CHAPTER 1THE ACCOUNTANT’S ROLE IN THE ORGANIZATION

See the front matter of this Solutions Manual for suggestions regarding your choices of assignment material for

each chapter.

1-1 Management accountants can help in formulating strategy by providing information about the sources of competitive advantage—for example, the cost, productivity, or efficiency advantage of their company relative to competitors or the premium prices a company can charge relative to the costs of adding features that make its products or services distinctive.

1-2 Management accounting measures and reports financial and non-financial information that helps managers make decisions to fulfill the goals of an organization. It focuses on internal reporting.

Financial accounting focuses on reporting to external parties. It measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP).

Other differences include: (1) management accounting emphasizes the future, (2) management accounting influences the behavior of managers and employees (3) management accounting is not restricted by Generally Accepted Accounting Principles and (4) management accounting covers more topics.

1-3 Planning decisions focus on (a) selecting organization goals, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and (b) communicating the goals and how to attain them to the entire organization.

Control decisions focus on (a) taking actions that implement the planning decisions, and (b) deciding how to evaluate performance and what related feedback to provide that will help future decision making.

1-4 The three roles are:1. Problem solving—comparative analysis for decision making.2. Scorekeeping—accumulating data and reporting results to all levels of management

describing how the organization is doing.3. Attention directing—helping managers to focus on opportunities and problems.

1-5 Financial accounting is constrained by generally accepted accounting principles. Management accounting is not restricted to these principles. The result is that: management accounting allows managers to charge interest on owners’ capital to

help judge a division’s performance, even though such a charge is not allowed under GAAP,

management accounting can include assets or liabilities (such as “brand names” developed internally) not recognized under GAAP, and

management accounting can use asset or liability measurement rules (such as present values or resale prices) not permitted under GAAP.

1-1

1-6 The business functions in the value chain are:• Research and development—generating and experimenting with ideas related to

new products, services, or processes.• Design of products, services, and processes—the detailed planning and

engineering of products, services, or processes.• Production—acquiring, coordinating, and assembling resources to produce a

product or deliver a service.• Marketing—promoting and selling products or services to customers or

prospective customers.• Distribution—delivering products or services to customers.• Customer service—providing after-sales support to customers.

1-7 Customer focus is a critically important theme for all companies. The management accountant must track whether the internal business functions are adding value to customers. To do so, management accountants provide timely and relevant advice to line and staff managers.

1-8 The four themes are:1. Customer focus.2. Value-chain and supply-chain analysis.3. Key success factors (such as cost and efficiency, quality, time, and innovation).4. Continuous improvement and benchmarking.

1-9 Supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations.

Cost management is most effective when it integrates and coordinates activities across all companies in the supply chain as well as across each business function in an individual company’s value chain. Attempts are made to restructure all cost areas to be more cost-effective.

1-10 The three guidelines for management accountants are:1. Employ a cost-benefit approach.2. Recognize behavioral and technical considerations.3. Adopt the “different costs for different purposes” notion.

1-11 Agree. A successful management accountant requires general business skills (such as understanding the strategy of an organization) and people skills (such as motivating other team members) as well as technical skills (such as computer knowledge, calculating costs of products, and supporting planning and control decisions).

1-2

1-12 The new controller could reply in one or more of the following ways:

(a) Demonstrate to the plant manager how he or she could make better decisions if the plant controller was viewed as a resource rather than a deadweight. In a related way, the plant controller could show how the plant manager's time and resources could be saved by viewing the new plant controller as a team member.

(b) Demonstrate to the plant manager a good knowledge of the technical aspects of the plant. This approach may involve doing background reading. It certainly will involve spending much time on the plant floor speaking to plant personnel.

(c) Show the plant manager examples of the new plant controller's past successes in working with line managers in other plants. Examples could include:• assistance in preparing the budget,• assistance in analyzing problem situations and evaluating financial and nonfinancial

aspects of different alternatives, and• assistance in submitting capital budget requests.

(d) Seek assistance from the corporate controller to highlight to the plant manager the importance of many tasks undertaken by the new plant controller. This approach is a last resort but may be necessary in some cases.

1-13 IMA stands for the Institute of Management Accountants. It is the largest association of management accountants in the United States. The CMA (Certified Management Accountant) is the professional designation for management accountants and financial executives. It demonstrates that the holder has met the admission criteria and demonstrated the competency of technical knowledge required by the IMA.

1-14 The Institute of Management Accountants (IMA) sets standards of ethical conduct for management accountants in the following areas:• Competence• Confidentiality• Integrity• Objectivity

1-15 Steps to take when established written policies provide insufficient guidance are:(a) Discuss problem with the immediate superior (except when it appears that the

superior is involved).(b) Clarify relevant ethical issues by confidential discussion with an objective advisor.(c) Consult your own attorney as to legal obligations and rights concerning the ethical

conflicts.If (a), (b), (c) and other avenues do not resolve the situation, resignation from the organization should be considered.

1-3

1-16 (15 min.) Planning and control decisions.

1. (a) Planning—decision by Barnes & Noble (B&N) about cash needs for the future.(b) Control—performance evaluation of B&N for the year.

2. (a) Planning—decision to increase or decrease local marketing support.(b) Control—decision on whether recent sales promotion led to an increase in revenues.

3. (a) Planning—decision about whether or not to expand B&N’s Internet lines of business.(b) Control—evaluation by VP of New Business Development of the performance of

managers of individual lines of business.4. (a) Planning—decision on which books to advertise more or which books to include in a

special chat-room site.(b) Control—decision by publisher to pay additional bonuses to authors due to their book

being on a bestseller list.5. (a) Planning—decision by B&N on the amount and type of insurance to purchase next year.

(b) Control—follow up by B&N with the insurance company regarding a cash payment to B&N.

1-17 (15 min.) Problem solving, scorekeeping, and attention directing.

Because the accountant's duties are often not sharply defined, some of these answers might be challenged:1. Scorekeeping2. Attention directing3. Scorekeeping4. Problem solving5. Attention directing6. Attention directing7. Problem solving8. Scorekeeping (depending on the extent of the report) or attention directing9. This question is intentionally vague. The give-and-take of the budgetary process usually

encompasses all three functions, but it emphasizes scorekeeping the least. The main function is attention directing, but problem solving is also involved.

10. Problem solving

1-18 (15 min.) Problem solving, scorekeeping, and attention directing.

The accountant's duties are often not sharply defined, so some of these answers might be challenged:1. Attention directing2. Problem solving3. Scorekeeping4. Scorekeeping5. Scorekeeping6. Attention directing7. Problem solving8. Scorekeeping9. Problem solving10. Attention directing

1-4

1-19 (15 min.) Value chain and classification of costs, computer company.

Cost Item Value Chain Business Functiona.b.c.d.e.f.g.h.

ProductionDistributionDesignResearch and DevelopmentCustomer ServiceDesign (or Research and Development)MarketingProduction

1-20 (15 min.) Value chain and classification of costs, pharmaceutical company.

Cost Item Value Chain Business Functiona.b.c.d.e.f.g.h.

DesignMarketingCustomer ServiceResearch and DevelopmentMarketingProductionMarketingDistribution

1-21 (25 min.) Management accounting system and customer focus.

1. Management accounting’s customers are managers of departments such as marketing, production and R&D. Management accounting focuses on providing financial and nonfinancial information to the managers to help them make better decisions to achieve the organization’s goals.

2. The value of a management accounting system can be enhanced and, simultaneously, expectations of managers may be exceeded. It can be done by providing to the managers the information that is important to them in achieving success in their strategic decisions and planning and control decisions. The managers should find the information provided to them by management accounting systems both relevant and timely. This requires that management accounting must have customer focus. The information needs of the managers for decision making must be met to satisfy them and to retain them as users of management accounting information. Management accounting systems should address the information needs of the

1-5

managers by helping with problem solving, scorekeeping, and attention directing relating to key success factors:

1-21 (Cont’d.) Cost control, High quality, Timely response to customer demand in dynamic global markets, and Innovation.

Management accountants have several tools that can be used to help managers concentrate on continuous improvement of various aspects of their operations.

Value chain and supply chain analysis performed by the management accounting function can contribute to the achievement of key success factors. When each business function adds value and all business functions are coordinated and well integrated, it contributes to cost control, high quality, timely response, and innovation.

1-22 (15 min.) Management themes and changes in management accounting.

Change in Management Accounting Key Theme

a.b.c.

d.

e.

Value-chain and supply-chain analysisKey success factors (quality) Key success factors (cost) and continuous improvement and benchmarking.Continuous improvement and benchmarking and key success factor (cost).Customer focus

1-23 (10-15 min.) Professional ethics and reporting division performance.1. Miller's ethical responsibilities are well summarized in the IMA's "Standards of Ethical Conduct for Management Accountants" (Exhibit 1-7 of text). Areas of ethical responsibility include:• competence• confidentiality• integrity• objectivityThe ethical standards related to Miller's current dilemma are integrity, competence and objectivity. Using the integrity standard, Miller should refrain from either actively or passively subverting the attainment of the organization’s legitimate and ethical objectives. Competence demands that Miller perform her professional duties in accordance with relevant laws, regulations, and technical standards. Objectivity requires that Miller report information fairly and objectively. Miller should refuse to book the $200,000 of sales until the goods are shipped. Both financial accounting and management accounting principles maintain that sales are not complete until the title is transferred to the buyer.

2. Miller should refuse to follow Maloney's orders. If Maloney persists, the incident should be reported to the corporate controller. Support for line management should be wholehearted, but it should not require unethical conduct.

1-6

1-24 (15 min.) Management accounting guidelines.

1. Cost-benefit approach

2. Behavioral and technical considerations

3. Different costs for different purposes

4. Cost-benefit approach

5. Behavioral and technical considerations

6. Cost-benefit approach

7. Behavioral and technical considerations

8. Different costs for different purposes

9. Behavioral and technical considerations

1-25 (15 min.) Planning and control decisions, Internet company.

1. Planning decisions at WebNews.com focus on organizational goals, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to attain them to the entire organization. For example, WebNews.com could have the objective of revenue growth to gain critical mass or it could have the objective of increasing operating income. Many Internet companies in their formative years make revenue growth (and subscriber growth) their primary goal.

Control focuses on (a) deciding on, and taking actions that implement the planning decisions, and (b) deciding how to evaluate performance and what feedback to provide that will help future decision making.

2. Planning decisionsa. Decision to raise monthly subscription feec. Decision to upgrade content of online servicese. Decision to decrease monthly subscription fee

Control decisionsb. Decision to inform existing subscribers about the rate of increase—an implementation part of control decisionsd. Demotion of VP of Marketing—performance evaluation and feedback aspect of control decisions

1-7

1-26 (30 min.) Problem solving, scorekeeping, attention directing, and feedback, Internet company (continuation of 1-25).

1. Problem solving – comparative analysis for decision making.Scorekeeping – accumulating data and reporting results to all levels of management describing how the organization is doing.Attention directing – helping managers focus on opportunities and problems.

2. (a) and (e) Decisions to change subscription fee.Problem solving – report outlining expected revenues from subscribers and advertising with different monthly fee amounts.Scorekeeping – report with monthly subscribers and their revenues in prior months.Attention directing – report showing the change in the number of subscribers of Internet companies at the time they change their monthly fees.

(b) Decision to inform existing subscribers of $24.95 fee from July onwards.Problem solving – report analyzing different ways (e-mail, regular mail) of informing subscribers.Scorekeeping – report indicating how many subscribers have been contacted.Attention directing – report showing how many subscribers have cancelled their subscriptions following notification of the increase in fees.

(c) Decision to upgrade content of online services and to offer better Internet mail services.Problem solving – report outlining expected revenues from subscribers and advertisers as a result of upgrading service.Scorekeeping – report with monthly subscribers and revenues before and after upgrading service.Attention directing – report showing the change in the number of subscribers of Internet companies after they upgraded service.

(d) Decision to demote vice president of marketing.Problem solving and attention directing – report analyzing growth in subscribers at competing Internet companies.

3. As a result of the feedback, WebNews.com made the following decisions:

a. Decision to change subscription fee from $24.95 per month in September 2003 to $21.95 in October 2003.

b. Demotion of Vice President of Marketing after significant slowing of subscriber growth in accounts and revenues.

4. WebNews.com overestimated the number of subscribers for the July to September 2003 period. It might examine the methodology it uses to estimate the sensitivity of subscriptions to price changes and upgrade of its services.

1-8

1-27 (15 min.) The chief financial officer and the controller.

1. As a controller, Rodriguez was primarily responsible for management accounting and financial accounting functions. Typical functions of a controller include:

Financial planning and budgeting

Operations administration

Profitability reporting

Inventory accounting

General ledger

Accounts payable

Accounts receivable

2. The chief financial officer’s responsibilities include:

Controllership

Treasury

Risk management

Taxes

Internal audit

Information systems (in some organizations)

Investor relations

Financial planning

1-28 (30 min.) Software procurement decisions, ethics.

1. Michael faces an ethical problem. The trip appears to be a gift which could influence his purchase decision. The ethical standard of integrity requires Michaels to refuse the gift. Companies with "codes of conduct" frequently have a "supplier clause" that prohibits their employees from accepting "material" (in some cases, any) gifts from suppliers. The motivations include:(a) Integrity/conflict of interest. Suppose Michaels recommends that a Horizon 1-2-3

product subsequently be purchased by Fiesta. This recommendation could be because he felt obligated to them as his trip to the Cancun conference was fully paid by Horizon.

(b) The appearance of a conflict of interest. Even if the Horizon 1-2-3 product is the superior one at that time, other suppliers likely will have a different opinion. They may believe that the way to sell products to Fiesta is via "fully-paid junkets to resorts." Those not wanting to do business this way may downplay future business activities with Fiesta even though Fiesta could gain much from such activities.

Some executives view the meeting as "suspect" from the start given the Caribbean location and its "rest and recreation" tone.

1-28 (Cont’d.)

1-9

2. I do not think Fiesta should allow executives to attend user meetings while negotiating with other vendors about a purchase decision. The payment of expenses for the trip constitutes a gift that could appear to influence their purchase decision.

Pros of attending user meeting(a) Opportunity to learn more about Horizon’s software products.(b) Opportunity to interact with other possible purchasers and get their opinions.(c) Opportunity to influence the future product development plans of Horizon in a way that

will benefit Fiesta. An example is Horizon subsequently developing software modules tailored to food product companies.

(d) Saves Fiesta money. Visiting suppliers and their customers typically cost money, whereas Horizon is paying for the Cancún conference.

Cons of Attending(a) The ethical issues raised in requirement 1.(b) Negative morale effects on other Fiesta employees who do not get to attend the Cancún

conference. These employees may reduce their trust and respect for Michaels's judgment, arguing he has been on a "supplier-paid vacation."

Conditions on Attending that Fiesta Might Impose(a) Sizable part of that time in Cancun has to be devoted to business rather than recreation.(b) Decision on which Fiesta executive attends is not made by the person who attends (this

reduces the appearance of a conflict of interest).(c) Person attending (Michaels) does not have final say on purchase decision (this reduces

the appearance of a conflict of interest).(d) Fiesta executives go only when a new major purchase is being contemplated (to avoid the

conference becoming a regular "vacation").

A Conference Board publication on Corporate Ethics asked executives about a comparable situation:• 76% said Fiesta and Michaels face an ethical consideration in deciding whether to attend.• 71% said Michaels should not attend, as the payment of expenses is a "gift" within the

meaning of a credible corporate ethics policy.

3. I think the company does not need its own code of ethics. They can use the code of ethics developed by the IMA.

Pros of having a written codeThe Conference Board outlines the following reasons why companies adopt codes of

ethics:(a) Signals commitment of senior management to ethics.(b) Promotes public trust in the credibility of the company and its employees.(c) Signals the managerial professionalism of its employees.

1-10

1-28 (Cont’d.)

(d) Provides guidance to employees as to how difficult problems are to be handled. If adhered to, employees will avoid many actions that are unethical or appear to be unethical.

(e) Drafting of the policy (and its redrafting in the light of ambiguities) can assist management in anticipating and preparing for ethical issues not yet encountered.

Cons of having a written code(a) Can give appearance that all issues have been covered. Issues not covered may appear to

be "acceptable" even when they are not.(b) Can constrain the entrepreneurial activities of employees. Forces people to always

"behave by the book."(c) Cost of developing code can be "high" if it consumes a lot of employee time.

1-29 (30-40 min.) Professional ethics and end-of-year games.

1. The possible motivations for the snack foods division wanting to play end-of-year games include:(a) Management incentives. Gourmet Foods may have a division bonus scheme based on one-

year reported division earnings. Efforts to front-end revenue into the current year or transfer costs into the next year can increase this bonus.

(b) Promotion opportunities and job security. Top management of Gourmet Foods likely will view those division managers that deliver high reported earnings growth rates as being the best prospects for promotion. Division managers who deliver "unwelcome surprises" may be viewed as less capable.

(c) Retain division autonomy. If top management of Gourmet Foods adopts a "management by exception" approach, divisions that report sharp reductions in their earnings growth rates may attract a sizable increase in top management supervision.

2. The "Standards of Ethical Conduct . . . " require management accountants to:• Refrain from either actively or passively subverting the attainment of the organization's

legitimate and ethical objectives, and• Communicate unfavorable as well as favorable information and professional judgment

or opinions.

Several of the "end-of-year games" clearly are in conflict with these requirements and should be viewed as unacceptable by Taylor:(b) The fiscal year-end should be closed on midnight of December 31. "Extending" the close

falsely reports next year's sales as this year's sales.(c) Altering shipping dates is falsification of the accounting reports.(f) Advertisements run in December should be charged to the current year. The advertising

agency is facilitating falsification of the accounting records.

1-11

1-29 (Cont’d.)

The other "end-of-year games" occur in many organizations and may fall into the "gray" to "acceptable" area. However, much depends on the circumstances surrounding each one:

(a) If the independent contractor does not do maintenance work in December, there is no transaction regarding maintenance to record. The responsibility for ensuring that packaging equipment is well maintained is that of the plant manager. The division controller probably can do little more than observe the absence of a December maintenance charge.

(d) In many organizations, sales are heavily concentrated in the final weeks of the fiscal year-end. If the double bonus is approved by the division marketing manager, the division controller can do little more than observe the extra bonus paid in December.

(e) If TV spots are reduced in December, the advertising cost in December will be reduced. There is no record falsification here.

(g) Much depends on the means of "persuading" carriers to accept the merchandise. For example, if an under-the-table payment is involved, it is clearly unethical. If, however, the carrier receives no extra consideration and willingly agrees to accept the assignment, the transaction appears ethical.

Each of the (a), (d), (e), and (g) "end-of-year games" may well disadvantage Gourmet Foods in the long run. For example, lack of routine maintenance may lead to subsequent equipment failure. The divisional controller is well advised to raise such issues in meetings with the division president. However, if Gourmet Foods has a rigid set of line/staff distinctions, the division president is the one who bears primary responsibility for justifying division actions to senior corporate officers.

3. If Taylor believes that Ryan wants her to engage in unethical behavior, she should first directly raise her concerns with Ryan. If Ryan is unwilling to change his request, Taylor should discuss her concerns with the Corporate Controller of Gourmet Foods. Taylor also may well ask for a transfer from the snack foods division if she perceives Ryan is unwilling to listen to pressure brought by the Corporate Controller, CFO, or even President of Gourmet Foods. In the extreme, she may want to resign if the corporate culture of Gourmet Foods is to reward division managers who play "end-of-year games" that Taylor views as unethical and possibly illegal.

1-30 (40 min.) Global company, ethical challenges with bribery.

1. It is clear that bribes are illegal according to U.S. laws. It is not clear from the case whether bribes are illegal in Safistan. However, knowledgeable people in global business would attest to the fact that it is virtually impossible to find any country in the world which specifically sanctions bribery. The major point, however, that deserves discussion is: Should Norris engage in any unethical activities even if they are not illegal?

It is difficult to make a generalization about all shareholders of the company. It is, however, safe to assume that not all shareholders would want to keep their investment in a company that is engaged in unethical and/or illegal activities. There is historical evidence to

1-12

substantiate this point: When apartheid laws were in effect in South Africa, many investors divested shares of companies doing business in South Africa.

Apart from the ethical issues, it should also be noted that bribery can be very costly in some parts of the world. Bribes may not generate revenues sufficient enough to offset their cost.

2. Apparently Short thinks that local culture and common practice are one and the same. This, in fact, is not the case. There are many common practices in developing countries, which are against the native culture.

Specifically, bribery often leads to decisions that are not made on the basis of the merits of the alternative selected. This results in misallocation of meager resources of the developing country. Misallocation of resources has adverse effects on the economy of a country and the living standard of its population. The negative impact is intensified in developing countries because they can least afford the misallocation of resources.

3. Norris might have an articulated corporate policy against such payments to get the message across that regardless of laws, the top management would not tolerate any bribery payments made by its employees. A strong and consistent message from the top often has a noticeable effect on the corporate culture and employee behavior.

U.S. laws specifically prohibit bribery payments. Such payments can result in heavy penalties to the corporation making the payments.

1-13

Chapter 1 Internet Exercise

The Internet exercise is available to students only on the Prentice Hall Companion Website www.prenhall.com/horngren. Students can click on Cost Accounting, 11th ed., and access the Internet Exercise for the chapter, which links to the Web site of a company or organization. The Internet Exercise on the Web will be updated periodically so that it is current with the latest information available on the subject organization's Web site. A printout copy of the Internet exercise for this chapter as of early 2002 appears below.

The solution to the Internet exercise, which will also be updated periodically, is available to instructors from the Companion Website's faculty view. To access the solution, click on Cost Accounting, 11th ed., Faculty link, and then register once to obtain your password through the online form. After the initial registration, you will have a personal login ID and password to use to log in. A printout of the solution to the Internet exercise for this chapter as of early 2002 follows. The exercise and solution provide instructors with an idea of the content of the Internet exercise for this chapter.

Internet Exercise

Cost Accounting Fundamentals. Go to www.imanet.org and answer the following questions about the Institute of Management Accountants (IMA):

1. What is the IMA?2.a. What are the two professional designations offered by the IMA?2.b. What are the four primary objectives of the IMA professional-certification programs? 2.c. How do you obtain a CMA or CFM professional designation?3.a. Describe the information available on the IMA's student Web site.3.b. Click on the "Campus Site Map" and then on the link, "How Do I Start My Career?"

Describe how typical management-trainee and internship programs operate.3.c. Click on the "Campus Site Map" and then on the link, "How Do I Start My Career?"

Describe the typical positions available to management-accounting trainees.

Solution to Internet Exercise

1. The Institute of Management Accountants (IMA) is the leading professional organization devoted exclusively to management accounting and financial management. Its goals are to help members develop both personally and professionally, by means of education, certification, and association with other business professionals.

2.a. The Institute of Management Accountants offers two professional designations. The Certified Management Accountant (CMA) and the Certified in Financial Management (CFM) Programs recognize the unique qualifications and expertise of those professionals engaged in management accounting and financial management.

2.b. The Certification Programs have four primary objectives:1. To establish management accounting and financial management as recognized

professions by identifying the role of the professional, the underlying body of knowledge, and a course of study by which such knowledge is acquired;

2. To encourage higher educational standards in the management accounting and financial management fields;

1-14

Internet Exercise (Cont’d.)

3. To establish an objective measure of an individual's knowledge and competence in the fields of management accounting and financial management; and

4. To encourage continued professional development.

2c. Become a member of the Institute of Management Accountants (IMA). 1. Pass all four parts of the CMA or CFM examination. 2. Satisfy a two-year experience requirement.*3. Hold a baccalaureate degree, in any area, from an accredited U.S. college or

university.*4. Comply with the Standards of Ethical Conduct.

*There are exceptions to these general requirements.

3a. 1. From the Administration Building students can access information on jobs, scholarships, and careers.

2. From the Academic Hall students can access information on certification and IMA student competitions.

3. Students can go to the Library for research and reference material.

3b. In general, how do management accounting training or internship programs operate? They expose the entry-level accountant to several financial areas within an organization. Large organizations, such as the Fortune 1,000, provide a variety of opportunities for the entry-level accountant to sample a number of situations in which the company can evaluate the performance of the accountant. Most of the companies have financial personnel at the plant, division, group/line of business, and corporate levels. Each of these organizations will give a new management accountant experience in two to four financial areas.

3c. Typical positions available to management accounting trainees are in: 1. Financial reporting—corporate accounting: regulatory reporting, financial

accounting, special reports. 2. Financial systems—receivables, payables, collections, credit management,

property, plant and equipment, production/cost analyst, inventory costs/controls. 3. Planning/analysis—strategic planning, operational budgets, special reports,

acquisitions, capital budgeting.4. Taxes—state/local/federal taxes: compliance tax work, payroll taxes, tax planning

(markets, business combinations). 5. Internal audits—various levels: corporate, division/group/line of business, and

plant level.

1-15

Chapter 1 Video Case

The video case can be discussed using only the case writeup in the chapter. Alternatively, instructors can have students view the videotape of the company that is the subject of the case. The videotape can be obtained by contacting your Prentice Hall representative. The case questions challenge students to apply the concepts learned in the chapter to a specific business situation.

REGAL MARINE: THE ACCOUNTANT’S ROLE

1. a. Preparing a schedule of depreciation for boat hull and deck molds—Scorekeeping.

b. Analyzing the desirability of using standard Volvo-Penta boat engines in a new boat model—Problem solving.

c. Preparing the daily report of the number of hull defects found during the quality check on the Sport Boat assembly line—Attention directing and scorekeeping.

d. Explaining the Commodore Yacht Division’s monthly performance report—Attention directing.

e. Interpreting differences between actual results and budgeted amounts on performance report for the prototyping department—Attention directing.

f. Preparing a monthly statement of boat sales, by model and customer, for the company’s vice president of sales—Attention directing (or Scorekeeping).

g. Analyzing, for the design team, the impact on product costs for a new dashboard odometer display—Problem solving.

h. Preparing a cost comparison of two plywood manufacturers for use by the purchasing manager—Problem solving.

2. a. Cost of a toll-free telephone line used for customer inquiries about product specifications—Customer Service, or if prior to purchase—Marketing.

b. Cost of sales and promotional materials—Marketing. c. Labor costs of workers in the Cabinetry Department of the facility—Production.d. Cost of an industry research report on boat industry trends—Research &

Development.e. Equipment and trucks purchased for transporting finished boats to retail outlets

such as the Boat Tree—Distribution.f. Boat hull and deck mold fabrication costs—Production.g. Cost of a new CAD design station—Design.h. Costs of upholstery seats for Commodore yachts—Production.

1-16