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Principles of Accounting, Volume 2: Managerial Accounting

Thought Provokers

Principles of Accounting, Volume 2: Managerial AccountingThought Provokers

Thought Provokers

TP 1.

LO 12.1What combination of quantitative factors and qualitative factors would you like your potential employer to use as a performance management system? Explain your answer.

TP 2.

LO 12.2Josh O’Shea is the manager of the Cardiovascular/Respiratory Laboratory. This department is responsible for measuring blood gases, performing respiratory treatments, and distributing automated IV equipment. As a manager, Josh hires and trains personnel, prepares his departmental budget, and maintains the personnel schedule. Josh recommends equipment needs for the department, but he may be overruled in the acquisition process. Josh and his departmental personnel are paid for the professional credentials they hold, earn, and maintain and are reimbursed by the hospital for any approved training or professional credentials they acquire. Josh must use the equipment, reagents, and supplies provided to him from central purchasing. Based on this information, what incentives do you see as those that will motivate Josh as part of the hospital team, and why? Which incentives will be demotivating, and why?

TP 3.

LO 12.2Kanye Achebe just became the operations manager of Weston Transportation. Weston transports large crates for online companies and transports containers overseas.

Kanye would like to evaluate each divisional manager on a basis similar to segmental reporting required by generally accepted accounting principles (GAAP) financial statements contained in annual reports. These data include a presentation of net sales, operating profit and loss before and after taxes, total identifiable assets, and depreciation for segment reported. Kanye thinks that evaluating business division managers by the same criteria as the total company is appropriate.

  1. Explain why you think the chief financial officer (CFO) disagrees and tells Kanye that publicly reporting information might demotivate managers.
  2. For better evaluation of the managers, what type of information should Kanye propose that the CFO might accept?
TP 4.

LO 12.3Which of the performance measures—ROI, RI, or EVA—is best, and why? Explain your answer thoroughly.

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