Chapter 1-Activity 1 (Minglana, Mitch T.)

Minglana, Mitch T.
BSA 301
MANAGERIAL ACCOUNTING
CHAPTER 1: ACTIVITY: 1
1–1 How does managerial accounting differ from financial accounting?
ANSWER:
Managerial accounting and financial accounting are two of the most prominent
branches of accounting. They both deal with processing information which is useful in
decision-making; however, they have notable differences that distinguish them from
each other.
Managerial accounting processes economic information to be used by management in

making decisions. Financial accounting involves the preparation of general-purpose
financial statements used by various users in making informed decisions.
1–2 Pick any major television network and describe some planning and control
activities that its managers would engage in.
ANSWER:
One of famous television network here in the Philippines is the ABS CBN. So in this
network, the manager will engage in the planning activities such as in (1) estimating the
advertising revenues for a future period, (2) estimating the total expenses for a future
period, including the salaries of all actors, news reporters, and sportscasters, (3) planning
how many new television shows to introduce to the market, (4) planning each television
show's designated broadcast time slot, and (5) planning the network’s advertising
activities and expenditures.
On the other hand, it control activities, the managers would engage in (1) comparing the
actual number of viewers for each show to its viewership projections, (2) comparing the
actual costs of producing a made-for-television movie to its budget, (3) comparing the
revenues earned from broadcasting a sporting event to the costs incurred to broadcast that
event, (4) comparing the actual costs of running a production studio to the budget, and (5)
comparing the actual cost of providing global, on-location news coverage to the budget.
1–3 If you had to decide whether to continue making a component part or to begin
buying the part from an overseas supplier, what quantitative and qualitative factors
would influence your decision?
ANSWER:
If I had to decide whether to continue making a component part or to begin buying the
part from an overseas supplier, I would most likely focused on the quantitative analysis
which is to determine the potential cost savings from buying the part rather than
making it. The qualitative analysis would focus on broader issues such as strategy, risks,
and corporate social responsibility. For example, if the part is critical to the organization's
strategy, it may continue making the part regardless of any potential cost savings from
outsourcing. If the overseas supplier might create quality control problems that could
threaten the end consumers' welfare, then the risks of outsourcing may swamp any cost
savings. Finally, from a social responsibility standpoint, a company may decide against
outsourcing if it would result in layoffs at its domestic manufacturing facility.
1–4 Why do companies prepare budgets?
ANSWER:
The companies need to prepare budgets in order to cover the expenses and other
expenditures in the future. Budgets are used for various purposes, such as forcing
managers to plan ahead, allocating resources across departments, coordinating activities
across departments, establishing goals that motivate people, and evaluating and
rewarding employees. These various purposes often conflict with one another, which
makes budgeting one of management's most challenging activities.
1–5 Why is managerial accounting relevant to business majors and their future
careers?
ANSWER:
Managerial accounting is very relevant to business majors and their careers because as
soon as they land to a job that holds managerial position or in line in managing the
company or business, they must possess skills that know how to plan, control, and
make decisions for the company. If managers wish to influence co-workers across the
organization, they must be able to speak in financial terms to justify their proposed
courses of action.
1–6 Why is managerial accounting relevant to accounting majors and their future
careers?
ANSWER:
Managerial accounting is relevant to accounting majors and their future careers

because as the Institute of Management Accountant (IMA), estimates that 80% of
accountants work in non-public accounting environments. Accountants that work in
corporate, non-profit, and governmental organizations are expected to use their planning,
controlling, and decision-making skills to help improve performance.
1–7 Pick any large company and describe its strategy using the framework in the
chapter.
ANSWER:
McDonald’s main competitive advantage relies on a cost leadership strategy. The

company is able to utilize economies of scale and produce products at a low cost and, as a
result, offer products at a lower selling price than that of its competitors.
Louis Vuitton’s advantage relies on both differentiation and a differentiation-focus

strategy. The company is able to be a leader in the luxury market and command premium
prices through product uniqueness.
Walmart’s advantage relies on a cost leadership strategy. Walmart is able to offer

“everyday low prices” through economies of scale.
1–8 Why do management accountants need to understand their company’s strategy?
ANSWER:
The management accountants need to understand their company’s strategy to be able to

know or to project planning, controlling, and decision. For example, if a company that
competes as a product leader plans to grow too quickly, it may diminish quality and
threaten the company's customer value proposition. A company that competes in terms of
operational excellence would select control measures that focus on time-based
performance, convenience, and cost. A company that competes in terms of customer
intimacy may decide against outsourcing employee training to cut costs because it might
diminish the quality of customer service.
1–9 Pick any large company and describe three risks that it faces and how it responds
to those risks.
ANSWER:
An example of large company that has three risks that it faces and their strategy in
responding to those risks is based on Nike, which has suppliers in over 40 countries. One
risk that Nike faces is that its suppliers will fail to manage their employees in a socially
responsible manner. Nike conducts Management Audit Verifications at its overseas
plants to minimize this risk. Nike faces the risk that unsatisfactory environmental
performance will diminish its brand image. The company is investing substantial
resources to develop products that minimize adverse impacts on the environment.
Nike faces the risk that customers will not like its new products. The company uses focus
group research to proactively assess the customers' reaction to its new products.
1–10 Provide three examples of how a company’s risks can influence its planning,
controlling, and decision-making activities.
ANSWER:
The following are the examples of how a company’s risks can influence in their planning,
controlling and decision making activities. First, the Airlines that face the risk those large
spikes in fuel prices will lower their profitability. Therefore, they may reduce this risk by
spending money on hedging contracts that enable them to lock-in future fuel prices that
will not change even if the market price increases. Second, Steel manufacturers face
major risks related to employee safety, so they create and monitor control measures
related to occupational safety compliance and performance. Third,
Restaurants face the risk that an economic downturn will reduce customer traffic and
lower sales. They reduce this risk by choosing to create menus during economic
downturns that offer more low-priced entrees.
1–11 Pick any large company and explain three ways that it could segment its
companywide performance.
ANSWER:
Procter & Gamble could segment its performance by product category (e.g., beauty and
grooming, household care, and health and well-being), product line (e.g., Crest, Tide, and
Bounty), and stock keeping units (e.g., Crest Cavity Protection toothpaste, Crest Extra
Whitening toothpaste, and Crest Sensitivity toothpaste).
1–12 Locate the website of any company that publishes a corporate social
responsibility report (also referred to as a sustainability report). Describe three
nonfinancial performance measures included in the report. Why do you think the
company publishes this report?
ANSWER:
An example of company that publishes a corporate social responsibility (CSR) is the

Timberland Company; it publishes quarterly corporate social responsibility (CSR)
metrics (see www.earthkeeper.com/CSR/csrdownloads. Three of those metrics include
metric tons of carbon emissions, the percentage of total cotton sourced that is organic and
renewable energy use as a percent of total energy usage.
Timberland's corporate slogan of "doing well by doing good" suggests that the company
publishes CSR reports because it believes that its financial success (i.e., doing well) is
positively influenced by its social and environmental performance (i.e., doing good).
1–13 Why do companies that implement Lean Production tend to have minimal
inventories?
ANSWER:
Companies that use lean production only make units in response to customer orders. They
produce units just in time to satisfy customer demand, which results in minimal
inventories.
1–14 Why are leadership skills important to managers?
ANSWER:
Organizations are managed by people that have their own personal interests, insecurities,
beliefs, and data-supported conclusions that ensure unanimous support for a given course
of action is the exception rather than the rule. Therefore, managers must possess strong
leadership skills if they wish to channel their co-workers' efforts towards achieving
organizational goals.
1–15 Why is ethical behavior important to business?
ANSWER:
Ethical behavior is the lubricant that keeps the economy running. Without that lubricant,
the economy would operate much less efficiently—less would be available to consumers,
quality would be lower, and prices would be higher.

Chapter 1-Activity 1 (Minglana, Mitch T.)

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Chapter 1-Activity 1 (Minglana, Mitch T.)

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Minglana, Mitch T.

1–1 How does managerial accounting differ from financial accounting?

Managerial accounting processes economic information to be used by management in

1–4 Why do companies prepare budgets?

Managerial accounting is relevant to accounting majors and their future careers

McDonald’s main competitive advantage relies on a cost leadership strategy. The

Louis Vuitton’s advantage relies on both differentiation and a differentiation-focus

Walmart’s advantage relies on a cost leadership strategy. Walmart is able to offer

1–8 Why do management accountants need to understand their company’s strategy?

The management accountants need to understand their company’s strategy to be able to

An example of company that publishes a corporate social responsibility (CSR) is the

1–14 Why are leadership skills important to managers?

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