Deck 1: The Accountants Vital Role in Decision Making

Question 1

Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition. Assume you are opening a small food outlet across the street from your campus. How might that business be operated under each of the two broad strategies? Consider the following specific operational areas:
a. target customers
b. products offered
c. product pricing
d. location choice
e. advertising content
f. advertising media

Answer 1

The purpose of this question is to explore some of the differences in business operations as a result of a broad strategic choice. Answers will differ from student to student, but you should see some specific themes.

Question 2

Which of the following is TRUE concerning the value chain of business functions?

A) Managers should always proceed sequentially through the value chain, since distribution, for example, cannot occur before production is completed.
B) Senior managers from individual parts of the value chain do not have a responsibility in deciding on the organization's overall strategy.
C) An organization can only realize gains from having individual parts of the value chain work sequentially.
D) The value chain refers to the value added to the customer from marketing.
E) Senior managers from individual parts of the value chain have a responsibility in deciding how resources are to be obtained and used, and how rewards are to be given.

Answer 2

Senior managers from individual parts of the value chain have a responsibility in deciding how resources are to be obtained and used, and how rewards are to be given.

Question 3

Cyclone Car Company tries to assign appropriate responsibilities to all of its managers. Production managers receive reports which accumulate information of the shop operations for each plant. Plant operations are further aggregated in the report received by the vice president of manufacturing. These reports show the budgeted and actual operating results for the current month and year-to-date. These, along with inventory status reports, provide the major source of production information for the next planning period. Managers evaluate the variances between actual and budgeted amounts and determine whether operations are in or out of control. If variances are large, appropriate action is taken, i.e., the plans are changed.
The company's profits have been decreasing, and management has requested similar aggregate sales data from marketing. It is felt that this added information will suffice for its decision-making needs.
Required:
Do you agree? Why? Do you foresee any needs that will not be met by this information? If so, what additional information do you suggest that management be provided by the management accounting system?

Answer 3

The operating and variance information received by management of Cyclone Car is only a part of the total information set required to make managerial decisions which deal with the efficient allocation of the firm's resources in accordance with the policies and goals of the firm. The firm's collection of information needs to be expanded to encompass external market and economic information, analysis of causes of unacceptable variances, and evaluations of production efficiency using measures other than dollars (for example, quality). Also, student may provide metrics that support KSFs.

Question 4

Classify each cost item into one of the business functions of the value chain listed.

-cost of samples mailed to promote sales of a new product

A) production
B) customer service
C) marketing
D) distribution

Question 5

Classify each cost item into one of the business functions of the value chain listed.

-labour cost of workers in the manufacturing plant

A) production
B) customer service
C) marketing
D) distribution

Question 6

Classify each cost item into one of the business functions of the value chain listed.

-bonus paid to a person with a 90% satisfaction rating in handling customers with complaints

A) production
B) customer service
C) marketing
D) distribution

Question 7

Hardcover Company incurs the following costs when it manufactures books. Match each one of them to one of the value chain functions listed.

-cost of customer order forms

A) marketing
B) research and development
C) production
D) distribution

Question 8

Hardcover Company incurs the following costs when it manufactures books. Match each one of them to one of the value chain functions listed.

-cost of paper used in manufacture of books

A) marketing
B) research and development
C) production
D) distribution

Question 9

Hardcover Company incurs the following costs when it manufactures books. Match each one of them to one of the value chain functions listed.

-cost of paper used in packing cartons to ship books

A) marketing
B) research and development
C) production
D) distribution

Question 10

Hardcover Company incurs the following costs when it manufactures books. Match each one of them to one of the value chain functions listed.

-cost of paper used in display at national trade show

A) marketing
B) research and development
C) production
D) distribution

Question 11

Hardcover Company incurs the following costs when it manufactures books. Match each one of them to one of the value chain functions listed.

-amortization of delivery trucks

A) marketing
B) research and development
C) production
D) distribution

Question 12

Hardcover Company incurs the following costs when it manufactures books. Match each one of them to one of the value chain functions listed.

-amortization of the wood used in the manufacturing plant

A) marketing
B) research and development
C) production
D) distribution

Question 13

Johnson Advertising Agency incurs the following costs in its service activities. Match each one of them to one of the value chain functions listed.

-amortization of the artist design desk

A) design of products, services, and processes
B) customer service
C) production
D) marketing

Question 14

Johnson Advertising Agency incurs the following costs in its service activities. Match each one of them to one of the value chain functions listed.

-cost of computer time used to create designs for customers

A) design of products, services, and processes
B) customer service
C) production
D) marketing

Question 15

Johnson Advertising Agency incurs the following costs in its service activities. Match each one of them to one of the value chain functions listed.

-cost of updating an ad for a customer

A) design of products, services, and processes
B) customer service
C) production
D) marketing

Question 16

Johnson Advertising Agency incurs the following costs in its service activities. Match each one of them to one of the value chain functions listed.

-cost of computer time used by a salesperson

A) design of products, services, and processes
B) customer service
C) production
D) marketing

Question 17

Johnson Advertising Agency incurs the following costs in its service activities. Match each one of them to one of the value chain functions listed.

-cost of materials used in the layout of a customer's magazine ad

A) design of products, services, and processes
B) customer service
C) production
D) marketing

Question 18

Jayhawk Basketballs manufactures and distributes rebounding equipment. The company is having a problem coordinating its marketing and production efforts. Every time marketing has a special promotion in a certain part of the country, production either cannot deliver the products or distribution has them in the wrong part of the country. In addition, the company has had several production stoppages due to insufficient raw material stock at the manufacturing plant.
Required:
In terms of the information system, what appears to be the main problems? What action can be taken to improve the situation?

Question 19

Match each independent statement with the appropriate use of feedback.

-Quality control activities have been moved from the end of the assembly line to critical points along the assembly line.

A) Changing the range of information collected in order to make predictions.
B) Changing goals.
C) Changing managers.
D) Changing how decision alternatives are identified.
E) Changing how the company operates.
F) Changing reward systems.

Question 20

Match each independent statement with the appropriate use of feedback.

-Home office changes stock option plans.

A) Changing the range of information collected in order to make predictions.
B) Changing goals.
C) Changing managers.
D) Changing how decision alternatives are identified.
E) Changing how the company operates.
F) Changing reward systems.

Question 21

Match each independent statement with the appropriate use of feedback.

-Jackson Company increases emphasis on cash flow rather than income, after prior liquidity problems lead to bankruptcy.

A) Changing the range of information collected in order to make predictions.
B) Changing goals.
C) Changing managers.
D) Changing how decision alternatives are identified.
E) Changing how the company operates.
F) Changing reward systems.

Question 22

Match each independent statement with the appropriate use of feedback.

-MLB Company contracts with an outside janitorial service rather than continuing with its own cleaning crew.

A) Changing the range of information collected in order to make predictions.
B) Changing goals.
C) Changing managers.
D) Changing how decision alternatives are identified.
E) Changing how the company operates.
F) Changing reward systems.

Question 23

Match each independent statement with the appropriate use of feedback.

-AMB Company is adopting online meetings to identify which product lines to establish.

A) Changing the range of information collected in order to make predictions.
B) Changing goals.
C) Changing managers.
D) Changing how decision alternatives are identified.
E) Changing how the company operates.
F) Changing reward systems.

Question 24

Match each independent statement with the appropriate use of feedback.

-Local Computer Company incorporates average inflation forecasts for wages when predicting future labour costs.

A) Changing the range of information collected in order to make predictions.
B) Changing goals.
C) Changing managers.
D) Changing how decision alternatives are identified.
E) Changing how the company operates.
F) Changing reward systems.

Question 25

For each of the independent activities give the aspect of the Five-Step Decision-Making Process that best describes what is being undertaken.

-Preparing a report comparing actual and budgeted waste percentages from a chemical process in a herbicide plant.

A) Obtain information
B) Decide on and implement one of the alternatives
C) Make predictions about the future
D) Identify the problem and uncertainties
E) Implement the decision, evaluate performance, and learn

Question 26

For each of the independent activities give the aspect of the Five-Step Decision-Making Process that best describes what is being undertaken.

-Changing the selling price of a product.

A) Obtain information
B) Decide on and implement one of the alternatives
C) Make predictions about the future
D) Identify the problem and uncertainties
E) Implement the decision, evaluate performance, and learn

Question 27

For each of the independent activities give the aspect of the Five-Step Decision-Making Process that best describes what is being undertaken.

-Explaining the variances in Department 23's labour report.

A) Obtain information
B) Decide on and implement one of the alternatives
C) Make predictions about the future
D) Identify the problem and uncertainties
E) Implement the decision, evaluate performance, and learn

Question 28

For each of the independent activities give the aspect of the Five-Step Decision-Making Process that best describes what is being undertaken.

-Evaluating a new environmental law.

A) Obtain information
B) Decide on and implement one of the alternatives
C) Make predictions about the future
D) Identify the problem and uncertainties
E) Implement the decision, evaluate performance, and learn

Question 29

For each of the independent activities give the aspect of the Five-Step Decision-Making Process that best describes what is being undertaken.

-Estimate possible outcomes from outsourcing production to another country.

A) Obtain information
B) Decide on and implement one of the alternatives
C) Make predictions about the future
D) Identify the problem and uncertainties
E) Implement the decision, evaluate performance, and learn

Question 30

For each of the independent activities give the aspect of the Five-Step Decision-Making Process that best describes what is being undertaken.

-Conduct a consumer survey.

A) Obtain information
B) Decide on and implement one of the alternatives
C) Make predictions about the future
D) Identify the problem and uncertainties
E) Implement the decision, evaluate performance, and learn

Question 31

Which of the following would likely constitute a breach of ethics for a management accountant?

A) to omit pertinent information from a report because it is personally unfavourable
B) to consider disclosing confidential information in order to further your own career
C) to consider disclosing confidential information (ie gained from a third party) in order to assist your employer/client
D) to report the unethical actions of another party, with the expectation that this will further your own career
E) to be disruptive in a meeting

Question 32

Which of the following statements is TRUE regarding sustainability accounting?

A) The Global Reporting Initiative (GRI) is a for profit organization established to develop guidelines so that "reporting on economic, environmental and social performance by all organizations is as routine and comparable as financial reporting."
B) Statutory requirements describe the elements that must be included in reports based on sustainability accounting.
C) Since 2002 it has been a criminal offence for the Chief Financial Officer to sign off on a report based on sustainability accounting that does not include a section on environmental management.
D) Corporate Social Responsibility (CSR) is a subset of sustainability accounting.
E) The trend to sustainability in reporting has emphasized value creation as well as risk mitigation in financial reports and management discussion and analysis of organizations.

Question 33

A company may employ CPAs and other persons who are required to meet certain standards of professional conduct due to their membership in relevant professional organizations. These standards of conduct often include the areas of responsibility, competence, fairness and independence. However, holding only a few people responsible for sound professional conduct does not make a company behave ethically.
Required:
What can a company do to increase the likelihood of its employees being ethical in all their undertakings?