INTRODUCTION TO MANAGERIAL

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INTRODUCTION TO MANAGERIAL

ACCOUNTING

DISCUSSION QUESTIONS

1.Managerial accounting provides accounting information for internal users in a firm. Specifically, managerial accounting identifies, collects, measures, classifies, and reports financial and nonfinancial information that is useful to internal users in planning, controlling, and decision making. Managerial accounting also has no mandatory rules, emphasizes the future, and is multidisciplinary.

2.The thre e broad objectives of managerial accounting are to provide information for planning, controlling, and decision making.

3.The users of managerial accounting information are generally managers and other employees of a firm.Managerial accounting information is typically not provided to outsiders but may be in selected cases. For example, a bank may require budgeting information for the next few years before agreeing to grant a loan.

4.A managerial accounting system typically provides both financial and nonfinancial information. For example, financial information on cost of production is tracked. Other information, such as the number of warranty returns, may also be tracked by the management information system.

5.Controlling involves comparing the expected performance with the actual performance to see what differences, if any, exist.

6.Planning occurs first. Planning requires setting objectives and identifying the means of achieving those objectives. Then, the results of the plan are compared with the plan, which is called controlling. Clearly, it is also feedback, in that any impediments or unexpected occurrences are noted. This feedback is then used to develop the plan for the next period.

7.Managerial accounting is internally focused, does not follow mandatory rules, keeps track of both financial and nonfinancial information, emphasizes the future, and relies on a broad range of disciplines. Financial accounting, on the other hand, is externally focused, follows externally imposed rules (such as GAAP), has a historic al orientation, and provides information about the company as a whole.

8.Managerial accountants have had to broaden their focus beyond simple financial reporting to include the gathering of information on all types of costs and of the value of the product or service to customers. These broader costs are used in planning and decision making.

9.Customer value is the difference between what a customer receives and what the customer gives up when buying a product or service. The focus on customer value forces management accounting to look at many types of costs, not simply manufacturing cost. These may include the price of the good or service, maintenance costs, search costs, learning costs, and disposal costs.

10.The value chain is the set of activities required to design, develop, produce, market, and deliver products and services to customers. It is important because it helps the company to understand its role in serving customers and to develop strategic competence.

11.Today’s managerial accountant must understand many functions of the business, from manufacturing to marketing to distribution to customer service, in order to provide appropriate information for managing the value chain. Increased international trade means the managerial accountant must be familiar with not only business practices and laws in his or her own country but also in the countries with which the company trades.1 Managerial Accounting The Cornerstone of Business Decision Making, 8e Maryanne Mowen, Don Hansen, Dan Heitger ( Solutions Manual, All Chapters.100% Original Verified, A+ Grade) All Chapters Download Link At The End of This File. 1 / 4

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12.Enterprise risk management (ERM) refers to the formal process of identifying the factors or threats, both internal and external to the organization, that might prevent the organization from achieving its strategi c objectives. The managerial accountant plays an increasingly important role in ERM by providing financial a nd nonfinancial measures of these threats and communicating them to high-level ex ecutives (e.g., chief risk officer, chief financial officer, board of directors) in the organization who manage these factors.

13.Line positions are those that have direct responsibility for t he basic objectives of an organization. These typically include producing and selling a product. Staff positions are supportive in nature (e.g., human resources, maintenance) and have only indirect responsibility for an organization’s basic obje ctives.

14.Yes, the controller should be a member of top management. This is because the controller, as the chie f accountant for the firm, has a wealth of information needed by top management in determining the strate gic direction of the firm.

15.Ethical behavior involves choosing actions that are right, proper, and just. Yes, it is possible to teach aspect s of ethical behavior in a managerial accounting classroom. Students need to see examples of right and wro ng behavior in business. These examples help them to recognize ethical dilemmas later on the jo b.

16.One major theme or executive pressure common to many of the recent accounting scandals is a focus on th e short term, rather than the long term. For example, WorldCom wrongly decided to increase current period ne t income by inappropriately decreasing current period expenses (by recording more of the expenditures as an asset that would be expensed in small amounts each period rather than all at once in the current perio d).Often, the high-level executives that perpetrate such financial fraud are rewarded by incentives that overweight current period net income performance relative to long-term net income performance. Anothe r major theme common to many of the accounting and banking frauds is a lack of sufficient transparency , or clarity, in the types and timing of the information that is reported to parties outside of the organization . Some business experts also would argue that a third common theme underlying many of these scandals wa s the lack of sufficient oversight (i.e., watchdog mentality) by the perpetrating organization’s auditors, boa rd of directors, or bo th.

17.The three forms of certification discussed are the Certified Management Accoun tant, the Certified Public Accountant, and the Certified Internal Auditor. While all three are appropriate to the accounta nt within the company, only the CMA exam is interdisciplinary and covers the broad range of subjects face d by the managerial accountan

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CHAPTER 1 Introduction to Managerial Accounting

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MULTIPLE-CHOICE QUESTIONS

1-1. c 1-2. b 1-3. a 1-4. b 1-5. e 1-6. e 1-7. d 1-8. d 1-9. b 1-10. e 1-11. d

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CHAPTER 1 Introduction to Managerial Accounting

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EXERCISES

E 1-12

• Decision making
• Controlling
• Planning
• Decision making
• Planning
• Decision making

E 1-13

• Managerial accounting oriented
• Financial accounting oriented
• Managerial accounting oriented
• Financial accounting oriented
• Managerial accounting oriented

E 1-14

• The total product is the product and its features (processing speed, disk drives,

software packages, and so on), the service, the operating and maintenance requirements, and the delivery speed.

• One company is emphasizing low costs, and the other is attempting to differentiate

its PC by offering faster delivery and higher-quality service.

• The Confiar’s service component and its delivery time appear to be better than

Drantex’s. Thus, the realization of these features appears to outweigh the additional sacrifice (the additional operating and maintenance cost) associated with the Confiar PC. The implications for management accounting are straightforward. The management accounting information system should collect and report information about customer realization and sacrifice. Much of this information is external to the firm but clearly needed by management.

• Better quality and shorter delivery time increase the value of what the customer

receives, while lowering the price decreases the amount paid. In total, customer value has increased, and presumably, this should make the Drantex PC much more competitive. This example illustrates how quality, time, and costs are essential competitive weapons. It also illustrates how critical it is for the management accounting system to collect and report data concerning these three dimensions.

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