Note: Chapter 1 content does not have Hints.
,1–1 Give four examples of firms you believe would be significant users of
cost management information and explain why.
1-1 Firms Using Cost Management. Here are some examples; there
are many possible answers.
1. Wal-Mart: to keep costs low by streamlining restocking and sales
2. Dell: to keep costs low by improving manufacturing performance
and by using target costing and other management techniques
3. Citicorp: to keep costs low by using activity analysis to identify
key operations and to find those that add little or no value
4. A local school district or public agency: to keep costs low in
order to provide the best possible service given available funds
5. Procter & Gamble: to assess the profitability of its different
products
6. Any other large, diversified manufacturer, like Procter & Gamble:
which needs to be able to analyze the relative profitability of its
different products, using cost management
7. A small machine shop: which needs cost management to
determine whether it should repair or replace a machine
8. A dance studio: to analyze and choose between different
compensation plans for its teachers; and to determine whether it
should open a new studio
1–2 Give three examples of firms you believe would not be significant users
of cost management information and explain why.
1-2 Firms not expected to be significant users of cost management
information:
1. Microsoft: here the focus is on forming strategic alliances,
innovation and competition; cost management is more important for
other firms in the information technology business, such as Hewlett
Packard and IBM that compete in part on innovation but also on price
2. Versace: a high fashion firm competes on innovation and product
leadership; the development and communication of attractive new
ideas is the key to competitive success rather than cost management
3. Other firms in the fashion industry, such as Chanel, Coach , and
Armani: for reasons similar to Versace
4. Major league sports: dependent primarily on the development of fan
support, good coaching and player acquisition
1–3 What does the term cost management mean? Who in the typical firm or
organization is responsible for cost management?
l.
,1–3 What does the term cost management mean? Who in the typical firm or
organization is responsible for cost management?
1-3 Cost management information is a broad concept. It is the information
the manager needs to effectively manage the firm or not-for-profit
organization -- both financial information about costs and revenues
and relevant non-financial information about productivity, quality, and
other key success factors for the firm. Typically, cost management is
the responsibility of the Chief Financial Officer (CFO) who often
delegates much of this responsibility to the Controller.
1–4 Name three professional cost management organizations and explain
their roles and objectives.
1-4 In the private sector, the Financial Accounting Standards
Board, an independent organization, and the American Institute
of Certified Public Accountants (AICPA) supply guidance
regarding financial reporting practices. The Sarbanes-Okley Act
of 2002 also created the Public Company Accounting Oversight
Board which reports to the SEC to oversee auditing standards
and practices. The AICPA also provides educational
opportunities. In the public sector, The Cost Accounting
Standards Board (CASB) sets cost accounting standards for
those doing business with the federal government, especially
defense contractors. The Institute of Management Accountants
(IMA) is the principal organization devoted primarily to
management accountants in the United States. The IMA has
magazines, newsletters, research reports, management
accounting practice reports, professional development
seminars, and monthly technical meetings that serve the broad
purpose of providing continuing educational opportunities for
management accountants. In Canada, the Society of
Management Accountants provides a similar role. Similar
organizations are present in most other countries around the
world. The Financial Executive International (FEI) organization
provides services much like the IMA for financial managers,
including controllers and treasurers. Because of the nature of
its membership, the FEI tends to focus on management and
operational control issues, and less on the product costing,
planning, and decision-making functions.
1–5 What type of professional certification is most relevant for the
management accountant and why?
.
, 1–5 What type of professional certification is most relevant for the
management accountant and why?
1-5 The Certificate in Management Accounting (CMA) is the most
relevant certification program for management accountants
since it focuses on the types of skills that are most in demand
for management accountants: economics, finance, and
management, financial accounting and reporting, management
analysis and reporting, and decision analysis and information
systems. Other relevant certifications include the Chartered
Global Management Accountant (CGMA), the Certificate in
Financial Management (CFM) and the Certified Public
Accountant (CPA).
1–6 List the four functions of management. Explain what type of cost
management information is appropriate for each.
1-6 The four functions of management are:
1. Strategic Management -- information is needed by
management to make sound strategic decisions regarding
choice of products, manufacturing methods, marketing
techniques and channels, and other long term issues.
2. Planning and Decision Making -- information is needed to
support recurring decisions regarding replacement of
equipment, managing cash flow, budgeting raw materials
purchases, scheduling production, and pricing.
3. Management and Operational Control -- information is
needed to provide a fair and effective basis for identifying
inefficient operations, and to reward and support the most
effective managers.
4. Preparation of Financial Statements -- information is needed
to provide accurate accounting for inventory and other assets,
in compliance with reporting requirements, for the preparation
of financial reports and for use in the three other management
functions.
1–7 Which is the most important function of management? Explain why?
1-7 Strategic management is the most important management function
since it most directly relates to the overall success of the firm. In
strategic management, top managers determine how the firm is to
compete and what specific goals it must set and achieve to be
successful. The determination of these strategies and goals drives
all other activities in the firm.
,1–1 Give four examples of firms you believe would be significant users of
cost management information and explain why.
1-1 Firms Using Cost Management. Here are some examples; there
are many possible answers.
1. Wal-Mart: to keep costs low by streamlining restocking and sales
2. Dell: to keep costs low by improving manufacturing performance
and by using target costing and other management techniques
3. Citicorp: to keep costs low by using activity analysis to identify
key operations and to find those that add little or no value
4. A local school district or public agency: to keep costs low in
order to provide the best possible service given available funds
5. Procter & Gamble: to assess the profitability of its different
products
6. Any other large, diversified manufacturer, like Procter & Gamble:
which needs to be able to analyze the relative profitability of its
different products, using cost management
7. A small machine shop: which needs cost management to
determine whether it should repair or replace a machine
8. A dance studio: to analyze and choose between different
compensation plans for its teachers; and to determine whether it
should open a new studio
1–2 Give three examples of firms you believe would not be significant users
of cost management information and explain why.
1-2 Firms not expected to be significant users of cost management
information:
1. Microsoft: here the focus is on forming strategic alliances,
innovation and competition; cost management is more important for
other firms in the information technology business, such as Hewlett
Packard and IBM that compete in part on innovation but also on price
2. Versace: a high fashion firm competes on innovation and product
leadership; the development and communication of attractive new
ideas is the key to competitive success rather than cost management
3. Other firms in the fashion industry, such as Chanel, Coach , and
Armani: for reasons similar to Versace
4. Major league sports: dependent primarily on the development of fan
support, good coaching and player acquisition
1–3 What does the term cost management mean? Who in the typical firm or
organization is responsible for cost management?
l.
,1–3 What does the term cost management mean? Who in the typical firm or
organization is responsible for cost management?
1-3 Cost management information is a broad concept. It is the information
the manager needs to effectively manage the firm or not-for-profit
organization -- both financial information about costs and revenues
and relevant non-financial information about productivity, quality, and
other key success factors for the firm. Typically, cost management is
the responsibility of the Chief Financial Officer (CFO) who often
delegates much of this responsibility to the Controller.
1–4 Name three professional cost management organizations and explain
their roles and objectives.
1-4 In the private sector, the Financial Accounting Standards
Board, an independent organization, and the American Institute
of Certified Public Accountants (AICPA) supply guidance
regarding financial reporting practices. The Sarbanes-Okley Act
of 2002 also created the Public Company Accounting Oversight
Board which reports to the SEC to oversee auditing standards
and practices. The AICPA also provides educational
opportunities. In the public sector, The Cost Accounting
Standards Board (CASB) sets cost accounting standards for
those doing business with the federal government, especially
defense contractors. The Institute of Management Accountants
(IMA) is the principal organization devoted primarily to
management accountants in the United States. The IMA has
magazines, newsletters, research reports, management
accounting practice reports, professional development
seminars, and monthly technical meetings that serve the broad
purpose of providing continuing educational opportunities for
management accountants. In Canada, the Society of
Management Accountants provides a similar role. Similar
organizations are present in most other countries around the
world. The Financial Executive International (FEI) organization
provides services much like the IMA for financial managers,
including controllers and treasurers. Because of the nature of
its membership, the FEI tends to focus on management and
operational control issues, and less on the product costing,
planning, and decision-making functions.
1–5 What type of professional certification is most relevant for the
management accountant and why?
.
, 1–5 What type of professional certification is most relevant for the
management accountant and why?
1-5 The Certificate in Management Accounting (CMA) is the most
relevant certification program for management accountants
since it focuses on the types of skills that are most in demand
for management accountants: economics, finance, and
management, financial accounting and reporting, management
analysis and reporting, and decision analysis and information
systems. Other relevant certifications include the Chartered
Global Management Accountant (CGMA), the Certificate in
Financial Management (CFM) and the Certified Public
Accountant (CPA).
1–6 List the four functions of management. Explain what type of cost
management information is appropriate for each.
1-6 The four functions of management are:
1. Strategic Management -- information is needed by
management to make sound strategic decisions regarding
choice of products, manufacturing methods, marketing
techniques and channels, and other long term issues.
2. Planning and Decision Making -- information is needed to
support recurring decisions regarding replacement of
equipment, managing cash flow, budgeting raw materials
purchases, scheduling production, and pricing.
3. Management and Operational Control -- information is
needed to provide a fair and effective basis for identifying
inefficient operations, and to reward and support the most
effective managers.
4. Preparation of Financial Statements -- information is needed
to provide accurate accounting for inventory and other assets,
in compliance with reporting requirements, for the preparation
of financial reports and for use in the three other management
functions.
1–7 Which is the most important function of management? Explain why?
1-7 Strategic management is the most important management function
since it most directly relates to the overall success of the firm. In
strategic management, top managers determine how the firm is to
compete and what specific goals it must set and achieve to be
successful. The determination of these strategies and goals drives
all other activities in the firm.
