www.jntuworld.com
Chapter 1 n
Managerial Accounting and the Business
n n n n n
Environment
SolutionsntonQuestions
1-1 Managerialnaccountingnisnconcernednwithnp fromnmakingnonenproductntonmakingnanothernal-
rovidingninformationntonmanagersnfornusenwithinnth nlowsnthe ncompanyntonrespondnmorenquicklyntoncus-
enorganization.nFinancialnaccountingnisncon- tomers.nFinally,nsmallernbatchesnmakenitneasierntons
n
ncerned nwithnprovidingninformationntonstockholders potnmanufacturingnproblemsnbeforentheynresultninnanl
,ncreditors,nandnothersnoutsidenofnthenorganization. argennumbernofndefectivenunits.
1-2 Essentially,nmanagersncarrynoutnthreenma- 1-7 ThenmainnbenefitsnofnansuccessfulnJITnsys-
njornactivities ninnannorganization:nplanning,ndirectin temnarenreductionsnin:n(1)nfundsntiednupninninven-
n
gnandnmotivating,nandncontrolling.nAllnthreenactivitie ntories;n(2)nspacenrequirements;n(3)nthroughputnti
sninvolvendecisionnmaking. me;nandn(4)ndefects.
1-3 ThenPlanningnandnControlnCycleninvolvesnf 1-8 TQMngenerallynapproachesnimprovementni
ormulatingnplans,nimplementingnplans,nmeasuringn nnanseriesnofnsmallnstepsnthatnarenplannednandnim-
performance,nandnevaluatingndifferencesnbetweenn plementednbynteamsnofnfront-
n
plannednandnactualnperformance. linenworkers.nProcessnReengineeringninvolvesncompl
etelynredesigningnbusinessnprocessesnfromnthengro
1-4 Anlinenpositionnisndirectlynrelatedntonthenach undnup—oftennwithnthenusenofnoutsidenconsultants.
ievementnofnthenbasicnobjectivesnofnthenorgani-
nzation.nAnstaffnpositionnisnnotndirectlynrelatedntonthen 1-9 IfnProcessnReengineeringnisnsuccessful,nf
achievementnofnthosenobjectives;nrather,nitnisnsup- ewernworkersnarenneeded.nIfnmanagementnre-
nportive,nprovidingnservicesnandnassistance ntonothern nspondsnbynlayingnoffnworkers,nmoralenwillnalmos
partsnofnthenorganization. tncertainnsuffer.
1-5 Inncontrastntonfinancialnaccounting,nmana- 1-10 Somenbenefitsnfromnimprovementneffortsn
ngerialnaccounting:n(1)nfocusesnonnthenneeds nofnthen comenfromncostnreductions,nbutnthenprimarynbene-
manager;n(2)nplacesnmorenemphasisnonnthenfuture; fitnisnoftennannincreaseninncapacity.nAtnnon-con-
n
(3)nemphasizesnrelevancenandnflexibility,nratherntha nstraints,nincreasesninncapacitynjustnaddntonthenal-
nnprecision;n(4)nemphasizesnthensegmentsnofnannorg nready-existingnexcessncapacity.nTherefore,nim-
anization;n(5)nisnnotngovernednbynGAAP;nand nprovementneffortsnshouldnordinarilynfocusnonnthen
(6) isnnotnmandatory. constraint.
1-6 Annumbernofnbenefitsnaccruenfromnreducedn 1-11 Ifnpeoplengenerallyndidnnotnactnethicallyninn
setupntime.nFirst,nreducednsetupntimenallowsnancom business,nnononenwouldntrustnanyonenelsenandnpeo
panyntonproduceninnsmallernbatches,nwhichninnturnnr plenwouldnbenreluctantntonenternintonbusinessntrans
educesnthenlevelnofninventories.nSecond,nre- actions.nThenresultnwouldnbenlessnfundsnraisedninnca
nducednsetup ntimenallowsnancompanyntonspendnmoren pitalnmarkets,nfewerngoodsnandnservicesnavail-
timenproducingngoodsnandnlessntimengettingnreadynt ablenfornsale,nlowernquality,nandnhighernprices.
n
onproduce.nThird,nthenabilityntonrapidlynchange
©nThenMcGraw-HillnCompanies,nInc.,n2006.
SolutionsnManual,nChaptern1 1
www.jntuworld.com
,www.jntuworld.com
Exercise 1-1 (10 minutes)
n n n
1. Line
2. Directing and motivating
n n
3. Budgets
4. Planning
5. Staff
6. Decentralization
7. Precision; Nonmonetary data
n n
8. Managerial accounting; Financial accounting
n n n
9. Feedback
10. Controller
11. Performance report n
12. Chief Financial Officer
n n
©nThenMcGraw-HillnCompanies,nInc.,n2006.nAllnrightsnreserved.
2 ManagerialnAccounting,n11thnEdition
www.jntuworld.com
,www.jntuworld.com
Exercise 1-2 (10 minutes)
n n n
1. Total quality management; Process reengineering
n n n n
2. Just-In-Time
3. Nonconstraint
4. Benchmarking
5. Setup
6. Constraint
7. Non-value-added activities n
8. Business process
n
©nThenMcGraw-HillnCompanies,nInc.,n2006.nAllnrightsnreserved.
SolutionsnManual,nChaptern1 3
www.jntuworld.com
,www.jntuworld.com
Exercise 1-3 (15 minutes) n n n
If cashiers routinely shortchanged customers whenever the opportunity pres
n n n n n n n n
ented itself, most of us would be careful to count our change before leaving t
n n n n n n n n n n n n n n
he counter. Imagine what effect this would have on the line at your favorite fa
n n n n n n n n n n n n n n
st-
food restaurant. How would you like to wait in line whileeach and every custo
n n n n n n n n n n n n n n
mer laboriously counts out his or her change? Addi-
n n n n n n n n
ntionally, if you can’t trust the cashiers to give honest change, can you trustth
n n n n n n n n n n n n n n
e cooks to take the time to follow health precautions such as washing their ha
n n n n n n n n n n n n n n
nds? If you can’t trust anyone at the restaurant would you even want to eat o
n n n n n n n n n n n n n n n
ut?
Generally, when we buy goods and services in the free market, we assumewe
n n n n n n n n n n n n n n
are buying from people who have a certain level of ethical standards. Ifwe cou
n n n n n n n n n n n n n n
ld not trust people to maintain those standards, we would be reluc-
n n n n n n n n n n n
ntant to buy. The net result of widespread dishonesty would be a shrunken eco
n n n n n n n n n n n n n
nomy with a lower growth rate and fewer goods and services for sale ata lowe
n n n n n n n n n n n n n n n
r overall level of quality.
n n n n
©nThenMcGraw-HillnCompanies,nInc.,n2006.nAllnrightsnreserved.
www.jntuworld.com
Chapter 1 n
Managerial Accounting and the Business
n n n n n
Environment
SolutionsntonQuestions
1-1 Managerialnaccountingnisnconcernednwithnp fromnmakingnonenproductntonmakingnanothernal-
rovidingninformationntonmanagersnfornusenwithinnth nlowsnthe ncompanyntonrespondnmorenquicklyntoncus-
enorganization.nFinancialnaccountingnisncon- tomers.nFinally,nsmallernbatchesnmakenitneasierntons
n
ncerned nwithnprovidingninformationntonstockholders potnmanufacturingnproblemsnbeforentheynresultninnanl
,ncreditors,nandnothersnoutsidenofnthenorganization. argennumbernofndefectivenunits.
1-2 Essentially,nmanagersncarrynoutnthreenma- 1-7 ThenmainnbenefitsnofnansuccessfulnJITnsys-
njornactivities ninnannorganization:nplanning,ndirectin temnarenreductionsnin:n(1)nfundsntiednupninninven-
n
gnandnmotivating,nandncontrolling.nAllnthreenactivitie ntories;n(2)nspacenrequirements;n(3)nthroughputnti
sninvolvendecisionnmaking. me;nandn(4)ndefects.
1-3 ThenPlanningnandnControlnCycleninvolvesnf 1-8 TQMngenerallynapproachesnimprovementni
ormulatingnplans,nimplementingnplans,nmeasuringn nnanseriesnofnsmallnstepsnthatnarenplannednandnim-
performance,nandnevaluatingndifferencesnbetweenn plementednbynteamsnofnfront-
n
plannednandnactualnperformance. linenworkers.nProcessnReengineeringninvolvesncompl
etelynredesigningnbusinessnprocessesnfromnthengro
1-4 Anlinenpositionnisndirectlynrelatedntonthenach undnup—oftennwithnthenusenofnoutsidenconsultants.
ievementnofnthenbasicnobjectivesnofnthenorgani-
nzation.nAnstaffnpositionnisnnotndirectlynrelatedntonthen 1-9 IfnProcessnReengineeringnisnsuccessful,nf
achievementnofnthosenobjectives;nrather,nitnisnsup- ewernworkersnarenneeded.nIfnmanagementnre-
nportive,nprovidingnservicesnandnassistance ntonothern nspondsnbynlayingnoffnworkers,nmoralenwillnalmos
partsnofnthenorganization. tncertainnsuffer.
1-5 Inncontrastntonfinancialnaccounting,nmana- 1-10 Somenbenefitsnfromnimprovementneffortsn
ngerialnaccounting:n(1)nfocusesnonnthenneeds nofnthen comenfromncostnreductions,nbutnthenprimarynbene-
manager;n(2)nplacesnmorenemphasisnonnthenfuture; fitnisnoftennannincreaseninncapacity.nAtnnon-con-
n
(3)nemphasizesnrelevancenandnflexibility,nratherntha nstraints,nincreasesninncapacitynjustnaddntonthenal-
nnprecision;n(4)nemphasizesnthensegmentsnofnannorg nready-existingnexcessncapacity.nTherefore,nim-
anization;n(5)nisnnotngovernednbynGAAP;nand nprovementneffortsnshouldnordinarilynfocusnonnthen
(6) isnnotnmandatory. constraint.
1-6 Annumbernofnbenefitsnaccruenfromnreducedn 1-11 Ifnpeoplengenerallyndidnnotnactnethicallyninn
setupntime.nFirst,nreducednsetupntimenallowsnancom business,nnononenwouldntrustnanyonenelsenandnpeo
panyntonproduceninnsmallernbatches,nwhichninnturnnr plenwouldnbenreluctantntonenternintonbusinessntrans
educesnthenlevelnofninventories.nSecond,nre- actions.nThenresultnwouldnbenlessnfundsnraisedninnca
nducednsetup ntimenallowsnancompanyntonspendnmoren pitalnmarkets,nfewerngoodsnandnservicesnavail-
timenproducingngoodsnandnlessntimengettingnreadynt ablenfornsale,nlowernquality,nandnhighernprices.
n
onproduce.nThird,nthenabilityntonrapidlynchange
©nThenMcGraw-HillnCompanies,nInc.,n2006.
SolutionsnManual,nChaptern1 1
www.jntuworld.com
,www.jntuworld.com
Exercise 1-1 (10 minutes)
n n n
1. Line
2. Directing and motivating
n n
3. Budgets
4. Planning
5. Staff
6. Decentralization
7. Precision; Nonmonetary data
n n
8. Managerial accounting; Financial accounting
n n n
9. Feedback
10. Controller
11. Performance report n
12. Chief Financial Officer
n n
©nThenMcGraw-HillnCompanies,nInc.,n2006.nAllnrightsnreserved.
2 ManagerialnAccounting,n11thnEdition
www.jntuworld.com
,www.jntuworld.com
Exercise 1-2 (10 minutes)
n n n
1. Total quality management; Process reengineering
n n n n
2. Just-In-Time
3. Nonconstraint
4. Benchmarking
5. Setup
6. Constraint
7. Non-value-added activities n
8. Business process
n
©nThenMcGraw-HillnCompanies,nInc.,n2006.nAllnrightsnreserved.
SolutionsnManual,nChaptern1 3
www.jntuworld.com
,www.jntuworld.com
Exercise 1-3 (15 minutes) n n n
If cashiers routinely shortchanged customers whenever the opportunity pres
n n n n n n n n
ented itself, most of us would be careful to count our change before leaving t
n n n n n n n n n n n n n n
he counter. Imagine what effect this would have on the line at your favorite fa
n n n n n n n n n n n n n n
st-
food restaurant. How would you like to wait in line whileeach and every custo
n n n n n n n n n n n n n n
mer laboriously counts out his or her change? Addi-
n n n n n n n n
ntionally, if you can’t trust the cashiers to give honest change, can you trustth
n n n n n n n n n n n n n n
e cooks to take the time to follow health precautions such as washing their ha
n n n n n n n n n n n n n n
nds? If you can’t trust anyone at the restaurant would you even want to eat o
n n n n n n n n n n n n n n n
ut?
Generally, when we buy goods and services in the free market, we assumewe
n n n n n n n n n n n n n n
are buying from people who have a certain level of ethical standards. Ifwe cou
n n n n n n n n n n n n n n
ld not trust people to maintain those standards, we would be reluc-
n n n n n n n n n n n
ntant to buy. The net result of widespread dishonesty would be a shrunken eco
n n n n n n n n n n n n n
nomy with a lower growth rate and fewer goods and services for sale ata lowe
n n n n n n n n n n n n n n n
r overall level of quality.
n n n n
©nThenMcGraw-HillnCompanies,nInc.,n2006.nAllnrightsnreserved.
www.jntuworld.com
