Question

For each of the following activities, explain which of the objectives of managerial accounting activity is involved. In some cases, several objectives may be involved.

1. Developing a bonus reward system for the managers of the various offices of the American Automobile Association.

2. Comparing the actual and planned cost of a consulting engagement completed by an engineering firm such as Allied Engineering

3. Determining the cost of manufacturing a tennis racket at Wilson Sporting Goods

4. Measuring the cost of the inventory of digital cameras on hand in a store.

5. Estimating the annual operating cost of a newly proposed branch bank.

6. Measuring the following costs incurred during one month in a hotel: a. Wages of table-service personnel. b. Property taxes.

7. Comparing a room rate structure, occupancy rate, and restaurant patronage with industry averages.

Answer 1

1. Developing a bonus reward system for the managers of the various offices of the American Automobile Association: Developing a bonus reward system for managerial personnel is a way of encouraging and motivating managers and all other employees so that they work for the fulfillment of the organization's goals. In order to serve the purpose effectively, the bonus system must provide various incentives for managers to work in the direction that helps them achieve the objectives and goals.

2. Comparing the actual and planned cost of a consulting engagement completed by an engineering firm such as Allied Engineering. Comparing actual results and planned costs is consistent with two objectives of managerial accounting activity: (1) assisting managers in controlling the operations, and (2) in measuring the performance of the various activities, subunits, managers, and other employees within the organization.

3. Determining the cost of manufacturing a tennis racket at Wilson Sporting Goods. It is especially closely related to the objective of providing data and information which is useful for the purpose of decision making and the planning activity.

4, Measuring the cost of the inventory of digital cameras on hand in a store. Measuring inventory costs is most closely linked with the first two objectives of managerial accounting activity: (1) providing information for decision making and planning, and (2) assisting managers in directing and controlling operational activities. Since inventory costs are of great help in external financial reports, they are also relevant in measuring the performance of managers and subunits within the organization.

5.Estimating the annual operating cost of a newly proposed branch bank: Estimating costs is particularly relevant to the objective of providing information with the aim of helping in the decision making process and the planning activity.

6.Measuring the following costs incurred during one month in a hotel: a. Wages of table-service personnel. b. Property taxes. Measuring operating costs is relevant to each and every objective of the managerial accounting activity.

7. Comparing a room rate structure, occupancy rate, and restaurant patronage with industry averages. Comparing operating statistics such as those mentioned for a hotel is particularly relevant to the following objective of managerial accounting: Understanding and Assessing the organization's position in the competitive environment and working in co-operation with the other managerial staff in order to secure the long-run competitiveness of the organization in its industry.