SolutionnManualnfornManagerialnAccountingnCreatingnValueninnanDynamicnBusinessnEnvironment,n12thnEdition
SOLUTION MANUAL FOR MANAGERIAL ACCOUNTING: CREATING VALUE I
n n n n n n n
N A DYNAMIC BUSINESS ENVIRONMENT, 12TH EDITION, RONALD HILTON,
n n n n n n n n n
DAVID
,SolutionnManualnfornManagerialnAccountingnCreatingnValueninnanDynamicnBusinessnEnvironment,n12thnEdition
CHAPTER 1 n
The Crucial Role of Managerial Accounting in a Dynamic
n n n n n n n n
Business Environment
n n
FOCUS ON ETHICS (Located before the Chapter Summary in the text.)
n n n n n n n n n n
The focus-on- n
ethics inset for Chapter 1 is the IMA Statement of Ethical Professional Practice. Instructors ca
n n n n n n n n n n n n n n
n use this list of ethical principles and standards to lead a class discussion. The discussion can a
n n n n n n n n n n n n n n n n n
lso range to consideration of how these standards may have been violated by accountants and
n n n n n n n n n n n n n n n
managers involved in the various ethical scandals uncovered over the past several years. It is al
n n n n n n n n n n n n n n n
so useful to discuss the pros and cons of the procedures that IMA suggests for its members when
n n n n n n n n n n n n n n n n n
nthey believe they know about ethical lapses in their organizations.
n n n n n n n n n
ANSWERS TO REVIEW QUESTIONS n n n
1-1 The explosion in e- n n n
commerce will affect managers in significant ways. One effect will be a drastic reduction
n n n n n n n n n n n n n n
in paper work. Millions of transactions between businesses are now being conducted ele
n n n n n n n n n n n n
ctronically with no hard- n n n
copy documentation. Along with this method of communicating for business transactio
n n n n n n n n n n
ns comes the very significant issue of information security. Businesses need to find ways
n n n n n n n n n n n n n n
to protect confidential information in their own computers, in cloud computing data cen
n n n n n n n n n n n n
ters, and while moving across the internet, while at the same time sharing the informatio
n n n n n n n n n n n n n n
n necessary to complete transactions. Another effect of e-
n n n n n n n n
commerce is the dramatically increased speed with which business transactions can be c
n n n n n n n n n n n n
onducted. In addition, there will be dramatic changes in the way managerial accounting
n n n n n n n n n n n n
nprocedures are carried out, one example being cloud-
n n n n n n n
based budgeting, which is the enterprise-
n n n n n
wide and electronic completion of a company’s budgeting process using cloud-
n n n n n n n n n n
based software and data storage.
n n n n
,SolutionnManualnfornManagerialnAccountingnCreatingnValueninnanDynamicnBusinessnEnvironment,n12thnEdition
1-2 Plausible goals for the organizations listed are as follows:
n n n n n n n n
(a) Amazon.com: (1) To achieve and maintain profitability, and (2) to grow on-
n n n n n n n n n n n
line sales of their many products. Amazon is also famous (infamous) for wanting to h
n n n n n n n n n n n n n n
ave every product in the world on its site.
n n n n n n n n
(b) American Red Cross: (1) To raise funds from the general public sufficient to have res
n n n n n n n n n n n n n n
ources available to meet any disaster that may occur, and (2) to provide assistance to p
n n n n n n n n n n n n n n n
eople who are victims of a disaster anywhere in the world on short notice.
n n n n n n n n n n n n n
(c) General Motors: (1) To earn income sufficient to provide a good return on the invest
n n n n n n n n n n n n n n
ment of the company's stockholders, and (2) to provide the highest-
n n n n n n n n n n
quality product possible. n n
(d) Wal-
Mart: (1) To penetrate the retail market in virtually every location in the United State
n n n n n n n n n n n n n n
s, and (2) to grow over time in terms of number of retail locations, total assets, and ea
n n n n n n n n n n n n n n n n n
rnings. Also, to be competitive with Amazon in the e-retail space.
n n n n n n n n n n
(e) City of Seattle: (1) To maintain an urban environment as free of pollution as possible,
n n n n n n n n n n n n n n n
and (2) to provide public safety, police, and fire protection to the city's citizens.
n n n n n n n n n n n n n
(f) Hertz: (1) To be a recognizable household name associated with rental car services, a
n n n n n n n n n n n n n
nd (2) to provide reliable and economical transportation services to the company's cu
n n n n n n n n n n n n
stomers.
1-3 The four basic management activities are listed and defined as follows:
n n n n n n n n n n
(a) Decision making: Choosing among the available alternatives.
n n n n n n
(b) Planning: Developing a detailed financial and operational description of anticipated
n n n n n n n n n n
operations.
(c) Directing operations: Running the organization on a day-to-day basis.
n n n n n n n n
(d) Controlling: Ensuring that the organization operates in the intended manner and ac
n n n n n n n n n n n
hieves its goals. n n
, SolutionnManualnfornManagerialnAccountingnCreatingnValueninnanDynamicnBusinessnEnvironment,n12thnEdition
1-4 Examples of the four primary management activities in the context of a national fast-
n n n n n n n n n n n n n
food chain are as follows:
n n n n n
(a) Decision making: Choosing among several possible locations for a new fast-
n n n n n n n n n n
food outlet. n
(b) Planning: Developing a cost budget for the food and paper products to be used during t
n n n n n n n n n n n n n n n
he next quarter in a particular fast-food restaurant.
n n n n n n n
(c) Directing operations: Developing detailed schedules for personnel for the next month
n n n n n n n n n n n
to provide counter service in a particular fast-food restaurant.
n n n n n n n n
(d) Controlling: Comparing the actual cost of paper products used during a particular
n n n n n n n n n n n n
month in a restaurant with the anticipated cost of paper products for that same time
n n n n n n n n n n n n n n n
period.
1-5 Examples of the objectives of managerial-
n n n n n
accounting activity in an airline company are described below:
n n n n n n n n
(a) Providing information for decision making and planning, and proactively participati
n n n n n n n n n
ng as part of the management team in the decision making and planning processes:
n n n n n n n n n n n n n n
Managerial accountants provide estimates of the cost of adding a flight on the route fr
n n n n n n n n n n n n n n
om Dallas to Miami and actively participate in making the decision about adding the f
n n n n n n n n n n n n n n
light.
(b) Assisting managers in directing and controlling operations: Managerial accountants
n n n n n n n n n
provide information about the actual costs of flying the company’s Asian routes duri
n n n n n n n n n n n n
ng a particular month.
n n n
(c) Motivating managers and other employees toward the organization's goals: A budget i
n n n n n n n n n n n
s provided for the cost of handling baggage at Chicago O'Hare Airport. The budget is
n n n n n n n n n n n n n n
ngiven to the airline's baggage handling manager, who is expected to strive to achieve
n n n n n n n n n n n n n n
the budget. n
(d) Measuring the performance of activities, subunits, managers, and other employees w
n n n n n n n n n n
ithin the organization: Quarterly income statements are prepared for each of the airl
n n n n n n n n n n n n
ine's major geographical sectors, and these income reports are used to evaluate the e
n n n n n n n n n n n n n
arnings performance of each sector during the relevant time period.
n n n n n n n n n
(e) Assessing the organization's competitive position and working with other managers t
n n n n n n n n n n
o ensure the organization's long-
n n n n
run competitiveness in its industry: Information about industry-
n n n n n n n
wide performance standards is obtained and compared with the airline's own perfor
n n n n n n n n n n n
mance. For example, how does the airline stack up against its competitors in ticket pr
n n n n n n n n n n n n n n
ices, on-time departures, mishandled baggage, customer complaints, and safety?
n n n n n n n n
SOLUTION MANUAL FOR MANAGERIAL ACCOUNTING: CREATING VALUE I
n n n n n n n
N A DYNAMIC BUSINESS ENVIRONMENT, 12TH EDITION, RONALD HILTON,
n n n n n n n n n
DAVID
,SolutionnManualnfornManagerialnAccountingnCreatingnValueninnanDynamicnBusinessnEnvironment,n12thnEdition
CHAPTER 1 n
The Crucial Role of Managerial Accounting in a Dynamic
n n n n n n n n
Business Environment
n n
FOCUS ON ETHICS (Located before the Chapter Summary in the text.)
n n n n n n n n n n
The focus-on- n
ethics inset for Chapter 1 is the IMA Statement of Ethical Professional Practice. Instructors ca
n n n n n n n n n n n n n n
n use this list of ethical principles and standards to lead a class discussion. The discussion can a
n n n n n n n n n n n n n n n n n
lso range to consideration of how these standards may have been violated by accountants and
n n n n n n n n n n n n n n n
managers involved in the various ethical scandals uncovered over the past several years. It is al
n n n n n n n n n n n n n n n
so useful to discuss the pros and cons of the procedures that IMA suggests for its members when
n n n n n n n n n n n n n n n n n
nthey believe they know about ethical lapses in their organizations.
n n n n n n n n n
ANSWERS TO REVIEW QUESTIONS n n n
1-1 The explosion in e- n n n
commerce will affect managers in significant ways. One effect will be a drastic reduction
n n n n n n n n n n n n n n
in paper work. Millions of transactions between businesses are now being conducted ele
n n n n n n n n n n n n
ctronically with no hard- n n n
copy documentation. Along with this method of communicating for business transactio
n n n n n n n n n n
ns comes the very significant issue of information security. Businesses need to find ways
n n n n n n n n n n n n n n
to protect confidential information in their own computers, in cloud computing data cen
n n n n n n n n n n n n
ters, and while moving across the internet, while at the same time sharing the informatio
n n n n n n n n n n n n n n
n necessary to complete transactions. Another effect of e-
n n n n n n n n
commerce is the dramatically increased speed with which business transactions can be c
n n n n n n n n n n n n
onducted. In addition, there will be dramatic changes in the way managerial accounting
n n n n n n n n n n n n
nprocedures are carried out, one example being cloud-
n n n n n n n
based budgeting, which is the enterprise-
n n n n n
wide and electronic completion of a company’s budgeting process using cloud-
n n n n n n n n n n
based software and data storage.
n n n n
,SolutionnManualnfornManagerialnAccountingnCreatingnValueninnanDynamicnBusinessnEnvironment,n12thnEdition
1-2 Plausible goals for the organizations listed are as follows:
n n n n n n n n
(a) Amazon.com: (1) To achieve and maintain profitability, and (2) to grow on-
n n n n n n n n n n n
line sales of their many products. Amazon is also famous (infamous) for wanting to h
n n n n n n n n n n n n n n
ave every product in the world on its site.
n n n n n n n n
(b) American Red Cross: (1) To raise funds from the general public sufficient to have res
n n n n n n n n n n n n n n
ources available to meet any disaster that may occur, and (2) to provide assistance to p
n n n n n n n n n n n n n n n
eople who are victims of a disaster anywhere in the world on short notice.
n n n n n n n n n n n n n
(c) General Motors: (1) To earn income sufficient to provide a good return on the invest
n n n n n n n n n n n n n n
ment of the company's stockholders, and (2) to provide the highest-
n n n n n n n n n n
quality product possible. n n
(d) Wal-
Mart: (1) To penetrate the retail market in virtually every location in the United State
n n n n n n n n n n n n n n
s, and (2) to grow over time in terms of number of retail locations, total assets, and ea
n n n n n n n n n n n n n n n n n
rnings. Also, to be competitive with Amazon in the e-retail space.
n n n n n n n n n n
(e) City of Seattle: (1) To maintain an urban environment as free of pollution as possible,
n n n n n n n n n n n n n n n
and (2) to provide public safety, police, and fire protection to the city's citizens.
n n n n n n n n n n n n n
(f) Hertz: (1) To be a recognizable household name associated with rental car services, a
n n n n n n n n n n n n n
nd (2) to provide reliable and economical transportation services to the company's cu
n n n n n n n n n n n n
stomers.
1-3 The four basic management activities are listed and defined as follows:
n n n n n n n n n n
(a) Decision making: Choosing among the available alternatives.
n n n n n n
(b) Planning: Developing a detailed financial and operational description of anticipated
n n n n n n n n n n
operations.
(c) Directing operations: Running the organization on a day-to-day basis.
n n n n n n n n
(d) Controlling: Ensuring that the organization operates in the intended manner and ac
n n n n n n n n n n n
hieves its goals. n n
, SolutionnManualnfornManagerialnAccountingnCreatingnValueninnanDynamicnBusinessnEnvironment,n12thnEdition
1-4 Examples of the four primary management activities in the context of a national fast-
n n n n n n n n n n n n n
food chain are as follows:
n n n n n
(a) Decision making: Choosing among several possible locations for a new fast-
n n n n n n n n n n
food outlet. n
(b) Planning: Developing a cost budget for the food and paper products to be used during t
n n n n n n n n n n n n n n n
he next quarter in a particular fast-food restaurant.
n n n n n n n
(c) Directing operations: Developing detailed schedules for personnel for the next month
n n n n n n n n n n n
to provide counter service in a particular fast-food restaurant.
n n n n n n n n
(d) Controlling: Comparing the actual cost of paper products used during a particular
n n n n n n n n n n n n
month in a restaurant with the anticipated cost of paper products for that same time
n n n n n n n n n n n n n n n
period.
1-5 Examples of the objectives of managerial-
n n n n n
accounting activity in an airline company are described below:
n n n n n n n n
(a) Providing information for decision making and planning, and proactively participati
n n n n n n n n n
ng as part of the management team in the decision making and planning processes:
n n n n n n n n n n n n n n
Managerial accountants provide estimates of the cost of adding a flight on the route fr
n n n n n n n n n n n n n n
om Dallas to Miami and actively participate in making the decision about adding the f
n n n n n n n n n n n n n n
light.
(b) Assisting managers in directing and controlling operations: Managerial accountants
n n n n n n n n n
provide information about the actual costs of flying the company’s Asian routes duri
n n n n n n n n n n n n
ng a particular month.
n n n
(c) Motivating managers and other employees toward the organization's goals: A budget i
n n n n n n n n n n n
s provided for the cost of handling baggage at Chicago O'Hare Airport. The budget is
n n n n n n n n n n n n n n
ngiven to the airline's baggage handling manager, who is expected to strive to achieve
n n n n n n n n n n n n n n
the budget. n
(d) Measuring the performance of activities, subunits, managers, and other employees w
n n n n n n n n n n
ithin the organization: Quarterly income statements are prepared for each of the airl
n n n n n n n n n n n n
ine's major geographical sectors, and these income reports are used to evaluate the e
n n n n n n n n n n n n n
arnings performance of each sector during the relevant time period.
n n n n n n n n n
(e) Assessing the organization's competitive position and working with other managers t
n n n n n n n n n n
o ensure the organization's long-
n n n n
run competitiveness in its industry: Information about industry-
n n n n n n n
wide performance standards is obtained and compared with the airline's own perfor
n n n n n n n n n n n
mance. For example, how does the airline stack up against its competitors in ticket pr
n n n n n n n n n n n n n n
ices, on-time departures, mishandled baggage, customer complaints, and safety?
n n n n n n n n
