Horngren’s Cost Accounting A Managerial Emphasis 17th Global Edition by Srikant M. Datar test bank

 
b.    Planning: Decisions regarding future staffing needs.
        Control: Decision regarding whether the recent sales promotion led to an increase in revenue.
 
c.     Planning: Decision of the store manager about whether to change the types of retail items carried.
        Control: Decision of the store manager regarding performance of the analyst that prepared the special study.
Diff: 3
Objective:  4
AACSB:  Application of knowledge
 
32) Briefly explain the planning and control activities in management accounting. How are these two activities linked to each other?
Answer:  Planning business operations relates to designing, producing, and marketing a product or service. This includes preparing budgets and determining the prices and cost of products and services. A company must know the cost of each product and service to decide which products to offer and whether to expand or discontinue product lines.
 
Controlling business operations includes comparing actual results to the budgeted results and taking corrective action when needed.
 
Feedback links planning and control. The control function provides information to assist in better future planning.
Diff: 3
Objective:  4
AACSB:  Analytical thinking
 
33) Explain how a budget can help management implement strategy.
Answer:  A budget is a planning tool, a quantitative expression of a plan of action. First, actions are planned and then they are communicated to the entire organization.
 
The budget also helps with coordination.
Diff: 1
Objective:  4
AACSB:  Analytical thinking
 
34) What is planning in decision making? Explain how a budget helps in planning.
Answer:  Planning consists of selecting an organization's goals and strategies, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to achieve them to the entire organization. Management accountants serve as business partners in these planning activities because they understand the key success factors and what creates value.
The most important planning tool when implementing strategy is a budget. A budget is the quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan. It helps in the production, distribution, and customer-service costs to achieve the company's sales goals; the anticipated cash flows; and the potential financing needs.
Diff: 3
Objective:  4
AACSB:  Analytical thinking
 
35) Complete a performance report for the month of May, 2020, for First News Corp, a regional newspaper showing four columns: 1) Actual Result; 2) Budgeted Amount; 3) Difference: Actual Result minus Budgeted Amount; 4) Difference as a Percentage of Budgeted Amount, given the following data:
 
Actual pages sold
600

Budgeted advertising pages
510

Actual Advertising revenue
$4,200,000

Budgeted Advertising revenue
$4,000,000

 
Does the report indicate any cause for managerial investigation?
Answer:  The performance report should look something like the following:
 
 
Actual
Result
(1)
Budgeted Amount
(2)
Difference (Actual Result - Budgeted Amount)
(3) = (1) - (2)
Difference as a Percentage of Budgeted Amount (4) = (3) / (2)

Advertising pages sold
600 pages
510 pages
90 pages Favorable
17.6% Favorable

Average rate per page (Advertising Revenues) / (Advertising pages sold)
$7,000
$7,843.14
$843.14 Unfavorable
10.75% Unfavorable

Advertising revenues
$4,200,000
$4,000,000
$200,000 Favorable
5% Favorable

 
The overall 5% favorable difference in advertising revenue is caused by offsetting differences in advertising pages sold (favorable) and the average rate per page (unfavorable). The performance report highlights the favorable increase in the advertising pages sold. The percentage drop in advertising revenue per page is marginal in comparison with the favorable increase of the pages sold.
Diff: 3
Objective:  4
AACSB:  Application of knowledge
 
Objective 1.5
 
1) Which of the following is a guideline used by management accountants to assist in strategic and operational decision making?
A) employing a cost-benefit approach
B) employing a supply chain approach
C) employing a six sigma approach
D) employing a regression approach