72. What can a company do to increase the likelihood of its employees being ethical in all their undertakings?
ANSWER:
Companies can establish a culture and atmosphere of ethical business practices by rewarding those employees that are honest, fair, and act with integrity. They can establish their own code of professional conduct that sets out the organizational purpose, beliefs, values, and expectations of employees. The code of conduct should be known, visible, and enforced. Companies should hire certified professionals, when appropriate. Professions have codes of conduct and standards appropriate to their duties. Companies can incorporate ethical values into the selection criteria for employee recruitment.
73. Explain what is meant by confidentiality and why it is important.
ANSWER:
Management accountants are entrusted with sensitive information about their companies and their dealings with outside firms. Confidentiality standards require that accountants honor this trust. They cannot disclose confidential information without the permission of the company, unless legally required to do so. They must monitor their subordinates to make sure that they are upholding the confidentiality standard. They may not use or appear to use confidential information acquired in their work for unethical or illegal advantage.
74. Describe a cost management information system, its objectives, and major subsystems.
ANSWER:
The cost management information system is an accounting information subsystem that is primarily concerned with producing outputs for internal users using inputs and processes needed to satisfy management objectives.
The objectives are as follows:
1.
To provide information for costing out services, products, and other objects of interest to management.
2.
To provide information for planning and control.
3.
To provide information for decision making.
The major subsystems of a cost management information system are the cost accounting information system and the operational control information system.
75. Discuss the change in composition of total manufacturing costs during the last century, using the three major cost categories: direct materials, direct labour, and manufacturing overhead.
ANSWER:
1.
Direct materials, the cost of primary raw materials converted into finished goods, have increased slightly as organizations purchase components that they formerly fabricated.
2.
Direct labour, the wages earned by production employees for the time they spend converting raw materials into finished products, has decreased significantly as employees spend less time physically working on products and more time supporting automated production activities.
3.
Manufacturing overhead, which includes all manufacturing costs other than direct materials and direct labour, has increased significantly due to automation, product diversity, and product complexity.
76. Briefly discuss the three dimensions on which competition takes place.
ANSWER:
Competition takes place on the dimensions of price/cost, service, and quality. Well-informed buyers routinely search the world for the product or service that best fits their needs on the three interrelated dimensions. To compete on the basis of price, the seller must carefully manage costs. Otherwise, reduced prices might squeeze product margins to such an extent that a sale becomes unprofitable. Quality refers to the degree to which products or services meet the customer's needs. Service includes such things as timely delivery, helpfulness of sales personnel, and subsequent support.
77. Identify the trends impacting management accounting and discuss the implications for management accounting.
ANSWER:
Changes in the manufacturing environment, brought about by the implementation of JIT manufacturing, increasing quality requirements, product diversity, diminishing product life cycles, automation, and advances in information technology, are having a significant influence on the management accounting environment. Many traditional management accounting practices will be altered because of the revolution taking place among many manufacturing firms. Deregulation and growth in the service sector of our economy are also increasing the demand for management accounting practices.
78. What is the role of management accounting information in strategic cost management?
ANSWER:
Firms generally choose a strategy of cost leadership and product differentiation. Cost leadership involves providing better value to customers at a lower cost than its competitors. Through activity-based costing, product costs are more accurate by first tracing costs to activities and then to products and customers. Process value analysis tries to determine the nature of activities, monitors the costs of the activities to more efficiently perform the activities that add value to the product, and eliminates the activities that do not add value. Management accounting information plays a key role in strategic cost management. This information is used to accumulate and monitor costs to achieve cost leadership. Product differentiation needs management accounting information to determine whether the cost of added value to the customer exceeds the firm's cost to provide the differentiation.