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INTRODUCTION TO MANAGERIAL
ACCOUNTING
DISCUSSION QUESTIONS
1. Managerial accounting is the provision of accounting information for internal users in a firm.
2. The three broad objectives of managerial accounting are to provide information for planning, controlling, and
decision making.
3. The users of managerial accounting information are generally managers and other employees of a firm.
Managerial accounting information is typically not provided to outsiders but may be in selected cases. For
example, a bank may require budgeting information for the next few years before agreeing to grant a loan.
7. Managerial accounting is internally focused, does not follow mandatory rules, keeps track of both financial
and nonfinancial information, emphasizes the future, and relies on a broad range of disciplines. Financial ac-
counting, on the other hand, is externally focused, follows externally imposed rules (such as GAAP), has a
historical orientation, and provides information about the company as a whole.
10. The value chain is the set of activities required to design, develop, produce, market, and deliver products and
services to customers. It is important because it helps the company to understand its role in serving custom-
ers and to develop strategic competence.
11. Today’s managerial accountant must understand many functions of the business, from manufacturing to mar-
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CHAPTER 1 Introduction to Managerial Accounting
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13. Line positions are those that have direct responsibility for the basic objectives of an organization. These typi-
cally include producing and selling a product. Staff positions are supportive in nature (e.g., human resources,
maintenance) and have only indirect responsibility for an organization’s basic objectives.
16. One major theme or executive pressure common to many of the recent accounting scandals is a focus on the
short term, rather than the long term. For example, WorldCom wrongly decided to increase current period net
income by inappropriately decreasing current period expenses (by recording more of the expenditures as an
CHAPTER 1 Introduction to Managerial Accounting
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MULTIPLE-CHOICE QUESTIONS
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1-2. e
CHAPTER 1 Introduction to Managerial Accounting
EXERCISES
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a. Decision making
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a. Managerial accounting oriented
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1. The total product is the product and its features (processing speed, disk drives,
2. One company is emphasizing low costs, and the other is attempting to differentiate
its PC by offering faster delivery and higher-quality service.
3. The Confiar’s service component and its delivery time appear to be better than
Drantex’s. Thus, the realization of these features appears to outweigh the additional
4. Better quality and shorter delivery time increase the value of what the customer
receives, while lowering the price decreases the amount paid. In total, customer
CHAPTER 1 Introduction to Managerial Accounting
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E 1-14
Joan Dennison is staff. She is in a support role—she prepares reports and helps explain
E 1-15
No, it is not ethical for Steve to demand a kickback from Dave. Dave should not agree to
this unethical proposal. This brief situation actually happened to Dave, a friend of one
of the authors. The author advised Dave not to accept the deal. Dave then checked with
E 1-16
A manager has a responsibility to the company as well as society. If the manager lays
off the employees, he or she ignores both of these responsibilities. In effect, the man-
ager would be pursuing self-interest at the expense of the company and the sales-
CHAPTER 1 Introduction to Managerial Accounting
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1. By the time most students graduate from high school, they have not had much ex-
posure to business. Therefore, they do not have full knowledge of acceptable behav-
ior for the business environment. Students may not know that certain practices are
2. Sacrificing self-interest is a choice that each person must make. Others may be in-
fluenced by those individuals who behave ethically. Individuals committed to ethical
behavior produce societies committed to ethical behavior.
3. While this sounds noble, many would disagree that managers are first seeking to
serve others and accept personal financial rewards as a by-product of a good job.
4. It is often true that unethical firms and individuals suffer financially. In the long run,
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The employees should not follow the suggestion of their boss to purchase more shares
E 1-19
