To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CHAPTER INTRODUCTION TO COST ACCOUNTING Learning Objectives After completing this chapter, you should be able to answer the following questions: What are the relationships among financial, management, and cost accounting? What are the sources of authoritative pronouncements for the practice of cost accounting? What are the sources of ethical standards for cost accountants? What is a mission statement, and why is it important to organizational strategy? What must accountants understand about an organization’s structure and business environment to perform effectively in that organization? What is a value chain, and what are the major value chain functions? How is a balanced scorecard used to implement an organization’s strategy? Why is ethical behavior so important in organizations? ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 01: Introduction to Cost Accounting IM Terminology Authority: The right (usually by virtue of position or rank) to use resources to accomplish a task or achieve an objective Balanced scorecard: A framework that restates an organization’s strategy into clear and objective performance measures focused on customers, internal business processes, employees, and shareholders Competence: Professional ethics standard that requires professionals to develop and maintain the skills needed to practice their profession Confidentiality: Professional ethics standard that requires professionals to refrain from disclosing company information to inappropriate parties (such as competitors) Core competency: Any critical function or activity in which an organization seeks a higher proficiency than its competitors, making it the root of competitiveness and competitive advantage Cost accounting: A discipline that addresses the demands of both financial and management accounting by providing product cost information to (1) external parties (stockholders, creditors, and various regulatory bodies) for investment and credit decisions and (2) internal managers who are responsible for planning, controlling, decision making, and evaluation of performance Cost leadership: A company’s ability to maintain its competitive advantage by undercutting competitor prices Credibility: Professional ethics standard that requires individuals to provide full, fair, and timely disclosure of all relevant information in a given situation Customer value perspective: The balanced scorecard perspective that addresses how well the organization is doing relative to important customer criteria such as speed (lead time), quality, service, and price (both purchase and after purchase) Downstream cost: Costs such as marketing, distribution, and customer service which are typically incurred after production of the product as opposed to upstream costs of research and development and product design Earnings management: The act of using accounting methods or practices to deliberately “adjust” a company’s profit amount to meet a predetermined internal or external target Environmental constraint: any limitation caused by external cultural, fiscal (such as taxation structures), legal/regulatory, or political situations and by the competitive market structures that cannot be directly controlled by management Financial performance perspective: The balanced scorecard perspective that addresses the concerns of stockholders and other stakeholders about profitability and organizational growth Integrity: Professional ethics standard that prohibits individuals from participating in activities that would discredit their company or profession Intellectual capital: All of the intangible assets contained in an organization, including knowledge, skills, and information thaue chain so that the strategy can be effectively implemented ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 01: Introduction to Cost Accounting IM 10 LO.7 How is a balanced scorecard used to implement an organization’s strategy? H Balanced Scorecard Firms use a portfolio of lag and lead indicators to determine not only how the organization has performed in the past but also how it is likely to perform in the future a Lag indicators which are historical financial data that reflect outcomes that have resulted from past actions, such as installing a new production process or implementing a new software system, are often recognized and assessed too late to significantly improve current or future actions b Lead indicators which reflect future financial and nonfinancial outcomes (including opportunities and problems) help managers assess strategic progress and guide decision making before lag indicators are known Organizations often use both lead and lag indicators in a balanced scorecard to assess strategy congruence The balanced scorecard (BSC) is a framework that restates an organization’s strategy into clear and objective performance measures focused on customers, internal business processes, employees, and shareholders The BSC includes long-term and short-term, internal and external, financial and nonfinancial measures to balance management’s view and execution of strategy As illustrated in text Exhibit 1–8 (p 13), the balanced scorecard has four perspectives: a The learning and growth perspective focuses on using the organization’s intellectual capital to adapt to changing customer needs or to influence new customers’ needs and expectations through product or service innovations b The internal business perspective focuses on those things that the organization needs to well to meet customer needs and expectations c The customer value perspective addresses how well the organization is doing relative to important customer criteria such as speed (lead time), quality, service, and price (both purchase and after purchase) d The financial perspective addresses the concerns of stockholders and other stakeholders about profitability and organizational growth See text Exhibit 1–9 (p 14) for a more realistic and more complicated balanced scorecard LO.8 Why is ethical behavior so important in organizations? I Ethics in Multinational Corporations Accountants and other individuals working for multinational companies should be aware of not only their company’s and the IMA’s code of ethical conduct but also the laws and ethical parameters within countries in which the multinational operates The Foreign Corrupt Practices Act (FCPA) of 1977 prohibits U.S corporations from offering or ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 01: Introduction to Cost Accounting IM 11 giving bribes (directly or indirectly) to foreign officials to influence those individuals (or cause them to use their influence) to help businesses obtain or retain business The Organization of Economic Cooperation and Development (OECD) has released a document that makes it a crime to offer, promise or give a bribe to a foreign public official in order to obtain or retain international business deals a As of March 2008, 37 countries (see Text Exhibit 1–10 (p 15)) had signed this document, including the United States b Signing the OECD convention illustrates that companies globally are beginning to acknowledge that bribery should not be considered an appropriate means of doing business ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 01: Introduction to Cost Accounting IM 12 Multiple Choice Questions (LO.1) Select the incorrect comparison between financial and management accounting: a b c d Primary focus Overriding criteria Information timeframe Recordkeeping Financial Accounting External Verifiability Historical Formal Management Accounting Internal GAAP Current/future Formal and informal (LO.1) Oversight of auditing standards for public companies is the responsibility of the a Public Company Accounting Oversight Board b Securities and Exchange Commission c Financial Accounting Standards Board d Institute of Management Accountants 3, (LO.1) The acronym IASB stands for a Internal Accounting Standards Board b Internal Auditing Standards Board c International Auditing Standards Board d International Accounting Standards Board (LO.1) Cost accounting can best be described as a the intersection between financial and management accounting b a system that meets the informational demands of both financial and management accounting c a system that provides product cost information to Internal managers for planning, controlling, decision making and evaluating performance d all of the above (LO.2) Statements on Management Accounting (SMA) are directives on the practice of management and cost accounting Select the incorrect statement concerning SMAs from the following a SMAs are issued by the Cost Accounting Standards Board b SMAs are not legally binding c SMAs go through a rigorous developmental and exposure process d SMAs describe high-quality or best practices in management accounting (LO.3) A management accountant who fails to perform professional duties in accordance with relevant standards is acting contrary to which of the following standards? a Competency b Integrity c Objectivity d Confidentiality (LO.3) The IMA Code of Ethics requires a management accountant to follow the established policies of the organization when facing an ethical conflict When management accountants fail to resolve an ethical conflict by talking with their immediate supervisor they should a communicate the problem to authorities outside the organization b contact the next higher managerial level c notify the audit committee of the board of directors d contact the chief financial officer ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 01: Introduction to Cost Accounting IM 13 (LO.3) According to the IMA Code of Ethics a practitioner has the responsibility to recognize professional limitations Under which standard of ethical conduct would this responsibility be included? a Competency b Confidentiality c Integrity d Objectivity (LO.4) Strategic planning includes all of the following except: a top-level management participation b a long-term focus c analysis of the current month’s actual variances from budget d identification of long-term key variables including external influences 10 (LO.4) The strategy that is being used by a company that seeks to provide superior quality products or more unique services than its competitors is a a cost leadership strategy b differentiation strategy c customer value strategy d value chain strategy 11 (LO.5) All of the following are staff personnel except: a production supervisor b cost accountant c corporate controller d tax accountant 12 (LO.5) An organization’s collection of knowledge, skills, and information is referred to as its a political capital b qualitative capital c intangible capital d intellectual capital 13 (LO.6) All of the following are examples of upstream functions in the value chain except a supply b research and development c production d design 14 (LO.7) Which balanced scorecard perspective focuses on those things that the organization must well to meet customer needs and expectations? a Customer perspective b Learning and growth perspective c Financial perspective d Internal business perspective 15 (LO.8) Which of the following is a violation of the Foreign Corrupt Practices Act? a Paying cash bribes to foreign officials b Giving sporting event tickets to foreign officials c Providing free samples to the families of foreign officials d All of the above ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 01: Introduction to Cost Accounting IM 14 Multiple Choice Solutions b a d d a a (CMA Adapted) b (CMA Adapted) c (CMA Adapted) c (CMA Adapted) 10 b 11 a 12 d 13 c 14 d 15 d ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank  ... implemented © 2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, ... offering or © 2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, ... business © 2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual,