SOLUTIONS MANUAL
Managerial Accounting: Creating Value in a Dynamic Business
Environment, 13th Edition by Hilton.
,CHAPTER`1
The`Crucial`Role`of`Managerial`Accounting`in`a`Dynamic`Business`Environm
ent
FOCUS`ON`ETHICS`(Located`before`the`Chapter`Summary`in`the`text.)
The`focus-on-
ethics`inset`for`Chapter`1`is`the`IMA`Statement`of`Ethical`Professional`Practice.` Instru
ctors`can`use`this`list`of`ethical`principles`and`standards`to`lead`a`class`discussion.` The`di
scussion`can`also`range`to`consideration`of`how`these`standards`may`have`been`violated`b
y`accountants`and`managers`involved`in`the`various`ethical`scandals`uncovered`over`the`pas
t`several`years.` It`is`also`useful`to`discuss`the`pros`and`cons`of`the`procedures`for`―Resolvin
g`Ethical`Issues‖`that`IMA`suggests`for`its`members`when`they`believe`they`know`about`ethi
cal`lapses`in`their`organizations.
We`also`introduce`here`the`connection`to`the`―Ethics`Unwrapped‖`video`series`that`can`s
upplement`the`discussion`of`ethics`in`the`context`of`each`chapter.`In`each`chapter`of`the`tex
t,`we`have`suggested`topic`videos`in`the`series`that`align`with`that`chapter.`Discussion`guid
ance`and`questions`relating`to`the`videos`can`be`found`on`the`―Ethics`Unwrapped‖`site`at`the`U
RL`provided.`This`resource`is`provided`by`permission`from`the`University`of`Texas`at`Austin,`
McCombs`School`of`Business.
ANSWERS`TO`REVIEW`QUESTIONS
1-1 The`explosion`in`e-
commerce`will`affect`managers`in`significant`ways.` One`effect`will`be` a`drastic`reduction`i
n`paperwork.` Millions`of`transactions`between`businesses`are`conducted`electronic
ally`with`no`hard-
copy`documentation.`Along`with`this`method`of`communicating`for`business`transac
tions`comes`the`very`significant`issue`of`information`security.`Businesses`need`to`fin
d`ways`to`protect`confidential`information`in`their`own`computers,`in`cloud`computing`d
ata`centers,`and`while`moving`across`the`internet,`while`at`the`same`time`sharing`the`i
nformation`necessary`to`complete`transactions.` Another`effect`of`e-
commerce`is`the`dramatically`increased`speed`with`which`business`transactions`can`
be`conducted.`In`addition,`there`will`be`dramatic`changes`in`the`way`managerial`acco
unting`procedures`are`carried`out,`one`example
Managerial`Accounting,`13/e 5-1
, being`cloud-based`budgeting,`which`is`the`enterprise-wide`and`electronic`completion`of
a`company‘s`budgeting`process`using`cloud-based`software`and`data`storage.
1-2 Plausible`goals`for`the`organizations`listed`are`as`follows:
(a) Amazon.com:`(1)`To`achieve`and`maintain`profitability,`and`(2)`to`grow`on-
line`sales`of`their`many`products.` Amazon`is`also`famous`(infamous)`for`wanting`
to`have`every`product`in`the`world`on`its`site.
(b) American`Red`Cross:`(1)`To`raise`funds`from`the`general`public`sufficient`to`have`res
ources`available`to`meet`any`disaster`that`may`occur,`and`(2)`to`provide`assi
stance`to`people`who`are`victims`of`a`disaster`anywhere`in`the`world`on`short`
notice.
(c) General`Motors:`(1)`To`earn`income`sufficient`to`provide`a`good`return`on`the`inv
estment`of`the`company's`stockholders,`and`(2)`to`provide`the`highest-
quality`product`possible.
(d) Wal-
Mart:`(1)`To`penetrate`the`retail`market`in`virtually`every`location`in`the`United
`States,`and`(2)`to`grow`over`time`in`terms`of`number`of`retail`locations,`total`ass
ets,`and`earnings.` Also,`to`be`competitive`with`Amazon`in`the`e-retail`space.
(e) City`of`Seattle:`(1)`To`maintain`an`urban`environment`as`free`of`pollution`as`p
ossible,`and`(2)`to`provide`public`safety,`police,`and`fire`protection`to`the`city's`citize
ns.
(f) Hertz:`(1)`To`be`a`recognizable`household`name`associated`with`rental`car`s
ervices,`and`(2)`to`provide`reliable`and`economical`transportation`services`to`th
e`company's`customers.
1-3 The`four`basic`management`activities`are`listed`and`defined`as`follows:
(a) Decision`making:`Choosing`among`the`available`alternatives.
(b) Planning:` Developing` a` detailed` financial` and` operational` description` of`a
nticipated`operations.
(c) Directing`operations:`Running`the`organization`on`a`day-to-day`basis.
(d) Controlling:`Ensuring`that`the`organization`operates`in`the`intended`manner`and` ac
hieves`its`goals.
5-2 Solutions`Manual
, 1-4 Examples`of`the`four`primary`management`activities`in`the`context`of`a`national`fast-
`food`chain`are`as`follows:
(a) Decision`making:`Choosing`among`several`possible`locations`for`a`new`fast-
food`outlet.
(b) Planning:`Developing`a`cost`budget`for`the`food`and`paper`products`to`be`used`d
uring`the`next`quarter`in`a`particular`fast-food`restaurant.
(c) Directing`operations:`Developing`detailed`schedules`for`personnel`for`the`next`
month`to`provide`counter`service`in`a`particular`fast-food`restaurant.
(d) Controlling:`Comparing`the`actual`cost`of`paper`products`used`during`a`part
icular`month`in`a`restaurant`with`the`anticipated`cost`of`paper`products`for`that`s
ame`time`period.
1-5 Examples`of`the`objectives`of`managerial-
accounting`activity`in`an`airline`company` are`described`below:
(a) Providing`information`for`decision`making`and`planning,`and`proactively`pa
rticipating`as`part`of`the`management`team`in`the`decision`making`and`plan
ning`processes:`Managerial`accountants`provide`estimates`of`the`cost`of`addin
g`a`flight`on`the`route`from`Dallas`to`Miami`and`actively`participate`in`making`
the`decision`about`adding`the`flight.
(b) Assisting`managers`in`directing`and`controlling`operations:`Managerial`acc
ountants`provide`information`about`the`actual`costs`of`flying`the`company‘s`Asia
n`routes`during`a`particular`month.
(c) Motivating`managers`and`other`employees`toward`the`organization's`goals:`A`b
udget`is`provided`for`the`cost`of`handling`baggage`at`Chicago`O'Hare`Airport.`Th
e`budget`is`given`to`the`airline's`baggage`handling`manager,`who`is`expected`to`stri
ve`to`achieve`the`budget.
(d) Measuring`the`performance`of`activities,`subunits,`managers,`and`other`em
ployees`within`the`organization:`Quarterly`income`statements`are`prepared`for`each`
of`the`airline's`major`geographical`sectors,`and`these`income`reports`are`used`t
o`evaluate`the`earnings`performance`of`each`sector`during`the`relevant`time`per
iod.
(e) Assessing`the`organization's`competitive`position`and`working`with`other`
managers`to`ensure`the`organization's`long-
run`competitiveness`in`its`industry:`Information`about`industry-
wide`performance`standards`is`obtained`and`compared`with`the`airline's`own`p
erformance.`For`example,`how`does`the`airline`stack`up`against`its`competitors`in`tic
ket`prices,`on-
time`departures,`mishandled`baggage,`customer`complaints,`and`safety?
Managerial Accounting: Creating Value in a Dynamic Business
Environment, 13th Edition by Hilton.
,CHAPTER`1
The`Crucial`Role`of`Managerial`Accounting`in`a`Dynamic`Business`Environm
ent
FOCUS`ON`ETHICS`(Located`before`the`Chapter`Summary`in`the`text.)
The`focus-on-
ethics`inset`for`Chapter`1`is`the`IMA`Statement`of`Ethical`Professional`Practice.` Instru
ctors`can`use`this`list`of`ethical`principles`and`standards`to`lead`a`class`discussion.` The`di
scussion`can`also`range`to`consideration`of`how`these`standards`may`have`been`violated`b
y`accountants`and`managers`involved`in`the`various`ethical`scandals`uncovered`over`the`pas
t`several`years.` It`is`also`useful`to`discuss`the`pros`and`cons`of`the`procedures`for`―Resolvin
g`Ethical`Issues‖`that`IMA`suggests`for`its`members`when`they`believe`they`know`about`ethi
cal`lapses`in`their`organizations.
We`also`introduce`here`the`connection`to`the`―Ethics`Unwrapped‖`video`series`that`can`s
upplement`the`discussion`of`ethics`in`the`context`of`each`chapter.`In`each`chapter`of`the`tex
t,`we`have`suggested`topic`videos`in`the`series`that`align`with`that`chapter.`Discussion`guid
ance`and`questions`relating`to`the`videos`can`be`found`on`the`―Ethics`Unwrapped‖`site`at`the`U
RL`provided.`This`resource`is`provided`by`permission`from`the`University`of`Texas`at`Austin,`
McCombs`School`of`Business.
ANSWERS`TO`REVIEW`QUESTIONS
1-1 The`explosion`in`e-
commerce`will`affect`managers`in`significant`ways.` One`effect`will`be` a`drastic`reduction`i
n`paperwork.` Millions`of`transactions`between`businesses`are`conducted`electronic
ally`with`no`hard-
copy`documentation.`Along`with`this`method`of`communicating`for`business`transac
tions`comes`the`very`significant`issue`of`information`security.`Businesses`need`to`fin
d`ways`to`protect`confidential`information`in`their`own`computers,`in`cloud`computing`d
ata`centers,`and`while`moving`across`the`internet,`while`at`the`same`time`sharing`the`i
nformation`necessary`to`complete`transactions.` Another`effect`of`e-
commerce`is`the`dramatically`increased`speed`with`which`business`transactions`can`
be`conducted.`In`addition,`there`will`be`dramatic`changes`in`the`way`managerial`acco
unting`procedures`are`carried`out,`one`example
Managerial`Accounting,`13/e 5-1
, being`cloud-based`budgeting,`which`is`the`enterprise-wide`and`electronic`completion`of
a`company‘s`budgeting`process`using`cloud-based`software`and`data`storage.
1-2 Plausible`goals`for`the`organizations`listed`are`as`follows:
(a) Amazon.com:`(1)`To`achieve`and`maintain`profitability,`and`(2)`to`grow`on-
line`sales`of`their`many`products.` Amazon`is`also`famous`(infamous)`for`wanting`
to`have`every`product`in`the`world`on`its`site.
(b) American`Red`Cross:`(1)`To`raise`funds`from`the`general`public`sufficient`to`have`res
ources`available`to`meet`any`disaster`that`may`occur,`and`(2)`to`provide`assi
stance`to`people`who`are`victims`of`a`disaster`anywhere`in`the`world`on`short`
notice.
(c) General`Motors:`(1)`To`earn`income`sufficient`to`provide`a`good`return`on`the`inv
estment`of`the`company's`stockholders,`and`(2)`to`provide`the`highest-
quality`product`possible.
(d) Wal-
Mart:`(1)`To`penetrate`the`retail`market`in`virtually`every`location`in`the`United
`States,`and`(2)`to`grow`over`time`in`terms`of`number`of`retail`locations,`total`ass
ets,`and`earnings.` Also,`to`be`competitive`with`Amazon`in`the`e-retail`space.
(e) City`of`Seattle:`(1)`To`maintain`an`urban`environment`as`free`of`pollution`as`p
ossible,`and`(2)`to`provide`public`safety,`police,`and`fire`protection`to`the`city's`citize
ns.
(f) Hertz:`(1)`To`be`a`recognizable`household`name`associated`with`rental`car`s
ervices,`and`(2)`to`provide`reliable`and`economical`transportation`services`to`th
e`company's`customers.
1-3 The`four`basic`management`activities`are`listed`and`defined`as`follows:
(a) Decision`making:`Choosing`among`the`available`alternatives.
(b) Planning:` Developing` a` detailed` financial` and` operational` description` of`a
nticipated`operations.
(c) Directing`operations:`Running`the`organization`on`a`day-to-day`basis.
(d) Controlling:`Ensuring`that`the`organization`operates`in`the`intended`manner`and` ac
hieves`its`goals.
5-2 Solutions`Manual
, 1-4 Examples`of`the`four`primary`management`activities`in`the`context`of`a`national`fast-
`food`chain`are`as`follows:
(a) Decision`making:`Choosing`among`several`possible`locations`for`a`new`fast-
food`outlet.
(b) Planning:`Developing`a`cost`budget`for`the`food`and`paper`products`to`be`used`d
uring`the`next`quarter`in`a`particular`fast-food`restaurant.
(c) Directing`operations:`Developing`detailed`schedules`for`personnel`for`the`next`
month`to`provide`counter`service`in`a`particular`fast-food`restaurant.
(d) Controlling:`Comparing`the`actual`cost`of`paper`products`used`during`a`part
icular`month`in`a`restaurant`with`the`anticipated`cost`of`paper`products`for`that`s
ame`time`period.
1-5 Examples`of`the`objectives`of`managerial-
accounting`activity`in`an`airline`company` are`described`below:
(a) Providing`information`for`decision`making`and`planning,`and`proactively`pa
rticipating`as`part`of`the`management`team`in`the`decision`making`and`plan
ning`processes:`Managerial`accountants`provide`estimates`of`the`cost`of`addin
g`a`flight`on`the`route`from`Dallas`to`Miami`and`actively`participate`in`making`
the`decision`about`adding`the`flight.
(b) Assisting`managers`in`directing`and`controlling`operations:`Managerial`acc
ountants`provide`information`about`the`actual`costs`of`flying`the`company‘s`Asia
n`routes`during`a`particular`month.
(c) Motivating`managers`and`other`employees`toward`the`organization's`goals:`A`b
udget`is`provided`for`the`cost`of`handling`baggage`at`Chicago`O'Hare`Airport.`Th
e`budget`is`given`to`the`airline's`baggage`handling`manager,`who`is`expected`to`stri
ve`to`achieve`the`budget.
(d) Measuring`the`performance`of`activities,`subunits,`managers,`and`other`em
ployees`within`the`organization:`Quarterly`income`statements`are`prepared`for`each`
of`the`airline's`major`geographical`sectors,`and`these`income`reports`are`used`t
o`evaluate`the`earnings`performance`of`each`sector`during`the`relevant`time`per
iod.
(e) Assessing`the`organization's`competitive`position`and`working`with`other`
managers`to`ensure`the`organization's`long-
run`competitiveness`in`its`industry:`Information`about`industry-
wide`performance`standards`is`obtained`and`compared`with`the`airline's`own`p
erformance.`For`example,`how`does`the`airline`stack`up`against`its`competitors`in`tic
ket`prices,`on-
time`departures,`mishandled`baggage,`customer`complaints,`and`safety?
