Question

Question

You are the manager. What information should you request from the management accounting department? How will this information help you make a decision to solve this problem? If you use outside resources, please cite them using APA format.

Details

Managerial Accounting Scenario 1

The manager of a fabric store has noticed a considerable increase in the amount of defective fabric being scrapped by his store. Clerks notice the defects (such as irregularities in the weave or color of fabric) when they cut yardage from bolts of fabric. These defects usually affect only a small portion of the fabric on a bolt. Therefore, when a clerk discovers a defect, the “bad spot” is cut from the bolt. The clerk fills out a defect slip, which includes the amount of defective fabric (in yards), the retail price per yard, and the inventory control number. The defect slip is attached to the fabric and put in a “defects” bin in the storeroom. Once a month, the assistant manager sends the defect slips to the accounting department and packages the bad fabric for sale as scrap material. The accounting department uses the defect slips to write off the defective inventory in the accounting records.

What information could the manager request from the management accounting department that might help in attacking the problem of increasing defects?

Managerial Accounting Scenario 2

The top management of a fast-food hamburger chain is considering installing point-of-sale machines that will allow customers to pay for food with an automated teller-machine card. Previously, the restaurant has accepted only cash.

What information could the management accounting department supply to assist management with this decision?

Managerial Accounting Scenario 3

B Squared Inc. manufactures and sells awnings all over the southeastern United States. Each state has a sales representative who is paid on commissions. Each salesperson is responsible for checking the credit of customers as part of the sales process. Buddy has been the top salesman for the past 5 years in a row. You have been hired as the new sales manager and after meeting with your sales representatives, there are some questions being raised as to why Buddy is the top salesperson and the legitimacy of some of the sales being reported. What information would you request from the accounting department to help confirm or negate these accusations?

Managerial Accounting Scenario 4

You are the newly hired production manager for the XYZ Company manufacturing plant and have been ask by the VP of manufacturing to provide a budget for the next quarter production for overhead cost. What information will you need from accounting to assist in building this report?

Managerial Accounting Scenario 5

You are the newly hired production manager for the XYZ Company manufacturing plant and have been ask by the VP of manufacturing to provide a budget for the next quarter production for prime cost. What information will you need from accounting to assist in building this report?

Answer 1

Financial accounting focuses on providing historical financial information to external users. External users are those outside the company, including owners (e.g., shareholders) and creditors (e.g., banks or bondholders). Financial accountants reporting to external users are required to follow U.S. Generally Accepted Accounting Principles (U.S. GAAP), a set of accounting rules that requires consistency in recording and reporting financial information. This information typically summarizes overall company results and does not provide detailed information.

Managerial accounting focuses on internal users—executives, product managers, sales managers, and any other personnel within the organization who use accounting information to make important decisions. Managerial accounting information need not conform with U.S. GAAP. In fact, conformance with U.S. GAAP may be a deterrent to getting useful information for internal decision-making purposes. For example, when establishing an inventory cost for one or more units of product (each jersey or hat produced at Sportswear Company), U.S. GAAP requires that production overhead costs, such as factory rent and factory utility costs, be included. However, for internal decision-making purposes, it might make more sense to include nonproduction costs that are directly linked to the product, such as sales commissions or administrative costs.