Managerial Accounting Ch. 1 HW

For each of the following users of financial accounting information and managerial accounting information, specify whether the user would primarily use financial accounting information or managerial accounting information or both

1. SEC examiner
2. Bookkeeping Department
3. Division controller
4. External auditor (public accounting firm)
5. Loan officer at the company’s bank
6. State tax agency auditor
7. Board of director
8. Manager of the Service Department
9. Wall Street analysis
10. Internal auditor
11. Potential investors
12. Current stockholders
13. Reporter from the Wall Street Journal
14. Regional division managers

1. SEC examiner – *Financial accounting Information*
2. Bookkeeping Department – *Financial accounting Information*
3. Division controller – *Both financial and managerial accounting information*
4. External auditor (public accounting firm) – *Financial accounting Information*
5. Loan officer at the company’s bank – *Financial accounting Information*
6. State tax agency auditor – *Financial accounting Information*
7. Board of director – *Both financial and managerial accounting information*
8. Manager of the Service Department – *Managerial accounting information*
9. Wall Street Analyst – *Financial accounting Information*
10. Internal auditor – *Both financial and managerial accounting information*
11. Potential investors – *Financial accounting Information*
12. Current stockholders – *Financial accounting Information*
13. Reporter from the Wall Street Journal – *Financial accounting Information*
14. Regional division managers – *Managerial accounting Information*
According to the *IMA’s Statement of Ethical Professional Practice*, management accountants should follow four standards: competence, confidentiality, integrity, and credibility. Each of these standards contains specific responsibilities. Classify each of the following responsibilities according to the standard it addresses.

*Responsibility*
1. Maintain an appropriate level of professional expertise by continually developing knowledge and skills
2. Recognize and communicate professional limitations that would preclude responsible judgement or successful performance of an activity
3. Disclose all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analyses, or recommendations
4. Disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law.
5. Perform professional duties in accordance with relevant laws, regulations, and technical standards.
6. Abstain from engaging in or supporting any activities that might discredit the profession
7. Refrain from engaging in any conduct that would prejudice carrying out duties ethically
8. Provide decision support information and recommendations that are accurate, clear, concise, and timely.
9. Keep information confidential except then disclosure is authorized or legally required.
10. Communicate information fairly and objectively.
11. Refrain from using confidential information for unethical or illegal advantage.
12. Inform all relevant parties regarding the appropriate use of confidential information. Monitor subordinates’ activities to ensure compliance
13. Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid apparent conflicts of interest. Advise all parties of any potential conflicts.

*Responsibility/Standard*
1. Maintain an appropriate level of professional expertise by continually developing knowledge and skills *-Competence*
2. Recognize and communicate professional limitations that would preclude responsible judgement or successful performance of an activity *-Competence*
3. Disclose all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analyses, or recommendations. *-Credibility*
4. Disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law. *-Credibility*
5. Perform professional duties in accordance with relevant laws, regulations, and technical standards. *Competence*
6. Abstain from engaging in or supporting any activity that might discredit the profession. – *Integrity*
7. Refrain from engaging in any conduct that would prejudice carrying out duties ethically. – *Integrity*
8. Provide decision support information and recommendations that are accurate, clear, concise, and timely. – *-Competence*
9. Keep information confidential except when disclosure is authorized or legally required. *-Confidentiality*
10. Communicate information fairly and objectively. *-Credibility*
11. Refrain from using confidential information for unethical or illegal advantage. *-Confidentiality*
12. Inform all relevant parties regarding the appropriate use of confidential information. Monitor subordinate’s activities to ensure compliance. *-Confidentiality*
13. Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid apparent conflicts of interest. Advise all parties of any p-otential conflicts. *-Integrity*
Ditoro manufactures snowboards, Willy Williams, the CEO, is trying to decide whether to adopt a lean thinking model. He expects that adopting lean production would save $98,000 in warehousing expenses and $47,000 in spoilage costs. Adopting lean production will require several one-time up-front expenditures: $45,100 for an employee training program, $38,000 to streamline the plant’s production process, and $8,750 to identify suppliers that will guarantee zero defects and on-time delivery.

*Requirements*
*1.*What are the total costs of adopting lean production?
*2.* What are the total benefits of adopting lean production?
*3.* Should Ditoro adopt lean production? Why or why not?

*Requirement 1.* What are the total costs of adopting lean production?
The total costs of adopting lean production are *$91850*
($45,100+$38,000+$8,750)=$91,850

*Requirement 2.* What are the total benefits of adopting lean production?
The total benefits of adopting lean production are *$145000.*
($98,000+$47,0000)=$145,000

*Requirement 3.* Should Ditoro adopt lean poduction? Why or Why not?
Ditoro *should* adopt lean production because the expected benefits *are greater than* the costs

Bryan Haas has his own electronics retail chain, TechnoGeek. His stores sell computer parts, audio visual equipment, consumer electronics, and related items. Custom
computer building and electronics repair are also offered. In addition, TechnoGeek has a website to sell its merchandise. The store has a staff of 90 people working in six departments: Sales, Customization, Repairs, Web Development, Accounting, and Human Resources. Each department has its own manager.

*Requirement1.* For each of the six departments, choose all appropriate decisions/actions for each of the three stages of management (planning, directing, and controlling).

Begin by choosing the appropriate decision/action for the Planning Stage of management.
*Planning*
*Sales* ->Increase sales.
*Repairs*-> Increase volume of repairs
*Customization* -> Increase number of custom systems built
*Web Development* -> Increase web traffic
*Accounting* -> Implement ERP system to monitor department activities and record finances.
*Human Resource* -> Decrease employee turnover.

Next, select the appropriate decisions/actions for the Directing stage of management.
*Directing*
*Sales*
-Examine sales reports
-Setting competitive prices.
*Repairs*
-Set competitive prices; generate reports showing time used for each type of repair.
-Streamline process to save time.
*Customization*
-Find out what customers want and need.
-Observe competitors for prices and customizations offered.
-Improve employee certification and offer higher-quality parts.
*Web Development*
-Improve design of website.
-Offer more products online.
-Increase marketing efforts.
-Make shopping easier and more intuitive
*Accounting*
-Find potential flaws in the system and fix before implementation.
-Train employees on new system.
*Human Resources*
-Give feedback to employees.
-Hire employees that are “a good fit” for the company.
-Raise employee morale’ set clear job descriptions.

Finally, select the appropriate decisions/activities for the Controlling stage of management.
*Controlling*
*Sales*
-Monitor sales numbers and prices from different products and locations over time.
-Investigate variances.
*Repairs*
-Track total numbers of repairs. See if more repairs are being made and if time is utilized efficiently.
*Customization*
-Examine number of computer systems built per type (multimedia, gaming, etc)
*Web Development*
-Monitor web traffic by having an online counting device.
-Look at sales numbers to see if people are just surfing or actually buying merchandise.
*Accounting*
-Double check entries to ensure system is working properly.
-Track employee work schedules to stay on time.
*Human Resources*
-Interview employees to determine potential problems with the workplace
-Monitor both involuntary and voluntary turnover.

*Requirement 2.* For each of the decisions/actions you chose in Part 1, identify what information is needed for that decision/action. Specify whether that information would be generated by the financial accounting system or the managerial accounting system at TechnoGeek.

Begin with the decisions at the Planning stage of management.
*Planning*
*Sales*
-Haas would need a sales budget for the entire company and each individual product at each location
*Repairs*
-Labor budgets used to determine if hiring more repair staff would be feasible
-Labor budgets used to determine the time taken to repair computers.
*Customization*
-Market analysis to determne which computers potential customers want.
-Budgets for types of computers offered, time needed per job.
*Web Development*
-A budget would be needded to set web traffic goals.
-Haas would need an expense budget to ensure money is spent efficiently
*Accounting*
-Haas would need time budgets as well as expense budgets
*Human Resources*
-Employee satisfaction surveys and feedback reports.

Next identify what information is needed for the decision/action at the Directing stage of management.
*Directing*
*Sales*
-Analyze sales reports to monitor type and amount of sales made.
-Prices would be analyzed using these reports and market anlysis of Haas’ competitors
*Repairs*
-Monitor time taken per repair for each member of repair staff.
-Employee training programs would be used.
*Customization*
-Analyze market analysis to determine market needs and proper pricing schemes.
-Research quality of available parts.
-Ensure customer satisfaction by hiring qualified staff.
*Web Development*
-Monitor department expenses and website visits using online counting program.
*Accounting*
-Train employees on new system to keep within time budget
*Human Resources*
-Active relationship between management and employees.
-Management would record needs and suggestions made by employees in feedback system.

Identify what information is needed for the decision/action at the Controlling stage of management.
*Controlling*
*Sales*
-Change prices if deemed appropriate.
-Investigate variances and make changes as needed.
-Compare budgets with actual results.
*Repairs*
-Compare budgets with actual results.
-Investigate variances and make changes as needed.
*Customizations*
-Compare budgets with actual results.
-Use customer feedback to improve custom builds.
-Make changes if needed.
*Web Development*
-Compare budgeted expenses with actual and compare expected web traffic with actual.
-Investigate variances and make changes as needed.
*Accounting*
-Investigate variances and make changes as needed.
-Compare budgets with actual results.
*Human Resources*
-Consider employee suggestions.
-Make changes if needed.

Specify whether the information above would be generated by the financial accounting system or the managerial accounting system at TechnoGeek.

The *managerial* accounting system will be used to gather, summarize and report data above.

Mid – West Gas wants to move its sales order system to the Internet. Under the proposed system, gas stations and other merchants will use a secure site to check the availability and current price of various products and place an order. Currently, customer service representatives take dealers’ order over the phone’ they record the information on a paper form, then manually enter it into the firm’s computer system.

*Cost Information*
CFO Maria Flores believes that dealers will not adopt the new internet system unless Mid-West Gas provides financial assistance to help them purchase or upgrade their computer systems. Flores estimates this one-time cost as $745,000. Mid-West Gas will also have to invest $155,000 in upgrading its own computer hardware. The cost of the software and the consulting fee for installing the system will be $230,000.

*Benefit Information*
The Web system will enable Mid-West Gas to eliminate 25 clerical positions. Flores estimates that the benefits of the new system’s lower labor costs will have saved the company $1,360,000.

*Requirement*
Use a cost-benefit analysis to recommend to Flores whether Mid-West Gas should proceed with the internet-based ordering system. Give your reasons, showing supporting calculations.

Expected benefits *$1,360,000*
Expected costs *$1,130,000*
Net Benefits (Costs) *$230,000*
*Expected Costs=($745,000+$155,000+230,000)=$1,130,000

Recommend to Flores whether Mid-West Gas should proceed with the internet-based ordering system.

Since the expected value of the benefits *are greater than* the total costs, Mid-West *should* proceed with the Internet-based system.

Star Gas wants to move its sales order system to the Internet. Under the proposed system, gas stations and other merchants will use a secure site to check the availability and current price of various products and place an order. Currently, customer service representatives take dealers’ orders over the phone; they record the information on a paper form, then manually enter it into the firm’s computer system.

*Cost Information*
CFO Maria Bardeen believes that dealers will not adopt the new internet system unless Star Gas provides financial assistance to help them purchase or upgade their computer systems. Bardeen estimates this one-time cost at $745,000. Star Gas will also have to invest $165,000 in upgrading its own computer hardware. The cost of the software and the consulting fee for installing the system will be $230,000.

*Benefit Information*
The Web system will enable Star Gas to eliminate 25 clerical positions. Bardeen estimates that the new system’s lower labor costs will have saved the company $1,335,000.

*Requirement1.* Compute the expected benefits of the Internet-based ordering system.

The expected benefits of the Internet-based ordering system are *$933,000.*

*Requirement 2.* Would you recommend that Star Gas accept the proposal?
Complete the cost-benefit analysis below to compute the expected (costs) of the project.

Expected benefits *$933,000*
Expected costs *$1,140,000*
Net Benefits (costs) *$(207,000)*

Expected Costs:($745,000+$165,000+$230,000)=$1,140,000

Because the *costs exceed the benefits*, a cost-benefit analysis *does not justify* proceeding with the Internet-based system.

*Requirement 3.* Before Bardeen makes a final decision, what other factors should she consider?
*-Electronic order processing should reduce human errors, and therefore decrease costs.*
*-Employee layoffs may hurt morale and efficiency, thus increasing costs.*
*The difficulty and cost of laying off employees may reduce the expected benefits.*
*-Providing dealers with current information could help Star Gas reduce its inventory levels.*