Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773



Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem

Planning and Control

  1. a. Dr. Jones, a dentist, wants to increase the size and profitability of his business by building a reputation for quality and timely service.
  2. b. To achieve this, he plans on adding a dental laboratory to his building so that crowns, bridges, and dentures can be made in-house.
  3. c. To add the laboratory, he needs additional money, which he decides must be obtained by increasing revenues. After some careful calculation, Dr. Jones concludes that annual revenues must be increased by 10%.
  4. d. Dr. Jones finds that his fees for fillings and crowns are below the average in his community and decides that the 10% increase can be achieved by increasing these fees.
  5. e. He then identifies the quantity of fillings and crowns expected for the coming year, the new per-unit fee, and the total fees expected.
  6. f. As the year unfolds (on a month-by-month basis), Dr. Jones compares the actual revenues received with the budgeted revenues. For the first 3 months, actual revenues were less than planned.
  7. g. Upon investigating, he discovered that he had some reduction in the number of patients because he had also changed his available hours of operation.
  8. h. He returned to his old schedule and found out that the number of patients was restored to the original expected levels.
  9. i. However, to make up the shortfall, he also increased the price of some of his other services.


Match each statement with the following planning and control elements. (Note: A letter may be matched to more than one item.)

  1. 1. Corrective action
  2. 2. Budgets
  3. 3. Feedback
  4. 4. Investigation
  5. 5. Short-term plan
  6. 6. Comparison of actual with planned
  7. 7. Monitoring of actual activity
  8. 8. Strategic plan
  9. 9. Short-term objectives
  10. 10. Long-term objectives

To determine

Identify the matching planning and control element for each of the given activity.



Budgets are prepared for the planning and controlling purposes. Budgets facilitate planning and making decisions to achieve the desired objectives and are prepared to enable comparison between actual and expected outcomes.

Match activities with planning and control elements:

Activity NumberElement
a.8. Strategic PlanIncreasing size and profitability by building reputation is a strategic plan, as this would help develop policies and provide direction to the company.
b.10. Long term objectivesObjectives help to achieve strategic plans. Adding a laboratory constitutes a long term objective.
c.9. Short-term objectivesIncreasing revenues to achieve long term objectives is a short term objective.
d.5. Short-term planPlan to increase fee to achieve short term objectives is a short term plan...

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