SOLUTIONS MANUAL
Managerial Accounting
The Cornerstone of Business Decision ~Making 9th Edition
By Maryanne Mowen, Don Hansen, Dan Heitger
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, INTRODUCTION TO MANAGERIAL
1 ACCOUNTING
MULTIPLE-CHOICE QUESTIONS
1-1. c
1-2. b
1-3. a
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1-4. b
1-5. e
af
1-6. e
1-7. d
1-8. d
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1-9. b
1-10. e
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1-11. d
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1-1
,CHAPTER 1 Introduction to Managerial Accounting
EXERCISES
E 1-12
a. Decision-making
b. Controlling
c. Planning
d. Decision-making
e. Planning
f. Decision-making
E 1-13
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a. Managerial accounting oriented
b. Financial accounting oriented
c. Managerial accounting oriented
af
d. Financial accounting oriented
e. Managerial accounting oriented
E 1-14
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1. The total product is the product and its features (processing speed, disk drives,
software packages, and so on), the service, the operating and maintenance
requirements, and the delivery speed.
do
2. One company is emphasizing low costs, and the other is attempting to differentiate
its PC by offering faster delivery and higher-quality service.
3. The Confiar’s service component and its delivery time appear to be better than
Drantex’s. Thus, the realization of these features appears to outweigh the additional
cs
sacrifice (the additional operating and maintenance cost) associated with the
Confiar PC. The implications for management accounting are straightforward. The
management accounting information system should collect and report information
about customer realization and sacrifice. Much of this information is external to the
firm but clearly needed by management.
4. Better quality and shorter delivery time increase the value of what the customer
receives, while lowering the price decreases the amount paid. In total, customer
value has increased, and presumably, this should make the Drantex PC much more
competitive. This example illustrates how quality, time, and costs are essential
competitive weapons. It also illustrates how critical it is for the management
accounting system to collect and report data concerning these three dimensions.
1-2
, CHAPTER 1 Introduction to Managerial Accounting
E 1-15
Joan Dennison is staff. She is in a support role—she prepares reports and helps explain
and interpret them. Her role is to help the line managers more effectively carry out their
responsibilities.
Steven Swasey is a line manager. He has direct responsibility for producing a garden
hose. Clearly, one of the basic objectives for the existence of a manufacturing firm is to
make a product. Thus, Steven has direct responsibility for a basic objective and holds a
line position.
E 1-16
No, it is not ethical for Steve to demand a kickback from Dave. Dave should not agree
to this unethical proposal. This brief situation actually happened to Dave, a friend of
M
one of the authors. The author advised Dave not to accept the deal. Dave then checked
with his lawyer who bluntly told him the deal was illegal. Dave did not accept. In
addition to rejecting Steve’s unethical offer, Dave might consider reporting the
unethical offer to relevant key stakeholders, such as Steve’s superiors in the
university’s Athletic Department, university’s Office of the Provost, or president.
af
Hopefully, university administrators would be interested in learning of one (or more)
of its employees damaging the integrity of its bidding process with key business
partners such as Dave’s printing shop. If Dave were a management accountant, he
should consider the IMA's Statement of Ethical Professional Practice and what it says
ia
about avoiding and reporting such unethical behavior (e.g., see the first standard under
Integrity and the second under Credibility).
E 1-17
do
A manager has a responsibility to the company as well as society. If the manager
lays off the employees, he or she ignores both of these responsibilities. In effect, the
manager would be pursuing self-interest at the expense of the company and the
salespeople. While pursuit of self-interest is not necessarily unethical, it can be if it
harms others. In this case, the manager’s action could result in lower profits for the
cs
company because sales may decrease and unnecessary training costs will be incurred
when the positions are refilled the following year. Similarly, it is unjust to penalize
productive employees simply to earn a bonus. The right choice is to retain the three
salespeople. In ethical terms, the manager is not behaving with integrity.
The reward system, in part, encouraged this behavior. Apparently, the manager is paid a
bonus if profits exceed 10% of planned profits. By basing rewards on a measure such
as short-run profits, the company has given the manager an incentive to manipulate
earnings in the short run. One way of manipulating annual earnings is to reduce or
defer discretionary expenditures.
This type of behavior can be discouraged by proper matching of expenses with
revenues and by expanding the performance measures to include long-run factors
like market share, productivity, and personnel development. The accounting system
1-3
,CHAPTER 1 Introduction to Managerial Accounting
can also be used to track trends (e.g., training costs over time). Moreover, managers
can be required to provide extensive justification for significant changes in
discretionary expenses.
E 1-18
1. By the time most students graduate from high school, they have not had much
exposure to business. Therefore, they do not have full knowledge of acceptable
behavior for the business environment. Students may not know that certain
practices are unethical because they may not be familiar with the behavioral norms
associated with these practices. Once students begin to learn business practices,
they begin to see what ethical dilemmas can arise in a business context. Then they
are able to apply the moral training they have had to deal with the situations.
Furthermore, evidence exists that ethical reasoning can be changed for the better.
M
Thus, instruction in ethics can be a vital part of a student’s education.
2. Sacrificing self-interest is a choice that each person must make. Some may be
influenced by those individuals who behave ethically. Individuals committed to
ethical behavior produce societies committed to ethical behavior.
af
3. While this sounds noble, many would disagree that managers are first seeking to
serve others and accept personal financial rewards as a by-product of a good job.
Pursuit of self-interest and personal financial well-being is not necessarily unethical.
It is only when this pursuit is done at the expense of the collective good that the
ia
behavior becomes questionable.
4. It is often true that unethical firms and individuals suffer financially. In the long run,
some evidence suggests that ethical behavior does pay. It is doubtful, however,
that every unethical firm or individual is wiped out financially. Too many notable
do
exceptions to this statement exist (e.g., the selling of drugs by organized crime).
5. While some unethical behavior might be highly visible, many discoveries of unethi-
cal behavior reveal that the unethical behavior spanned long time periods, often mul-
tiple years. For example, the fake account scandal at Wells Fargo was publicly
announced in 2016, but had been building internally for several years. This scandal
eventually revealed that over 5,000 Wells Fargo employees were fired for opening
cs
millions of customer accounts without customer knowledge or consent. The scandal
cost Wells Fargo—an historic and long respected banking giant in the United
States—billions of dollars in fines, regulatory fees, legal and risk management
expenses, stock price valuation decreases, and reputational damage. Therefore,
some evidence exists that suggests that unethical behavior is not usually highly
visible and, thus, not quickly detected or, ultimately corrected.
1-4
, CHAPTER 1 Introduction to Managerial Accounting
E 1-19
The employees should not follow the suggestion of their boss to purchase more
shares in anticipation of a buyout. This is insider trading and is illegal. Insider trading
is prohibited by many corporate codes of ethics. Even when it is not explicitly
prohibited by the corporate code of ethics, it is still wrong and illegal.
E 1-20
Answers will vary.
E 1-21
1. Answers will vary. However, some companies discuss various environmental
M
issues, such as rising sea levels, greenhouse gas emissions, or pollution (e.g., of
water, air, soil, landfills, etc.) as having important ethical consequences to their key
stakeholders (customers, employees, community members near their facilities, etc.).
Other companies discuss various social issues, such as worker safety, child
af
labor, and human rights as having important ethical consequences to their key
stakeholders (employees and suppliers). Finally, yet other companies discuss
various governance issues, such as company performance measures and employee
compensation, as having important ethical consequences to their key stakeholders
(executives and other employees) as the actions that are measured and rewarded
ia
(as part of governance’s compensation oversight) typically reflect the items of
greatest interest to the company. Of course, successes (or failures) in identifying
and managing the ethical consequences of any environmental, social, or governance
ultimately have materially significant impacts on company shareholders.
do
2. Again answers will vary. However, companies are generally increasing use of data
analytics (e.g., descriptive, diagnostic, predictive, or prescriptive approaches) in
various ways to capture and analyze data regarding their environmental, social, or
governance performance. In addition, companies often utilize various static and
dynamic data visualization techniques (e.g., dashboards, charts) to communicate
cs
their ESG performance to key stakeholders within their ESG reports. Finally,
Chapter 2 discusses data analytics (including Exhibit 2.2) in more detail.
1-5
Managerial Accounting
The Cornerstone of Business Decision ~Making 9th Edition
By Maryanne Mowen, Don Hansen, Dan Heitger
M
af
ia
do
cs
, INTRODUCTION TO MANAGERIAL
1 ACCOUNTING
MULTIPLE-CHOICE QUESTIONS
1-1. c
1-2. b
1-3. a
M
1-4. b
1-5. e
af
1-6. e
1-7. d
1-8. d
ia
1-9. b
1-10. e
do
1-11. d
cs
1-1
,CHAPTER 1 Introduction to Managerial Accounting
EXERCISES
E 1-12
a. Decision-making
b. Controlling
c. Planning
d. Decision-making
e. Planning
f. Decision-making
E 1-13
M
a. Managerial accounting oriented
b. Financial accounting oriented
c. Managerial accounting oriented
af
d. Financial accounting oriented
e. Managerial accounting oriented
E 1-14
ia
1. The total product is the product and its features (processing speed, disk drives,
software packages, and so on), the service, the operating and maintenance
requirements, and the delivery speed.
do
2. One company is emphasizing low costs, and the other is attempting to differentiate
its PC by offering faster delivery and higher-quality service.
3. The Confiar’s service component and its delivery time appear to be better than
Drantex’s. Thus, the realization of these features appears to outweigh the additional
cs
sacrifice (the additional operating and maintenance cost) associated with the
Confiar PC. The implications for management accounting are straightforward. The
management accounting information system should collect and report information
about customer realization and sacrifice. Much of this information is external to the
firm but clearly needed by management.
4. Better quality and shorter delivery time increase the value of what the customer
receives, while lowering the price decreases the amount paid. In total, customer
value has increased, and presumably, this should make the Drantex PC much more
competitive. This example illustrates how quality, time, and costs are essential
competitive weapons. It also illustrates how critical it is for the management
accounting system to collect and report data concerning these three dimensions.
1-2
, CHAPTER 1 Introduction to Managerial Accounting
E 1-15
Joan Dennison is staff. She is in a support role—she prepares reports and helps explain
and interpret them. Her role is to help the line managers more effectively carry out their
responsibilities.
Steven Swasey is a line manager. He has direct responsibility for producing a garden
hose. Clearly, one of the basic objectives for the existence of a manufacturing firm is to
make a product. Thus, Steven has direct responsibility for a basic objective and holds a
line position.
E 1-16
No, it is not ethical for Steve to demand a kickback from Dave. Dave should not agree
to this unethical proposal. This brief situation actually happened to Dave, a friend of
M
one of the authors. The author advised Dave not to accept the deal. Dave then checked
with his lawyer who bluntly told him the deal was illegal. Dave did not accept. In
addition to rejecting Steve’s unethical offer, Dave might consider reporting the
unethical offer to relevant key stakeholders, such as Steve’s superiors in the
university’s Athletic Department, university’s Office of the Provost, or president.
af
Hopefully, university administrators would be interested in learning of one (or more)
of its employees damaging the integrity of its bidding process with key business
partners such as Dave’s printing shop. If Dave were a management accountant, he
should consider the IMA's Statement of Ethical Professional Practice and what it says
ia
about avoiding and reporting such unethical behavior (e.g., see the first standard under
Integrity and the second under Credibility).
E 1-17
do
A manager has a responsibility to the company as well as society. If the manager
lays off the employees, he or she ignores both of these responsibilities. In effect, the
manager would be pursuing self-interest at the expense of the company and the
salespeople. While pursuit of self-interest is not necessarily unethical, it can be if it
harms others. In this case, the manager’s action could result in lower profits for the
cs
company because sales may decrease and unnecessary training costs will be incurred
when the positions are refilled the following year. Similarly, it is unjust to penalize
productive employees simply to earn a bonus. The right choice is to retain the three
salespeople. In ethical terms, the manager is not behaving with integrity.
The reward system, in part, encouraged this behavior. Apparently, the manager is paid a
bonus if profits exceed 10% of planned profits. By basing rewards on a measure such
as short-run profits, the company has given the manager an incentive to manipulate
earnings in the short run. One way of manipulating annual earnings is to reduce or
defer discretionary expenditures.
This type of behavior can be discouraged by proper matching of expenses with
revenues and by expanding the performance measures to include long-run factors
like market share, productivity, and personnel development. The accounting system
1-3
,CHAPTER 1 Introduction to Managerial Accounting
can also be used to track trends (e.g., training costs over time). Moreover, managers
can be required to provide extensive justification for significant changes in
discretionary expenses.
E 1-18
1. By the time most students graduate from high school, they have not had much
exposure to business. Therefore, they do not have full knowledge of acceptable
behavior for the business environment. Students may not know that certain
practices are unethical because they may not be familiar with the behavioral norms
associated with these practices. Once students begin to learn business practices,
they begin to see what ethical dilemmas can arise in a business context. Then they
are able to apply the moral training they have had to deal with the situations.
Furthermore, evidence exists that ethical reasoning can be changed for the better.
M
Thus, instruction in ethics can be a vital part of a student’s education.
2. Sacrificing self-interest is a choice that each person must make. Some may be
influenced by those individuals who behave ethically. Individuals committed to
ethical behavior produce societies committed to ethical behavior.
af
3. While this sounds noble, many would disagree that managers are first seeking to
serve others and accept personal financial rewards as a by-product of a good job.
Pursuit of self-interest and personal financial well-being is not necessarily unethical.
It is only when this pursuit is done at the expense of the collective good that the
ia
behavior becomes questionable.
4. It is often true that unethical firms and individuals suffer financially. In the long run,
some evidence suggests that ethical behavior does pay. It is doubtful, however,
that every unethical firm or individual is wiped out financially. Too many notable
do
exceptions to this statement exist (e.g., the selling of drugs by organized crime).
5. While some unethical behavior might be highly visible, many discoveries of unethi-
cal behavior reveal that the unethical behavior spanned long time periods, often mul-
tiple years. For example, the fake account scandal at Wells Fargo was publicly
announced in 2016, but had been building internally for several years. This scandal
eventually revealed that over 5,000 Wells Fargo employees were fired for opening
cs
millions of customer accounts without customer knowledge or consent. The scandal
cost Wells Fargo—an historic and long respected banking giant in the United
States—billions of dollars in fines, regulatory fees, legal and risk management
expenses, stock price valuation decreases, and reputational damage. Therefore,
some evidence exists that suggests that unethical behavior is not usually highly
visible and, thus, not quickly detected or, ultimately corrected.
1-4
, CHAPTER 1 Introduction to Managerial Accounting
E 1-19
The employees should not follow the suggestion of their boss to purchase more
shares in anticipation of a buyout. This is insider trading and is illegal. Insider trading
is prohibited by many corporate codes of ethics. Even when it is not explicitly
prohibited by the corporate code of ethics, it is still wrong and illegal.
E 1-20
Answers will vary.
E 1-21
1. Answers will vary. However, some companies discuss various environmental
M
issues, such as rising sea levels, greenhouse gas emissions, or pollution (e.g., of
water, air, soil, landfills, etc.) as having important ethical consequences to their key
stakeholders (customers, employees, community members near their facilities, etc.).
Other companies discuss various social issues, such as worker safety, child
af
labor, and human rights as having important ethical consequences to their key
stakeholders (employees and suppliers). Finally, yet other companies discuss
various governance issues, such as company performance measures and employee
compensation, as having important ethical consequences to their key stakeholders
(executives and other employees) as the actions that are measured and rewarded
ia
(as part of governance’s compensation oversight) typically reflect the items of
greatest interest to the company. Of course, successes (or failures) in identifying
and managing the ethical consequences of any environmental, social, or governance
ultimately have materially significant impacts on company shareholders.
do
2. Again answers will vary. However, companies are generally increasing use of data
analytics (e.g., descriptive, diagnostic, predictive, or prescriptive approaches) in
various ways to capture and analyze data regarding their environmental, social, or
governance performance. In addition, companies often utilize various static and
dynamic data visualization techniques (e.g., dashboards, charts) to communicate
cs
their ESG performance to key stakeholders within their ESG reports. Finally,
Chapter 2 discusses data analytics (including Exhibit 2.2) in more detail.
1-5
