EOC Questions and Solutions

32 Chapter 1 EOC Questions and Solutions

Discussion Questions

• What is meant by the cost-benefit constraint when developing managerial accounting

systems?

Difficulty: Easy

Time on Task: 3 minutes

Objective: LO6

AACSB: Application of knowledge

Assignment: Homework

Solution:

The cost of obtaining the inputs and processing those inputs into information that is concise, easily understandable, and timely must be less than the benefits obtained from the information.

• Differentiate between operational and strategic information needs.

Difficulty: Moderate

Time on Task: 4 minutes

Objective: LO2

AACSB: Reflective thinking

Assignment: Quiz, Test and Homework

Solution:

Different information is required for strategic and operational decisions. Strategic decisions, which are typically made by upper-level management, require information so that managers can determine with which markets, customers, services, or products they should operate. Operational decisions, in contrast, are typically made by operations management. Those managers require information on how to efficiently and effectively render services or provide product lines.Special Instruction from Original Author: All dates should be changed to “2022-2023” throughout, including Ms, EOC, Widget Ms, and Art Ms.(Managerial Accounting, 1e Jennifer Cainas, Celina Jozsi, Kelly Richmond Pope) (Solution Manual Latest Edition 2023-24, Grade A+, 100% Verified) 1 / 4

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• What is the difference between effectiveness and efficiency?

Difficulty: Easy

Time on Task: 3 minutes

Objective: LO8

AACSB: Reflective thinking

Assignment: Homework

Solution:

Effectiveness refers to achieving the goals, whereas efficiency relates to the resources used to create the actual results. Using The Lawn Care Company example, if the goal is to cut 30 lawns per month, but you cut only 18, you were not effective in reaching your target. If your costs (in both time and money) were less than anticipated for the 18 lawns that you did cut, you were efficient.

• What are key differences between financial and managerial accounting?

Difficulty: Easy

Time on Task: 3 minutes

Objective: LO1

AACSB: Application of knowledge

Assignment: Homework

Solution:

Managerial accounting information is designed to provide management with detailed, relevant information that will help determine the future actions of the company. This is in contrast to financial accounting information, which adheres to Generally Accepted Accounting Principles (GAAP) and is used to produce summarized reports based on past performance.

• Which actions are needed when analyzing and resolving potential ethical problems?

Difficulty: Difficult

Time on Task: 4 minutes

Objective: LO8

AACSB: Application of knowledge

Assignment: Homework 2 / 4

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Solution:

First, it is important to fully research the relevant facts to obtain a full understanding of the ethical scenario. Then, you must apply a framework such as the Institute of Management Accountants’ (IMA’s) Statement of Ethical Professional Practice, keeping in mind the policies of the company, as well as applicable laws and regulations, to determine what your obligations are so as to maintain the highest standards of ethical conduct.

• Describe the IMA’s Statement of Ethical Professional Practice.

Difficulty: Moderate

Time on Task: 6 minutes

Objective: LO8

AACSB: Application of knowledge

Assignment: Homework

Solution:

The IMA’s Statement of Ethical Professional Practice serves as a guideline for expected ethical behavior for all accounting professionals. The four main standards under the code of professional conduct require the members of the

IMA to exhibit:

• Competence—by maintaining their level of technical expertise in accounting

and properly following applicable laws, policies, and procedures.II. Confidentiality—by keeping all company information confidential from outside parties unless authorized or legally required to disclose that information.III. Integrity—by being honest and trustworthy at all times, no matter what the circumstance.IV. Credibility—by presenting information fairly, objectively, and without bias to intended users of the information.

• Explain the differences between the three means of gathering managerial accounting data.

Difficulty: Difficult

Time on Task: 5 minutes

Objective: LO6

AACSB: Reflective thinking

Assignment: Test

Solution:

The three means of gathering managerial accounting data include (1) direct observation, (2) interviewing, and (3) storyboarding. 3 / 4

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• With direct observation, you directly watch and record data. While this

approach is perhaps the most accurate, it requires that you spend considerable time observing and tracking.

• Interviewing requires meeting with individuals familiar with the process. If the

people being interviewed are experienced, this approach can yield accurate enough internal information and may require less time to gather than the process of direct observation.

• Storyboarding requires a facilitator to ask questions of several employees

regarding which tasks are performed; the facilitator captures the answers on a board and ensures that all activities are documented according to the consensus of the group. This may be quite time intensive but can yield a more complete and visual picture that would justify the cost involved.

• Explain the three primary uses of managerial accounting information.

Difficulty: Moderate

Time on Task: 4 minutes

Objective: LO4

AACSB: Application of knowledge

Assignment: Homework

Solution:

Managerial accounting provides the owners and managers of a company with

useful information to make decisions in three areas: the cost of a service or

product, planning and performance evaluation, and nonroutine special decisions.The information can be financial (in dollars) as well as nonfinancial, such as time, quality, and customer satisfaction.

• What are three means of gathering managerial accounting data?

Difficulty: Easy

Time on Task: 3 minutes

Objective: LO6

AACSB: Application of knowledge

Assignment: Homework

Solution:

The three means of gathering managerial accounting data are direct observation, interviewing, and storyboarding.

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