Managerial Accounting: Tools for Business Decision-Making 6th Canadian Edition by Jerry J. Weygandt

 
 
Brief Exercise 88
Preparation of a budget at the beginning of a period entails looking at last year’s results, adjusting for any changes in prices and activity in the current year and anticipating consumer demand levels based on economic activity and historical trends. The process of preparing a budget is part of which management function? The process of comparing actual results to the budget is part of which other management function?
 
Solution 88
The process of preparing a budget is part of planning while the process of comparing a budget to actual results is part of control.
 
 
Brief Exercise 89
Activities in a warehouse may include materials and inventory handling, staffing and scheduling, setting up production runs, and managing quality. The management of these activities is part of which one of the key three management functions: planning, directing, or controlling?
 
Solution 89
The management of these activities is part of directing.
 
 
Brief Exercise 90
Explain how systems to control and evaluate the actions of managers are circumvented when managers use budgetary slack.
 
Solution 90
Because the budget is also used as an evaluation tool, some managers try to play a “game” by using budgetary slack; whereby, they build some slack into the budget by underestimating their division’s predicted performance so that it will be easier to meet their performance targets.
 
 
Brief Exercise 91
Explain how setting unattainable levels in a budget may promote unethical actions by managers.
 
Solution 91
If the budget is set at unattainable levels, managers sometimes take unethical actions to meet the targets to receive higher compensation or, in some cases, to keep their jobs.
 
 
Brief Exercise 92
What are the eight steps in the value chain for a manufacturing company?
 
Solution 92
The eight steps in the value chain include research and development, product design, acquisition of raw materials, sales and marketing, delivery, customer relations, and subsequent service.
 
 
Brief Exercise 93
A manufacturing company produces a product that first must be cut into a specific size, then sanded, and finally painted. The cutting process can produce five units in an hour, the sanding process produces three units in an hour, and the painting process can produce ten units in an hour. Which process is the bottleneck?
 
Solution 93
The sanding process.
 
Brief Exercise 94
What is a balanced scorecard?
 
Solution 94
A balanced scorecard is a performance-measurement approach that uses both financial and non-financial measures to evaluate all aspects of a company’s operations in an integrated way.
 
 
Brief Exercise 95
Better Built Boats Ltd. Is a company that manufactures boats and sells them through a series of dealers nationwide. It is publicly traded and has always had a “clean bill of health” from its auditors. It prides itself on building high quality boats and considers that its customers view it as an “ethical” company.
It also has good internal information that it uses to ensure that its cost per boat is within the appropriate guidelines in order to ensure profitability.
Recently, the CPA handbook has instituted a change in accounting policy that would make it more expensive to offer such products as boats to the public. For the following users of the company’s financial information, describe how such changes could affect financial information provided:
a)    The Board of Directors of the company
b)    The Vice President of Sales
c)    The Production Manager of the company
d)    The company’s Finance Manager
e)    The company’s Corporate Controller
 
Solution 95
a)    The Board, through its Audit Committee, would have to ensure that all financial information reported to external stakeholders was consistent with the new changes.
 
b)    There would likely be little effect on the sales VP other than explaining to dealers why there may have to be an increase in the price of the boats.  Particularly if the boats become more expensive to manufacture because of the new regulations.
 
c)    The Production Manager would likely expect a modification to internal data provided on manufacturing processes to incorporate the changes required.
 
d)    The Finance Manager may be concerned with ensuring that there is sufficient capital available to adjust to the new changes.