Chapter 1 Regardless Fault Henry Powell Inc Should Immediately

Chapter 1

Introduction to Managerial Accounting

Concept Questions*

1. (LO 1—Data, information, and knowledge)

Data include items such as sales invoices, purchase orders, customer lists, and

2. (LO 2—Managerial versus financial accounting)

The primary purpose of financial accounting is the preparation of general use

3. (LO 2—Strategic and operational planning)

4. (LO 2—Role of finance function)

The finance function is responsible for managing the financial resources of the

5. (LO 3—Role of the managerial accountant)

Advances in accounting information systems and other changes in the past five

6. (LO 3—Sunk and opportunity costs)

Sunk costs are costs that have already been incurred. As a result, they cannot be

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7. (LO 4—Ethics)

As there is no one correct answer to this question, student responses will vary.

Exercises

1. (LO 2—Users of accounting information)

Note to Instructors: Student responses will vary to this question. You may find

that students will have difficulty identifying the types of information needed by

these individuals and organizations because they lack experience with

accounting. You may find that this question is useful as an in-class discussion

exercise. Below are a few of the potential answers that students may provide.

a. Financial statements, cash flow projections, sales projections, and budgets.

2. (LO 2—Managerial vs. financial accounting)

Managerial accounting

Financial accounting

▪ Timeliness is critical

▪ Must follow GAAP

▪ Information is often less precise

▪ Focused on past performance

▪ Reports results by segments

▪ Highly customizable

▪ Information is often “old”

3. (LO 2—Types of business managers)

a. finance managers

Chapter 1: Introduction to Managerial Accounting

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4. (LO 4—Decision making and ethics)

Note to Instructors: This question is loosely based on the facts surrounding the

Ford Explorer/Firestone tire rollover problems in 2000. As part of the discussion,

you may want to discuss the role of risk in analyzing and making decisions.

A. Regardless of fault, Henry Powell, Inc., should immediately advise

Problems

5. (LO 2—Financial vs. managerial accounting)

A. Financial accounting is concerned with the preparation of general purpose

6. (LO 3—Decision making and relevant factors)

A. The problem faced is basically one of choosing the “best” flight. However,

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B. Although answers will vary, quantitative objectives might include

D. The best choice will depend on the specific objectives identified by

7. (LO 3 and 4—Decision making and ethics)

A. Ken may identify the objectives of the dangers associated with the

B. Ken could notify his superiors of the problem with the seal and

C. Knowing that the part may fail certainly requires the company to take

D. While cost is a consideration in most business decisions, the cost is not