Chapter 1: Intro to Managerial Accounting

Question 1

Financial Accounting

Answer 1

The discipline of accounting concerned with providing information to shareholders, creditors, and others OUTSIDE the organization.

Question 2

Managerial Accounting

Answer 2

The discipline of accounting concerned with providing information to managers for use in planning, directing and motivating, and controlling WITHIN the organization. Historical and future looking

Question 3

Broadly speaking, there are three types of organizations

Answer 3

Service, Merchandising, and manufacturing

Question 4

Service firms include

Answer 4

Great canadian oil change, Sun life insurance, doctor clinics, and advertising agency

Question 5

Merchandising firms

Answer 5

Largely retail and wholesale outlets that buy goods from suppliers and resell to customers

Question 6

Manufacturing firms

Answer 6

Engage in the production and sale of different types of products, ranging from small consumer goods (like gum) to large products (such as ships and aircrafts)

Question 7

Most organizations have

Answer 7

1) A mission (purpose)
2) A vision (long-term goal)
3) Strategies for achieving the mission and vision

Question 8

Strategy

Answer 8

The general direction in which an organization plans to move to achieve its goals and objectives.

Guided by the company’s vision, mission, and strategy, managers carry out the three main activities of planning, implementation (implementing), and control

Question 9

Planning

Answer 9

Selecting a course of action and specifying how the action will be implemented.

Question 10

First step of planning

Answer 10

Identifying alternatives and then selecting the one that does the best job of furthering the organizations objectives

Question 11

Budgets

Answer 11

Detailed plans for the future, usually expressed in formal quantitative (number) terms.

Planned annually, quarterly, or even monthly

Question 12

Implementation or execution

Answer 12

Putting the plans into effect.

Involves carrying out day-to-day activities, making short-term and long-term decisions, organizing and allocating resources, and managing people by directing and motivating them

Question 13

Control or monitoring

Answer 13

The process of instituting procedures and then obtaining feedback to ensure that all parts of the organization are functioning effectively and moving toward overall company goals.

Largely achieved through internal management reports produce on a frequent basis; these reports provide feedback

Question 14

Feedback

Answer 14

A mechanism that signals whether operations (and performance) are on track; usually achieved through reviewing periodic performance reports.

Question 15

Performance report

Answer 15

A detailed report comparing budgeted results with actual results.

Question 16

How are managerial and financial different?

Answer 16

Users: Financial = external, Management = internal

Time horizon: Financial = historical perspective, management = historical and future perspective

Financial: Emphasis on verifiability, management = emphasis on relevance

Financial: Emphasis on precision, Management: emphasis on timeliness

Unit of analysis: financial = entire organization, management = individual units or the entire organization

Regulation: Financial = ASPE or IFRS, management = no prescribed

Requirement: Financial = MANDATORY, management = optional

Question 17

Relevant

Answer 17

Appropriate for the decision at hand

Question 18

Segments (managerial accounting)

Answer 18

Parts of an organization that can be evaluated independently of other parts and about which the manager seeks financial data. Examples are a product line, a sales territory, a division, or a department.

Question 19

No need for ASPE or IFRS in managerial accounting, however, what could be considered a constraint?

Answer 19

The expected benefits from using the information should outweigh the costs of collecting, analyzing, and summarizing the data

Question 20

Management cycle

Answer 20

1) Planning: which includes setting objectives and outlining how to attain these objectives
2) Implementation: which involves putting the plans into effect
3) Control: provides required periodic feedback to monitor the organization’s progress toward achieving its stated objectives

Question 21

Increased relevance of managerial accounting

Answer 21

Greatly increased in last 4 decades, competitive boundaries expanded due to globalization, higher scrutiny of companies by a variety of stakeholders, rapid tech advances significantly impact business practices and their outputs

Question 22

Globalization positives

Answer 22

• Offers greater opportunities (networking, access to new markets)
• Large variety of choices for customers, higher quality, lower prices

Question 23

Why globalization (these factors led to globalization)

Answer 23

Improvements in global communication and transportation systems

• increasing sophistication in international trade markets
• Reduction in trade barriers achieved through bilateral, trinational, and multinational free trade agreements

Question 24

Implications of globalization

Answer 24

1) Organizations must find new ways of conducting business: new strategies, new management practices, and more sophisticated managerial accounting systems
2) Organizations must conduct their affairs in a responsible manner

Question 25

Lean business model

Answer 25

A business model that focuses on continuous improvement by eliminating waste in an organization.

Question 26

In order to eliminate waste, companies must adopt and implement one or more management practices that focus on different aspects of the ____________

Answer 26

lean business model

Question 27

Examples of said practices from #26

Answer 27

Just-in-time
Total quality management
Process reengineering
Theory of constraints

Question 28

Just-in-time (JIT)

Just in time

Answer 28

A production and inventory control system in which materials are purchased and units produced only as needed to meet actual customer demand.

Question 29

Results of JIT

Answer 29

1) A substantial reduction in ordering and warehousing costs and in waste due to obsolescence, pilferage, and other reasons
2) Much more effective operations

Question 30

Zero defects

Part of JIT

Answer 30

A policy of striving for no defects or as few as possible.

Question 31

Total quality management (TQM)

Answer 31

An approach to continuous improvement that focuses on customers and using teams of front-line workers to systematically identify and solve problems.

Question 32

Two major characteristics of TQM

Answer 32

1) Focus on serving customers

2) Systematic problem solving using teams made up of front-line workers

Question 33

Benchmarking

Answer 33

A study of organizations that are among the best in the world at performing a particular task.

Question 34

Plan-Do-Check-Act (PDCA) cycle
plan do check act cycle
AKA deming wheel

Answer 34

A systematic approach to continuous improvement that applies the scientific method to problem solving

Phases

1) Plan: problem-solving team analyzes data to identify possible causes of the problem and then proposes a solution
2) Do: team conducts an experiment
3) Check: Analyzes the results
4) Act: If the results are favourable, they implement that plan. If results are not favourable (unfavourable), team goes back to original data and tries again

Question 35

Business process

Answer 35

A series of steps followed to carry out a task in a business.

examples: Making a Canadian bacon pizza at a place

Question 36

Process reengineering

Answer 36

An approach to improvement that involves completely redesigning business processes in order to eliminate unnecessary steps, reduce errors, and reduce costs.

Focusses on simplification and elimination of wasted effort

Question 37

Non-value-added activities

non value added activities

Answer 37

Activities that consume resources or take time but do not add value for which customers are willing to pay.

Example: needing to move stuff all around the factory, just reorganize the layout to reduce moving

Negatives: Layoffs (job loss occurs when you are too efficient)

Question 38

Constraint

Answer 38

A hurdle (or obstacle) that prevents people from getting more of what they want.

Question 39

Theory of constraints (TOC)

Answer 39

A management approach that emphasizes the importance of managing constraints.

Looking at solutions to fix constraints

Example: gas station is too small, and people need to wait. You can either get more pumps, increase pump speed, introduce fast checkout

Question 40

Corporate governance

Answer 40

The system by which an organization is directed and controlled.

SHould encourage the board of directors and top management to pursue objectives that are in the interest of the company’s stakeholders

Question 41

Are managerial and financial reports independent of each other??

Answer 41

NOOOOOOOOOO

The reports can feed into each other