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management accounting
Management Accounting 3rd Edition Anthony A. Atkinson, Robert S. Kaplan, S. Mark Young, Rajiv D. Banker, Pajiv D. Banker - Solutions
Z Limited manufactures three products, the selling price and cost details of which are given below:In a period when direct materials are restricted in supply, the most and the least profitable uses of direct materials are Product Product Product X Y Z () () () Selling 75 95 95 price per unit Costs
Your company regularly uses material X and currently has in stock 600 kg, for which it paid 1500 two weeks ago. It this were to be sold as raw material it could be sold today for 2.00 per kg. You are aware that the material can be bought on the open market for 3.25 per kg, but it must be purchased
Q plc makes two products-Quone and Qutwo- from the same raw material. The selling price and cost details of these products are as shown below: Quone Qutwo () () Selling price 20.00 18.00 Direct material (2.00/kg) 6.00 5.00 Direct labour 4.00 3.00 Variable overhead unit 2.00 1.50 12.00 9.50
BB Limited makes three components: S, T and U. The following costs have been recorded:Another company has offered to supply the com- ponents to BB Limited at the following prices: Component Component Component S T U Unit cost Unit cost Unit cost () () () Variable cost 2.50 8.00 5.00 Fixed cost 2.00
M plc makes two products - M1 and M2 budgeted details of which are as follows:Budgeted production and sales for the year ended 31 December are:The fixed overhead shown above comprises both general and specific fixed overhead costs. The general fixed overhead cost has been attributed to units of MI
A company is considering accepting a one-year contract which will require four skilled employ- ees. The four skilled employees could be recruited on a one-year contract at a cost of 40000, per employee. The employees would be supervised by an existing manager who earns 60 000 per annum. It is
Make or buy decision The management of Springer plc is considering next year's production and purchase budgets. One of the components produced by the company, which is incorporated into another product before being sold, has a budgeted manu- facturing cost as follows:Trigger plc has offered to
Calculation of minimum selling price You have received a request from EXE plc to provide a quotation for the manufacture of a specialized piece of equipment. "This would be a one-off order, in excess of normal budgeted production. The following cost estimate has already been prepared:Required:(a)
PQR Limited is an engineering company engaged in the manufacture of components and finished products. The company is highly mechanised and each of the components and finished products requires the use of one or more types of machine in its machining department. The following costs and revenues
Price/output and key factor decisions You work as a trainee for a small management consultancy which has been asked to advise a company, Rane Limited, which manufactures and sells a single product. Rane is currently operating at full capacity producing and selling 25000 units of its product each
Relevant costs for a pricing decision Johnson trades as a chandler at the Savoy Marina. His profit in this business during the year to 30 June was 12000. Johnson also undertakes occa- sional contracts to build pleasure cruisers, and is considering the price at which to bid for the contract to build
Deleting a segment The original budget for the K department of Hilton Ltd for the forthcoming year was as follows:As part of Hilton's long-term strategic plan the K department was due to be closed at the end of the forthcoming year. However, rumours of the closure have resulted in the majority of
appreciate the important role that management accounting information plays in manufacturing, service, nonprofit, and governmental organizations LO1
discuss the significant differences between management accounting and financial accounting LO1
understand how different people in the organization have different demands for management accounting information LO1
appreciate how management accounting creates value for organizations and how it relates to operations, marketing, and strategy LO1
explain why management accounting information must include both financial and nonfinancial information LO1
understand why activities should be the primary focus for measuring and managing performance in organizations LO1
appreciate the behavioral and ethical issues faced by management accountants LO1
Why do operators/workers, middle managers, and senior executives have different informa¬ tional needs? (LO 1, 3)
Why do a company's operators/workers, man¬ agers, and executives have different informa¬ tional needs than shareholders and external suppliers of capital? (LO 2)(LO 1, 3)
Why may financial information alone be insuffi¬ cient for the ongoing informational needs of operators/workers, managers, and executives?(LO 3, 4, 5)
Why might senior executives need measures be¬ sides financial ones to assess how well their busi¬ ness performed in the most recent period?(LO 4, 5)
What forces have caused management account¬ ing systems designed decades ago to become less relevant and less valuable for organizational em¬ployees in today's globally competitive environ¬ ment? (LO 1, 5)
How does the role for management accounting systems change as the environment becomes more competitive? (LO 4, 5)
What is the impact of shifting the role of man¬ agement accounting information from control¬ ling workers and operators to informing the continuous improvement activities of these work¬ ers and operators? (LO 6)
What, if any, are the differences between the management accounting information needed in manufacturing organizations and that needed in service organizations? (LO 1)
Why is management accounting information im¬ portant in government and nonprofit organiza¬ tions? (LO 1)Management Accounting: Information that Creates Value 25(LO 4, 5)
What information do employees need about ac¬ tivities performed in the organization? (LO 6)
How can managers use information on the cost of activities and business processes? (LO 6)
What information might management account¬ ing systems provide to managers and employees for each of the following strategies: operational excellence, product leadership, and customer service? (LO 4)
How can management accounting information produce behavioral and organizational reactions?(LO 7)
How can beliefs systems and boundary systems foster high ethical standards among employees?(LO 7)
Different information needs Consider the operation of a fast-food company with hundreds of retail outlets scattered about the country. Identify the management ac¬ counting information needs for the following:(a) The manager of a local fast-food outlet that prepares food and serves it to cus¬
Different information needs Consider the operation of a hospital. Identify the management accounting information needs for the following:(a) The managers of (1) a patient unit, where patients stay while being treated for illness or while recuperating from an operation, and (2) the radiology
Different information needs Consider the operation of Ikon Printing. Identify the management accounting information needs for the following:(a) An employee desiring to help serve customers more efficiently and effectively(b) The manager of a single retail outlet(c) The president of Ikon Printing Be
Consider the descriptions of management accounting provided in Exhibit 1-1 and Exhibit 1-2. Discuss why these responsibilities are viewed as "accounting" and how management accountants interface with other functional areas in fulfilling the stated responsibilities. What skills and knowledge does a
Differences between financial and managerial accounting Many German com¬ panies have their management accounting department as part of the manufactur¬ ing operations group rather than as part of the corporate finance department. These German companies operate two separate accounting departments.
Role for nonfinancial information for senior executives A recent article on the de-cline of a U.S. corporation described the information provided and the reward structure of senior managers: "Summarized data on sales and sales growth were dis¬ played on senior executives' instrument panels and the
Sarah Schmit, manager of the Components Division of FX Corporation, is consid¬ ering a new investment for her division. The division has an investment base of $4,000,000 and an operating income of $600,000. The new investment of $500,000 supports corporate strategy and is expected to increase
Differences between financial and managerial accounting The controller of a German machine tool company believed that historical cost depreciation was in¬ adequate for assigning the cost of using expensive machinery to individual parts and products. Each year he estimated the replacement cost of
Role for financial information for continuous improvement Consider an organiza¬tion that has empowered its employees, asking them to improve the quality, produc¬ tivity, and responsiveness of their processses that involve repetitive work. This work could arise in a manufacturing setting, such as
Ethical issues You are employed as a senior manager in an insurance organization. One of your responsibilities is to randomly review claims for reimbursement that have been submitted by people who have traveled on the organization's behalf.By chance, you have pulled a claim that was submitted by
Information for employee empowerment A U.S. automobile components plant had recently been reorganized so that quality and employee teamwork were to be the guiding principles for all managers and workers. One production worker described the difference:In the old production environment, we were not
Role for financial information for continuous improvement The manager of a large semiconductor production department expressed his disdain for the cost information he was presently given:Cost variances are useless to me.7 I don't want to ever have to look at a cost variance, monthly or weekly.
Part proliferation: role for activity-based costing An article in The Wall Street Journal Qune 23, 1993) reported on the major changes occurring in General Motors. Its new CEO, John Smith, had been installed after the board of directors requested the resignation of Robert Stempel, the previous
Role for activity-based cost systems in implementing strategy Consider the case of the Cott Corporation, a Canadian private label producer of high- quality cola beverages. Cott is attempting to get grocery retailers to stock its cola beverages, as a lower price alternative to the international
Financial versus management accounting: role for activity-based cost systems m privatization ofgovernment services The mayor of Gotham City is dissatis¬ fied with rising costs and deteriorating quality of the services provided by the municipal workers, particularly in the transportation
Comprehensive performance measurement in public and nonprofit organiza- LO 1, 5 tions Organizations in the public and nonprofit sector, such as government agencies and charitable social service entities, have financial systems that bud¬ get expenses and monitor and control actual spending. Explain
Ethical issues, revenue recognition Read the article, "What's Wevenue?" by LO 7 Elizabeth MacDonald, in The Wall Street Journal (January 6, 2000, p. A1). The article states that managers faced aggressive revenue targets and reports testi¬ mony about "a dozen or more accounting tricks that various
understand how organizations define objectives and use these objectives to define operating priorities LO1
think of the organization as a sequence of activities in a value chain LO1
demonstrate how performance measures help organization members manage the value chain LO1
describe the process that organizations can use to reduce costs by focusing on activity performance LO1
Why is the target set of customers the central strategic planning element? (LO 1)
What are stakeholders? (LO 1)
Why should stakeholder requirements matter to an organization? (LO 1)
What are organization objectives? (LO 1)
What are the distinctions between the three levels of strategy: organizational level, business level, and operational (tactical) level? (LO 1)
What is a value chain? Provide an example (LO 2)
What is an activity? Provide an example. (LO 2)
How are service and quality defined? Are they related? Explain. (LO 2)
What elements does price, defined as the lifetime cost of a product to a customer, include? (LO 2)
What is organization control, and what are its four components? (LO 3)
What is process, or operations, control? (LO 3)
What does effective mean? (LO 3)
What does efficient mean? (LO 3)
What are customer-validated performance mea¬ sures? Provide an example. (LO 3)
How are outcome and output defined? Are they related? Explain. (LO 3)
What is task control? Provide an example. (LO 3)
What is results control? Provide an example(LO 3)
What is benchmarking? (LO 3)
What is managing by the numbers, and what problems are associated with such an ap¬ proach? (LO 3)
From the producer's point of view, what costs are included in life-cycle costs? (LO 3)
How does continuous improvement differ from reengineering? (LO 4)
How are efficient and inefficient activities de¬ fined? (LO 4)
How can activity, or value, analysis help an organization reduce costs while improving processes? (LO 4)
Ethics and stakeholders Lee and Alex are discussing labeling for product 121, LO 1 one of their company's products that will be exported overseas to country C.Lee: In the US, product 121 must be labeled as possibly hazardous to humans. I think the warning is unnecessary, though, because the amounts
Defining the organization's environment Identify two ways that each of the LO 1 owner, customer, and community stakeholder groups define the organization's external environment. Why is each group's requirements important to the organi¬ zation?
Community satisfaction and owner wealth Identify how an organization might LO 1 learn about how community satisfaction with the organization might translate into increased owner wealth.
Product service features For each of the following products, what are the three most important elements of service:(a) television set (f)(b) university course (g)(c) meal in an exclusive restaurant(d) carry-out meal from a restaurant (i)(e) container of milk (j)visit to the doctor trip on an
The elements of quality sures of quality:(a) television set(b) university course(c) meal in an exclusive restaurant(d) carry-out meal from a restaurant(e) container of milk following products, suggest three mea-(f) visit to the doctor(g) trip on an airplane(h) pair of jeans(i) novel(j) university
Input, output, and outcome Pick any job with which you are familiar. Do not use an example from the text. Give one example each of an input, output, and outcome measure for that job. Do you see any danger in using either input or output measures to assess performance on that job? Why?LO 1
Using results control A company that sells life insurance to customers has de¬ cided to use results control to control the behavior of its sales staff. What form of results control do you think the company should use in this situation? Why?LO 1
Choosing between task and results control Do you think that results control or task control is better suited for controlling the performance of a professional ath¬ lete? Why?LO 1
Using benchmarking Describe how you might use benchmarking to improve your study habits.LO 1
Effectiveness and efficiency Give an example of an activity that is effective but not efficient. Why do you think that organizations sometimes design processes that accomplish activities effectively but not efficiently?LO 1
Process charting Briefly chart (that is, specify from start to finish, the activities used to complete the product or service) any process with which you are famil¬ iar. Identify two activities in the process that you think are inefficient, and why. You need not make this complicated. Describing
Stakeholders and strategy Suppose that you are the owner/manager of a busi¬ ness that provides food catering services.REQUIRED (a) Identify your stakeholder groups.(b) Identify three different approaches that you may use to compete in the food catering market (c) Identify how you would choose
Community expectations Use business periodicals and general news sources, such as newspapers and magazines, to identify five examples of community ex¬ pectations concerning organizations. Each example should clearly identify the communitys expectation and should indicate your assessment of the
Activities and critical performance indicators in a hospital What are the key activities in a hospital? What are some critical performance indicators for activi¬ ties in a hospital?LO 1
Activities and critical performance indicators in a convenience store Describe the value chain in a neighborhood convenience store. What are some critical performance indicators that might be used to evaluate the key activities?LO 1
Critical performance indicators in the personal computer industry Identify some critical performance indicators for a manufacturer of personal computers.LO 1
Information to evaluate performance You have just been made the manager of a group of 45 dry-cleaning outlets that are located in a large metropolitan area. Your company has positioned itself as a niche competitor. You offer personalized customer service and prompt cleaning. As a result, your
Choosmg information for control Suppose that you are the general manager of a arge hotel. Identify the daily, weekly, monthly, quarterly, and annual informa-58 Chapter 2 tion that you would want to receive to help you manage the hotel. Assume for the sake of discussion that the hotel is divided
Outputs and outcomes Choose a familiar activity or process. Define an output and an outcome. (Do not use an example from the text.) Explain how using the outcome measure would be more effective in promoting activity improvement efforts than using the output measure.LO 1
Monitoring materials use Organizations in the natural resource sector of the economy, such as pulp and paper, meat packers, and organizations that process ores and metals, have developed and use perhaps the most sophisticated tools for monitoring and managing materials costs. Why do you think this
Managing by the numbers Give an example of managing by the numbers. In view of its limitations, why do you think that managing by the numbers has at¬ tracted such a wide following?LO 1
Process charting Chart the sequence of activities that occur from the time that you enter a restaurant until the time you leave. Are some of these activities un¬ necessary, or poorly designed? Does your evaluation of these activities depend on the type of restaurant (i.e., a fast-food restaurant
Identifying stakeholders and strategic performance measures Pick any organi¬ zation that you know or for which you can develop the data that you need to complete this question. (You may find pertinent information in annual reports or company web sites.) Identify the stated stakeholders, the
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