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