavior cannot be condoned by the company. He concludes that the company should do something about this problem.
Instructions
(a) Who arc the stakeholders (the affected parties) in this situation?
(b) Identify the ethical implications, conflicts, or dilemmas in the above described situation.
(c) What might the company do to reduce the pressures on managers and decrease the ethical conflicts?
(CMA adapted)
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2.Which of the following statements regarding multiple measures or a single measure of performance is not correct?A)The advantage of using branch profits to evaluate branch mangers is that profit is relatively simple to compute and reflects the organization's ultimate goal.B)The use of multiple measures can influence branch managers' decisions by changing the components of the performance measurement system to reflect changes in the firm's strategy.C)If the branch managers are more knowledgeable than the corporate staff about local conditions and what local clients value, a single measure could be preferable.D)If the corporate office has better knowledge of what it requires to operate a profitable branch, using multiple measures provides a way to communicate this knowledge and achieve common branch operationsE)All of the above are correct statements.5
What is one of the ways that accounting is used to direct and control the manager of a corporation?
a.Threatening to tell shareholders a mangers income if a manager makes a ‘poor financial’ decision.
b.Linking of a mangers performance to a bonus that depends on accounting profit.
c.Making decisions based on the accounting information regardless of managerial input.
d.Using income smoothing to assure a manager that they can invest in a low risk investment.
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Chapter 10 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 10 - Prob. 1QCh. 10 - The following purposes are part of a budgetary...Ch. 10 - How may a budget report for the second quarter...Ch. 10 - Ken Bay questions the usefulness of a master sales...Ch. 10 - Under what circumstances may a static budget be an...Ch. 10 - A flexible budget is really a series of static...Ch. 10 - The static manufacturing overhead budget based on...Ch. 10 - A static overhead budget based on 40,000 direct...Ch. 10 - Megan Pedigo is confused about how a flexible...Ch. 10 - Call Company has prepared a graph of flexible...
Ch. 10 - The flexible budget formula is fixed costs 50,000...Ch. 10 - What is management by exception? What criteria may...Ch. 10 - What is responsibility accounting? Explain the...Ch. 10 - Prob. 14QCh. 10 - Distinguish between controllable and...Ch. 10 - How do responsibility reports differ from budget...Ch. 10 - Prob. 17QCh. 10 - Distinguish among the three types of...Ch. 10 - Prob. 19QCh. 10 - Prob. 20QCh. 10 - Prob. 21QCh. 10 - Prob. 22QCh. 10 - Prob. 23QCh. 10 - Prob. 24QCh. 10 - Prob. 25QCh. 10 - Prob. 26QCh. 10 - For the quarter ended March 31, 2017, Croix...Ch. 10 - Data for Croix Company are given in BE10-1. In the...Ch. 10 - In Rooney Company, direct labor is 20 per hour....Ch. 10 - Gundy Company expects to produce 1,200,000 units...Ch. 10 - Data for Gundy Company are given in BE10-4. In...Ch. 10 - In the Assembly Department of Hannon Company,...Ch. 10 - Torres Company accumulates the following summary...Ch. 10 - For the year ending December 31, 2017, Cobb...Ch. 10 - Prob. 10.9BECh. 10 - Prob. 10.10BECh. 10 - Prob. 10.11BECh. 10 - Prob. 10.12BECh. 10 - Wade Company estimates that it will produce 6,000...Ch. 10 - In Pargo Company's flexible budget graph, the...Ch. 10 - Prob. 10.3DICh. 10 - Prob. 10.4DICh. 10 - Connie Rice has prepared the following list of...Ch. 10 - Crede Company budgeted selling expenses of 30,000...Ch. 10 - Myers Company uses a flexible budget for...Ch. 10 - Using the information in E10-3. assume that in...Ch. 10 - Fallon Company uses flexible budgets to control...Ch. 10 - The actual selling expenses incurred in March 2017...Ch. 10 - Appliance Possible Inc. (AP) is a manufacturer of...Ch. 10 - Rensing Groomers is in the dog-grooming business....Ch. 10 - As sales manager, Joe Batista was given the...Ch. 10 - Chubbs Inc.'s manufacturing overhead budget for...Ch. 10 - UrLink Company is a newly formed company...Ch. 10 - Venetian Company has two production departments....Ch. 10 - Fey Company's Organization chart includes the...Ch. 10 - The Mixing Department manager of Malone Company is...Ch. 10 - Horatio Inc. has three divisions which are...Ch. 10 - The Sports Equipment Division of Harrington...Ch. 10 - The South Division of Wiig Company reported the...Ch. 10 - The Dinkle and Frizell Denial Clinic provides both...Ch. 10 - The Ferrell Transportation Company uses a...Ch. 10 - Presented below is selected information for three...Ch. 10 - Presenled below is selected financial information...Ch. 10 - Bumblebee Company estimates that 300,000 direct...Ch. 10 - Zelmer Company manufactures tablecloths. Sales...Ch. 10 - Ratchet Company uses budgets in controlling costs....Ch. 10 - Clarke Inc. operates the Patio Furniture Division...Ch. 10 - Optimus Company manufactures a variety of tools...Ch. 10 - Durham Company uses a responsibility reporting...Ch. 10 - Sentinel Industries has manufactured prefabricated...Ch. 10 - CURRENT DESIGNS The Current Designs staff has...Ch. 10 - Green Pastures is a 400-acre farm on the outskirts...Ch. 10 - Prob. 10.2BYPCh. 10 - Prob. 10.3BYPCh. 10 - The manufacturing overhead budget for Fleming...Ch. 10 - Ethics Case American Products Corporation...Ch. 10 - Considering Your Costs and Benefits Preparing a...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 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.arrow_forwardThe balanced scorecard provides an action plan for achieving competitive success by focusing management attention on critical success factors. Which of the following is not one of the competitive success factors commonly found on the balanced scorecard? a. Competitor business strategies b. Financial performance measures c. Internal business processes d. Learning and growtharrow_forwardPerformance measures are only useful if _______. A. there are both controllable and uncontrollable factors to evaluate managers B. manager reward systems are designed by the chief financial officer prior to implementation C. all of the measures used are accounting numbers D. there is a baseline against which to compare the measured resultsarrow_forward
- Managers in decentralized organizations make decisions relating to all of the following except_______. A. the companys stock price B. equipment purchases C. personnel D. prices to charge customersarrow_forward(a) Explain how return on investment might lead a divisional manager to reject new investments that could be profitable for the company as a whole. (b) How can this disadvantage be overcome?arrow_forwardWhen a Dupont analysis reveals that a company has much higher than average asset turnover and much lower than average profit margin, what can be concluded about the companys strategy? a. It is a product differentiator. c. It has no strategy. b. It needs to concentrate on improve- d. It is a low-cost provider ing its profit margins.arrow_forward
- Suspicious Acquisition of Data, Ethical Issues Bill Lewis, manager of the Thomas Electronics Division, called a meeting with his controller, Brindon Peterson, and his marketing manager, Patty Fritz. The following is a transcript of the conversation that took place during the meeting: Bill: Brindon, the variable costing system that you developed has proved to be a big plus for our division. Our success in winning bids has increased, and as a result our revenues have increased by 25%. However, if we intend to meet this years profit targets, we are going to need something extraam I right, Patty? Patty: Absolutely. While we have been able to win more bids, we still are losing too many, particularly to our major competitor, Kilborn Electronics. If we knew more about their bidding strategy, we could be more successful at competing with them. Brindon: Would knowing their variable costs help? Patty: Certainly. It would give me their minimum price. With that knowledge, Im sure that we could find a way to beat them on several jobs, particularly on those jobs where we are at least as efficient. It would also help us to identify where we are not cost competitive. With this information, we might be able to find ways to increase our efficiency. Brindon: Well, I have good news. Ive been talking with Carl Penobscot, Kilborns assistant controller. Carl doesnt feel appreciated by Kilborn and wants to make a change. He could easily fit into our team here. Plus, Carl has been preparing for a job switch by quietly copying Kilborns accounting files and records. Hes already given me some data that reveal bids that Kilborn made on several jobs. If we can come to a satisfactory agreement with Carl, hell bring the rest of the information with him. Well easily be able to figure out Kilborns prospective bids and find ways to beat them. Besides, I could use another accountant on my staff. Bill, would you authorize my immediate hiring of Carl with a favorable compensation package? Bill: I know that you need more staff, Brindon, but is this the right thing to do? It sounds like Carl is stealing those files, and surely Kilborn considers this information confidential. I have real ethical and legal concerns about this. Why dont we meet with Laurie, our attorney, and determine any legal problems? Required: 1. Is Carls behavior ethical? What would Kilborn think? 2. Is Bill correct in supposing that there are ethical and/or legal problems involved with the hiring of Carl? (Reread the section on corporate codes of conduct in Chapter 1.) What would you do if you were Bill? Explain.arrow_forwardUnder what type of financial risks you would put these risk factors? Economic Distress Mismanagement Technological Causes Working Capital Problems Fraudulent Management Lack of board effectiveness Boards' risk blindness Poor leadership on ethos and culture Defective communication Excessive complexity Inappropriate incentives Information "glass ceiling" Managerial inefficiency and ineffectiveness Over expansion Ineffective sales force High production costs Poor financial management Risk assessment strategy Inappropriate commercial policy Absence of manpower training and development policy Capital inadequacy Socio cultural factors Income instability Public policyarrow_forwardfintech corporation, a large multinational firm, has various business units operating in diverse industries. it has been observed that managerial employment risk is at its lowest when the firm maintains relatively high levels of diversification. investors in the company face lower risk when the firm adopts a strategy of... related linked diversification. related constrained diversification. single business strategies. higher levels of firm diversification.arrow_forward
- Part BABC Ltd has incorporated a bonus plan that rewards the board of directors (executive members) by providing a bonus of 3 per cent of reported profits. This is an Accounting-based incentive that has the advantage whichthe accounting results may be based on subunit or divisional performance."A well-informed labour market will motivate management to work to maximise the value of its firm. Underperformance might lead to dismissal and, if the labour market is efficient in disseminating data, a 'failed'manager might have difficulty attracting a position with comparable pay elsewhere." (Deegan, 2020)Requirement:1) Using Positive Accounting Theory (PAT), discuss the bonus theme in general and why the bonus plan(Accounting-based) was put in place in ABC Ltd?2) Explain whether the board of directors could be motivated to try to inflate reported profits.3) Use the opportunistic perspective of PAT to explain the potential for managers to manipulate corporate disclosure.arrow_forwardWhich of the following statements about the balanced scorecard approach is false? It requires managers to focus on financial measures more than nonfinancial measures. It looks at performance from the following perspectives: financial, customer, internal business, and learning and growth. It helps balance short-term operating performance with long-term strategies. It recognizes that traditional measures of performance are often not adequate to fully assess a company’s performance.arrow_forwardDecision Making with Managerial Accounting Due to varying business characteristics, the managerial accounting techniques applied in each business may differ. For example, a business in the start-up phase may rely heavily upon budgeting and capital investment techniques; whereas, a business in the mature/maintaining phase may rely heavily upon cost management and quality control. Ultimately, the techniques used by management should assist the business in achieving its short-term and long-term goals through effective decision-making. For your Final Paper, you will analyze the role of managerial accounting in two parts. Part I will provide a general overview of managerial accounting. Part II will provide examples of how managerial accounting theories and principles are applied in the business world. You may find it helpful to reflect upon your own professional experiences for examples. Part I (three to four double-spaced pages, excluding the title…arrow_forward
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY