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Tutorial Questions Week 2

Management accountants can help improve quality and timeliness by recording, reporting, analyzing, and evaluating an organization's current performance and the costs and benefits of new quality initiatives. For a company considering several strategic decisions, the management accountant can provide information on the costs and competitive advantages associated with each option to help identify the best strategy. This includes the costs to develop, produce, and sell new products and lines as well as how sensitive customers are to price, quality, and uniqueness. The accountant analyzes the organization's productivity, efficiency, and costs relative to competitors for each alternative.

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julia cheng
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58 views

Tutorial Questions Week 2

Management accountants can help improve quality and timeliness by recording, reporting, analyzing, and evaluating an organization's current performance and the costs and benefits of new quality initiatives. For a company considering several strategic decisions, the management accountant can provide information on the costs and competitive advantages associated with each option to help identify the best strategy. This includes the costs to develop, produce, and sell new products and lines as well as how sensitive customers are to price, quality, and uniqueness. The accountant analyzes the organization's productivity, efficiency, and costs relative to competitors for each alternative.

Uploaded by

julia cheng
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Tutorial Questions Week 2

1.1 Explain the way in which management accountants help to improve quality and to
ensure that products are delivered on time.

Solution:
Management accountants can help improve quality and achieve timely product deliveries by
recording and reporting an organisation’s current quality and timeliness and by analysing
and evaluating the costs and benefits—both financial and non-financial—of new quality
initiatives such as TQM, relieving bottleneck constraints or providing faster customer service.

1.2 Planning and control decisions


Gregor Ltd makes and sells brooms and mops. It takes the following actions, not necessarily
in the order given. For each action (a–e), state whether it is a planning decision or a control
decision.
a. Gregor asks its advertising team to develop fresh advertisements to market its
newest product.
b. Gregor calculates customer satisfaction scores after introducing its newest product.
c. Gregor compares the costs it actually incurred with the costs it expected to incur for
the production of the new product.
d. Gregor’s design team proposes a new product to compete directly with the Swiffer.
e. Gregor estimates the costs it will incur to distribute 30 000 units of the new product
in the first quarter of next financial year.

Solution:
Planning and control decisions

Action Decision
a. Planning
b. Control
c. Control
d. Planning
e. Planning

1.3 Professional ethics


Heather Scott is division management accountant and Martin Andrews is division manager
of the Walk Smart Shoe Company. Scott has line responsibility to Andrews, but she also has
staff responsibility to the company management accountant.
Andrews is under severe pressure to achieve the budgeted division profit for the year. He
has asked Scott to book $200 000 of revenues on 30 June. The customers’ orders are firm
but the shoes are still in the production process. They will be shipped on or around 4 July.
Andrews says to Scott: ‘The key event is getting the sales order, not shipping the shoes. You
should support me, not obstruct me in reaching my division goals.’

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Required
1. Describe Scott’s ethical responsibilities.
2. What should Scott do if Andrews gives her a direct order to book the sales?

Solution:
Professional ethics
1. Scott’s ethical responsibilities are well summarised in the CIMA’s code of ethics for
professional management accountants which can be found at:
www.cimaglobal.com/Documents/code%20FINAL.pdf. Areas of ethical responsibility
include the following:
 Integrity
 Objectivity
 Professional competence and due care
 Confidentiality
 Professional behaviour.

The ethical standards related to Scott’s current dilemma are Integrity, Objectivity,
Professional competence and due care, Confidentiality and Professional behaviour.
Using the integrity standard, Scott should carry out duties ethically and communicate
unfavourable as well as favourable information and professional judgements or
opinions. Competence and due care, and professional behaviour, demand that Scott
perform her professional duties in accordance with relevant laws, regulations and
technical standards. Objectivity requires that Scott report information fairly and
objectively. Scott should refuse to book the A$200 000 of sales until the goods are
shipped. Both financial accounting and management accounting principles maintain
that sales are not complete until the title is transferred to the buyer.

Scott should refuse to follow Andrews’ orders. If Andrews persists, the incident should
be reported to the Company Management Accountant. Support for line management
should be wholehearted, but it should not require unethical conduct.

1.4 Strategic decisions and management accounting


A series of independent situations in which a firm is about to make a strategic decision
follow.

Decisions
a. Prestige Computers is trying to decide whether to produce and sell a new home
computer software package that includes the ability to interface with a thermostat
and a refrigerator. There is no such software currently on the market.
b. Mayberry Pharmaceuticals has been asked to provide a ‘store brand’ facial cream
that will be sold at discount retail stores.
c. Hellophones is about to decide whether to launch the production and sale of a
mobile phone with standard features.
d. Georges Delicatessen is entertaining the idea of developing a special line of gourmet
pasta sauce made with sun-dried tomatoes, mushrooms and truffle oil.

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Required
1. For each decision, state whether the company is following a cost-leadership or a
differentiated-product strategy.
2. For each decision, discuss what information the management accountant can
provide about the source of competitive advantage for these firms.

Solution:
Strategic decisions and management accounting
1. The strategies that the companies are following in each case are:
a. Differentiated product strategy
b. Low price strategy
c. Differentiated product strategy
d. Low price strategy

2. The following are examples of information the management accountant can provide
for each strategic decision.
a. Cost to develop, produce and sell new software
Premium price that customers would be willing to pay due to product
uniqueness
Price of basic software
Price of closest competitive software
Cash needed to develop, produce and sell new software

b. Cost of producing the ‘store-brand’ facial cream


Productivity, efficiency and cost advantages relative to competition
Prices of competitive products
Sensitivity of target customers to price and quality
How the market for facial cream is growing

c. Cost to manufacture and sell the cell phone


Productivity, efficiency and cost advantages relative to competition
Prices of competitive cell phones
Sensitivity of target customers to price and quality
The production capacity of Hello phones and its competitors

d. Cost to produce and sell new line of gourmet pasta sauce


Premium price that customers would be willing to pay due to product
uniqueness
Price of basic ingredients
Price of closest competitive product

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