BALUCAN LUIGI E.

1. What is Strategic Cost Management?

ANSWER: Strategic Cost Management is the process of reduction total cost while improving
the strategic position of a business- which is accomplished by having a deep understanding of
which cost support the company’s strategic position and which cost either weaken it or have no
impact.

2. What are the broad objectives of managerial accounting?

ANSWER: The broad and most highlighted objective of Cost Management i to reduce the cost
expended by an organization while solidifying the strategic position of the firm. Cost
Management System will not only manage costs but also enhances profit consciousness. This
will help the company’s ability to serve its customers because division will become increasingly
more focused on operating more efficiently.
It also aims to capture a company’s total cost of production by assessing the variable cost of
each step of production as well as fixed cost such as lease expense.it is used internally by
management in order to make fully informed business decisions.

3. Who are the users of cost information?

ANSWER: Just like other accounting information, cost accounting information are used by
both internal and external users to come up with an effective and efficient decision with regards
to the business production or investments.

4. What is meant by controlling?

ANSWER: it is a function of management which helps to locate and check errors in order to
have corrective actions. It is the process of ensuring that actions performed are in compliance
to what is planned by the company. This is done to minimized deviation from standards and
ensures that the stated goals of the organization are achieve in a desired manner.

5. How do managerial accounting, financial accounting and cost accounting differ?

ANSWER:
Management Accounting assists the management in taking rational policy decisions and to
evaluate the impact of its decisions and actions. However, Cost accounting-analyse the
expenditures so as to ascertain the cost of various products manufactured by the firm and fix the
price. It also helps in controlling the cost and providing necessary costing information to
management for decision making while Financial Accounting is to keep records of financial
transaction.
 6. Explain the role of financial reporting in the development of managerial accounting. Why
has this changed in recent years?
ANSWER: Financial reporting helps in broadening the management accounting information by
providing data of all the external cost of a company to the managerial accountant. It also helps
in determining the value of goods and services that are provided by the customers.

7. The controller should be a member of the top management staff. Do you agree or disagree?
Explain.
ANSWER: YES, because a controller plays an important role to play in an organization
because he is in-charge of the design of a control system and complex the task for the chief
executive to undertake without the benefit of staff support.
8. What is ethical behaviour?
ANSWER: it is the way of demonstrating respect for key moral principles that includes
honesty, fairness, equality, dignity, diversity, and individual rights. If a business runs with this,
then you shouldn’t ever have any legal problems to worry about.

9. Briefly describe some of the common themes or pressures faced by executives who commit
corporate fraud.
ANSWER:

These are the factors that influenced any employee maybe on the top or in low ranking positions.
HOW DO GOOD PEOPLE GO BAD?
It is because they are unfairly treated or they are tempted to do so because of greed.
 10. Identify the forms of accounting certification. Which form of certification do you believe is the best
for a managerial accountant? Why?
ANSWER:
1. CERTIFIED PUBLIC ACCOUNTANT (CPA)
2. CERTIFIED FINANCIAL ANALYST (CFA)
3. CERTIFIED MANAGEMENT ACCOUNTANT (CMA)
4. ENROLLED AGENT (EA)
5. CERTIFIED FINANCIAL SERVICES AUDITOR (CFSA)
6. CERTIFIED INTERNAL AUDITOR (CIA)
7. CERTIFIED FRAUED EXAMINER (CFE)

My answer to that question is CMA or CPA because these two forms of accounting
certification are related to the job description of a Managerial Accountant. Accountancy has
wide range of courses that mostly covers all forms and CMA also have specified courses for
that field that was not deeply emphasized in accountancy. For me, it would be an advantage
if a Managerial Accountant is versatile in any field. He is able locate errors or fraud and
conduct corrective actions.

Exercises:

1. Each of the following scenarios requires the use of accounting information to carry out one or more
managerial accounting objective.

a. Laboratory Manger: An HMO approached me recently and offered us its entire range of blood
tests. It provided a price list revealing the amount it is willing to pay for each test. In many cases, the
prices are below what we normally charge. I need to know the costs of the individual tests to assess
the feasibility of accepting its offer and perhaps suggest some price adjustments on some of the tests.
DECISION MAKING

b. Operating Manager: This report indicates that we have 30% more defects than originally targeted.
An investigation into the cause has revealed the problem. We were using a lower-quality material
than expected, and the waste has been higher than normal. By switching to the quality level
originally specified, we can reduce the defects to the planned level. CONTROLLING

c. Divisional Manager: Our market share has increase because of higher-quality products. Current
projections indicate that we should sell 25% more units than last year. I want a projection of the
effect that this increase in sales will have on profits. There are two proposals that should help us
accomplish these goals, both of which involve investing in computer-aided manufacturing. I need to
know the future cash flows associated with each system and the effect each systems has on unit costs
and cycle time. PLANNING

d. Manager: At the last board meeting, we established an objective of earning a 25% return on sales. I
need to know how many units of our product we need to sell to meet his objective. Once I have the
estimated sales in units, we need to outline a promotional campaign that will take us where we want
to be. However, in order to compute the targeted sales in units, I need to know the expected unit
price and a lot of cost information. PLANNING

e. Manager: Perhaps the Harrison Medical Clinic should not offer a full range of medical services.
Some services seem to be having a difficult time showing any kind of profit. I am particularly
concerned about the mental health service. It has not shown a profit since the clinic opened. I want to
 know the impact on the other services we offer. Some of our patients may choose this clinic because
we offer a full range of services. DECISION MAKING
Required: Select the managerial accounting objective(s) that are applicable for each scenario:
planning, controlling (including performance evaluation), or decision making.

2. Jenna Suarez, the controller for Arben Company, has faced the following situations in the past two
weeks:

A .Ben Heald, head of production, wondered whether it would be more cost effective to buy parts partially
assembled or to buy individual parts and assemble them at the Arben factory.

MANAGEMENT ACCOUNTING ORIENTED

B. The president of Arben reminded Jenna that the stockholders’ meeting was coming up, and he needed her to
prepare a PowerPoint presentation showing the income statement and balance sheet information for last year.

FINANCIAL ACCOUNTING ORIENTED

C. Ellen Johnson, vice president of sales, has decided to expand the sales offices for next year. She sent Jenna
the information on next year’s rent and depreciation information for budgeting purposes.

MANAGEMENT ACCOUNTING ORIENTED

D. Jenna’s assistant, Mike, received the information from Ellen on depreciation and added it to depreciation
expenses and accumulated depreciation on office equipment.

FINANCIAL ACCOUNTIG ORIENTED

E. Jenna compared the budgeted spending on materials used in production with the actual spending on materials
used in production. Materials spending were significantly higher than expected. She set up a meeting to discuss
this outcome with Ben Heald so that he could explain it.

MANAGEMENT ACCOUNTING ORIENTED

Required: Determine whether each request is relatively more managerial accounting oriented or
financial accounting oriented.

3. Manager: If I can reduce my costs by P40,000 during this last quarter, my division will show a profit
that is 10% above the planned level, and I will receive a P10,000 bonus. However, given the projections for the
fourth quarter, it does not look promising. I really need that P10,000. I know of one way that I can quality. All I
have to do is lay off my three most expensive salespeople. After all, most of the orders are in for the fourth
quarter, and I can always hire new sales personnel at the beginning of the next year.

Questions:

a. What is the right choice for the manager to make?

The manager must not take his three salespeople out of the company for his own benefits. It can also
accumulate spending and cost for hiring new salespeople because it involves new training program. He
must have a long term plan for the business because firing now is just for short term way of manipulating
the business expenditures.

b. Why did the ethical dilemma arise?

This is due to the personal desire of the manager in receiving high bonus. This move can affect the
profitability of the business because expenses will increase and the lay offing of salesperson can
have a change in its operation.
C. Is there any way to redesign the accounting reporting system to discourage the type of behaviour that the
manager is contemplating?

Strategic planning is an essential way in increasing profitability of the business and I think this is not
just the focus of the manager. In order to achieve higher profits, he must first build a team. It is important for a
manager to build relationship with its employee. Through these things he will be able to have a better
connection with his employees and can have more brains to think of strategies for profit maximizing.

4. The Bedron Company is a closely held investment service group that has been quite successful over the
past 5 years, consistently providing most members of the top management group with 50% bonuses. In addition,
both the chief financial officer and the chief executive officer received 100% bonuses. Bedron expects this trend
to continue.

Recently, Bedron’s topm management group, which holds 35% of the outstanding shares of common stock, has
learned that a major corporation is interested in acquiring Bedron. The other corporation’s initial offer I
attractive and is several dollars per share higher than Bedron’s current share price. One member of the
management told a group of employees under him about the potential offer. He suggested that they might want
to purchase more Bedron stock at the current price in anticipation of the takeover offer.

Questions:

a. Do you think that the employees should take the action suggested by their boss? Suppose the action
is prohibited by Bedron’s code of ethics.
No because it is against the Bedron’s Code of ethics. Profit maximizing in an illegal way is a big no
because it is against the rights of the consumer, labor code and the government.

b. Now suppose that it is not prohibited by Bedron’s code of ethics. Is the action acceptable in that case?

No it is not acceptable even if it is not prohibited in the Bedron’s Code of ethics because the action is illegal
and punishable by law.