管理会计ima13sol-ch01.doc

CHAPTER 1
COVERAGE OF LEARNING OBJECTIVES

LEARNING OBJECTIVE
FUNDA-
MENTAL
ASSIGN-MENT
MATERIAL
CRITICAL THINKING
EXERCISES AND EXERCISES

PROBLEMS
CASES, EXCEL,
COLLAB., & INTERNET EXERCISES
LO1: Describe the major users and uses of accounting information.
A1, B1
31
37, 38, 40
52
LO2: Explain why ethics is important to management accountants.
A3
35, 36
45, 46, 47
49, 52
LO3: Describe the cost-benefit and behavioral issues involved in designing an accounting system.

39, 41

LO4: Explain the role of budgets and performance reports in planning and control.
A2, B2
30
43
50
LO5: Discuss the role accountants play in the company’s value chain functions.
A1, B1
28, 29, 32, 33, 34
37, 40, 42

LO6: Contrast the functions of controllers and treasurers.
B3
27, 34
37, 43, 44
48
LO7: Explain why accounting is important in a variety of career paths.

28, 29

52
LO8: Identify current trends in management accounting.

51
LO9: Appreciate the import-
ance of ethical conduct to professional accountants.
A3
35, 36
45, 46, 47
49, 52

CHAPTER 1
Managerial Accounting and the Business Organization

1-A1 (10-15 min.)

Because the accountant's duties are often not sharply defined, some of these answers could be challenged:

1. Attention directing and problem solving. Budgeting involves making decisions about planned activities -- hence, aiding problem solving. Budgets also direct attention to areas of opportunity or concern --hence, directing attention. Reporting against the budget also has a scorekeeping dimension.
2. Problem solving. Helps a manager assess the impact of a decision.
3. Scorekeeping. Reports on the results of an operation. Could also be attention direction if scrap is an area that might require management decisions.
4. Attention directing. Focuses attention on areas that need attention.
5. Attention directing. Helps managers learn about the information contained in a performance report.
6. Scorekeeping. The statement merely reports what has happened.
7. Problem solving. The cost comparison is apparently useful because the manager wishes to decide between two alternatives. Thus, it aids problem solving.
8. Attention directing. Variances point out areas where results differ from expectations. Interpreting them directs attention to possible causes of the differences.
9. Problem solving. Aids a decision about where the parts should be made.
10. Scorekeeping. Determining a depreciation schedule is simply an exercise in preparing financial statements to report the results of activities.

1-A2 (15-20 min.)

1. Budgeted Actual Deviations
Amounts Amounts or Variances
Room rental $ 140 $ 140 $ 0
Food 800 1,008 208U
Entertainment 600 600 0
Decorations 220 190 30F
Total $1,760 $1,938 $178U

2. Because of the management by exception rule, room rental and entertainment require no explanation. The actual expenditure for food exceeded the budget by $208. Of this $208, $150 is explained by attendance of 15 persons more than budgeted (at a budget of $10 per person) and $58 is explained by expenditures above $10 per person.

Actual expenditures for decorations were $30 less than the budget. If all desired decorations were purchased, the decorations committee should be commended for their savings.

1-A3 (10 min.)

All of the situations raise possibilities for violation of the integrity standard. In addition, the manager in each situation must address an additional ethical standard:

1. The General Mills manager must respect the confidentiality standard. He or she should not disclose any information about the new cereal.
2. Roberto must address his level of competence for the assignment. If his supervisor knows his level of expertise and wants an analysis from a “layperson” point of view, he should do it. However, if the supervisor expects an expert analysis, Roberto must admit his lack of competence.
3. The objectivity standard should cause Helen to decline to omit the information from her budget. It is relevant information, and its omission may mislead readers of the budget.
1-B1 (15-20 min.)

Because the accountant’s duties are often not sharply defined, some of these answers could be challenged:

1. Scorekeeping. Records events.
2. Scorekeeping. Simply recording of what has happened.
3. Problem solving. Helps a manager decide between alternatives.
4. Attention directing. Directs attention to the use of overtime labor.
5. Problem solving. Provides information to managers for deciding between alternatives.
6. Attention directing. Directs attention to why nursing costs increased.
7. Attention directing. Directs attention to areas where actual results differed from the budget.
8. Problem solving. Helps the vice-president to decide which course of action is best.
9. Scorekeeping. Records costs in the department to which they belong.
10. Scorekeeping. Records actual overtime costs.
11. Attention directing. Directs attention to stores with either high or low ratios of advertising expenses to sales.
12. Attention directing. Directs attention to causes of returns of the drug.
13. Attention directing or problem solving, depending on the use of the schedule. If it is to identify areas of high fuel usage it is attention directing. If it is to plan for purchases of fuel, it is problem solving.
14. Problem solving. Provides information for deciding between two alternative courses of action.
15. Scorekeeping. Records items needed for financial statements.

1-B2 (10-15 min.)

1 & 2. Budget Actual Variance
Sales $75,000 $74,860 $ 140U
Costs:
Fireworks $35,000 $39,500 $4,500U
Labor 15,000 13,000 2,000F
Other 8,000 8,020 20U
Profit $17,000 $14,340 $2,660U

3. The cost of fireworks was $4,500 ÷ $35,000 = 13% over budget. Did fireworks suppliers raise their prices? Did competition cause retail prices to be lower than expected? There should be some explanation for the extra cost of fireworks. Also, the labor cost was $2,000 ÷ $15,000 =13% below budget. It would be useful to discover why this cost was saved. Both sales and other costs were very close to budget.

1-B3 (10 - 15 min.)

1. Treasurer. Analysts affect the company's ability to raise capital, which is the responsibility of the treasurer.
2. Controller. Advising managers aids operating decisions.
3. Controller. Advice on cost analysis aids managers' operating decisions.
4. Controller. Divisional financial statements report on operations. Financial statements are generally produced by the controller's department.
5. Treasurer. Financing the business is the responsibility of the treasurer.
6. Controller. Tax returns are part of the accounting process overseen by the controller.

7. Treasurer. Insurance, as with other risk management activities, is usually the responsibility of the treasurer.
8. Treasurer. Allowing credit is a financial decision.
1-1 Decision makers within and outside an organization use accounting information for three broad purposes:

1. Internal reporting to managers for planning and controlling operations.
2. Internal reporting to managers for special decision-making and long-range planning.
3. External reporting to stockholders, government, and other interested parties.

1-2 The emphasis of financial accounting has traditionally been on the historical data presented in the external reports. Management accounting emphasizes planning and control purposes.

1-3 The branch of accounting described in the quotation is management accounting.

1-4 Scorekeeping is the recording of data for a later evaluation of performance. Attention directing is the reporting and interpretation of information for the purpose of focusing on inefficiencies of operation or opportunities for improvement. Problem solving presents a concise analysis of alternative courses of action.

1-5 GAAP applies to publicly issued annual financial reports. Internal accounting reports are not restricted by GAAP.

1-6 Yes, but it covers more than that. The Foreign Corrupt Practices Act applies to all publicly-held companies and covers the quality of internal accounting control as well as bribes and other matters.

1-7 Users cannot easily observe the quality of accounting information. Thus, they rely on the integrity of accountants to be sure the information is accurate. Information that is unreliable is worthless, so if accountants do not have a reputation for integrity, the information they produce will not have value.

1-8 Three examples of service organizations are banks, insurance companies, and public accounting firms. Such organizations tend to be labor intensive, have outputs that are difficult to define and measure, and have both inputs and outputs that are difficult or impossible to store.

1-9 Two considerations are cost-benefit balance and behavioral effects. Cost-benefit balance refers to how well an accounting system helps achieve management's goals in relation to the cost of the system. The behavioral consideration specifies that an accounting system should be judged by how it will affect the behavior (that is, decisions) of managers.

1-10 Yes. The act of recording events has become as much a part of operating activities as the act of selling or buying. For example, cash receipts and disbursements must be traced, and receivables and payables must be recorded, or else gross confusion would ensue.

1-11 A budget is a prediction and guide; a performance report is a tabulation of actual results compared with the budget; and a variance reconciles the differences between budget and actual.

1-12 No. Management by exception means that management spends more effort on those areas that seem to be out of control and less on areas that are functioning as planned. This method is an efficient way for managers to decide where to put their time and effort.

1-13 No. There is no perfect system of automatic control, nor does accounting control anything. Accounting is a tool used by managers in their control of operations.

1-14 Information that is relevant for decisions about a product depends on the product's life-cycle stage. Therefore, to prepare and interpret information, accountants should be aware of the current stage of a product's life cycle.

1-15 The six functions are: (1) research and development – generation and experimentation with new ideas; (2) product and service process design – detailed design and engineering of products; (3) production – use of resources to produce a product or service; (4) marketing - informing customers of the value and features of products or services; (5) distribution – delivering products or services to customers; and (6) customer service – support provided to customers.

1-16 No. Not all of the functions are of equal importance to the success of a company. Measurement and reporting should focus on those functions that enable a company to gain and maintain a competitive edge.

1-17 Line managers are directly responsible for the production and sale of goods or services. Staff managers have an advisory function – they support line managers.

1-18 Management accountants are the information specialists, even in non-hierarchical companies. However, in such companies they are more directly involved with managers and are often parts of cross-functional teams.

1- 19 A treasurer is concerned mainly with the company's financial matters, the controller with operating matters. In large organizations, there are sufficient activities associated with both financial and operating matters to justify two separate positions. In a small organization the same person might be both treasurer and controller.

1-20 The four parts of the CMA examination are: (1) economics, finance, and management, (2) financial accounting and reporting, (3) management reporting, analysis, and behavioral issues, and (4) decision analysis and information systems.

1-21 This is not true. About one-third of CEOs come from finance or accounting backgrounds. Accounting is excellent preparation for top management positions because accountants are often exposed to many parts of the company early in their careers.

1-22 Changes in technology are affecting how accountants operate. They must be able to account for e-commerce transactions efficiently and safely, they often must integrate their accounting systems into ERP systems, and an increasing number are beginning to use XBRL to communicate information electronically.

1-23 The essence of the just-in-time philosophy is the elimination of waste, accomplished by reducing the time products spend in the production process and trying to eliminate the time spent in processes that do not add value to the product.

1-24 Moving tools and products that are in process from one location to another in a plant is an activity that does not add value to the product. So changing the plant layout to eliminate wasted movement and time improves production efficiency.

1-25 The four major responsibilities are: (1) competence - develop knowledge; know and obey laws, regulations, and technical standards; and perform appropriate analyses, (2) confidentiality - refrain from disclosing or using confidential information, (3) integrity - avoid conflicts of interest, refuse gifts that might influence actions, recognize limitations, and avoid activities that might discredit the profession, and (4) objectivity - communicate information fairly, objectively, and completely, within confidentiality constraints.

1-26 Standards do not always provide the needed guidance. Sometimes an action borders on being unethical, but it is not clearly an ethical violation. Other times two ethical standards conflict. In situations such as these, accountants must make ethical judgments.

1-27 (5-10 min.)

Typical activities associated with the treasurer function include:

q Provision of capital
q Investor relations
q Short-term financing
q Banking and custody
q Credits and collections
q Investments
q Risk management

Typical activities associated with the controller function include:

q Planning for control
q Reporting and interpreting
q Evaluating and consulting
q Tax administration
q Government reporting
q Protection of assets
q Economic appraisal

1-28 (5-10 min.)

Activities 2, 4, 5, and 6 are primarily associated with marketing decisions.

The management accountant would assist in these decisions as follows:

Boeing Company’s pricing decision requires cost data relevant to the new method of distributing spare parts. A will need to know the costs of the advertising program as well as the additional costs of other value chain functions resulting from increased sales. TexMex Foods will need to know the incremental