Chapter 1

Question 1

Management Accounting

Answer 1

• the process of supplying the managers and employees in an organziation with relevant information, both financial and nonfinancial, for making decisions, allocating resources, and monitoring, evaluating, and rewarding performance.
• to assist management in the formulation and implementation of the organization’s strategy
• must be relevant and helpful to managers, and customized to serve multiple purposes
• a discipline that helps an enterprise to develop and implement its strategy

Question 2

How are financial and management accounting similar?

Answer 2

• they are both based on financial information and other quantitative information about business operations

Question 3

How do financial and managerial accounting differ?

(From a management accounting standard)

Answer 3

• its is both retrospective and also propsective, and uses both financial and nonfiancial info (financial is only retrospective and only uses financial info)
• oriented to meeting the decision-making needs of employees and managers inside the organization (finacial is primarily orietened to stakeholders)
• no prescribed form or rules about its content
• the scope is disaggregated (in financial, the scope is highly aggregated)

Question 4

Strategy

Answer 4

• about an organization making choices about what it will do and equally important, what it will not do
• involves choosing a strategy that provides the best fit between the organization’s environment and its internal resources to achieve the organization’s objectives
• forces managers to make choices about what markets the organization should target and how the organization will compete in those markets

Question 5

Two Essential Components of Strategy

Answer 5

• Clear statement of company’s advantage in the competitive marketplace
  
  • different, better, uniquely
• Strategy’s scope: where will compete most aggressively, e.g.,
  
  • targeted customers
  • technologies employed
  • geographic locations served
  • product line breadth

Question 6

Plan-do-check-act Cycle

(Deming Cycle)

Answer 6

• originally developed for improving the quality of products and processes
• systematic and recursive way to develop, implement, monitor, evaluate and, when necessary, change a course of action

Question 7

Plan

Answer 7

• defines the organization’s purpose and selects the focus and scope of its strategy
• Identify objectives
• Choose a course of action to achieve the desired objectives
• Essential components of planning are:
  
  • Balanced Scorecard and strategy map
  • Cost-volume-profit analysis, relevant costs
  • Designing new prodcuts and assessing total lifecycle consequences
  • budgeting: revenues, costs, proftis, resource allocation

Question 8

Do

Answer 8

• the implementation of a chosen course of action
• Financial and nonfinancial to:
  
  • operate and improve processes
  • market, sell, and deliver products and services
  • respond to customer requests

Question 9

Check

Answer 9

• Includes two components:
  
  • measuring and monitoring ongoing performance and taking short-term actions based on the measured performance.
• Measuring, evaluating, and reporting performance
  
  • cost and profitability of products and services
  • Cost and profitability of customers; customer satisfaction and loyalty
  • Operational processes
  • Compare planned to actual performance
  • Departmental and business unit performance

Question 10

Nonfinancial information

Answer 10

• Reports on the critical drivers of long-term financial performance: customers, processes, inovation, employees, systems and culture.

Question 11

Act

Answer 11

• Take actions to lower costs, change resource allocations, improve the quality, cycle time, and flexibility of processes, modigy the product mix, change customer relationships, and redesign and introduce new products
• Afterwards, cycle around to “plan” step; reaffirm or change the previous plan.