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Principles of Accounting, Volume 2: Managerial Accounting

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Principles of Accounting, Volume 2: Managerial AccountingQuestions
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Table of contents
  1. Preface
  2. 1 Accounting as a Tool for Managers
    1. Why It Matters
    2. 1.1 Define Managerial Accounting and Identify the Three Primary Responsibilities of Management
    3. 1.2 Distinguish between Financial and Managerial Accounting
    4. 1.3 Explain the Primary Roles and Skills Required of Managerial Accountants
    5. 1.4 Describe the Role of the Institute of Management Accountants and the Use of Ethical Standards
    6. 1.5 Describe Trends in Today’s Business Environment and Analyze Their Impact on Accounting
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Thought Provokers
  3. 2 Building Blocks of Managerial Accounting
    1. Why It Matters
    2. 2.1 Distinguish between Merchandising, Manufacturing, and Service Organizations
    3. 2.2 Identify and Apply Basic Cost Behavior Patterns
    4. 2.3 Estimate a Variable and Fixed Cost Equation and Predict Future Costs
    5. Key Terms
    6. Summary
    7. Multiple Choice
    8. Questions
    9. Exercise Set A
    10. Exercise Set B
    11. Problem Set A
    12. Problem Set B
    13. Thought Provokers
  4. 3 Cost-Volume-Profit Analysis
    1. Why It Matters
    2. 3.1 Explain Contribution Margin and Calculate Contribution Margin per Unit, Contribution Margin Ratio, and Total Contribution Margin
    3. 3.2 Calculate a Break-Even Point in Units and Dollars
    4. 3.3 Perform Break-Even Sensitivity Analysis for a Single Product Under Changing Business Situations
    5. 3.4 Perform Break-Even Sensitivity Analysis for a Multi-Product Environment Under Changing Business Situations
    6. 3.5 Calculate and Interpret a Company’s Margin of Safety and Operating Leverage
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  5. 4 Job Order Costing
    1. Why It Matters
    2. 4.1 Distinguish between Job Order Costing and Process Costing
    3. 4.2 Describe and Identify the Three Major Components of Product Costs under Job Order Costing
    4. 4.3 Use the Job Order Costing Method to Trace the Flow of Product Costs through the Inventory Accounts
    5. 4.4 Compute a Predetermined Overhead Rate and Apply Overhead to Production
    6. 4.5 Compute the Cost of a Job Using Job Order Costing
    7. 4.6 Determine and Dispose of Underapplied or Overapplied Overhead
    8. 4.7 Prepare Journal Entries for a Job Order Cost System
    9. 4.8 Explain How a Job Order Cost System Applies to a Nonmanufacturing Environment
    10. Key Terms
    11. Summary
    12. Multiple Choice
    13. Questions
    14. Exercise Set A
    15. Exercise Set B
    16. Problem Set A
    17. Problem Set B
    18. Thought Provokers
  6. 5 Process Costing
    1. Why It Matters
    2. 5.1 Compare and Contrast Job Order Costing and Process Costing
    3. 5.2 Explain and Identify Conversion Costs
    4. 5.3 Explain and Compute Equivalent Units and Total Cost of Production in an Initial Processing Stage
    5. 5.4 Explain and Compute Equivalent Units and Total Cost of Production in a Subsequent Processing Stage
    6. 5.5 Prepare Journal Entries for a Process Costing System
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  7. 6 Activity-Based, Variable, and Absorption Costing
    1. Why It Matters
    2. 6.1 Calculate Predetermined Overhead and Total Cost under the Traditional Allocation Method
    3. 6.2 Describe and Identify Cost Drivers
    4. 6.3 Calculate Activity-Based Product Costs
    5. 6.4 Compare and Contrast Traditional and Activity-Based Costing Systems
    6. 6.5 Compare and Contrast Variable and Absorption Costing
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  8. 7 Budgeting
    1. Why It Matters
    2. 7.1 Describe How and Why Managers Use Budgets
    3. 7.2 Prepare Operating Budgets
    4. 7.3 Prepare Financial Budgets
    5. 7.4 Prepare Flexible Budgets
    6. 7.5 Explain How Budgets Are Used to Evaluate Goals
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  9. 8 Standard Costs and Variances
    1. Why It Matters
    2. 8.1 Explain How and Why a Standard Cost Is Developed
    3. 8.2 Compute and Evaluate Materials Variances
    4. 8.3 Compute and Evaluate Labor Variances
    5. 8.4 Compute and Evaluate Overhead Variances
    6. 8.5 Describe How Companies Use Variance Analysis
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  10. 9 Responsibility Accounting and Decentralization
    1. Why It Matters
    2. 9.1 Differentiate between Centralized and Decentralized Management
    3. 9.2 Describe How Decision-Making Differs between Centralized and Decentralized Environments
    4. 9.3 Describe the Types of Responsibility Centers
    5. 9.4 Describe the Effects of Various Decisions on Performance Evaluation of Responsibility Centers
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  11. 10 Short-Term Decision Making
    1. Why It Matters
    2. 10.1 Identify Relevant Information for Decision-Making
    3. 10.2 Evaluate and Determine Whether to Accept or Reject a Special Order
    4. 10.3 Evaluate and Determine Whether to Make or Buy a Component
    5. 10.4 Evaluate and Determine Whether to Keep or Discontinue a Segment or Product
    6. 10.5 Evaluate and Determine Whether to Sell or Process Further
    7. 10.6 Evaluate and Determine How to Make Decisions When Resources Are Constrained
    8. Key Terms
    9. Summary
    10. Multiple Choice
    11. Questions
    12. Exercise Set A
    13. Exercise Set B
    14. Problem Set A
    15. Problem Set B
    16. Thought Provokers
  12. 11 Capital Budgeting Decisions
    1. Why It Matters
    2. 11.1 Describe Capital Investment Decisions and How They Are Applied
    3. 11.2 Evaluate the Payback and Accounting Rate of Return in Capital Investment Decisions
    4. 11.3 Explain the Time Value of Money and Calculate Present and Future Values of Lump Sums and Annuities
    5. 11.4 Use Discounted Cash Flow Models to Make Capital Investment Decisions
    6. 11.5 Compare and Contrast Non-Time Value-Based Methods and Time Value-Based Methods in Capital Investment Decisions
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  13. 12 Balanced Scorecard and Other Performance Measures
    1. Why It Matters
    2. 12.1 Explain the Importance of Performance Measurement
    3. 12.2 Identify the Characteristics of an Effective Performance Measure
    4. 12.3 Evaluate an Operating Segment or a Project Using Return on Investment, Residual Income, and Economic Value Added
    5. 12.4 Describe the Balanced Scorecard and Explain How It Is Used
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  14. 13 Sustainability Reporting
    1. Why It Matters
    2. 13.1 Describe Sustainability and the Way It Creates Business Value
    3. 13.2 Identify User Needs for Information
    4. 13.3 Discuss Examples of Major Sustainability Initiatives
    5. 13.4 Future Issues in Sustainability
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Thought Provokers
  15. A | Financial Statement Analysis
  16. B | Time Value of Money
  17. C | Suggested Resources
  18. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
  19. Index
1.

LO 9.1What is a management control system? What are its components and how does the system help the business?

2.

LO 9.1Identify and describe the levels of management, including the various types of decisions managers at each level make.

3.

LO 9.1Discuss the difference between centralized and decentralized organizations. Does the size of the organization influence whether the organization has a centralized or decentralized structure? Explain.

4.

LO 9.1Identify a company where you recently shopped. Assume the company operates with a decentralized structure. Describe how customers might benefit from the decentralized structure.

5.

LO 9.1Discuss the difference between daily and strategic decisions. Think of a business and provide an example of a daily and strategic decision.

6.

LO 9.1Access PepsiCo’s 2017 annual report. Starting at the top of the document, use the find (Ctrl + F) or search feature in the browser to search the annual report for the word “segments” to determine how many operating segments PepsiCo has. What are the segments? How are the segments categorized?

7.

LO 9.1Another search of PepsiCo’s 2017 annual report reveals the company maintains a centralized management perspective on aspects of these items:

  • Commodities (items such as sugar and high fructose corn syrup that go into many of the beverages)
  • Research and development
  • Insurance and benefit program
  • Foreign currency transactions
  • Debt, investments, and other financing activities

Explain why these activities would be centralized functions within PepsiCo as opposed to decentralized like many other activities.

8.

LO 9.2Define segments and describe how identifying segments within a business might help manage the business.

9.

LO 9.2Choose a company and describe how a specific issue, policy, or procedure (for example, granting merchandise returns, establishing sales prices) might look if the business is structured as a centralized business.

10.

LO 9.2Choose a company and explain how a specific issue, policy, or procedure (for example, granting merchandise returns, establishing sales prices) might look if the business is structured as a decentralized business.

11.

LO 9.2Assume you are the manager of a local Starbucks. What factors do you feel would be relevant to hiring workers (including pay), assuming Starbucks is a decentralized organization?

12.

LO 9.2Assume you are the manager of a local Starbucks. What factors do you feel would be relevant to hiring workers (including pay), assuming Starbucks is a centralized organization?

13.

LO 9.2Use Netflix’s 2017 annual report to answer the following questions. How many segments does Netflix have? What are the segments? The annual report also shows selected nonfinancial and financial information for each segment. Prepare a brief presentation listing the “Paid memberships at end of period,” “Revenues,” and “Contribution profit” (also called operating profit) for the three most recent years (2017, 2016, and 2015). In the presentation, include any observations you notice about the trends of each segment.

14.

LO 9.2Reference the Kellogg Company’s 2017 annual report to answer the following question. In “Note 18: Reportable Segments,” you will find selected financial information for segments within Kellogg Company. Prepare a brief presentation listing each segment, along with the “Net Sales,” “Operating Profit,” and “Total Assets.” For Total Assets, you should ignore Corporate and Elimination entries, and you will need to combine the U.S. divisions into a North American total. Report this information for the three most recent years (2017, 2016, and 2015). In the presentation, include any observations you notice about the trends of each segment. You may want to use Microsoft Excel or another spreadsheet application for the numerical data. This information will be used in a subsequent question.

15.

LO 9.2Lavell started out mowing lawns in the neighborhood when he was 13 years old. He did such good work that, without advertising, his business grew steadily each year. After college, Lavell decided to continue the business as a full-time career. One of his concerns, however, is the number of hours he is putting in. Once school lets out, he finds himself working long hours nearly every day of the week. Although he has added workers, his business now handles mowing, trimming, and landscaping for residential, corporate, and nonprofit clients. He is considering adding managers but is not quite sure how to structure the organization. Lavell wants to focus on building the business rather than doing the daily work, so he knows a decentralized structure will be best. He has asked you to develop a potential organizational chart to help him envision the best way to organize the business. Describe the advantages to this approach as well as any concerns he should have.

16.

LO 9.3Describe the concept of responsibility accounting.

17.

LO 9.3Describe the concept of a cost center and, using a specific organization, give an example of how this might be used to achieve the strategic goals of the organization.

18.

LO 9.3Describe the concept of a profit center and, using a specific organization, give an example of how this might be used to achieve the strategic goals of the organization.

19.

LO 9.3Explain the benefits of a return on investment structure within an investment center framework. It may help to think of an example using an existing company.

20.

LO 9.3Explain the benefits of a residual income structure within an investment center framework. It may help to think of an example using an existing company.

21.

LO 9.4Discuss the concept of controllable and uncontrollable costs and how they affect the evaluation of the responsibility center’s financial performance.

22.

LO 9.4Discuss the concept of transfer pricing.

23.

LO 9.4Discuss the advantages and disadvantages of a market-based transfer pricing approach.

24.

LO 9.4Discuss the advantages and disadvantages of a cost-based transfer pricing approach.

25.

LO 9.4Discuss the advantages and disadvantages of a negotiated transfer pricing approach.

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