Accounting Information and Managerial Decisions: Multiple Choice and Concept Questions - P, Study notes of Financial Accounting

Download Accounting Information and Managerial Decisions: Multiple Choice and Concept Questions - P and more Study notes Financial Accounting in PDF only on Docsity! Chapter 1 Accounting Information and Managerial Decisions Multiple Choice 1. (LO 1 – Users of accounting information) Answer: A 2. (LO 1 – Users of accounting information) Answer: D 3. (LO 1 – Knowledge management) Answer: C 4. (LO 2 – Data and knowledge warehouses) Answer: B 5. (LO 2 – ERP systems) Answer: B 6. (LO 2 – EDI) Answer: A 7. (LO 3 – Managerial vs. financial accounting) Answer: B 8. (LO 4 – Operational planning) Answer: C 9. (LO 5 – Functional responsibilities) Answer: A 10. (LO 6 – Role of managerial accountant) Answer: D 1 - 1 Solutions Manual 11. (LO 7 – Steps in decision making) Answer: A 12. (LO 8 – Relevant costs) Answer: B 13. (LO 8 – Sunk costs) Answer: D 14. (LO 9 – Risk in decision making) Answer: C 15. (LO 11 – Ethics) Answer: B 16. (LO 10 – Enterprise Risk Management) Answer: D 17. (LO 10 – Enterprise Risk Management) Answer B Concept Questions 18. (LO 1 – Data, information, and knowledge) Data includes items such as sales invoices, purchase orders, customer lists, and inventory records. Data are facts and figures which have not been organized and transformed into information. Information is data that has been sorted, organized, processed, and summarized. Knowledge is information that is shared and exploited so that it adds value to an organization. 19. (LO 2 – ERP and knowledge management) ERP systems provide more effective ways for organizations to gather information and disseminate knowledge to their employees. They facilitate the collection, organization, reporting, and distribution of data throughout an organization and help managers transform the data into usable knowledge for better decision making. 1 - 2 Chapter 1: Accounting Information and Managerial Decisions Exercises 29. (LO 1 – Users of accounting information) Note to instructors: Student responses will vary to this question. You may find that students will have difficulty identifying the types of information needed by these individuals and organizations because they lack experience with accounting. You may find that this question is useful as an in-class discussion exercise. Below are a few of the potential answers that students may provide. a. Financial statements, cash flow projections, sales projections, and budgets. b. Sales projections, financial statements, payroll analysis and related data, production budget, productivity data, and employment contracts for management. c. Production budget, labor budget, purchases budget, sales projection, and variance analysis (i.e., actual vs. budgeted performance). d. Financial statements, management discussion and analysis, and filings made with the Securities and Exchange Commission by public companies. e. Production budget, sales projection, product cost reports, inventory reports, and shipping schedules. f. Financial statements, budgets, projections and analyses (e.g., sales, cash flow, market share, and inventory), variance analysis, and filings made with the Securities and Exchange Commission by public companies. 30. (LO 1 and 2 – ERP, knowledge management and EDI) a. data warehouse b. sensitivity analysis c. data mining d. information e. sunk costs f. opportunity costs g. enterprise resource planning system h. electronic data interchange i. knowledge warehouse j. knowledge k. operational planning 1 - 5 Solutions Manual 31. (LO 2 – Knowledge management) Effective knowledge management allows company employees to share and exploit accumulated information such that the information adds value to the company. By effectively leveraging accumulated information in this way the company competitive position is enhanced. Student responses to the second part of this question will vary. You may wish to use this question for classroom discussion. 32. (LO 3 – Managerial vs. financial accounting) Managerial accounting Financial accounting  Timeliness is critical  Must follow GAAP  Information is often less precise  Focused on past performance  Future orientation  Reports results by segments  Emphasizes reporting on the whole company  Highly customizable  Information is often “old” 33. (LO 5 – Types of business managers) a. finance managers b. marketing managers c. human resource managers d. operations/production managers 34. (LO 7, 8, and 9 – Decision-making, relevant factors, opportunity costs, and risk) A. In this situation, the problem definition is straightforward. Should the student accept the part-time job? B. Specific objectives will vary depending on the student and may include maximizing the money earned during the semester, getting all A’s in your coursework, having additional free time, getting some work experience, etc. 1 - 6 Chapter 1: Accounting Information and Managerial Decisions C. Specific options depend on the objectives outlined in B. For example, if having more free time is a primary objective, accepting the job is probably not an option. If earning more money is the primary objective, your options include continuing to receive your $1,000 per month scholarship, accepting the part-time job earning approximately $1,200 per month and losing the scholarship, or perhaps finding an on-campus job that allows you to keep your scholarship. Among the relevant quantitative factors is the difference in earnings. (Students should note that tax consequences may be important in this decision. It is likely that the scholarship is not taxable while the earnings from the part-time job may be). Other relevant variables include the time commitment required by your studies and work schedule. D. A variety of relevant opportunity costs should be considered in this problem. For example, if you don’t accept the part-time job, you forego the benefit of the work experience that may lead to a later full-time job. In addition, the choice of working off-campus results in the loss of the scholarship, which can also be viewed as an opportunity cost. Finally, working part-time results in the loss of free time, another opportunity cost. E. Almost all decisions entail some uncertainty or risk. For example, if the job is accepted, it may not lead to a full-time job. Your studies may require more (or less) than 30 hours of study. The best way to adjust for risk in this situation is likely to be through sensitivity analysis. In another words, how sensitive is your decision to changes in assumptions? For example, if your classes end up taking 40 hours of study instead of 30, would your decision be affected? What if the part-time job is not expected to lead to a full-time job? Would your decision be affected? 35. (LO 9 and 11 – Risk and ethics) Note to instructors: This question is loosely based on the facts surrounding the Ford Explorer/Firestone tire rollover problems in 2000. As part of the discussion, you may want to discuss the role of risk in analyzing and making decisions. A. Regardless of “fault”, Walter Meyer, Inc. should immediately advise suppliers and consumers of the potential danger and try to either fix the problem or design a safeguard for the mower to protect users. B. Ideally, Walter Meyer, Inc. should work hand in hand with the lawn mower manufacturer in order to pinpoint the problem and develop a solution. C. Both Walter Meyer, Inc. and the lawn mower manufacturer have an ethical responsibility. Walter Meyer should alert the lawn mower manufacturer in an attempt to pinpoint the cause of the problem. Both companies should contact potential consumers and immediately offer to replace the batteries. 1 - 7