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C HAPTER 1 ACCOUNTING : INFORMATION FOR DECISION MAKING S OLUTIONS R EVIEW Q UESTIONS 1.1 Step 1: Specify the decision problem, including the decision maker’s goals. Step 2: Identify options. Step 3: Measure benefits (advantages) and costs (disadvantages) to determine the value (benefits reaped less costs incurred) of each option. Step 4: Make the decision, choosing the option with the highest value. 1.2 Because people place different emphasis on factors such as money, risk, and leisure. 1.3 The benefits of an option less its costs. Because value is the contribution of an option to the decision maker’s goals, we measure value relative to the status quo, which is not doing anything at all. 1.4 The value of the next best option. 1.5 An organization is a group of individuals engaged in a collectively beneficial mission. The key difference between individual and organizational decision making relates to goals – organizational goals rarely coincide with the goals of all individual participants. 1.6 (1) Policies and procedures; (2) Monitoring; (3) Incentive schemes and performance evaluation. 1.7 Planning decisions relate to choices about acquiring and using resources to deliver products and services to customers. Control decisions relate to motivating, monitoring, and evaluating performance. 1.8 Plan, Implement, Evaluate, Revise (PIER Cycle). 1.9 To help measure the costs and benefits of decision options. 1.10 Persons outside the firm. These individuals make decisions about buying and selling stock, lending money, dividends, and taxes. 1.11 Persons inside the firm. These individuals make decisions about which products and services to offer, the prices of products and services, what equipment to purchase, who to hire and how to pay them. Balakrishnan, Managerial Accounting 1e FOR INSTRUCTOR USE ONLY
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1-2 1.12 The primary users (external vs. internal), governing principles, the unit of analysis, emphasis, periodicity, and types of data considered. 1.13 Ethics relate to every step of the decision framework. Ethics can shape our goals, the options we consider, how we measure costs and benefits, and the ultimate decision we make. 1.14 The Foreign Corrupt Practices Act of 1977. 1.15 The key financial players include the CEO, CFO, controller, treasurer, and chief internal auditor. The roles of each player are described in detail in the appendix. 1.16 (1) Competence, (2) Confidentiality, (3) Integrity, and (4) Objectivity. D ISCUSSION Q UESTIONS 1.17 Your ultimate goal could be to earn as much as you can before you retire, say, 40 years after you graduate. With this goal in mind, you have to plan a career path and evaluate the three job offers to see which of these jobs will take you on that path. Besides pay, factors such as the reputation of the organization, the quality of on-the-job training you will get, opportunities to climb the organizational ladder are very important from a career perspective. If all three job offers are equally attractive in terms of the career you have
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This note was uploaded on 03/21/2010 for the course ACC 123 taught by Professor Wynn during the Spring '10 term at Baylor.

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