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

 
SAE 114
How do managers achieve control in a small versus a large organization?
 
Solution 114
A smart manager in a small organization can make personal observations, ask good questions, and know how to evaluate the answers. But using this approach in a large organization would result in chaos. Thus, large businesses typically use a formal system of evaluation. These systems include such features as budgets, responsibility centres, and performance evaluation reports — all of which are features of managerial accounting. Decision-making is not a separate management function. Rather, it is the outcome of the exercise of good judgement in planning, directing, and controlling
 
SAE 115
Million Dollar Mills is a textile manufacturing firm. The company carefully prepares all financial statements in accordance with GAAP and gives a copy of all financial statements to each department. In addition to this, the company also keeps records on company quality control, safety, and environmental pollution.. It then prepares "scorecards" for each department indicating their performance. Recently, the financial impact of the second set of metrics was added to the scorecard, and the information is being used in the evaluation of employees for merit pay and promotions.
At the most recent employee meeting, Tyler Hanes, marketing manager, expressed his discomfort with the system. He said that there was no guarantee that this additional   information was fair, since there were no generally accepted principles for this types of metrics. He also said that it was kind of like keeping two sets of books—one following all legal requirements, and the other one being used internally.
 
Instructions
a)    Is it ethical to evaluate managers in the way described? Explain briefly.
b)    Name at least two safeguards the company could build into its system to ensure the ethical treatment of employees.
 
Solution 115
a)    It is ethical for a company to use all available data to evaluate managers, and even to collect data not routinely available. In fact, such a method seems preferable to one in which the company may only use specified financial data in its evaluation of a manager's performance. It does not imply a departure from GAAP, nor that the company does not actually use the information prepared according to GAAP. It supplements the standard reports, it does not replace them.
 
b)    The company should make certain that the appropriate information is calculated in the same way each period. All the relevant data should be collected and reported each period. New data should be limited. The qualitative information should be complemented, not replaced, by the regular financial information.
 
SAE 116
Should organizations only offer incentives based on financial goals? Explain why or why not.
 
Solution 116
Incentives should be tied to more than just profits. Unethical activities related to increasing incentive based compensation are not necessarily practised by employees with criminal intentions but rather by employees who are paid based on goals that may be unrealistic. Although there is no excuse for behaving unethically, compensation and performance programs should be designed to discourage unethical practices and limit opportunity for unethical behaviour. For instance, organizations should offer incentives based on more than just financial goals.
 
 
SAE 117
What are data analytics and data visualizations? Explain. 
 
Solution 117
Data analytics is the use of techniques, which often combine the use of software and the knowledge of statistics, to analyze data to make informed decisions.
Data visualizations is an analytical tool that often help managers acquire a more intuitive understanding of (1) the relationships between variables and (2) business trends.