Jawapan MA 12th ed- Chapter 1

CHAPTER 1
THE ACCOUNTANT'S ROLE IN THE ORGANIZATION

1-1

Management accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. It focuses on internal reporting.

Financial accounting focuses on reporting to external parties. It measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP).

Other differences include:
(1) management accounting emphasizes the future,
(2) management accounting influences the behavior of managers and employees
(3) management accounting is not restricted by Generally Accepted Accounting Principles and
(4) management accounting covers more topics.


1-2

Financial accounting is constrained by generally accepted accounting principles.

Management accounting is not restricted to these principles. The result is that:
• management accounting allows managers to charge interest on owners’ capital to help judge a
division’s performance, even though such a charge is not allowed under GAAP,
• management accounting can include assets or liabilities (such as “brand names” developed
internally) not recognized under GAAP, and
• management accounting can use asset or liability measurement rules (such as present values or resale prices) not permitted under GAAP.


1-3

Management accountants can help in formulating strategy by providing information about the sources of competitive advantage—for example, the cost, productivity, or efficiency advantage of their company relative to competitors or the premium prices a company can charge relative to the costs of adding features that make its products or services distinctive.


1-4

The business functions in the value chain are:
• Research and development—generating and experimenting with ideas related to new products, services, or processes.
• Design of products, services, and processes—the detailed planning and engineering of products,
services, or processes.
• Production—acquiring, coordinating, and assembling resources to produce a product or deliver
a service.
• Marketing—promoting and selling products or services to customers or prospective customers.
• Distribution—delivering products or services to customers.
• Customer service—providing after-sales support to customers.


1-5

Supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations.

Cost management is most effective when it integrates and coordinates activities across all companies in the supply chain as well as across each business function in an individual company’s value chain. Attempts are made to restructure all cost areas to be more cost-effective.


1-8

Planning decisions focus on
(a) selecting organization goals, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and
(b) communicating the goals and how to attain them to the entire organization.

Control decisions focus on
(a) taking actions that implement the planning decisions, and
(b) deciding how to evaluate performance and what related feedback to provide that will help future decision making.


1-9

The three roles are:
1. Problem solving—comparative analysis for decision making.
2. Scorekeeping—accumulating data and reporting results to all levels of management describing how the organization is doing.
3. Attention directing—helping managers to focus on opportunities and problems.


1-10

The three guidelines for management accountants are:
1. Employ a cost-benefit approach.
2. Recognize behavioral and technical considerations.
3. Adopt the “different costs for different purposes” notion.


1-11

Agree. A successful management accountant requires general business skills (such as understanding the strategy of an organization) and people skills (such as motivating other team members) as well as technical skills (such as computer knowledge, calculating costs of products, and supporting planning and control decisions).


1-12

The new controller could reply in one or more of the following ways:

(a) Demonstrate to the plant manager how he or she could make better decisions if the plant controller was viewed as a resource rather than a deadweight. In a related way, the plant controller could show how the plant manager's time and resources could be saved by viewing the new plant controller as a team member.

(b) Demonstrate to the plant manager a good knowledge of the technical aspects of the plant. This approach may involve doing background reading. It certainly will involve spending much time on the plant floor speaking to plant personnel.

(c) Show the plant manager examples of the new plant controller's past successes in working with line managers in other plants. Examples could include:
• assistance in preparing the budget,
• assistance in analyzing problem situations and evaluating financial and nonfinancial aspects of different alternatives, and
• assistance in submitting capital budget requests.

(d) Seek assistance from the corporate controller to highlight to the plant manager the importance of many tasks undertaken by the new plant controller. This approach is a last resort but may be necessary in some cases.


1-13

IMA stands for the Institute of Management Accountants. It is the largest association of management accountants in the United States. The CMA (Certified Management Accountant) is the professional designation for management accountants and financial executives. It demonstrates that the holder has met the admission criteria and demonstrated the competency of technical knowledge required by the IMA.


1-16 Value chain and classification of costs, computer company.

Cost Item Value Chain Business Function
a. Production
b. Distribution
c. Design
d. Research and Development
e. Customer Service
f. Design (or Research and Development)
g. Marketing
h. Production


1-19 Planning and control decisions.

1.
(a) Planning—decision by Barnes & Noble (B&N) about cash needs for the future.
(b) Control—performance evaluation of B&N for the year.

2.
(a) Planning—decision to increase or decrease local marketing support.
(b) Control—decision on whether recent sales promotion led to an increase in revenues.

3.
(a) Planning—decision about whether or not to expand B&N’s Internet lines of business.
(b) Control—evaluation by VP of New Business Development of the performance of managers
of individual lines of business.

4.
(a) Planning—decision on which books to advertise more or which books to include in a
special chat-room site.
(b) Control—decision by publisher to pay additional bonuses to authors due to their book being
on a bestseller list.

5.
(a) Planning—decision by B&N on the amount and type of insurance to purchase next year.
(b) Control—follow up by B&N with the insurance company regarding a cash payment to B&N.


1-20 Problem solving, scorekeeping, and attention directing.

The accountant's duties are often not sharply defined, so some of these answers might be challenged:
1. Attention directing
2. Problem solving
3. Scorekeeping
4. Scorekeeping
5. Scorekeeping
6. Attention directing
7. Problem solving
8. Scorekeeping
9. Problem solving
10. Attention directing


1-21 Professional ethics and reporting division performance.

1.
Miller's ethical responsibilities are well summarized in the IMA's "Standards of Ethical Conduct for Management Accountants" (Exhibit 1-7 of text). Areas of ethical responsibility include:
• competence
• confidentiality
• integrity
• objectivity

The ethical standards related to Miller's current dilemma are integrity, competence and objectivity. Using the integrity standard, Miller should refrain from either actively or passively subverting the attainment of the organization’s legitimate and ethical objectives. Competence demands that Miller perform her professional duties in accordance with relevant laws, regulations, and technical standards. Objectivity requires that Miller report information fairly and objectively. Miller should refuse to book the $200,000 of sales until the goods are shipped. Both financial accounting and management accounting principles maintain that sales are not complete until the title is transferred to the buyer.

2.
Miller should refuse to follow Maloney's orders. If Maloney persists, the incident should be reported to the corporate controller. Support for line management should be wholehearted, but it should not require unethical conduct.


1-22 Planning and control decisions, Internet company.

1.
Planning decisions at WebNews.com focus on organizational goals, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to attain them to the entire organization. For example, WebNews.com could have the objective of revenue growth to gain critical mass or it could have the objective of increasing operating income. Many Internet companies in their formative years make revenue growth (and subscriber growth) their primary goal.

Control focuses on
(a) deciding on, and taking actions that implement the planning decisions, and
(b) deciding how to evaluate performance and what feedback to provide that will help future decision making.

2.
Planning decisions
a. Decision to raise monthly subscription fee
c. Decision to upgrade content of online services
e. Decision to decrease monthly subscription fee

Control decisions
b. Decision to inform existing subscribers about the rate of increase—an implementation part of control decisions
d. Demotion of VP of Marketing—performance evaluation and feedback aspect of control decisions


1-23 Problem solving, scorekeeping, attention directing, and feedback, Internet company (continuation of 1-22).

1.
Problem solving – comparative analysis for decision making.
Scorekeeping – accumulating data and reporting results to all levels of management describing how the organization is doing.
Attention directing – helping managers focus on opportunities and problems.

2.
(a) and (e) Decisions to change subscription fee.

Problem solving – report outlining expected revenues from subscribers and advertising with different monthly fee amounts.
Scorekeeping – report with monthly subscribers and their revenues in prior months.
Attention directing – report showing the change in the number of subscribers of Internet companies at the time they change their monthly fees.

(b) Decision to inform existing subscribers of $24.95 fee from July onwards.

Problem solving – report analyzing different ways (e-mail, regular mail) of informing subscribers.
Scorekeeping – report indicating how many subscribers have been contacted.
Attention directing – report showing how many subscribers have cancelled their subscriptions following notification of the increase in fees.

(c) Decision to upgrade content of online services and to offer better Internet mail services.

Problem solving – report outlining expected revenues from subscribers and advertisers as a result of upgrading service.
Scorekeeping – report with monthly subscribers and revenues before and after upgrading service.
Attention directing – report showing the change in the number of subscribers of Internet companies after they upgraded service.

(d) Decision to demote vice president of marketing.

Problem solving and attention directing – report analyzing growth in subscribers at competing Internet companies.

3.
As a result of the feedback, WebNews.com made the following decisions:
a. Decision to change subscription fee from $24.95 per month in September 2003 to $21.95 in October 2003.
b. Demotion of Vice President of Marketing after significant slowing of subscriber growth in accounts and revenues.

4.
WebNews.com overestimated the number of subscribers for the July to September 2003 period. It might examine the methodology it uses to estimate the sensitivity of subscriptions to price changes and upgrade of its services.


1-24 Management accounting guidelines.

1. Cost-benefit approach
2. Behavioral and technical considerations
3. Different costs for different purposes
4. Cost-benefit approach
5. Behavioral and technical considerations
6. Cost-benefit approach
7. Behavioral and technical considerations
8. Different costs for different purposes
9. Behavioral and technical considerations


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