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Management Accounting: Instructors' Manual
Management Accounting: Instructors' Manual
Gerald M. Myers
Pacific Lutheran University
MANAGEMENT
ACCOUNTING
FOURTH EDITION
Atkinson Kaplan Young
Using this manual Each chapter in the Instructors’ Manual begins with a restatement
of the learning objectives from the chapter. A chapter overview
summarizes the essential content of the chapter. For most chapters,
I have provided a series of “teaching tips.” Some of these identify
concepts which students traditionally find especially difficult. Other
teaching tips offer suggestions for coverage of particular topics
within the chapter. I have also identified cases relevant to each
chapter. The lists of cases are not exhaustive. Depending on course
focus, level, and instructor experience, there are a large number of
possible cases to use with a given chapter. Instructors are
encouraged to go beyond the suggested cases and use the online
resources of the Harvard Business School, The Richard Ivey
Business School at the University of Western Ontario, and the
European Case Clearing House to develop a sense of the breadth of
material available.
A chapter outline provides the basis for class discussion or lecture
notes, depending on an instructor’s preferences. The outlines are
organized by learning objectives for the chapter. Each chapter
concludes with a multiple-choice quiz, which can be printed for
class use. Solutions to the quizzes are provided on a separate page.
I would like to extend my thanks to Katie Rogers, Editorial
Assistant at Prentice Hall, and to Jeanne Molenaar, who did the
copy editing on this manual. Katie’s quick responses to my
questions and Jeanne’s sharp eye for my typographical errors are
much appreciated.
Gerald M. Myers
Renton, Washington
June 2003
Management Accounting:
Information That Creates
Value
Teaching tips • Stress to students that this chapter introduces many important
terms and concepts which form the foundation for an
understanding of the rest of the book.
• Stress to students that management accountants work in a
variety of organizations, such as small businesses, retailers, high-
technology electronic and software companies, capital-intensive
manufacturing companies, all types of service companies —
banks, insurance, transportation, health care,
telecommunications, and government and nonprofit
organizations.
• Clarify that, unlike financial accounting, management accounting
is an unconstrained process. Executives and managers have
almost complete discretion and flexibility in deciding the kinds of
information reported to people at different levels of the
organization, as well as the frequency with which such
information is provided. Note differences between financial and
management accounting listed in Exhibit 1-1.
To stress the different information needs for employees at
different levels of the organization, consider a local phone
company. Telephone operators work to performance standards
that measure how much time they should take to respond to a
customer request (such as a request for the phone number of a
restaurant or hotel), or, for front-line sales persons, success in
selling customers new features such as call waiting, call
forwarding, and voice mail.
Learning objective 2: II. The organization’s strategy is a major determinant in the
Understand how the nature of the management accounting information required for
organization’s strategy decision making.
drives the need for A. Introduce the notion of a value proposition – the set of
different types of
attributes that a firm tries to deliver to its customers.
management
accounting 1. The value proposition has several characteristics
information a. Cost to the buyer (i.e., “sales price”)
b. Quality (conformance with expectations; “quality is
what the customer says it is”)
c. Functionality and features (what ”bells and
whistles” come with the product?)
d. Service (attitudes of sales people, promptness of
delivery, etc.)
Learning Objective IV. Refer to the Cabinets By Design (CBD) illustration in the text.
5: Realize how Note that financial reports provided Diane with no information
management about the causes of her dilemma.
accountants can A. Diane needed financial information (profits were flat after
develop nonfinancial
4 years of growth) to alert her to the fact that there was a
information that can
predict and explain problem.
financial results B. More careful analysis was needed to figure out why profits
were flat.
C. Initial assumptions about the sustainability of competitors’
price cutting proved erroneous.
D. Diane and her managers needed a clear understanding of
CBD’s value proposition as well as knowledge of
customer perceptions about CBD’s fulfillment of its value
proposition.
E. Diane discovered problems:
1. Erroneous assumptions about the importance of sales
prices (customers were more price sensitive than she
had thought)
4. Front line workers/operators should see all of the following types of financial and
nonfinancial information EXCEPT:
a. cost of resources used in their production or service process.
b. financial statements of customers and suppliers.
c. quality and yield of the production or service process.
d. time required to perform their production or service process.
5. Senior executives of organizations should see all of the following types of financial and
nonfinancial information EXCEPT:
a. market share among targeted customer and market segments.
b. hourly quality and yield statistics for all manufacturing and service processes.
c. profit and cash flow statements of the enterprise.
d. monthly customer satisfaction and retention statistics.
8. Return on investment is
1. b
2. d
3. a
4. b
5. b
6. b
7. d
8. c
9. d
10. d