Chapter 1

Question 1

Management Accounting

Answer 1

A profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy.

• focused on internal users
• assists management to make decisions
• more participated function

Question 2

Key to success

Answer 2

having decision-relevant information

Question 3

Cost Management Information

Information managers need to manage effectively

Answer 3

-serves all management functions

• Financial & non-financial
  - financial alone shows ST focus
• Developed under the direction of the controller for the CFO of the organization

Question 4

Four functions of management

Answer 4

1. Strategic Management
2. Planning and decision-making
3. Management and operational control
4. Preparation of financial statements

Question 5

Strategic Management

Answer 5

-most important management function
(deciding where you’re goina go, and what to do to get there)
-Involves identifying and implementing goals and action plans to maintain a competitive advantage
-Monitoring of Critical Success Factors (CSFs) is necessary (items essential to the firms success)
-Critical to a firm’s success due to global competition and rapidly changing markets

Question 6

Planning and decision making

Answer 6

• information is needed to support recurring decisions such as scheduling production and pricing
• information is needed for short run planning (budgeting) and profit planning (Cost-Volume-Profit analysis)

Question 7

Management and operational control

Answer 7

-information is needed to identify inefficient operations and reward effective management practices

Question 8

Preparation of financial statements

Answer 8

Information is needed to guarantee compliance with regulatory reporting requirements

Question 9

Types of Organizations

Answer 9

Manufacturers
Merchandisers (Wholesalers & Retailers)
Service firms
Governmental & Not-for-profit

Question 10

Changes in the Contemporary Business Environment

Answer 10

1. Shift to a global business environment
2. Lean Manufacturing
3. Importance of information technology
4. Focus on the customer
5. Shifts in management organization
6. Social, political, and cultural considerations

Question 11

Shift to a global business environment

Answer 11

economic interdependence and increased competition

Question 12

Lean Manufacturing

Answer 12

Just-in-Time (JIT) inventory methods, inventory reduction and quality control
Emphasis on speed-to-market (i.e., time-based competition)
Flexible manufacturing systems

Question 13

Importance of Information Technology

Answer 13

Increased use of the internet has reduced processing time and facilitated information exchange

Question 14

Focus on the customer

Answer 14

Consumers expect functionality, quality and customization.

Shorter product life-cycles have intensified competition. (w/out short plc demand goes down and employment decreases)

Question 15

Shifts in management organization

Answer 15

The focus has shifted from financial measures and hierarchal command-and-control organizations to non financial measures and flexible organizational structures

Question 16

Social, political, and cultural considerations

Answer 16

Changes include a more diverse workforce, a renewed sense of ethical responsibility, and increased deregulation of business

Question 17

Kaplans Phases for Developing Cost Management Systems

Answer 17

Stage 1 - Cost management systems are basic transaction reporting systems (measurement & recording)
Stage 2 - Cost management systems focus on external reporting-decision-usefulness of cost management data is limited.
Stage 3 - Cost management systems track key operating data and relevant cost information for decision making (operational control)
Stage 4 - Strategically relevant cost-management information is an integral part of the system. (implement strategy)

Question 18

The management accountants role

Answer 18

• Provide strategically relevant cost management information to help the organization keep up with the ever-changing environment
• Thirteen Contemporary Management Techniques developed and employed by the management accountant

Question 19

Contemporary Management Techniques

Answer 19

1. The Balanced Scorecard and Strategy Map
2. The Value Chain
3. Activity Based Costing and Management
4. Business Intelligence
5. Target Costing
6. Life Cycle Costing
   (1-6 Focus on Strategy implementation)
7. Benchmarking
8. Business Process Improvement
9. Total Quality Management
10. Lean Accounting
11. The Theory of Constraints
12. Enterprise Sustainability
13. Enterprise Risk Management
    (7-13 help to achieve strategy implementation through a focus on process improvement)

Question 20

The Balanced Scorecard

Answer 20

An accounting report that addresses a firm’s performance in four areas: Financial, Customer, Internal business processes, and Innovation and Learning

Question 21

The Strategy Map

Answer 21

A method, based on the balance scorecard, which links the four perspectives in a cause-and-effect diagram

Question 22

The Value Chain

Answer 22

An analysis tool used to identify the specific steps required to provide a competitive product
Helps identify steps that can be eliminated or outsourced

Question 23

Activity-Based Costing and Management

Answer 23

Activity-Based Costing (ABC) improves the tracing of costs to individual products and customers
Activity-Based Management (ABM) improves operational and management control

Question 24

Business Intelligence

Answer 24

An approach to strategy implementation in which the management accountant uses data to understand and analyze business performance.

Question 25

Target Costing

Answer 25

Target Cost = Market determined price - desired profit

A method that has resulted from intensely competitive markets

Question 26

Life-Cycle Costing

Answer 26

Costs should be monitored throughout a product’s life cycle - from research and development to sales and service

Question 27

Benchmarking

Answer 27

Process by which a firm identifies its CSFs, studies the best practices of other firms in achieving these CSFs, and institutes change based on the assessment results
(fo in & evaluate competitors)