Questions and Answers of Management Accounting 4th edition

Hailey’s Hair Products has two criteria upon which its reward system is based:(1) Rewarding executives for performance (2) Adding to shareholder value.At present, the remuneration package for
Fitness Forever International sells personal exercise equipment both within Australia and internationally. One division of Fitness Forever produces a product called Absaway, which is a specialised
You are on the board of a computer software company that has three distinct divisions: home networks, small business systems and ERP systems. In a bid to encourage higher performance, it has been
Whistlestop Adventure has grown from a one-man operation into a large, soon-to-be-listed, adventure clothing and equipment company. For much of its four-year history, Whistlestop has used one
The Dancing Goat is the name Logan Jones chose for his café. The origins of the name came from a 1600s fable of a young goat herder watching his goats dance after they ate red coffee beans. Logan
Synergy Ltd’s incentive plan is based on a shared bonus pool. Return on investment (ROI) is used as the main performance metric and is calculated as:Operating profit before tax ÷ Assets at gross
Investigate which companies have experienced either one-strike or two-strikes on their remuneration reports in the last year or two. Summarise your results and collect the specifics of one example.
Sarah Tesar is the lead partner of a medium-sized accounting firm. The eight partners share in an annual bonus pool. The characteristics of the bonus pool system include:• The bonus pool size each
Harley–Davidson, Inc. has found itself having to confront a number of risk-related issues. These have mainly related to:(i) The need to increase the number of recalls due to faults(ii) Surging
Becky Tan is the CFO at Frosters Systems, a diversified company with eight different business units (divisions). Becky has been asked by the CEO to develop a shared bonus pool system.RequiredWhat key
Ben, an employee of Joseph’s, appears to be extremely enthusiastic about his back-office accounting role. He has been with Joseph’s company for about four years and has performed well in his
The ASX Corporate governance principles and recommendations set out rules to deal with enhanced management performance and effectiveness and requires disclosure of the process for performance
You are a remuneration consultant employed by a listed company to assess the CEO’s reward plan. The board is concerned that the CEO is overpaid in absolute terms and also when compared to other
Freshwater is an entity that processes and distributes bottled water throughout Australia and New Zealand. You have been employed as a remuneration consultant to develop a new reward system for the
You are a remuneration consultant. The board of a large multinational bank has asked you to draft a proposal for a new reward system for senior executives. Currently all senior executives are paid a
You are required to offer advice to a small but growing community bank. Describe the steps you would take to prepare a risk profile for this organisation.
Stevan is the divisional manager with the Liberty Property Development Group. His performance report shows a positive divisional margin but a loss for the year. Stevan has complained to the CEO about
Assume you are a senior manager at a publicly listed company. Under the company’s longer-term incentive plan you have recently received a parcel of share options. These share options can only be
Relative performance evaluation at the company level often results in using a market index like the ASX100 as the peer group.RequiredOutline the potential advantages and disadvantages of this
Many organisations use a balanced scorecard set of measures to determine the short-term incentive for senior managers and executives.RequiredOutline any potential difficulties associated with using a
Describe the factors that need to be considered when structuring a compensation plan for executives.
Explain why boards of directors will often employ independent remuneration consultants to assist in developing and assessing compensation plans.
Why would a company restrict when a senior executive can exercise their share options?
What role do the ASX Corporate Governance Council’s Corporate governance principles and recommendations and the Corporations Act play in executive remuneration?
What are the advantages and disadvantages of having an individual’s remuneration linked to performance outcomes?
Should a remuneration plan include a cash bonus or share options? Under which circumstances would either be appropriate?
‘Executives should only be compensated based upon the achievement of targets. They should not receive a fixed salary component.’ Discuss.
Identify why RPE would be used at the company level.
The use of RPE systems for the evaluation of individual managers has been abandoned by many organisations. Microsoft is one example. Given this, can we conclude that RPE is no good?
What is the role of rewards and incentives for executives in reducing agency costs?
How can target measures be used to promote either short-term or long-term performance?
Discuss why an incentive package might include individual, divisional and corporate-level performance targets.
What are the arguments for reward systems at the executive level to contain a longer-term component?
Explain the difference between shares and share options.
Explain agency theory and how it relates to reward systems.
The Galaxy Hotel Group owns and operates a number of mid-level boutique hotels mostly in regional Australia. Galaxy is structured around regions with a regional general manager usually given the
(a) How might organisations such as Qantas and Virgin Australia use a strategy map in the process of developing their scorecards?(b) Explain how the airlines might be able to use the balanced
Markman Ltd, a large pharmaceutical company, is concerned about the ability of its research and development department to develop profitable new prescription drugs. Once a drug has been developed and
Leyland College is in the process of developing a balanced scorecard. The administrators decided that their customers are parents and future employers of their students. They believe the students are
(a) Pick two public companies, go to their websites and identify their major strategies.(b) Pick one of the companies from part (a) and go to the website of a competitor in the same industry. For
What potential problems could arise if the balanced scorecard was developed without a strategy map being available?
Outline the purpose of strategy maps.
Differentiate between a lag indicator and a lead indicator. Provide two examples of each.
Refer to the information in exercise 16.23. The following cost reduction suggestions were made by the kaizen costing team.• Direct materials — suppliers agreed to cost reductions of $4.50 for
Sunshop Books is a multi-divisional book company that listed on the stock exchange about three years ago. Like many in the industry, Sunshop started out in the 1980s as a single-site suburban
Georgina Chan is the chief financial officer of Colorado Pty Ltd, which has three interdependent divisions where, on average, about 30 per cent of the output of one division is transferred to one of
The Enviro division of Solar Sun produces solar panels, 20 per cent of which are sold to the Energy Plus division of Solar Sun and the remainder to outside customers. Solar Sun treats its divisions
Refer to the information in problem 18.21. The manager of Sandy Point Construction is considering a new project. She can buy or lease equipment that will allow the quicker construction and erection
Senior management at Harriot Industries, an Italian-based fashion house and cosmetics company, have been engaged in a debate around the best key financial measure relevant to evaluating the
Mirror Industries laminating division, BrightShine, incurred the following costs and expenses in the last period.During the period, BrightShine produced 300 000 units of laminated board, which were
At a recent management meeting at Skyward Industries, the Transport Division manager was heard to say ‘this transfer pricing is a waste of time — at the end of the year all the internal
Why do you consider that taxation authorities require an international transfer price to be set based on an arm’s length transaction?
‘Transfer pricing is a waste of an entity’s resources; it all gets eliminated on consolidation.’ Discuss.
Cost allocation has no impact on the transfer price set. Discuss.
Suppose transfer prices are set at market prices and a manager who previously purchased internally begins to purchase externally. Explain what it means to say that the outsourcing decision might have
Lance Novak recently acquired Chiefs Loft, a restaurant in an inner-city suburb of Brisbane. Past records show the restaurant has generally experienced quite good customer numbers. While conducting
A senior nurse manager working in an endoscopy clinic in the northern suburbs of Melbourne is contemplating issues that have surfaced with the purchase of a new endoscope (colonoscope) used to
Livermore Components is a supplier of drive shafts to the motor vehicle industry. Currently it supplies two of the large car manufacturers in Australia and is also highly ranked in a tender bid to
Suppose that the director of a lost dogs’ home is concerned about an increase in number of adopted dogs returned to the home because of behaviour problems. When dogs are returned, the home incurs
During its second year of operations, Grilling Raine Computing, an entity that manufactures and sells laptop stands, produced 275 000 units and sold 250 000 units at $60 per unit. The beginning
As introduced in chapter 12, Paisley Insurance Company provides a range of insurance products to residential and commercial customers. Figure 17.16 shows the process map of Paisley’s billing
Synergy Clothing (Synergy) began operations as a clothing manufacturer in the 1940s. It has grown from a small firm into a multi-divisional diversified clothing company with three key
Paige Maddern owns and operates Paige Nightwear (PN), an internet-based company specialising in high-quality nightwear for men and women. From the outset, Paige has kept a number of key principles in
Elimination of waste to maximise customer value is at the core of the lean approach.RequiredSearch online to find two organisations that have adopted a lean approach to operations. Identify the
Following is a list of quality-related activities.(a) Inspecting units when they are 100 per cent complete to remove defective units.(b) Designing a process with as few parts as possible to reduce
Briefly comment on how a lean approach will impact on accounting practices?
Based on your understanding of the TOC, explain why conventional standard costed work in process inventories might hide problems, obscure interdependencies and make it difficult to identify the real
Proponents of the TOC suggest that it is problematic to make decisions based entirely on resource consumption (that is, the ABC system) because there is no guarantee that the spending to supply
Explain why a lean organisation would refuse to implement an absorption costing system.
What is throughput costing? How is it linked to lean accounting?
Should the lean thinking firm be concerned about the costs of quality activities? Explain by drawing on Deming’s 14 principles of management.
Describe the four types of quality-related activities.
Explain how the TOC fits within the lean thinking philosophy.
Outline the five steps in the theory of constraints. In many examples of the TOC in practice, idle capacity is generated. Why? Can this be a good thing?
What is a just-in-time manufacturing system? Why would organisations choose to adopt it?
Describe the behavioural and social controls in a lean manufacturing environment. How would they be different to in traditional (non-lean) organisations?
What is the lean thinking philosophy? Outline the five steps in the lean thinking model.
Transrapid is developing a new magnetically levitated train to run between major cities in Germany at a speed of 500 kilometres per hour. Engineers developed a system with trains departing every 10
Frosty Treats, a boutique ice cream shop, has asked your advice in setting pricing policies. Frosty Treats manager has collected information about prices and sales over the last four
Consider the Dublin Shirt Company in comprehensive example 1 and the additional material provided below.Two recent developments that may have an impact on the company should be noted. First, in the
Tania Wells owns and operates Gym Gear R Us, a growing internet business that specialises in the sale of gym wear for men, women and children. Tania designs her products but has them manufactured
Refer to Paisley Insurance in comprehensive example 1 in chapter 12. In this example, an ABC and non-ABC version of the costs of servicing each type of account customer — residential and commercial
Arnie’s Flowers is a small Mt Macedon florist shop. Arnie sells flowers for bouquets, and she also prepares and delivers flower arrangements.Required(a) Arnie is trying to decide how much to charge
Search online for two organisations that have used life cycle costing.RequiredBriefly comment on what you find in relation to this practice.
Search online for two organisations that have used target costing.RequiredBriefly comment on what you find in relation to this practice.
Cougar Toys is a toy wholesaler supplying to a range of different customers. With concerns about sources of profitability from these different customers, Cougar has embarked on a relatively simple
Duncans sells doughnuts. Data for a recent week are as follows.The manager estimates that, if Duncans increased the price of doughnuts from $1.75 to $1.93 each, weekly volume would be cut to 850
Hector Gonzales runs the Floral Art Company, which supplies floral arrangements to three large supermarket chains throughout Australia. Management has become concerned about the rising costs
If fixed costs are included in the marked-up costs used in setting cost-based prices, a problem may occur when demand declines. Describe this problem.
How can the principles of target costing assist with the decision to invest or continue to invest in the game console market?
In competitive markets such as the game console industry, how might management respond to techniques such as life cycle costing?
How might customer profitability analysis be used to improve organisational performance?
The Nutrition Division of Regal Foods focuses on health-related products. Historically, the Nutrition Division has been an excellent contributor to group performance, with annual growth rates of up
Xi Phan, CEO of the Furniture Supply Group, is considering an investment to upgrade his current computer-aided design equipment. The new equipment would cost $110 000, have a five-year useful life
As part of community town planning, an industrial estate was proposed for development on the outskirts of a growing township which was a two-hour commute from the Melbourne CBD. The estate required
Paradise Resorts, a Hong Kong company that owns and operates holiday resorts, has hired you to analyse its investment opportunities in Australia. The entity’s managers have always used the payback
Energy plays an important role in improving people’s lifestyles. In Australia, our energy consumption is growing and is forecasted to increase by 50 per cent over the next 15 years. The available
The Mavericks are a professional football team with a long tradition of winning. However, over the last three years, the team has not won a major championship, and attendance at games has dropped
Diggers is a coal mining company. Diggers has planned to invest in replacement equipment. Its existing equipment has come to the end of its useful life and will be scrapped with no resale value. The
MacArthur’s is a fast food company planning to invest in a restaurant expansion that entails the refurbishment and opening of four new stores across the country. The cost of this investment is $4

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