Jiam_Mgrl_4e_SolutionsManual_Ch01

Jiam_Mgrl_4e_SolutionsManual_Ch01 - Chapter 1 Managerial...

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Chapter 1 Managerial Accounting in the Information Age QUESTIONS 1. The goal of managerial accounting is to provide information needed for planning, control, and decision making. 2. Budgeted performance is a useful benchmark for evaluating current period performance. 3. This question asks students to identify three differences between financial and managerial accounting. In the text, five differences are noted: a) Managerial accounting is directed at internal rather than external users of accounting information. b) Managerial accounting may deviate from generally accepted accounting principles (GAAP). c) Managerial accounting may present more detailed information. d) Managerial accounting may present more nonmonetary information. e) Managerial accounting places more emphasis on the future. 4. Examples of nonmonetary information that might appear in managerial accounting reports include: the quantity of material consumed in production, the number of hours worked by the office staff, and the number of product defects. 5. Total variable costs change in proportion to business activity while total fixed costs do not change. 6. Salaries of the home appliance sales force would be a controllable cost for the manager of the home appliance department at a Sears’ store. Depreciation related to the department store building would be a noncontrollable cost. 7. Incremental analysis involves a comparison of the revenues that change and the costs that change when a decision alternative is selected. If incremental revenue exceeds incremental cost, a decision alternative should be undertaken. 8. “You get what you measure!” suggests that managers’ behaviors are affected by performance measures. 9. Information flows up and down the value chain—between a company and its suppliers and between a company and its customers. Information technology is helping companies track buying patterns of customers and send targeted selling
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Jiambalvo Managerial Accounting messages to them via email. Information technology is also helping companies better manage their supply chains and gain internal efficiencies. 10. A legal action is not necessarily ethical. Ethical actions involve “what’s right” while legal actions involve operating within boundaries of the law. EXERCISES E1. [LO 6] . Suppose the company selected is Microsoft. Measure 1: Number of errors in a piece of software. Favorable outcome: Number of errors is reduced. Unfavorable outcome: Software products are not released on a timely basis. Measure 2: Percent of sales to new customers. Favorable outcome: Sales staff works hard to develop new clients. Unfavorable outcome: Company loses existing customers who receive less attention from the sales staff. Measure 3: Average time spent handling customer service calls. Favorable outcome: Customer service representatives handle more calls per hour. Unfavorable outcome: Customer questions are not fully addressed and customer satisfaction decreases. E2. [LO 5] . The only costs that are relevant to a decision are incremental costs—that is, costs that change when an action is taken. The cost of the old copier is sunk and will not change. Therefore, it is irrelevant to Rachel’s decision. E3. [LO 7] . Boeing uses a system called Supplier Network Technical Interchange (SNET-TDI) to securely transmit parts information to parts suppliers and design partners. One of the benefits of this system is reducing the amount of time in the parts order/delivery process. E4. [LO 8] . The code suggests that Guthrie clarify the ethical issue by confidential discussion with an objective advisor (this might be the IMA Ethics Counseling service) to obtain a better understanding of possible courses of action. Guthrie should then discuss the problem with the manager to whom his boss reports (since his boss is involved in the ethical dilemma). Unless required by law, communication of the problem to authorities or individuals outside the organization is not appropriate. E5. [LO 2, 5] . Megan can prepare a profit budget for each store (planning). At the end of the accounting period, she can compare actual profit to the budget for each 1-2
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Chapter 1 Managerial Accounting in the Information Age store (control). Significant differences from the budget should be investigated to determine their cause. E6. [LO 3] . “c” is false. 1-3
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Jiambalvo Managerial Accounting E7. [LO 3] . Deidre should not be concerned that cost of sales has increased. Cost of sales is a variable cost and it is expected that it will increase when sales increase. In the budget, cost of sales ($400,000) is 67% of sales ($600,000). Actual cost of sales ($425,000) is 61% of actual sales ($700,000). Thus, while cost of sales has increased, it has not increased disproportionate to the increase in sales. E8. [LO 1, 4] . Managerial accounting focuses on accounting information for internal decision-making. This focus differs from financial accounting in a number of ways. For example managerial accounting: 1) focuses on internal users, 2) can deviate from generally accepted accounting principles (GAAP), 3) presents more detailed information, 4) presents more nonmonetary information, and 5) places emphasis on the future. E9. [LO 4] . For purposes of awarding bonuses, it may be advisable to record sales when orders are placed so that the sales force is rewarded on a timely basis. If the company waited until the order was delivered, the sales force might be rewarded more than a year after obtaining a customer order. The point is that for internal reporting purposes, companies need not follow GAAP. E10. [LO 5]. a. variable b. fixed c. variable d. fixed
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