c.
the “communicate” stage of the management process.
d.
all stages of the management cycle.
29. Which of the following is a nonfinancial performance measure?
a.
Return on investment
b.
Net income as a percentage of sales
c.
Cost of poor quality as a percentage of sales
d.
Average number of customers served per hour
30. Which of the following would be used to measure the performance of a segment in a profit-generating
company?
a.
Nonfinancial performance measures
b.
Financial performance measures
c.
Both financial and nonfinancial measures
d.
Neither financial nor nonfinancial measures
31. The balance scorecard
a.
is rarely used.
b.
produces formal reports.
c.
only applies to manufacturing companies.
d.
links the organization’s perspectives with stakeholders.
32. Jillian Harmon supervises 5 cashiers at Jack’s Market. In the past, each cashier served an average of 25
customers per hour. Two months ago, management remodeled the store and installed a new cash
register system. Customers no longer need to take their groceries out of the basket. Last month the
number of customers served was 5,185 and each cashier worked an average of 170 hours for the
month. Based on this information, the service rate has
a.
increased 19 percent.
b.
decreased 21 percent.
c.
increased 22 percent.
d.
decreased 20 percent.
33. Analysis of nonfinancial data is important to the management accountant because
a.
financial data are usually irrelevant.
b.
nonfinancial data lend themselves more to computer analysis than do financial data.
c.
managers make many decisions based solely on nonfinancial data.
d.
nonfinancial data are easier to work with than financial data.
34. Sinopole’s Pharmaceutical Delivery Company is a high-volume business that features home delivery
services to elderly shut-ins. Located in Bakersfield, California, the company currently uses six delivery
trucks to service the area within a 100-mile radius of the city. Each delivery truck can make a
maximum of 600 deliveries per month. In June, the demand for these deliveries totaled 3,200, and the
company has been experiencing a 2 percent increase in demand, compounded monthly. In which
month must the company add a seventh delivery truck, given these estimates?
a.
August
b.
October
c.
February of next year
d.
December
35. If a management accountant confides to a relative that his or her company has a confidential plan to
merge with another company in the near future, the accountant has
a.
not violated ethical standards.
b.
violated ethical standards only if the relative owns stock in the company.
c.
violated ethical standards because the accountant and relative could stand to gain
personally from that information.
d.
not violated ethical standards because the information was relayed to a family member.
36. Suppose a management accountant becomes aware that a poor judgment he or she made has resulted in
the loss of one of the company’s clients. Is the accountant bound to share this information with the
company? (The accountant doubts that the company will ever find out about it directly.)
a.
The management accountant is bound to honestly respond to inquiries regarding the
adequacy of professional judgments but is not bound to communicate them if not directly
asked.
b.
The management accountant is bound to communicate this error in judgment only if
another client cannot be found.
c.
The management accountant is not bound to communicate this error.
d.
The management accountant is bound to communicate unfavorable and favorable
judgments made even if not directly asked.
37. Integrity standards of management accountants include
a.
refraining from accepting hospitality gifts from coworkers.
b.
refraining from activities that the company does not actively endorse.
c.
avoiding actual or apparent conflicts of interest.
d.
avoiding only those conflicts of interest that occur between coworkers.
38. Which of the following statements is true regarding the ethical standards of management accountants?
a.
Management accountants are not obligated to develop their knowledge and skills beyond
the level they had when they sought employment with the company.
b.
Management accountants are not responsible for monitoring their subordinates to ensure
maintenance of confidentiality within the company.
c.
Management accountants are allowed privacy and are not bound to refrain from
supporting activities of personal interest even when they could discredit the profession.
d.
Management accountants should refrain from relationships with individuals that could
cause possible conflicts of interest.
39. The ethical standards for management accountants state that accountants are obligated to maintain
professional competence at all times when dealing with
a.
people outside the company.
b.
regulatory bodies.
c.
the world marketplace.
d.
people and resources of one’s own company, outside entities, and the world marketplace.
40. The objectivity standards of management accountants state that management accountants must
communicate information fairly and objectively. This means essentially that accountants must perform
each task
a.
as professionals, possessing the degree of skill of those management accountants who held
the position before them.
b.
to provide relevant information, both positive and negative, to the recipients of their
reports.
c.
in conformity with generally accepted accounting principles.
d.
to the satisfaction of government regulators.
SHORT ANSWER
1. Management accounting differs from financial accounting in many ways. Indicate with an “X” in the
appropriate column whether each of the following characteristics relates to financial accounting,
management accounting, or neither.
Financial
Accounting
Management
Accounting
Neither
Primary Users:
Owners, stockholders, lenders, customers,
governmental agencies
Managers, lenders
Managers, employees
Report Format and Frequency:
In conformance with GAAP whenever
needed
Flexible, driven by user’s needs
In conformance with GAAP on a periodic
basis
Nature and Purpose of Reports:
Objective and verifiable; reports on past
performance
Objective and verifiable for decision
making; subjective for planning
Subjective and verifiable; reports on past
performance
Units of Measure:
Dollars at historical, market, or projected
values; physical measures of time or
number of objects
Dollars at historical values only
Dollars at historical and market values
Primary Users:
Owners, stockholders, lenders,
customers, governmental agencies
Managers, lenders
Managers, employees
Report Format and Frequency:
In conformance with GAAP whenever
needed
Flexible, driven by user’s needs
In conformance with GAAP on a
periodic basis
Nature and Purpose of Reports:
Objective and verifiable; reports on past
performance
Objective and verifiable for decision
making; subjective for planning
Subjective and verifiable; reports on
past performance
Units of Measure:
time or number of objects
2. Identify and explain the important questions a manager must address before preparing a managerial
report. (Hint: Think “w’s.”)
3. Give two examples of each stage in the management process.
4. Chris Tyler owns and operates Surf’s Up, a shop in Florida that sells surfboards and beachwear. The
shop has been very successful, and now Chris is thinking of manufacturing his own brand of
surfboards. Chris discussed the following with you:
1. He plans to add value by making boards that are easier to maneuver and faster in the water.
2. Chris wants to purchase high-quality materials.
3. He wants a logo that will be distinctive and recognizable.
4. He would like to implement efficient manufacturing processes that will enable him to quickly
produce the boards when an order is placed.
5. He feels advertising is important.
6. Chris believes in customer satisfaction and wants to have courteous and efficient service for his
customers. He also would like to develop a website to establish Internet customers.
7. Because Chris believes in customer service, he would like to provide a warranty service offering a
free replacement if the customer is not satisfied.
8. Chris will need to hire and train employees to make the boards.
9. He will need legal advice when applying for a trademark and signing contracts.
10. He wants a computerized accounting system that also provides customer information and the
ability to develop management reports.
a. Identify from the value chain the primary processes that add value to the surfboards.
b. Identify the support services that are part of the same value chain.
5. What are the results of the successful implementation of a JIT operating environment?
6. What steps would a company using TQM take to improve product or service quality?
7. Identify three uses of the costs of quality information.
8. What would a company using an activity-based management approach attempt to do in regard to
activities that add value to the product and those that do not?
9. List three characteristics of a JIT operating environment.
10. A Taste of Italy is a pizza business that delivers only. A Taste of Italy’s business objectives are as
follows:
1. To be profitable and grow
2. To manage its food inventory carefully (especially the cheese!)
3. To provide fast and courteous service
4. To have repeat customers
The following performance measures were developed:
5. Average unsold food at the end of the business day as a percentage of the total purchased that day
6. Growth in revenues per quarter and profit margin
7. Average customer wait time between order and delivery
8. Percentage of customers who have ordered before (All customers are identified by phone number.)
Match each of the above business objectives and performance measures with the four perspectives of
the balanced scorecard. (Identify by placing the number or numbers next to the perspective; each
number can be used only once.)
a. Financial Perspective ________________
b. Learning and Growth Perspective ________________
c. Internal Business Processes Perspective __________________
d. Customer Perspective _______________
11. Give two examples of nonfinancial performance measures.
12. Mi Casa is a housekeeping company in Brownsville, Texas. The corporation is owned 100 percent by
Jean Kline. Jean plans to develop the company into a multimillion-dollar company as the demand for
housekeeping services in Brownsville is increasing at a rapid pace as the community grows.
Currently, Jean has three housekeepers who each work a 40-hour week. Over the past four weeks, the
actual hours worked were as follows:
Week 1
Week 2
Week 3
Week 4
Total
Housekeepers
136
140
145
145
566
Jean is concerned with the hours worked. Analyze the activity for the four weeks by preparing a table
showing the estimated hours, actual hours, and the hours under (or over) estimate. Based on the
information in your table, does Jean have reason for concern? If so, what could some of the possible
reasons be for the hours spent?
13. Accountants have ranked among the highest in ethics among business professions and other
occupations. List and briefly describe five ethical standards that management accountants subscribe to
that, in your opinion, help maintain the impression that accountants are highly ethical.
14. Suppose a management accountant becomes aware of a confidential but illegal act that has occurred
within her company. The management accountant must consider what she is ethically bound to do
about this situation. Three alternative responses to this situation are given below. State whether you
agree or disagree with each, and briefly detail your reasons.
a. The accountant must remain loyal to the company at all times and should report the occurrence only
to appropriate officials within the company.
b. The accountant is bound to inform officials only if she stands to personally gain (make money) from
knowledge of the illegal act.
c. The accountant must exercise personal judgment; a clear-cut answer does not exist given the limited
information provided.
15. Assume you are the president of the business club at your school. You are thinking about creating a
fundraising project to generate money for next year’s operations. Develop an outline of your ideas
using the various stages of the management process.
16. The Chief Financial Officer (CFO) of your company has asked you to help her develop a cost control
report to be distributed within the company. She wants your input concerning what she should think
about before developing such a report. Discuss the significant points, in detail, the CFO should
consider before the cost control report is prepared.
17. Assume your club makes and sells boxes of chocolate every year as a fundraising project for
Valentine’s Day. As the current director of projects, you are interested in improving the quality of the
service and the product your club offers. You have just learned about continuous improvement.
Discuss how your club could use JIT, TQM, and ABM to achieve improved quality.
18. The fathers of the balanced scorecard, Drs. Kaplan & Norton, introduced four generic perspectives
from which to view a business. Consider the following four questions and briefly describe the generic
perspective that relates to the question and why.
1. How should we present ourselves to our investors and owners to be considered by them as a
financial success and an attractive investment?
2. What do we have to offer our customers related to our product, customer intimacy, and operational
excellence?
3. In what activities must we excel to be able to accomplish our financial and customer-oriented
objectives?
4. What do we need to change in our infrastructure to achieve number 3?
19. The Assembly Department of KEIA employs three direct laborers and two supervisory personnel. For
the past several months, the employees have been assembling desks from pieces prepared in the
Cutting Department. Three desks are expected to be produced for every labor hour incurred in the
department. The hours worked in April, May, and June appear below.
April
May
June
Employee
Direct Labor
Supervisory
Direct
Labor
Supervisory
Direct
Labor
Supervisory
M. Jackson
178
180
185
J. Taylor
172
182
178
C. Dion
182
178
190
B. Dylan
188
176
184
J. Baez
167
188
195
Actual production of desks for April was 2,501; May, 2,532; and June, 2,601.
a. Calculate the number of desks expected to be produced each month.
b. By what percentage did production fall short of expectations each month?
c. Comment on your calculations, and recommend what actions should be taken by the plant manager.
3
3
3
20. Carlson Manufacturing is a producer of plastic bottles for bottled water companies. In July of this year,
the plant manager switched to a new supplier of raw materials. The materials have a lower cost, and
because of their chemical composition, more bottles can be made per hour. The downside of this faster
production is that more bad, unusable bottles result. Below are the production data for the two months
before and after the switch of suppliers.
May
June
July
August
Good
Bad
Good
Bad
Good
Bad
Good
Bad
Machine 1
21,014
1,116
20,560
1,182
22,584
1,564
23,651
1,622
Machine 2
19,876
1,220
19,614
1,202
22,108
1,605
23,615
1,638
Machine 3
19,912
1,204
20,811
951
22,916
1,477
23,918
1,714
a. Compute bad units as a percentage of total production for each month. Round answers to two
decimal places.
b. What does the plant manager need to consider in determining whether or not to continue buying raw
material from the new supplier?