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Managerial Accounting 4e Solutions Manual
Problems (Group B)
(45-60 min.) P1-27B
Req. 1
Planning
Directing
Controlling
Sales
Increase Sales
Setting competitive prices
Examine sales reports
Monitor sales numbers and
prices from different products
and locations over time.
Investigate variances.
Repairs
Increase
volume of
repairs
Streamline process to save time. Set
competitive prices; generate reports
showing time used for each type of
repair.
Track total number of repairs
and see if more repairs are
being made and if time is
utilized efficiently.
Lessons
Increase
number of
lessons given
Find out what customers want and need.
Observe competitors for prices and
lessons offered. Improve teacher
qualifications
Examine number of lessons
given per instrument
Web
Development
Increase web
traffic
Improve design of web site. Offer more
products online. Make shopping easier
and more intuitive. Increase marketing
efforts.
Monitor web traffic by having an
online counting device. Look at
sales numbers to see if people
are just surfing or actually
buying merchandise.
Accounting
Implement ERP
system to
monitor
department
activities and
record finances
Train employees on new system. Find
potential flaws in the system and fix
before implementation.
Track employee work schedules
to stay on time. Double-check
entries to ensure system is
working properly.
Human
Resources
Decrease
employee
turnover
Hire employees that are “a good fit” for
the company.
Raise employee morale; set clear job
descriptions. Give feedback to
employees.
Monitor both involuntary and
voluntary turnover. Interview
employees to determine
potential problems with the
workplace.
Chapter 1 Introduction to Managerial Accounting
(continued) P1-27B
Req. 2
Planning
Directing
Controlling
Sales
A sales budget for the
entire company and each
individual product at each
location is needed.
Analyze sales reports to
monitor type and amount of
sales made. Prices would be
analyzed using these reports
and market analysis of
competitors.
Compare budgets with actual
sales numbers. Investigate
variances to take corrective
actions if needed. Change
prices if deemed appropriate.
Repairs
Labor budgets would be
needed to determine the
time taken to repair
instruments and if hiring
more repair staff would be
feasible.
Employee training programs
would be used. Monitor time
taken per repair for each
member of repair staff.
Compare budgets with actual
results. Investigate variances
and take corrective action if
needed.
Lessons
Budgets for types of
lessons offered, time
needed per lesson taught,
and market analysis to
determine which lessons
potential customers want.
Ensure customer satisfaction
by hiring qualified staff.
Analyze market analysis to
determine market needs and
proper pricing schemes.
Compare budgets with actual
results. Use customer
feedback to improve lessons.
Make changes if needed.
Web
Development
An expense budget is
needed to ensure money is
spent efficiently. A budget
would also be needed to
set web traffic goals.
Monitor department expenses
and web site visits using online
counting program.
Compare budgeted expenses
with actual and compare
expected web traffic with
actual. Investigate variances
and make changes as needed.
Accounting
Time budgets as well as
expense budgets are
needed.
Train employees on new
system to keep within time
budget. Monitor expenses
closely.
Compare budget with actual
numbers. Investigate
variances and make changes if
needed.
Human
Resources
Employee satisfaction
surveys and feedback
reports.
Active relationship between
management and employees.
Management would record
needs and suggestions made
by employees in feedback
system.
Consider employee
suggestions and enact
changes if needed.
Chapter 1 Introduction to Managerial Accounting
(continued) P1-29B
Req. 3
A team was formed to evaluate the feasibility of installing an ERP system for two reasons. First, the project was
probably too big for one person. Second, the representatives of the different functional business areas have different
Managerial Accounting 4e Solutions Manual
(20-25 min.) P1-31B
Req. 1
The expected value of the benefits is the labor cost savings of $934,000. This is a downward revision from what was
originally estimated in P1-30B.
Copyright © 2015 Pearson Education, Inc.
1-19
A1-32
1. What are the three main areas of management’s responsibility? How are these three areas interrelated? How
does managerial accounting support each of the responsibility areas of managers?
2. What is the Sarbanes-Oxley Act of 2002 (SOX)? How does SOX affect financial accounting? How does SOX
impact managerial accounting? Is there any overlap between financial and managerial accounting in terms of
the SOX impact? If so, what are the areas of overlap?
3. Why is managerial accounting more suitable for internal reporting than financial accounting?
4. A company currently has all of its managerial accountants reporting to the controller. What might be inefficient
about this organizational structure? How might the company restructure? What benefits would be offered by
5. What skills are required of a management accountant? In what college courses are these skills taught or
developed? What skills would be further developed in the workplace?
Today’s management accountants need the following skills:
Chapter 1 Introduction to Managerial Accounting
9. How has technology changed the work of management accountants? What other business trends are influencing
managerial accounting today? How do these other trends impact management accountants’ roles in the
10. What significant regulatory trends are impacting accounting in general today? How do these regulatory trends
affect the field of managerial accounting?
11. The effect of sustainability on the planet (environment) is probably the most visible component of the triple
12. One controversial area regarding sustainability is whether organizations should use their sustainability progress
Managerial Accounting 4e Solutions Manual
Application & Analysis
A1-33
Basic Discussion Questions
1. When you think of an accountant, whom do you picture? Do you personally know anyone (family member,
2. Before reading Chapter 1, what did you picture accountants doing, day-in and day-out, at their jobs? From
3. What skills are highly valued by employers? What does that tell you about “what accountants do” at their
companies?
Today’s management accountants need the following skills:
• Solid knowledge of both financial and managerial accounting
4. Chapter 1 includes several quotes from accountants at Abbott Laboratories, Caterpillar, and U.S. West. After
reading these quotes and from what you know about accountants, how would you describe the role/job
5. Many, if not most, accounting majors start their careers in public accounting. Do you think most of them stay in
public accounting? Discuss what you consider to be a typical career track for accounting majors.
6. If you are not an accounting major, how do the salaries of accountants compare with your chosen field? How do
A1-34
Ethics
Basic Discussion Questions
1. Do you think such behavior is common at other companies, or do you think this was a fairly isolated event?
2. How important is the “tone at the top” (the tone set by company leadership?)
3. Do you think you could be tempted to follow along if the leadership at your company had the same mentality as
the leadership at Enron, or do you think you would have the courage to “just say no” or even be a “whistle-
blower”?
4. Why do you think some people can so easily justify (at least to themselves) their unethical behavior?
5. In general, do you think people stop to think about how their actions will affect other people (e.g., the elderly in
California who suffered due to electricity blackouts) or do they just “do their job”?
6. What was your reaction to the psychology experiment shown in the DVD? Studies have shown that unlike the
traders at Enron (who received large bonuses), most employees really have very little to gain from following a
superior’s directive to act unethically. Why then do some people do it?
7. Do you think people weigh the potential costs of acting unethically with the potential benefits?
8. You are a business student and will someday work for company or own a business. How will watching this movie
impact the way you intend to conduct yourself as an employee or owner?
9. The reporter from Fortune magazine asked the question, “How does Enron make its money?” Why should every
employee and manager (at every company) know the answer to this question?
10. In light of the “mark-to-market” accounting that enabled Enron to basically record any profit it wished to record,
can you understand why some of the cornerstones of financial accounting are “conservatism” and “recording
transactions at historical cost”?
11. How did employees of Enron (and employees of the utilities company in Oregon) end up losing billions in
retirement funds?
Student responses will vary.
Managerial Accounting 4e Solutions Manual
Decision Case
A1-35
Sustainability
This is an open-ended project, without definite solutions. However, the following observations may be helpful.
This project works best with groups of 4-5 students.
The person interviewed could be identified through a connection of one of the students, a connection made by the
instructor, or a connection through the school.
Requiring students to answer the first four questions before the interview will help ensure that they are prepared for
the interview. It is important that students be prepared so they can make a favorable impression on the interviewee
(for the school and future employment!) and so they do not waste the interviewee’s time. If the company is of any
reasonable size, they should be able to gather information from the library or the Internet.
1. What is the company’s primary product or service?
2. Does your company have a stated policy on sustainability? What is this policy?
3. How would this manager define “sustainability”? Is the manager’s definition similar to the definition of
“sustainability” in the chapter?
4. Regardless of whether the company has a sustainability policy or not, what sustainability efforts does the
company make with respect to the environment? For example, does the company recycle its waste? What
specific types of waste are recycled? Does the company purchase recycled-content products?
5. Is the amount (or percentage) of waste that is recycled tracked in a reporting system? Who gets reports on the
organization’s recycling efforts?
6. How does the company measure its impact on the environment (if it does)? (For example, does it measure its
carbon footprint in total? Does it measure the carbon footprint of individual projects?)
7. Does the company do any external reporting on sustainability? If so, how long has the company been reporting
on its sustainability efforts? If the company does not do any sustainability reporting at the current time, does it
anticipate starting to report on its sustainability efforts in the near future?
8. In the manager’s opinion, is sustainability important within that organization’s industry? Why or why not?
Student responses to the preceding questions will vary by student and organization.
A1-36
Ethics
The ethical standard that Jane may have violated is confidentiality. She had a responsibility to keep her work details
confidential. Tom, on the other hand, has committed illegal acts (insider trading at a minimum).
If Jane discovers what Tom has been doing, she may have a responsibility to report his actions. If they get married
before she would discover his wrongdoings, then that muddies the waters further.
Student responses will vary.
Note from author: This case was based loosely on a real-life legal case. For additional information, please see SEC Sues
26-Year Old On Charges He Made $200,000 Insider Trading Off Ex-Girlfriend's Work Project
http://www.businessinsider.com/toby-scammell-insider-trading-girlfriend-bain-capital-marvell-disney-2011-8
A1-37
1. Types of financial accounting information that may be generated or recorded includes:
2. Information needed by Mamma Mia! producers to make decision to move to a different theater:
a. Financial accounting system
i. Ticket revenues to date
3. Information needed by Once producers to calculate return of original investment and to keep show open:
a. Financial accounting system
4. Information needed by Memphis producers to close the show early and renovate theater versus producing
another show:
a. Financial accounting system
