Chapter 1
In-Class Discussion Questions and Exercises
Discussion Questions
Question 1. Value chain and classification of costs, fast food restaurant.
Burger King, a hamburger fast food restaurant, incurs the following costs:
a. Cost of oil for the deep fryer
b. Wages of the counter help who give customers the food they order
c. Cost of the costume for the King on the Burger King television commercials
d. Cost of children’s toys given away free with kids’ meals
e. Cost of the posters indicating the special “two cheeseburgers for $2.50”
f. Costs of frozen onion rings and French fries
g. Salaries of the food specialists who create new sandwiches for the restaurant chain
h. Cost of “to-go” bags requested by customers who could not finish their meals in the
restaurant
Classify each of the cost items (a–h) as one of the business functions of the value chain.
Question 2. Key success factors.
Grey Brothers Consulting has issued a report recommending changes for its newest
manufacturing client, Energy Motors. Energy Motors currently manufactures a single product,
which is sold and distributed nationally. The report contains the following suggestions for
enhancing business performance:
a. Add a new product line to increase total revenue and to reduce the company’s overall risk.
b. Increase training hours of assembly line personnel to decrease the currently high volumes of
scrap and waste.
c. Reduce lead times (time from customer order of product to customer receipt of product) by
20% in order to increase customer retention.
d. Reduce the time required to set up machines for each new order.
e. Benchmark the company’s gross margin percentages against its major competitors.
Link each of these changes to the key success factors that are important to managers.
Question 3. Planning and control decisions.
Conner Company 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. Conner asks its marketing team to consider ways to get back market share from its newest
competitor, Swiffer.
b. Conner calculates market share after introducing its newest product.
c. Conner compares costs it actually incurred with costs it expected to incur for the production
of the new product.
d. Conner’s design team proposes a new product to compete directly with the Swiffer.
e. Conner estimates the costs it will incur to sell 30,000 units of the new product in the first
quarter of next fiscal year.
Question 4. Five-step decision-making process, manufacturing.
Garnicki Foods makes frozen dinners that it sells through grocery stores. Typical products
include turkey dinners, pot roast, fried chicken, and meat loaf.
The managers at Garnicki have recently introduced a line of frozen chicken pies. They take the
following actions with regard to this decision.
a. Garnicki performs a taste test at the local shopping mall to see if consumers like the taste of
its proposed new chicken pie product.
b. Garnicki sales managers estimate they will sell more meat pies in their northern sales
territory than in their southern sales territory.
c. Garnicki managers discuss the possibility of introducing a new chicken pie.
d. Garnicki managers compare actual costs of making chicken pies with their budgeted costs.
e. Costs for making chicken pies are budgeted.
f. Garnicki decides to introduce a new chicken pie.
g. To help decide whether to introduce a new chicken pie, the purchasing manager calls a
supplier to check the prices of chicken.
Classify each of the actions (a–g) as a step in the five-step decision-making process (identify the
problem and uncertainties, obtain information, make predictions about the future, choose among
alternatives, implement the decision, evaluate performance, and learn). The actions are not listed
in the order they are performed.
Question 5. Strategic decisions and management accounting. A series of independent
situations in which a firm is about to make a strategic decision follow.
Decisions:
a. Roger Phones is about to decide whether to launch production and sale of a cell phone with
standard features.
b. Computer Magic is trying to decide whether to produce and sell a new home computer
software package that includes the ability to interface with a sewing machine and a vacuum
cleaner. There is no such software currently on the market.
c. Christina Cosmetics has been asked to provide a “store brand” lip gloss that will be sold at
discount retail stores.
d. Marcus Meats is entertaining the idea of developing a special line of gourmet bologna made
with sun dried tomatoes, pine nuts, and artichoke hearts.
1. For each decision, state whether the company is following a low price 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.
Multiple-Choice Questions
1) Management accounting:
A) focuses on estimating future revenues, costs, and other measures to forecast activities and
their results
B) provides information about the company as a whole
C) reports information that has occurred in the past that is verifiable and reliable
D) provides information that is generally available only on a quarterly or annual basis
2) Managers use management accounting information to ________ strategy.
A) choose
B) communicate
C) implement
D) All of these answers are correct.
3) Which of the following people is LEAST likely to use management accounting information?
A) the controller
B) a shareholder evaluating a stock investment
C) the treasurer
D) an assembly department supervisor
4) Cost accounting:
A) provides information on the efficiency of factory labor
B) provides information on the cost of servicing commercial customers
C) provides information on the performance of an operating division
D) All of these answers are correct.
5) ________ is the generation of, and experimentation with, ideas related to new products,
services, or processes.
A) Research and development
B) Design of products, services, or processes
C) Production
D) Marketing
6) ________ is the detailed planning and engineering of products, services, or processes.
A) Distribution
B) Design of products, services, or processes
C) Production
D) Marketing
7) ________ is the detailed planning and engineering of products, services, or processes.
A) Distribution
B) Design of products, services, or processes
C) Production
D) Marketing
8) ________ describe(s) the flow of goods, services, and information from the purchase of
materials to the delivery of products to consumers, regardless of whether those activities occur in
the same organization or with other organizations.
A) Supply chain
B) Key success factors
C) Continuous improvement
D) Customer focus
9) ________ is a philosophy in which management improves operations throughout the value
chain to deliver products and services that exceed customer expectations.
A) Cost-benefit approach
B) Customer focus
C) Customer relationship management
D) Total quality management
10) Customers are demanding improved performance related to:
A) reduced costs
B) both reduced costs and increased quality
C) lower costs, improved quality, and improved customer service
D) All of these answers are correct.
11) A budget:
A) is a quantitative expression of a proposed management plan
B) helps translate strategy into actions
C) aids in the coordination and communication among various business functions
D) All of these answers are correct.
12) Linking rewards to performance:
A) helps to motivate managers
B) allows companies to charge premium prices
C) should only be based on financial information
D) All of these answers are correct.
13) Control measures should:
A) be set and not changed until the next budget cycle
B) be flexible to allow for employees who are slackers
C) be kept confidential from employees so that competitors don't have an opportunity to gain a
competitive advantage
D) be linked by feedback to planning
14) The scenario that resources should be spent if the expected benefits to the company exceed
the expected costs describes:
A) cost-benefit approach
B) behavioral and technical considerations
C) balanced scorecard
D) different costs for different purposes
15) The person(s) directly responsible for attaining of organizational objectives is/are:
A) the treasurer
B) line management
C) the controller
D) the chief financial officer
