Chapter 1: The Changing Role of Managerial Accounting in a Dynamic

Business Environment
MULT!LE C"#CE $UE%T#&%
1. Which of the following statements about managerial accountants is false?
A. Managerial accountants more and more are considered "business partners."
B. Managerial accountants often are part of cross-functional teams.
C. An increasing number of organizations are segregating managerial accountants in separate
managerial-accounting departments.
. !n a number of companies" managerial accountants ma#e significant business decisions and
resol$e operating problems.
%. &he role of managerial accountants has changed considerabl' o$er the past decade.
Answer( C )*( 1 &'pe( +C
,. &he da'-to-da' wor# of management teams will t'picall' comprise all of the following acti$ities
e-cept(
A. decision ma#ing.
B. planning.
C. cost minimizing.
. directing operational acti$ities.
%. controlling.
Answer( C )*( , &'pe( +C
.. Which of the following functions is best described as choosing among a$ailable alternati$es?
A. ecision ma#ing.
B. /lanning.
C. irecting operational acti$ities.
. Controlling.
%. Budgeting.
Answer( A )*( , &'pe( +C
0. Which of the following managerial functions in$ol$es a detailed financial and operational
description of anticipated operations?
A. ecision ma#ing.
B. /lanning.
C. irecting operational acti$ities.
. Controlling.
%. Measuring.
Answer( B )*( , &'pe( +C
Chapter 1 1
1. Which of the following in$ol$es the coordination of dail' business functions within an
organization?
A. ecision ma#ing.
B. /lanning.
C. irecting operational acti$ities.
. Controlling.
%. Moti$ating.
Answer( C )*( , &'pe( +C
2. &itan Compan' has set $arious goals" and management is now ta#ing appropriate action to ensure
that the firm achie$es these goals. *ne such action is to reduce outla's for o$erhead" which ha$e
e-ceeded budgeted amounts. Which of the following functions best describes this process?
A. ecision ma#ing.
B. /lanning.
C. Coordinating.
. Controlling.
%. *rganizing.
Answer( )*( , &'pe( 3
4. Which of the following is not an ob5ecti$e of managerial accounting?
A. /ro$iding information for decision ma#ing and planning.
B. Assisting in directing and controlling operations.
C. Ma-imizing profits and minimizing costs.
. Measuring the performance of managers and subunits.
%. Moti$ating managers toward the organization6s goals.
Answer( C )*( . &'pe( +C
7. &he role of managerial accounting information in assisting management is a8n9(
A. financial-directing role.
B. attention-directing role.
C. planning and controlling role.
. organizational role.
%. problem-sol$ing role.
Answer( B )*( . &'pe( +C
:. %mplo'ee empowerment in$ol$es encouraging and authorizing wor#ers to ta#e initiati$es to(
A. impro$e operations.
B. reduce costs.
C. impro$e product ;ualit'.
. impro$e customer ser$ice.
%. all of the abo$e.
Answer( % )*( . &'pe( +C
2 Hilton, Managerial Accounting, Seventh Edition
1<. &he process of encouraging and authorizing wor#ers to ta#e appropriate initiati$es to impro$e the
o$erall firm is commonl' #nown as(
A. planning and control.
B. emplo'ee empowerment.
C. personnel aggressi$eness.
. decision ma#ing.
%. problem recognition and solution.
Answer( B )*( . &'pe( +C
11. Which of the following business models considers financial" customer" internal operating" and
other measures in the e$aluation of performance?
A. eterministic simulation.
B. Balanced scorecard.
C. /a'off matri-.
. ecision tree.
%. Chart of operating performance 8C*/9.
Answer( B )*( . &'pe( +C
1,. Which of the following perspecti$es is normall' absent in a balanced scorecard?
A. =inancial.
B. Customer.
C. !nternal operations.
. )earning and inno$ation>growth.
%. 3one of the abo$e.
Answer( % )*( . &'pe( +C
1.. Managerial accounting(
A. focuses onl' on historical data.
B. is go$erned b' ?AA/.
C. focuses primaril' on the needs of personnel within the organization.
. pro$ides information for parties e-ternal to the organization.
%. focuses on financial statements and other financial reports.
Answer( C )*( 0 &'pe( +C
10. Managerial accounting(
A. is unregulated.
B. produces information that is useful onl' for manufacturing organizations.
C. is based e-clusi$el' on historical data.
. is regulated b' the @ecurities and %-change Commission 8@%C9.
%. generall' focuses on reporting information about the enterprise in its entiret' rather than b'
subunits.
Answer( A )*( 0 &'pe( 3
Chapter 1 3
11. Which of the following would li#el' be considered an internal user of accounting information
rather than an e-ternal user?
A. @toc#holders.
B. Consumer groups.
C. )enders.
. Middle-le$el managers.
%. ?o$ernment agencies.
Answer( )*( 0 &'pe( +C
12. All of the following entities would ha$e a need for managerial accounting information e-cept(
A. ell Computer.
B. &he )os Angeles odgers baseball club.
C. *ffice epot.
. &he =ederal Bureau of !n$estigation 8=B!9.
%. 3one of the abo$e responses is correct" as all of these entities would use managerial
accounting information.
Answer( % )*( 0 &'pe( 3
14. Which of the following choices correctl' depicts whether Ban# of America" Microsoft" and
=lorida @tate Ani$ersit' would ha$e a need for managerial accounting?
Ban#
of America Microsoft
=lorida @tate
Ani$ersit'
A. Bes Bes 3o
B. Bes 3o Bes
C. Bes Bes Bes
. 3o Bes 3o
%. 3o Bes Bes
Answer( C )*( 0 &'pe( 3
17. =inancial accounting focuses primaril' on reporting(
A. to parties outside of an organization.
B. to parties within an organization.
C. to an organization6s board of directors.
. to financial institutions.
%. for financial institutions.
Answer( A )*( 0 &'pe( +C
1:. Which of the following statements represents a similarit' between financial and managerial
accounting?
A. Both are useful in pro$iding information for e-ternal users.
B. Both are go$erned b' ?AA/.
C. Both draw upon data from an organization6s accounting s'stem.
. Both rel' hea$il' on published financial statements.
%. Both are solel' concerned with historical transactions.
Answer( C )*( 0 &'pe( 3
4 Hilton, Managerial Accounting, Seventh Edition
,<. Which of the following emplo'ees at American Airlines would not be considered as holding a
line position?
A. /ilot.
B. Chief financial officer 8C=*9.
C. =light attendant.
. &ic#et agent.
%. Baggage handler.
Answer( B )*( 1 &'pe( 3
,1. Which of the following emplo'ees would be considered as holding a line position?
A. &he controller of %--on Corporation.
B. &he $ice-president for go$ernment relations of Microsoft.
C. &he manager of food and be$erage ser$ices at isne'6s Magic Cingdom.
. A secretar' emplo'ed b' Dewlett-/ac#ard.
%. 3one of the abo$e.
Answer( C )*( 1 &'pe( 3
,,. Which of the following emplo'ees at @tarbuc#s would li#el' be considered as holding a staff
position?
A. &he compan'6s chief operating officer 8C**9.
B. &he manager of a store located in Cansas Cit'" Missouri.
C. &he compan'6s lead" in-house attorne'.
. &he compan'6s chief financial officer 8C=*9.
%. Both the compan'6s lead" in-house attorne' and the chief financial officer.
Answer( % )*( 1 &'pe( 3
,.. &he chief managerial and financial accountant of an organization is the(
A. chief e-ecuti$e officer 8C%*9.
B. treasurer.
C. $ice-president of accounting.
. internal auditor.
%. chief financial officer 8C=*9.
Answer( % )*( 1 &'pe( +C
,0. Which of the following t'picall' does not relate to the role of a controller?
A. A controller super$ises the accounting department.
B. A controller safeguards an organization6s assets.
C. A controller o$ersees the preparation of reports re;uired b' go$ernmental authorities.
. A controller normall' assumes a narrow role within the organization" often pre$enting the
indi$idual6s rise to top management ran#s.
%. Choices "B" and "" abo$e.
Answer( % )*( 2 &'pe( +C
Chapter 1 5
,1. A controller is normall' in$ol$ed with(
A. preparing financial statements.
B. managing in$estments.
C. raising capital.
. safeguarding assets.
%. managing the firm6s credit polic'.
Answer( A )*( 2 &'pe( +C
,2. Which of the following is not a function of the treasurer?
A. @afeguarding assets.
B. Managing in$estments.
C. /reparing financial statements.
. Being responsible for an entit'6s credit polic'.
%. +aising capital.
Answer( C )*( 2 &'pe( +C
,4. Managerial accountants(
A. often wor# on cross-functional teams.
B. are located throughout an organization.
C. are found throughout an organization and wor# on cross-functional teams.
. are found primaril' at lower le$els of the organizational hierarch'.
%. are found primaril' at higher le$els of the organizational hierarch'.
Answer( C )*( 2 &'pe( +C
,7. &he two dimensions of managerial accounting are(
A. a decision-facilitating dimension and a decision-influencing dimension.
B. a decision-facilitating dimension and a financial-influencing dimension.
C. a decision-influencing dimension and a cost-minimizing dimension.
. a cost-minimizing dimension and a profit-ma-imizing dimension.
%. a decision-influencing dimension and a profit-ma-imizing dimension.
Answer( A )*( 4 &'pe( +C
,:. Much of managerial accounting information is based on(
A. a cost-benefit theme.
B. profit ma-imization.
C. cost minimization.
. the generation of e-ternal information.
%. effecti$eness but not efficienc'.
Answer( A )*( 4 &'pe( 3
6 Hilton, Managerial Accounting, Seventh Edition
.<. Which of the following is not normall' considered to be an element of e-business?
A. %-budgeting.
B. @uppl'-chain management.
C. %-commerce.
. Balanced scorecards.
%. Choices "B" and "" abo$e.
Answer( )*( 4 &'pe( +C
.1. Managerial accounting has changed in recent 'ears because of(
A. the growth of e-business.
B. increased global competition.
C. the emergence of new industries.
. an increased focus on the customer.
%. all of the abo$e factors.
Answer( % )*( 4 &'pe( +C
.,. Managerial accounting has changed in recent 'ears because of(
A. a growing ser$ice econom' in the Anited @tates.
B. the growing popularit' of cross-functional teams.
C. computer-integrated manufacturing 8C!M9.
. time-based competition.
%. all of the abo$e factors.
Answer( % )*( 4 &'pe( +C
... Which of the following statement8s9 about 5ust-in-time 8E!&9 in$entor' management is 8are9 true?
!.&he emphasis of E!& is on "pull" manufacturing.
!!.+aw materials are purchased 5ust in time to be used in production.
!!!.E!& is an in$entor' techni;ue that focuses on reduction of both in$entor' and related in$entor'
costs.
A. ! onl'.
B. !! onl'.
C. !!! onl'.
. !! and !!!.
%. !" !!" and !!!.
Answer( % )*( 4 &'pe( +C
Chapter 1 7
.0. *hio Corporation recentl' implemented a 5ust-in-time 8E!&9 production s'stem along with a series
of continuous impro$ement programs. !f the firm is now considering adopting a total ;ualit'
management 8&FM9 program" it would li#el' find that &FM(
A. is consistent with both E!& and continuous impro$ement.
B. is consistent with E!& but inconsistent with continuous impro$ement.
C. is consistent with continuous impro$ement but inconsistent with E!&.
. is inconsistent with both E!& and continuous impro$ement.
%. is an anti;uated management techni;ue.
Answer( A )*( 4 &'pe( 3
.1. Cost management s'stems tend to focus on an organization6s(
A. machines.
B. emplo'ees.
C. acti$ities.
. customers.
%. rules and regulations.
Answer( C )*( 4 &'pe( +C
.2. &he $alue chain of a manufacturer would tend to include acti$ities related to(
A. manufacturing.
B. research and de$elopment.
C. product design.
. mar#eting.
%. all of the abo$e.
Answer( % )*( 7 &'pe( +C
.4. Which of the following choices correctl' depicts acti$ities that would be included in a
manufacturer6s $alue chain?
+esearch and
e$elopment Mar#eting istribution
A. Bes Bes 3o
B. Bes 3o Bes
C. Bes Bes Bes
. 3o Bes 3o
%. 3o Bes Bes
Answer( C )*( 7 &'pe( +C
.7. Which of the preceding acti$ities would li#el' not be considered part of &he ?ap clothing
compan'Gs $alue chain?
A. esigning a new product line.
B. )ocating and then negotiating terms with a clothing manufacturer.
C. Mar#eting an e-isting product line.
. istributing goods from regional warehouses to local stores.
%. All of the abo$e acti$ities would be an element in the compan'Gs $alue
chain.
8 Hilton, Managerial Accounting, Seventh Edition
Answer( % )*( 7 &'pe( +C
Chapter 1
.:. &he acti$ities performed b' a manufacturing organization could be categorized as pre-production
8such as research and de$elopment and product design9" production-related" and post-production
8such as mar#eting and customer ser$ice9. Which acti$ities should the firm focus on if
management understands the $alue chain concept and desires to meet organizational goals?
A. /re-production acti$ities.
B. /roduction-related acti$ities.
C. /ost-production acti$ities.
. /re-production" production-related" and post-production acti$ities.
%. /re-production and production-related acti$ities.
Answer( )*( 7 &'pe( 3
0<. !n order for a compan' to achie$e a sustainable competiti$e ad$antage" it must perform $alue
chain acti$ities(
A. at the same ;ualit' le$el as competitors" at the same cost.
B. at the same ;ualit' le$el as competitors" but at a lower cost.
C. at a higher ;ualit' le$el than competitors" at a higher cost.
. at a higher ;ualit' le$el than competitors" but at no greater cost.
%. at either the same ;ualit' le$el as competitors" but at a lower cost" or at a higher ;ualit' le$el
than competitors" but at no greater cost.
Answer( % )*( 7 &'pe( +C
01. &he process of managing the $arious acti$ities in the $alue chain" along with the associated costs"
is commonl' #nown as(
A. acti$it'-based costing.
B. strategic cost management.
C. total ;ualit' management.
. computer-integrated costing.
%. sound management practices 8@M/9.
Answer( B )*( 7 &'pe( +C
0,. A compan' has a bottlenec# operation that slows production. Which of the following tools or
approaches could the firm use to determine the most cost-effecti$e wa's to eliminate this
problem?
A. )inear programming.
B. &heor' of constraints.
C. ecision-tree diagrams.
. /a'off matrices.
%. @trategic path anal'sis 8@/A9.
Answer( B )*( 7 &'pe( +C
1! Hilton, Managerial Accounting, Seventh Edition
0.. Which of the following can be lin#ed to the relati$el' recent wa$e of corporate scandals?
A. ?reed' corporate e-ecuti$es.
B. Managers who ma#e o$er-reaching business deals.
C. )ac# of o$ersight b' companies6 audit boards and boards of directors.
. @hodd' wor# b' e-ternal auditors.
%. All of the abo$e.
Answer( % )*( : &'pe( +C
00. Which of the following acts stri$es to impro$e corporate go$ernance and the ;ualit' of corporate
accounting>reporting?
A. +obinson-/atman.
B. &aft-Dartle'.
C. @arbanes-*-le'.
. Bush-Chene'.
%. =ran#s-Ashcroft.
Answer( C )*( : &'pe( +C
01. Which of the following statements about the ethical climate of business is false?
A. ?reed' corporate e-ecuti$es are" in part" to blame for the relati$el' recent rash of corporate
scandals.
B. Anethical business beha$ior can ha$e a negati$e impact on our econom'.
C. &he @arbanes-*-le' Act stri$es to impro$e the o$erall ;ualit' of corporate reporting.
. &he +obinson-/atman Act stri$es to impro$e the o$erall ;ualit' of corporate reporting.
%. Corporate scandals ha$e ser$ed as the accounting professionGs wa#e-up call to pa' increased
attention to ethical issues in the conduct of business.
Answer( )*( : &'pe( +C
02. Which of the following is not an ethical standard of managerial accounting?
A. Competence.
B. Confidentialit'.
C. %fficienc'.
. !ntegrit'.
%. Credibilit'.
Answer( C )*( : &'pe( +C
04. Which of the following is not an element of competenc'?
A. &o de$elop appropriate #nowledge about a particular sub5ect.
B. &o perform duties in accordance with rele$ant laws.
C. &o perform duties in accordance with rele$ant technical standards.
. &o refrain from engaging in an acti$it' that would discredit the accounting profession.
%. &o prepare clear reports after an anal'sis of rele$ant and reliable information.
Answer( )*( : &'pe( +C
Chapter 1 11
07. Assume that a managerial accountant regularl' communicates with business associates to a$oid
conflicts of interest and ad$ises rele$ant parties of potential conflicts. !n so doing" the accountant
will ha$e applied the ethical standard of(
A. ob5ecti$it'.
B. confidentialit'.
C. integrit'.
. credibilit'.
%. unified beha$ior.
Answer( C )*( : &'pe( +C
E'ERC%E%
Managers an( Decisions
0:. /resent se$eral e-amples of managerial accounting information that could help a manager ma#e
each of the following decisions(
A. A manufacturing compan' is currentl' ma#ing a part that is a production headache. &he firm
is deciding whether to abandon production and bu' the part from an outside supplier.
B. An operator of fast-food restaurants is deciding whether to open a new store in allas.
)*( 1 &'pe( 3
Answer(
3ote( Man' correct answers are possible.
A. &he cost of each alternati$e 8ma#e $s. bu'9 would be needed along with information about
suppliers that pertains to reliabilit' and product ;ualit' 8e.g." testimonials from a supplier6s
current customers that cite an' problems with on-time deli$eries" product stoc#outs" or
abnormall' high spoilage rates of purchased goods9. ?i$en the compan' is currentl' ma#ing
the part" what would happen to the facilities if the firm begins to purchase from outside
suppliers? Could the facilities be subleased" used for other profitable products" or downsized
8with e;uipment being sold9? What would happen to e-isting emplo'eesHwould there be
an' la'offs and how much would the compan' sa$e?
B. &he manager needs information about construction or leasing costs along with figures that
focus on subse;uent operating costs. Also" pro5ected sales" mar#et share figures" and data
about competitors would be helpful.
12 Hilton, Managerial Accounting, Seventh Edition
Balance( %corecar(
1<. Continental *$ernight operates an o$ernight pac#age deli$er' ser$ice that competes with =ederal
%-press and Anited /arcel @er$ice 8A/@9. &op management is considering the use of a balanced
scorecard to e$aluate operations.
A. What is a balanced scorecard and other than customer-satisfaction measures" what are its
t'pical #e' components?
B. )ist four customer-satisfaction measures that Continental might use to e$aluate performance.
)*( . &'pe( +C" 3
Answer(
A. &he balanced scorecard is a business model that helps to assess a firm6s competiti$e position
and ensures that the firm is progressing toward long-term sur$i$al. Balanced scorecards
differ from organization to organizationI howe$er" in addition to customer-satisfaction
measures" most ha$e a combination of financial measures" internal operating measures" and
measures of inno$ation>growth and learning.
B. Customer-satisfaction measures could include number of pac#ages deli$ered" mar#et share"
number of pac#ages lost or damaged" number of customer complaints" a$erage wait time
when calling and scheduling a pac#age pic#up" and response time to customer problems.
)inancial an( Managerial Accounting
11. Consider the descriptors that follow.
1. !s hea$il' in$ol$ed with the record#eeping and reporting of assets" liabilities" and
stoc#holdersG e;uit'.
,. =ocuses on planning" control" decision ma#ing" and performance e$aluation.
.. !s hea$il' regulated.
0. A field that is becoming more "cross-functional" in nature.
1. Much of the field is based on costs and benefits.
2. !s in$ol$ed almost e-clusi$el' with past transactions and e$ents.
4. Much of the information pro$ided is directed toward stoc#holders" financial anal'sts"
creditors" and other e-ternal parties.
7. &ends to focus more on subunits within an entit' rather than the organization as a whole.
:. Ma' become in$ol$ed with measures of customer satisfaction" and the amount of actual
cost incurred $s. budgeted targets.
+e;uired(
etermine whether the descriptors are most closel' associated with financial accounting or
managerial accounting.
)*( ," ." 0" 2 &'pe( +C
Chapter 1 13
Answer(
1. =inancial accounting 2. =inancial accounting
,. Managerial accounting 4. =inancial accounting
.. =inancial accounting 7. Managerial accounting
0. Managerial accounting :. Managerial accounting
1. Managerial accounting
Management Decision* Ethics
1,. Cen =ran#lin is the sales manager of a$idson %nterprises" a $er' profitable distributor of office
furniture to local businesses. A recent economic downturn has created an e-tremel' tight cash
position" and the compan' has been hurt b' the ban#ruptc' of two #e' customers.
!n late *ctober" anticipating an economic reco$er'" =ran#lin began an e-tensi$e remodeling of
the compan'6s sales floor. Construction costs" decorating" and e;uipment purchases are pro5ected
to cost J,1<"<<<.
a$idson has a polic' that indi$idual e-penditures in e-cess of J,<<"<<< must be appro$ed b'
the firm6s board of directors. =ran#lin" unfortunatel'" missed the deadline to ha$e the board
consider this pro5ect at its regular @eptember meeting. 3ot wanting to wait until the ne-t meeting
in ecember" he subdi$ided the pro5ect in two partsHconstruction and decorating 8J1:<"<<<9 and
e;uipment purchases 8J2<"<<<9Hneither of which needed board appro$al because of the dollar
amounts in$ol$ed.
&he pro5ect was recentl' completed and sales ha$e begun to reco$er. Customers ha$e ra$ed
about the new sales area" noting that it is far superior to those of a$idson6s competitors.
+e;uired(
A. Would =ran#lin6s approach of subdi$iding the pro5ect in two parts ha$e an' effect on the
compan'6s financial statements? Briefl' e-plain.
B. Briefl' discuss whether =ran#lin beha$ed in an ethical manner.
C. Which" if an'" of the following standards of conduct would ha$e applicabilit' to
=ran#lin6s conduct( competence" confidentialit'" integrit'" or credibilit'? Briefl' e-plain.
)*( : &'pe( 3
Answer(
A. Although some e-tra processing is in$ol$ed because of the "separate" pro5ects" the same total
costs will be incurred for the same assets. &hus" there is no impact on the financial
statements" which ser$e to summarize financial acti$it'.
B. =ran#lin beha$ed in an unethical manner. %$en though business is reco$ering and customers
seem more than satisfied with the new sales area" =ran#lin #nowingl' b'passed stated
compan' polic'. &he pro5ect is being done in a single phase" and is comprised of
construction" decorating" and e;uipment ac;uisition. &his is reall' one pro5ectI 'et his
accounting treatment implies otherwise.
14 Hilton, Managerial Accounting, Seventh Edition
C. &wo standards are rele$ant here. !ntegrit' holds that managers refrain from engaging in an'
conduct that would pre5udice the ethical performance of duties. Additionall'" credibilit'
recognizes that managers ha$e a responsibilit' to communicate information fairl' and
ob5ecti$el'" and disclose all rele$ant information that could reasonabl' be e-pected to
influence a user6s understanding of the reports and data presented.
!ossi+le Ethics ssues
1.. Man' professions ha$e adopted a series of ethical standards to pro$ide guidance for their
memberships. &he !nstitute of Management Accountants 8!MA9" for e-ample" has published
standards that focus on competence" confidentialit'" integrit'" and credibilit'. !n light of these
standards" consider the three cases that follow.
Ca"e AH)eston Corporation has e-perienced serious financial difficulties in recent 'ears.
Eohn Boung" the compan'Gs chief financial officer" has 5ust learned that a ma5or competitor
was li#el' to file for ban#ruptc'I howe$er" he failed to disclose this information at a board
meeting held later that da' when a plant closure decision was being discussed. &he board
e$aluated se$eral proposals during the session that focused on impro$ing )estonGs financial
position.
Ca"e #HFBK Compan' manufactures fertilizer from $arious raw materials" including a raw
material #now as =elstar. /aul Cell'" the firmGs purchasing manager" purposel' ac;uired a
lower grade of =elstar than normal because of a $er' attracti$e price. &he lower-grade
product resulted in increased usage during the manufacturing process but had no effect on the
fertilizerGs o$erall ;ualit'. An end-of-period report showed that FBK profited from Cell'Gs
actions" with the o$erall sa$ings in purchase price more than offsetting the cost of added
consumption.
Ca"e CHCentral istributing has a participati$e budgeting process" allowing emplo'ees to
ha$e a sa' in pro5ected sales targets for the upcoming period. &hese targets are reflected in a
series of performance reports that compare actual sales achie$ed against targeted amounts.
Dillar' Ba-ter submitted $er' low sales targets because" as she confided in a colleague" "!
alwa's want to loo# good in terms of meeting targets" e$en if anticipated sales and closures
donGt materialize."
+e;uired(
%$aluate the three cases and determine the ethical issues" if an'" that are in$ol$ed. Cite the
!MAGs standards if appropriate.
)*( : &'pe( 3
Answer(
Ca"e A$ Boung had an obligation to inform the other board members about the li#el' ban#ruptc'"
particularl' in light of the compan'Gs financial situation and the topics under discussion at the
meeting. &he information could ha$e affected the boardGs thin#ing on se$eral matters. &wo of
the !MA standards are rele$ant here( competence and credibilit'. Competence notes" in part" that
members pro$ide decision-support information that is accurate and timel'. Additionall'"
credibilit' holds that members disclose all rele$ant information that could influence a userGs
understanding of an anal'sis. BoungGs silence $iolates both of these ethical standards.
Chapter 1 15
Ca"e #$ Cell' did not $iolate an' ethical standards. &he ac;uisition of sub-par material was a
sound business decision" particularl' since FBK prospered financiall' and ;ualit' of the end
product did not suffer.
Ca"e C$ Ba-ter engaged in a somewhat common practice #nown as padding the budgetI
ne$ertheless" one can conclude that such a practice is inconsistent with the ethical standards of
credibilit' and competence. Ba-ter is not pro$iding full #nowledge of the sales situation b'
setting targets that are purposel' low" thus possibl' misleading managers who attempt to anal'ze
her performance. Additionall'" competence is in$ol$ed because the information pro$ided in
setting the sales targets is inaccurate.
D%CU%%#& $UE%T#&%
Managerial Accounting vs, )inancial Accounting
10. Briefl' distinguish between managerial accounting and financial accounting. Be sure to comment
on the general focus" users" and regulation related to the two fields.
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Answer(
Managerial accounting is concerned with pro$iding information to personnel within an
organization so that the' can plan" ma#e decisions" e$aluate performance" and control operations.
&here are no rules and regulations associated with this field since the information is intended
solel' for use within the firm.
=inancial accounting" in contrast" focuses on financial statements and other financial reports.
&his area deals with reporting to groups outside of an organization 8e.g." stoc#holders" lenders"
go$ernment agencies9 so that some assessment of profitabilit' and o$erall financial health can be
made. ?i$en the large number of firms in our econom' and the $ar'ing le$el of user
sophistication" the field is hea$il' regulated 8b' the =inancial Accounting @tandards Board and" to
a lesser degree" b' the @ecurities and %-change Commission9.
Cross-)unctional Teams an( Time-Base( Competition
11. Cross-functional teams and time-based competition are two themes of contemporar' management
accounting. Briefl' e-plain these two concepts.
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16 Hilton, Managerial Accounting, Seventh Edition
Answer(
Cross-functional teams in$ol$e bringing together indi$iduals from a $ariet' of different fields
8mar#eting" design" accounting" production" purchasing" human resources9 for an
"interdisciplinar' approach" to addressing management issues. @uch an approach $aries from
that used in the past when each of the indi$idual disciplines tended to stic# to their own turf.
Cross-functional teams add $alue to the organization b' meeting the firm and customer6s needs in
the most effecti$e manner possible.
&ime-based competition relates to "doing things faster" to gain a competiti$e edge. Bringing a
new product to mar#et faster than a ri$al firm" responding to customer concerns and problems
faster than the competition" and reducing production downtime are a few of its #e' elements.
The .alue Chain
12. &he $alue chain is a #e' component of contemporar' management accounting. efine the term
"$alue chain" and e-plain how it would relate to an airline.
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Answer(
&he $alue chain is a set of acti$ities that wor# together to create $alue for an organization. With
a manufacturer" for instance" acti$ities that range in scope from securing raw materials" to
production" to deli$er' of products will culminate in goods that boost a firm6s bottom-line
profitabilit'.
Acti$ities in a $alue chain for an airline would include reser$ations and tic#eting" maintenance"
baggage handling" mar#eting" customer ser$ice" fre;uent-fl'er programs" and" of course" flight
operations.
Chapter 1 17