Deck 14: Management Accounting in a Changing Environment

Question 1

Design a Balanced Scorecard
New Town Roasters (NTR) owns and operates a chain of 12 coffee shops around town. NTR's strategy is to provide the highest-quality coffee and baked goods in a warm, friendly environment. Each NTR provides its customers Internet access and current newspapers. Some shops are open 24 hours a day, especially those located around college campuses. Each shop manager is responsible for deciding the hours that the store is open, the selection of baked goods to stock, and the number of Internet terminals to provide in the store.
Required:
Design a balanced scorecard to evaluate and reward the manager of each shop.

Answer 1

The balanced scorecard should have four perspectives:
• Financial perspective (Return on assets to capture the manager's investment in Internet equipment)
• Customer perspective (customer satisfaction as measured by survey cards asking feedback on the store's appearance, availability of internet access, friendliness of service providers, and so forth).
• Internal business perspective (time customers wait for service)
• Learning and growth perspective (employee turnover)

Question 2

Kosmic Kan produces Kaos, a leading edge computer game. It is implementing a balanced scorecard to assess performance across multiple dimensions. Which is not an appropriate measure?

A)Financial: increase earnings per share by $0.12
B)Customer: add customer value
C)Learning and innovation: recruit 50 new staff from leading schools
D)Internal processes: reduce programming errors by 3%
E)None of the above

Answer 2

B

Question 3

Zagart's Zambonis manufactures Zambonis (ice rink machines). Its cost of quality data appears below. Total manufacturing cost this year was $4.6 million. Which is true?

A)Prevention costs are $116,000
B)Appraisal costs total $72,000
C)Internal failure costs amount to $186,000
D)External failure cost ZZ $105,000
E)None of the above

Answer 3

A

Question 4

Accounting for JIT
Vail operates a JIT plant assembling ceiling fans. The Sunset Model ceiling fan has a standard material cost of $28.40, a standard direct labor cost of $14.80, and overhead (fixed and variable) of $16.10. On Monday, a batch of 100 Sunset fans is completed. All of the materials for the 100 fans were on hand prior to Monday and had been previously recorded in the raw and in-process inventory account.
Required:
In analyzing the financial statements of a firm using JIT and another firm in the same industry not using JIT, what differences would you expect to observe?

Question 5

JIT and the Role of Accounting
The president of Kelly Windows is an avid believer in JIT. Kelly Windows manufactures bay windows. The president wants no inventory or work-in-process on the floor at the end of each day. Windows are only manufactured after being ordered and throughput time is quick enough to complete most orders during the day of the order. The president is also trying to eliminate all non-value added activities. She considers accounting to be non-value added and would like to reduce accounting activities sharply if not completely.
Required:
As the controller, how can you defend the accounting activities performed by your department?

Question 6

Which is not true of Total Quality Management (TQM)?

A)TQM is focused on improving product and customer service quality
B)TQM is expensive to initiate
C)TQM requires top management support
D)TQM requires ISO 9000 certification
E)All of the above

Question 7

In evaluating Zagart's Zambonis cost of quality report, which is false?

A)ZZ is likely not spending enough on training relative to other costs of quality
B)The external failure costs are likely understated
C)ZZ is not spending enough on appraisal relative to internal and external failure costs
D)ZZ is likely to have achieved its optimum quality level
E)None of the above

Question 8

Typical quality improvements include:

A)product redesign
B)electronic defect detection
C)alteration of organizational architecture to increase local responsiveness to customer needs
D)purchase of robotic manufacturing systems
E)all of the above

Question 9

JIT and Stock-Out Costs
James Industries is considering a shift to JIT. The president feels that considerable costs can be saved by reducing inventory. The marketing manager is worried, however. She recognizes that the inventory holding costs such as storage and the opportunity cost of cash used to hold inventory are high and will be reduced if the company changes to JIT. But she is worried that the president has forgotten about stock-out costs. Stock-out costs occur when customers want to purchase an item, but the item is not immediately available so the customer goes elsewhere to make the purchase.
Required:
How should the company measure stock-out costs and what can be done to minimize stock-out costs?

Question 10

Typical measures of quality include:

A)percentage of defects
B)dollars spent on rework
C)number of on-time deliveries
D)customer satisfaction surveys
E)all of the above

Question 11

An Inspection Decision with Quality Costs
A company is considering additional final inspection costs of $1 per unit before delivery to customers. The additional inspection should reduce the defective rate from 3 percent to 1 percent. If a defective unit is found, it is scrapped at no additional cost. The manufacturing costs before the final inspection are $200 per unit. The management believes that the external failure costs are $40 per defective unit.
Required:
Should the management incur the additional inspection costs?

Question 12

The balanced scorecard as a measure of corporate performance has been both criticized and lauded. Which is true?

A)Deviation from a single financial measure, such as EPS, ROA or EVA, in order to focus on the multiple measures of the balanced scorecard may cause management to reduce firm value
B)Managers can focus on multiple performance indicators simultaneously
C)Maximizing customer satisfaction maximizes value of the firm
D)Maximizing employee satisfaction and learning maximizes value of the firm
E)None of the above

Question 13

Which is false of just-in-time (JIT) manufacturing systems?

A)Demand pull means a closer relationship with the customer
B)The power of suppliers is reduced
C)Warehousing needs are reduced
D)After process re-engineering, time to complete the product is reduced
E)None of the above

Question 14

Internal accounting systems, including performance measures, affect behavior. It is often suggested that people pay attention to the dimensions of their work performance that are measured and rewarded. When, if ever, should these systems be revised?

A)Extremely seldom: it is too costly
B)Rarely: people understand how to perform under the present system
C)Sometimes: whenever it can be shown that significant dysfunctional results exist
D)Often: whenever management consultants develop a 'new and improved' system or measure
E)Never