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Abstract This paper surveys the development of cost accounting and managerial control practices and assesses their relevance to the changing nature of industrial competition in the 1980s. The paper starts with a review of cost accounting developments from 1850 through 1915, including the demands imposed by the origin of the railroad and steel enterprises and the subsequent activity from the scientific management movement. The DuPont Corporation (1903) and the reorganization of General Motors (1920) provided the opportunity for major innovations in the management control of decentralized operations, including the ROI criterion for evaluation of performance and formal budgeting and incentive plans. More recent developments have included discounted cash flow analysis and the application of management science and multiperson decision theory models. The cost accounting and management control procedures developed more than 60 years ago for the mass production of standard products with high direct labor content may no longer be appropriate for the planning and control decisions of contemporary organizations. Also, problems with using profits as the prime criterion for motivating and evaluating short-term performance are becoming apparent. This paper advocates a return to field-based research to discover the innovative practices being introduced by organizations successfully adapting to the new organization and technology of manufacturing. Journal Information The Accounting Review is the premier journal for publishing articles reporting the results of accounting research and explaining and illustrating related research methodology. The scope of acceptable articles embraces any research methodology and any accounting-related subject. The primary criterion for publication in The Accounting Review is the significance of the contribution an article makes to the literature. Publisher Information The American Accounting Association is the world's largest association of accounting and business educators, researchers, and interested practitioners. A worldwide organization, the AAA promotes education, research, service, and interaction between education and practice. Formed in 1916 as the American Association of University Instructors in Accounting, the association began publishing the first of its ten journals, The Accounting Review, in 1925. Ten years later, in 1935, the association changed its name to become the American Accounting Association. The AAA now extends far beyond accounting, with 14 Sections addressing such issues as Information Systems, Artificial Intelligence/Expert Systems, Public Interest, Auditing, taxation (the American Taxation Association is a Section of the AAA), International Accounting, and Teaching and Curriculum. About 30% of AAA members live and work outside the United States. Rights & Usage This item is part of a JSTOR Collection. Chapter 01 Test Bank – Static KEY
A. Financial accounting B. Management accounting C. Governmental accounting D. All of the given answers AACSB: Reflective Difficulty: Easy Learning Objective: 1 Describe the major differences between management accounting and financial accounting information Topic: Role of Management Accountant in Value Creation
i. It is a part of an organisation's management information system. ii. It is relied on by managers to plan and control an organisation's operations. iii. It is relied on by external users to make investment decisions. A. i and ii B. i, ii and iii C. iii D. ii AACSB: Reflective Difficulty: Easy Learning Objective: 1 Define management accounting in terms of value creation Topic: Role of Management Accountant in Value Creation
i. It is concerned only with information obtained from the accounting records. ii. It is concerned with financial and non-financial information. iii. It can provide information useful for making decisions. A. i B. i and ii C. ii and iii D. ii AACSB: Reflective Difficulty: Medium Learning Objective: 1 Define management accounting in terms of value creation Topic: Role of Management Accountant in Value Creation
i. another name for a long-term objective ii. the same as an objective iii. a means by which an organisation plans to meet its mission and achieve its objectives A. i B. ii C. iii D. i and ii AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain the basic concepts of strategy and how management accounting systems can support strategies Topic: Fundamental Management Processes
A. Providing information for making decisions B. Providing information for planning C. Providing information for control D. Providing information for profit and loss statements 1-Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain the basic concepts of strategy and how management accounting systems can support strategies Topic: Objectives of Management Accounting
A. comparing actual performance against targets B. setting objectives and formulating plans for future operations C. measuring the performance of managers against preset targets D. motivating managers towards achieving organisational goals AACSB: Reflective Difficulty: Easy Learning Objective: 1 Explain how planning and control mechanisms can be used to support resource management Topic: Fundamental Management Processes
A. formulating details of operations and finances for the next financial year B. comparing actual performance against targets C. deciding whether to expand activities D. All of the given answers AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain how planning and control mechanisms can be used to support resource management Topic: Fundamental Management Processes
A. formulating details of operations and finances for the next financial year B. comparing actual performance against targets C. making a choice between available alternatives D. measuring the performance of managers against preset targets AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain how planning and control mechanisms can be used to support resource management Topic: Fundamental Management Processes
A. provide information to parties outside the organisation B. provide information to managers within the organisation. C. provide information to government agencies. D. All of the given answers AACSB: Reflective Difficulty: Easy Learning Objective: 1 Define management accounting in terms of value creation Topic: Objectives of Management Accounting
A. motivate managers to achieve organisational goals. B. control operations. C. provide managers with information for making decisions and planning. D. All of the given answers AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain how planning and control mechanisms can be used to support resource management Topic: Fundamental Management Processes
A. improved decisions. B. more effective planning. 1-Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.C. developing and implementing information systems. D. All of the given answers AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain where management accountants are located in organisations Topic: Role of Management Accountant in Value Creation
A. CPA Australia. B. Australian Accounting Association. C. Institute of Chartered Accountants in Australia. D. Certified Institute of Management Accountants. AACSB: Reflective Difficulty: Easy Learning Objective: 1 After studying the appendix, discuss the professional qualifications that are relevant to becoming an accountant, and the ethical standards to which accountants must adhere Topic: Role of Management Accountant in Value Creation
A. Competence and confidentiality B. Integrity and objectivity C. Professional skepticism and efficiency D. Objectivity and confidentiality AACSB: Ethics Difficulty: Easy Learning Objective: 1 After studying the appendix, discuss the professional qualifications that are relevant to becoming an accountant, and the ethical standards to which accountants must adhere Topic: Ethics, Corporate Governance, and Corporate Social Responsibility
A. strive continually to improve technical services and keep knowledge up-to-date. B. not breach the trust of clients and employers. C. not disclose information acquired in the course of professional work, except where there is a legal or professional duty to disclose. D. at all times safeguard the interest of the clients and employers, provided it does not conflict with their duty to the community. AACSB: Ethics Difficulty: Easy Learning Objective: 1 After studying the appendix, discuss the professional qualifications that are relevant to becoming an accountant, and the ethical standards to which accountants must adhere Topic: Role of Management Accountant in Value Creation
i. Accountants must not disclose information acquired in the course of their work. ii. Accountants must disclose information if there is a professional duty to do so. iii. Accountants may not use information gained in the course of their work for their own or another's personal advantage. A. i B. ii C. iii D. i, ii and iii AACSB: Ethics Difficulty: Easy Learning Objective: 1 After studying the appendix, discuss the professional qualifications that are relevant to becoming an accountant, and the ethical standards to which accountants must adhere Topic: Ethics, Corporate Governance, and Corporate Social Responsibility
i. Cost 1-Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.ii. Profitability iii. Resource management iv. Waste reduction A. i, ii, iii and iv B. ii, iii, i and iv C. i, ii, iv and iii D. i, iii, iv and ii AACSB: Reflective Difficulty: Easy Learning Objective: 1 After studying the appendix, describe how the focus of management accounting has evolved Topic: Fundamental Management Processes
i. help in the provision of physical data to managers. ii. be included in the management of information systems. iii. present their information in monetary terms only. iv. help to ensure effective interdepartmental communications. A. i and ii B. iii and iv C. iii D. iv AACSB: Reflective Difficulty: Medium Learning Objective: 1 Describe the major differences between management accounting and financial accounting information Topic: Role of Management Accountant in Value Creation
A. Activity-based costing. B. E-commerce. C. Supplier cost analysis. D. A and C. AACSB: Reflective Difficulty: Easy Learning Objective: 1 Identify the organisational responses and management accounting responses to changes in the business environment Topic: Difference between Management and Financial Accounting
i. Competence ii. Objectivity iii. Confidentiality iv. Integrity A. i, ii, iii and iv B. ii, iii and iv C. i, ii and iv D. i, iii and iv AACSB: Ethics Difficulty: Easy Learning Objective: 1 After studying the appendix, discuss the professional qualifications that are relevant to becoming an accountant, and the ethical standards to which accountants must adhere Topic: Ethics, Corporate Governance, and Corporate Social Responsibility
i. Salary cost of management accounting personnel ii. Computer operating costs 1-Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.C. non-financial performance measures, external reporting and cost control. D. external reporting, labour-related activity measures and cost elimination. AACSB: Reflective Difficulty: Easy Learning Objective: 1 Identify the organisational responses and management accounting responses to changes in the business environment Topic: Fundamental Management Processes
A. Quality B. Delivery C. Product innovation D. Cost reduction AACSB: Reflective Difficulty: Easy Learning Objective: 1 Explain the basic concepts of strategy and how management accounting systems can support strategies Topic: Fundamental Management Processes
A. has a focus on past costs. B. has a focus on future costs. C. is collected as required by internal management of the firm. D. is constrained by the requirements of the Australian Accounting Standards. AACSB: Reflective Difficulty: Easy Learning Objective: 1 Describe the major differences between management accounting and financial accounting information Topic: Role of Management Accountant in Value Creation
A. A financial controller is only responsible for financial accounting. B. The primary role of the finance function of an organisation is to liaise with banks and financial intuitions to obtain finance to fund operations. C. In some organisations, management accountants are located in factories. D. Management accountants are responsible for external reporting as well as providing information to internal managers. AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain where management accountants are located in organisations Topic: Role of Management Accountant in Value Creation
A. refers to the desired future state of an organisation. B. refers to a statement that defines the purpose of the organisation. C. refers to specific statements of objective, upon which goals can be set. D. is only useful for non profit organisations. AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain the basic concepts of strategy and how management accounting systems can support strategies Topic: Role of Management Accountant in Value Creation
A. Should Animus Ltd operate in the mining industry only, or expand to heavy machinery manufacturing and distribution? B. Should Animus Ltd compete based on price or product differentiation? C. Should Animus Ltd hire a new financial controller? D. Should Animus Ltd develop a new management accounting system? 1-Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain the basic concepts of strategy and how management accounting systems can support strategies Topic: Fundamental Management Processes
A. Should Animus Ltd operate in the mining industry only or expand to heavy machinery manufacturing and distribution? B. Should Animus Ltd compete based on price or product differentiation? C. Should Animus Ltd hire a new financial controller? D. Should Animus Ltd develop a new management accounting system? AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain the basic concepts of strategy and how management accounting systems can support strategies Topic: Fundamental Management Processes
A. Awarding bonuses to Aimus Ltd's top performing executives B. Setting production targets for the company's new mines C. Developing correction actions to respond to lower-than-expected production levels in the existing mines D. Pursuing legal actions against environmental activists who stole mining equipment AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain how planning and control mechanisms can be used to support resource management Topic: Fundamental Management Processes
A. Awarding bonuses to Aimus Ltd's top performing executives B. Setting production targets for the company's new mines C. Developing correction actions to respond to lower-than-expected production levels in the existing mines. D. Pursuing legal actions against environmental activists who stole mining equipment. AACSB: Reflective Difficulty: Medium Learning Objective: 1 Explain how planning and control mechanisms can be used to support resource management Topic: Fundamental Management Processes
A. the new system is likely to be the result of the Australian culture of being environmentally conscious and the fact that negative environmental impacts can result in significant fines to the company. B. the new system is likely to be the result of gaining legitimacy and to imitate other mining companies who are 'doing the right thing'. C. the new system is likely to be the result of stringent government regulations. D. the new system is likely to be the result of careful, rational, cost-benefit analysis. AACSB: Reflective Difficulty: Medium Learning Objective: 1 Describe the factors that may influence the design of management accounting systems including behavioural issues, cost-benefit trade-offs and the implications of contingency and institutional theories Topic: Ethics, Corporate Governance, and Corporate Social Responsibility
A. Providing an environmental assurance report for his company's shareholders B. Compiling the company tax return C. Ensuring that the internal accounting system is compliant with generally accepted accounting standards D. Developing a production cost report for each of the company's three production lines AACSB: Reflective Difficulty: Medium 1-Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.A. product quality. B. product delivery. C. product innovation. D. product costs. AACSB: Reflective Difficulty: Easy Learning Objective: 1 Explain how planning and control mechanisms can be used to support resource management Topic: Fundamental Management Processes
A. accounting standards. B. all of the choices are correct. C. generally accepted accounting principles. D. traditional accounting conventions. 1-Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
AACSB: Reflective Difficulty: Easy Learning Objective: 1 Explain how costing systems can provide information to support a range of operational and strategic decisions Topic: Difference between Management and Financial Accounting What is meant by the following statement? 'The objectivity of the management accounting process is largely a myth.'
AACSB: Communication AACSB: Reflective Difficulty: Hard Learning Objective: 1 Define management accounting in terms of value creation Topic: Role of Management Accountant in Value Creation Give an example of management accounting information that could help a manager make each of the following decisions: i. The managing director of a car rental company is deciding whether to add luxury cars to the rental car fleet. ii. The production manager in an assembly plant is deciding whether to have routine maintenance performed on a machine weekly or fortnightly. iii. The manager of a department store is deciding on the number of security personnel to employ to reduce shoplifting. iv. The local council is deciding whether to build an addition to the local library. Note: any correct answers are possible since only one example is requested. i. Estimates of any operating costs associated with the proposed luxury cars would be relevant. For example, estimates of the cost of petrol, routine maintenance and insurance on the new vehicles would be useful. ii. Data about the cost of maintaining the machine weekly or fortnightly would be relevant. In addition, the production manager should consider information about the likely rates of defective products under each maintenance alternative. iii. Estimates of the cost of lost merchandise due to shoplifting and the cost of employing security personnel would be relevant to this decision. iv. Estimates of the cost of building the library addition as well as estimated benefits to the population from having the addition would be useful. In estimating the benefits, some value judgments may need to be made about the benefits to the public from having additional library space and more books. AACSB: Communication AACSB: Reflective Difficulty: Hard Learning Objective: 1 Define management accounting in terms of value creation Topic: Role of Management Accountant in Value Creation 1-Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Topic: Ethics, Corporate Governance, and Corporate Social Responsibility
Management accounting Financial accounting Users of information Internal: managers and employees at all levels Regulations No accounting standards or external rules are imposed. Information is generated to satisfy managers' information needs Source of data Both financial and non-financial data drawn from many sources—the core accounting system; physical and operational data from production systems; and market, customer and economic data from sources external to the organisation Nature of the information Past, current and future-oriented; subjective; relevant; timely; and supplied at various levels of detail to suit managers' specific needs External: shareholders, creditors, banks, securities exchange, trade unions and government agencies Accounting standards and corporations law regulate the content of external financial reports Financial data almost exclusively drawn from the organisation's core transaction- based accounting system Past; reliable; verifiable; not timely; not always relevant; and highly aggregated AACSB: Communication AACSB: Reflective Difficulty: Medium Learning Objective: 1 Describe the major differences between management accounting and financial accounting information Topic: Role of Management Accountant in Value Creation
FALSEAACSB: Reflective Difficulty: Medium Learning Objective: 1 Describe the factors that may influence the design of management accounting systems including behavioural issues, cost-benefit trade-offs and the implications of contingency and institutional theories Topic: Fundamental Management Processes
FALSEAACSB: Reflective Difficulty: Easy Learning Objective: 1 Explain the basic concepts of strategy and how management accounting systems can support strategies Topic: Role of Management Accountant in Value Creation FALSEAACSB: Reflective Difficulty: Easy Learning Objective: 1 After studying the appendix, describe how the focus of management accounting has evolved Topic: Expanding and Changing Role of Management Accounting
FALSEAACSB: Reflective Difficulty: Easy Learning Objective: 1 Define management accounting in terms of value creation Topic: Role of Management Accountant in Value Creation
TRUEAACSB: Reflective Difficulty: Easy Learning Objective: 1 Explain where management accountants are located in organisations Topic: Role of Management Accountant in Value Creation
FALSEAACSB: Reflective Difficulty: Easy Learning Objective: 1 Describe the major processes that management accounting systems use to create value and manage resources Topic: Fundamental Management Processes
A. All the answers are correct B. Buying produce C. Mopping the floor D. Refilling the napkin dispensers E. Hiring new cooks Accountants have wide areas of discretion in the selection, processing and recording of data. Various data can be used for different purposes. In addition, the same data can be used simultaneously for different purposes such as planning, decision making or controlling. AACSB: Reflective Thinking Difficulty: 2 Medium Learning Objective: 1 Define management accounting in terms of value creation Topic: Role of Management Accountant in Value Creation
A. the process of determining cost drivers. B. the recognition of the importance of cost relationships among the activities in the value chain. C. the process of managing cost relationships to the firm’s advantage. D. cost-causing factors. E. two of the answers are correct. The recognition of the importance of cost relationships among the activities in the value chain and the process of managing cost relationships to the firms’s advantage are the correct options. AACSB: Reflective Thinking Difficulty: 2 Medium Learning Objective: 1 Explain the basic concepts of strategy and how management accounting systems can support strategies Topic: Fundamental Management Processes
A. Provide information for decision making and planning. B. Assist managers in directing and controlling operational activities. C. Motivate managers and other employees towards the organisation’s goals. D. Assess an organisation’s competitive position and long-term managerial efforts.. E. Focus on activities that occur at the top level of the organisation. AACSB: Reflective Thinking Difficulty: 3 Hard Learning Objective: 1 Describe the major differences between management accounting and financial accounting information Topic: Objectives of Management Accounting
Required: Determine whether the descriptors are most closely associated with financial accounting or managerial accounting. 1. Financial accounting 6. Financial accounting2. Managerial accounting 7. Financial accounting3. Financial accounting 8. Managerial accounting4. Managerial accounting 9. Managerial accounting5. Managerial accountingAACSB: Reflective Thinking Difficulty: 1 Easy Learning Objective: 1 Describe the major differences between management accounting and financial accounting information Topic: Difference between Management and Financial Accounting
In late October, anticipating an economic recovery, Franklin began an extensive remodelling of the company's sales floor. Construction costs, decorating and equipment purchases are projected to cost $250 000. Darius has a policy that individual expenditures in excess of $200 000 must be approved by the firm's board of directors. Franklin, unfortunately, missed the deadline to have the board consider this project at its regular September meeting. Not wanting to wait until the next meeting in December, he subdivided the project in two parts—construction and decorating ($190 000) and equipment purchases ($60,000)— neither of which needed board approval because of the dollar amounts involved. The project was recently completed and sales have begun to recover. Customers have raved about the new sales area, noting that it is far superior to those of Darius's competitors. Required: A. Would Franklin's approach of subdividing the project in two parts have any effect on the company's financial statements? Briefly explain. B. Briefly discuss whether Franklin behaved in an ethical manner. C. Which, if any, of the following standards of conduct would have applicability to Franklin's conduct: competence, confidentiality, integrity or credibility? Briefly explain. A. Although some extra processing is involved because of the ‘separate’ projects, the same total costs will be incurred for the same assets. Thus, there is no impact on the financial statements, which serve to summarise financial activity. B. Franklin behaved in an unethical manner. Even though business is recovering and customers seem more than satisfied with the new sales area, Franklin knowingly bypassed stated company policy. The project is being done in a single phase, and comprises construction, decorating and equipment acquisition. This is really one project; yet his accounting treatment implies otherwise. C. Two standards are relevant here. Integrity holds that managers refrain from engaging in any conduct that would prejudice the ethical performance of duties. Additionally, credibility recognises that managers have a responsibility to communicate information fairly and objectively, and disclose all relevant information that could reasonably be expected to influence a user's understanding of the reports and data presented. AACSB: Ethics Difficulty: 3 Hard Learning Objective: 1 After studying the appendix, discuss the professional qualifications that are relevant to becoming an accountant, and the ethical standards to which accountants must adhere Topic: Ethics, Corporate Governance, and Corporate Social Responsibility Category # of QuestionsAACSB: Communication 7AACSB: Ethics 7AACSB: Reflective 60AACSB: Reflective Thinking 8AACSB: Technical 1Difficulty: 1 Easy 3Difficulty: 2 Medium 2Difficulty: 3 Hard 5Difficulty: Easy 38Difficulty: Hard 5Difficulty: Medium 24Learning Objective: 1 Describe changes that have taken place in the business environment in recent years 4Learning Objective: 1 Define management accounting in terms of value creation 10Learning Objective: 1 Describe the major differences between management accounting and financial accounting information11Learning Objective: 1 Explain where management accountants are located in organisations 3Learning Objective: 1 Describe the major processes that management accounting systems use to create value and manageresources4Learning Objective: 1 Explain the basic concepts of strategy and how management accounting systems can support strategies10Learning Objective: 1 Explain how planning and control mechanisms can be used to support resource management 11Learning Objective: 1 Explain how costing systems can provide information to support a range of operational and strategic decisions1Learning Objective: 1 Describe the factors that may influence the design of management accounting systems including behavioural issues, cost-benefit trade-offs and the implications of contingency and institutional theories7Learning Objective: 1 Identify the organisational responses and management accounting responses to changes in the business environment3Learning Objective: 1 After studying the appendix, describe how the focus of management accounting has evolved 3Learning Objective: 1 After studying the appendix, discuss the professional qualifications that are relevant to becoming anaccountant, and the ethical standards to which accountants must adhere11Topic: Difference between Management and Financial Accounting 8Topic: Ethics, Corporate Governance, and Corporate Social Responsibility 8Topic: Expanding and Changing Role of Management Accounting 2Topic: Fundamental Management Processes 27Topic: Globalisation and International Competition 3Topic: Objectives of Management Accounting 5Topic: Role of Management Accountant in Value Creation 23Topic: Some Implications for the Roles of Management Accountants 1Which of the following is not a business trend impacting management accounting quizlet?A shift toward a manufacturing-based economy is NOT a business trend impacting management accounting. The concern for sustainability, engaging in corporate social responsibility, and implementing integrated reporting systems are business trends that affect management accounting.
What are 5 trends in managerial accounting?What are the trends? They include channel and customer profitability reporting, integration of enterprise performance management methods (e.g., strategy maps, balanced scorecard), driver-based rolling financial forecasts, applying analytics, and co-existing methods (e.g. lean accounting).
Which of the following is not part of management accounting?The answer is B) Reporting financial information to the shareholders.
Which of the following characteristics does not pertain to management accounting?Generally accepted accounting principles (GAAP), which govern the preparationof external accounting reports, are not used in the field of management accountingthat prepares reports for management, or internal, use only.
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Which of the following is not a business trend impacting management accounting?
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