Chapter 1 7
accessible website, in whole or in part.
People skills Medium
Sales skills Low
Communication skills High
Analytical skills High
the skill set of management accountants.
19. Each student will have a different answer. No solution is provided.
20. a. A mission statement adds strength to an organization’s strategic planning process
by providing a clear view of what the organization wants to accomplish and how it
b. A mission statement should be developed using input from everyone involved in
c. In developing a mission statement, organization members need to consider the or-
ganization’s strengths (including core competencies) and weaknesses, opportuni-
d. Each student will have a different answer. No solution is provided.
21. a. Not every organization needs a mission statement. However, having one aids the
organization by providing a clear statement of what the organization wants to ac-
b. A mission statement can help an organization encourage ethical behavior by estab-
lishing ethical values as an organizational characteristic. By promoting ethical be-
8 Chapter 1
c. A mission statement can help an organization strive for a higher level of product
23. a. You might want to have information on the average age of your primary custom-
ers, their food preferences, what your competitors offer (quality and price), and the
skills of your cook.
tions you choose were currently available at your competitors’ restaurants (product
differentiation). Your cook’s talent is crucial because, regardless of preference or
chase it.
25. a. Each student will have a different answer, but the following items may be men-
tioned:
(1) Fiscal, legal/regulatory, and political
(3) Fiscal and legal/regulatory
(4) Cultural, fiscal, legal/regulatory, and political
28. Each student will have a different answer, but the following items may be mentioned:
sues than an absentee owner.
Chapter 1 9
b. As the owner, you may retain the billing process as well as the marketing function.
You would also probably want to verify customer satisfaction through surveys or
29. Each student will have a different answer. However, the following items may be men-
tioned:
b. Internal activities would include purchasing, receiving, package design, manufac-
turing, and so forth.
30. a. A strategic alliance would be considered illegal in the United States when it inter-
alliances), and so forth.
c. Each student will have a different answer, but the following partners may be men-
tioned:
Catalog production company
Photographer
31. a. A balanced scorecard is used to:
clarify or update a business’s strategy,
link strategic objectives to long-term targets and annual budgets,
track the key elements of the business strategy,
b. The majority of value in many modern businesses rests in the intangible assets (of-
ten times people and their organizational knowledge). Also, modern companies
recognize that mission success (or competitiveness) is primarily driven by the ide-
10 Chapter 1
as and innovations that come from people. Older management practices that are
focused solely on financial metrics and production activities are not appropriate in
this new environment. Financial metrics are lagging indicators that tell what hap-
pened in the past. Knowledge workers communicate and create in complex ways.
The balanced scorecard has evolved to support strategic planning and management
in this new work environment. The BSC changes the strategic plan from passive
document into organizational “marching orders.” It provides a framework that pro-
c. There are always challenges associated with any innovative management idea or
any effort that seeks to change the status quo in a large organization. A compre-
hensive BSC is somewhat difficult and time consuming to implement, and sus-
tained top-level support and commitment to develop and implement the system is
32. a. The IMA guidelines focus on competence, confidentially, integrity, and credibility.
Competence means that individuals will develop and maintain the skills needed to
would discredit the profession or violate the company’s corporate governance pol-
icies. Credibility means that the cost accountant will provide full, fair, and timely
b. The cost or management accountant should document which regulation is believed
to have been violated and then research and record the appropriate actions that
porate ladder (possibly up to the audit committee). Again, it is important to
document each communication and finding throughout the process. If the man-
regulatory authorities.
33. Each student will have a different answer. No solution is provided; however, it is es-
Chapter 1 11
34. a. Such a law change would reduce costs in the short run. All of the costs of comply-
ing with current environmental laws and policies would be eliminated. However,
run and would include the social costs of loss of life and loss of health. There
could also be backlash from the environmentally concerned sector of the consum-
b. Each student will have a different answer as it would depend upon how important
he/she believes environmental laws are for businesses. No solution is provided.
35. The purpose of this question is to get students to think about the role of laws and eth-
ard governing the actions in foreign jurisdictions, and the extent to which “being
36. a. If an organization’s management accountant is, in fact, primarily dealing with in-
ternal accounting and finance matters, then it is more likely that the financial ac-
b. Each student will have a different answer. Some earnings management falls under
the heading of normal business decision making, while “abusive” earnings man-
nancial reports, which should often be regarded as the equivalent of fraud. Fraud
is, of course, illegal and unethical. As Warren Buffett once said, “Managers who
the numbers.”
37. a. The CEO would be concerned about the earnings management if it were to be con-
sidered “abusive.” Under the 2002 Sarbanes–Oxley Act, an organization’s CEO
reporting.
b. Yes, whistle-blowing managers in SEC-registered companies are protected from
12 Chapter 1
accessible website, in whole or in part.
authority.
38. a. The quote indicates that the predominant concern of American businesses should
be profit generation. There is nothing explicit or implied in the statement to indi-
b. Ethically, one might feel that the pursuit of profit should be constrained such that
profit is not pursued to the detriment of human life, human happiness, the envi-
c. Taking a long-term view, it might be logical to argue that managers’ profit–
maximizing actions are those actions that are both legal and ethical. In the long
39. In addition to domestic exchanges, Volkswagen AG lists on the Frankfurt, Basel, Ge-
change may be illegal on another. For example, the Sarbanes-Oxley Act requires a
pan.