SOLUTION MANUAL FOR h h h h
Managerial Accounting Creating Value in a hh hh hh hh hh
hh DynamicBusiness Environment 13e Hilton h hh hh hh
Chapter 1-17 With Appendix (I II III)
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hh CHAPTER 1 hh
The Crucial Role of Managerial Accounting in a Dynamic Business
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hh Environment
FOCUS ON ETHICS (Located before the Chapter Summary in the text.)
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The focus-on-ethics inset for Chapter 1 is the IMA Statement of Ethical Professional
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Practice. Instructors can use this list of ethical principles and standards to lead a
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class discussion. The discussion can also range to consideration of how these
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standards mayhave been violated by accountants and managers involved in the various
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ethical scandals uncovered over the past several years. It is also useful to discuss the
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pros and cons of the procedures for ―Resolving Ethical Issues‖ that IMA suggests
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for its members when they believe they know about ethical lapses in their
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organizations.
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We also introduce here the connection to the ―Ethics Unwrapped‖ video series that
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can supplement the discussion of ethics in the context of each chapter. In each
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chapter of thetext, we have suggested topic videos in the series that align with that
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chapter. Discussionguidance and questions relating to the videos can be found on the
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―Ethics Unwrapped‖ site at the URL provided. This resource is provided by
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permission from the University of Texasat Austin, McCombs School of Business.
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ANSWERS TO REVIEW QUESTIONS hh hh hh
1-1 The explosion in e-commerce will affect managers in significant ways. One effect
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will be a drastic reduction in paperwork. Millions of transactions between
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businesses are conducted electronically with no hard-copy documentation. Along
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with this method of communicating for business transactions comes the very
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significant issue of information security. Businesses need to find ways to
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protect confidential information in their own computers, in cloud computing data
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centers, and while moving across the internet, while at the same time sharing the
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information necessary to complete transactions. Another effect of e-commerce is
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the dramatically increased speed with which business transactions can be
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conducted. In addition, there will be dramatic changes in the way managerial
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accounting
Managerial
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Accounting, hh hh 5-1 hh hh hh hh hh
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hhMcGraw hhHill hhLLC.
, being cloud-based budgeting, which is the enterprise-wide and electronic completion of
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a company‘s budgeting process using cloud-based software and data storage.
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1-2 Plausible goals for the organizations listed are as follows:
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(a) Amazon.com: (1) To achieve and maintain profitability, and (2) to grow on-
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line sales of their many products. Amazon is also famous (infamous) for
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wanting to have every product in the world on its site.
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(b) American Red Cross: (1) To raise funds from the general public sufficient to
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have resources available to meet any disaster that may occur, and (2) to
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provide assistance to people who are victims of a disaster anywhere in
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the world on short notice.
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(c) General Motors: (1) To earn income sufficient to provide a good return on
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the investment of the company's stockholders, and (2) to provide the highest-
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quality product possible.hh hh
(d) Wal-Mart: (1) To penetrate the retail market in virtually every location in
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the United States, and (2) to grow over time in terms of number of retail
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locations, total assets, and earnings. Also, to be competitive with Amazon
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in the e-retail space.
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(e) City of Seattle: (1) To maintain an urban environment as free of pollution
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as possible, and (2) to provide public safety, police, and fire protection to the
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city's citizens.
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(f) Hertz: (1) To be a recognizable household name associated with rental car
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services, and (2) to provide reliable and economical transportation
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services to the company's customers.
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1-3 The four basic management activities are listed and defined as follows:
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(a) Decision making: Choosing among the available alternatives.
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(b) Planning: Developing a detailed financial and operational description
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ofanticipated operations.
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(c) Directing operations: Running the organization on a day-to-day basis.
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(d) Controlling: Ensuring that the organization operates in the intended
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manner andachieves its goals.
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,1-4 Examples of the four primary management activities in the context of a national
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fast- food chain are as follows:
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(a) Decision making: Choosing among several possible locations for a new fast-
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food outlet. hh
(b) Planning: Developing a cost budget for the food and paper products to be
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usedduring the next quarter in a particular fast-food restaurant.
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(c) Directing operations: Developing detailed schedules for personnel for the
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nextmonth to provide counter service in a particular fast-food restaurant.
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(d) Controlling: Comparing the actual cost of paper products used during a
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particular month in a restaurant with the anticipated cost of paper
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products forthat same time period.
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1-5 Examples of the objectives of managerial-accounting activity in an airline
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companyare described below:
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(a) Providing information for decision making and planning, and proactively
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participating as part of the management team in the decision making and
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planning processes: Managerial accountants provide estimates of the cost
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of adding a flight on the route from Dallas to Miami and actively
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participate in making the decision about adding the flight.
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(b) Assisting managers in directing and controlling operations: Managerial
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accountants provide information about the actual costs of flying the
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company‘sAsian routes during a particular month.
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(c) Motivating managers and other employees toward the organization's goals:
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A budget is provided for the cost of handling baggage at Chicago O'Hare
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Airport. The budget is given to the airline's baggage handling manager,
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who is expected to strive to achieve the budget.
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(d) Measuring the performance of activities, subunits, managers, and other
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employees within the organization: Quarterly income statements are prepared
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for each of the airline's major geographical sectors, and these income
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reports are used to evaluate the earnings performance of each sector
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during the relevant time period.
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(e) Assessing the organization's competitive position and working with
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other managers to ensure the organization's long-run competitiveness in its
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industry: Information about industry-wide performance standards is
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obtained and compared with the airline's own performance. For example, how
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does the airline stack up against its competitors in ticket prices, on-time
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departures, mishandled baggage, customer complaints, and safety?
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Managerial Accounting, 13/e
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, 1-6 Four important differences between
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accounting are listed below:
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(a) Managerial-accounting information is provided to managers within hh hh hh hh hh hh
the organization, whereas financial-accounting information is provided to
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interested parties outside the organization.
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(b) Managerial-accounting reports are not required and are unregulated, hh hh hh hh hh hh hh
whereas financial-accounting reports are required and must conform to
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generally accepted accounting principles.
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(c) The primary source of data for managerial-accounting information is the
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organization's basic accounting system, plus various other sources.
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These sources include such data as rates of defective products manufactured,
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physical quantities of material and labor used in production, occupancy
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rates in hotels and hospitals, and average takeoff delays in airlines. The
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primary source of data for financial-accounting information is almost
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exclusively the organization's basic accounting system, which accumulates
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financial information.
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(d) Managerial-accounting reports often focus on subunits within the hh hh hh hh hh hh hh
organization, such as departments, divisions, geographical regions, or
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product lines. These reports are based on a combination of historical
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data, estimates, and projections of future events. Financial-accounting
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reports focus on the enterprise in its entirety. These reports are based
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almost exclusively on historical transaction data.
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1-7 The cost-accounting system is one part of an organization's overall
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accounting system, the purpose of which is to accumulate cost information.
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Cost information accumulated by the cost-accounting system is used for both
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managerial-accounting and financial-accounting purposes. Managerial
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accounting is the broad task of preparing information for making decisions
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about planning, directing, and controlling an organization's operations.
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1-8 Managers in line positions are directly involved in the provision of services
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or the production of goods in an organization. Managers in staff positions
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support the organization's overall objectives, but they are indirectly involved
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in operations. Examples of line positions in a university are the president,
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who is the university'schief executive officer, and the business school dean, who
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is responsible for running the ―division‖ called the business school. Examples of
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staff positions in a university are the university counsel, who is the
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university's chief lawyer, and the director ofmaintenance, who is charged with
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maintaining the university's facilities.
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1-9 An organization's controller (or comptroller) is the chief managerial and
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financial accountant. The controller usually is responsible for supervising the
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personnel in the accounting department and for preparing the information
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and reports used in both managerial and financial accounting. The
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