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

 
Solution 101
The manager is knowingly reporting false information that could mislead the users of that information. Not everyone may know that the budget numbers have some “slack” built into them.
 
 
Exercise 102
What is corporate social responsibility and why is it sometimes referred to as the triple bottom line?
 
Solution 102
Corporate social responsibility considers a company’s efforts to employ sustainable business practices with regard to its employees and the environment.  This is sometimes referred to as the triple bottom line because it evaluates a company’s performance with regard to people, plant, and profit. 
 
 
 
 
Exercise 103
Explain four of the implications on the financial community because of the Sarbanes-Oxley-Act (SOX) legislation.
 
Solution 103
1.    One result of SOX was the clarification of top management’s responsibility for the company’s financial statements. CEOs and CFOs must now certify that financial statements give a fair presentation of the company’s operating results and its financial condition.
2.    In addition, top managers must certify that the company maintains an adequate system of internal controls to safeguard the company’s assets and ensure accurate financial reports.
3.    Another result of Sarbanes-Oxley is that companies now pay more attention to the composition of the board of directors. In particular, members of the audit committee of the board of directors must all be entirely independent (that is, non-employees) and at least one must be a financial expert.
4.    Finally, to increase the likelihood of compliance with the rules that are part of the new legislation, the law substantially increases the penalties for misconduct.
 
Exercise 104
Misty River Spas offers weekly luxury spa packages to members of the fashion industry. After a good start to its operations, the company started to experience a drop in sales. Misty Rivers was operating at less than 100% capacity and started a major marketing campaign to attract more customers.
The company’s controller noticed that customers often left the spa after only four or five days. This was confusing, given, they paid for the entire week and were not entitled to refunds. The controller discovered that these people would complain about waiting times between spa activities and even a shortage of products in the facility. The marketing manager simply said that if the number of customers increased that these problems would eventually disappear. Besides, when a customer left early, the company did not incur any additional costs of related to service delivery. Comment on the company’s attitude toward its customers without looking into its internal activities.
 
Solution 104
A company is effective when it delivers what it promises. When services do not meet expectations, a company loses customers and its reputation suffers. A business such as a spa survives by delivering what it promises in an effective manner. This  ensures positive word-of-mouth advertising from happy customers. Simply attempting to increase top-line sales without caring about of the value delivered to the customer will eventually have long-term negative consequences.
Efficient and effective organizations keep information on internal activities and track their success in delivering products or services to a standard that has been set and expected by customers.
In the case of Misty River, the company clearly needs to look at the results of its internal activities and find out why customers are leaving and what can be done to keep them. Only then can the company expect to attract and retain more customers and ensure that the customer experience in the spa is a positive one.
 
Exercise 105
Stodgy Industries Ltd. has barely made a profit over the past few years and is looking for ways to improve its results. It has hired a consultant who has suggested that the company introduce a concept called the balanced scorecard. This involves looking into all aspects of a company’s activities and seeks to integrate them into a cohesive manner that can focus on corporate goals.
The company’s president has called in the vice president of sales and vice president of production to discuss how the company can establish goals and meet those targets. The consultant says that there is a critical person missing from the meeting, which is the company’s controller.
Explain why or why not the controller is a critical component of any desire to introduce a balanced scorecard in an organization
 
Solution 105
A balanced scorecard seeks to establish a series of goals that an organization can set that will enable it to attain a comprehensive target. This target can have both financial (profit) or non-financial (quality) targets that need to be monitored along the way. Both of these two broad components require adequate tracking of data generated through the company’s activities.