Seatwork For BA202.Saturday

I. Consider the descriptors that follow.
1. Is heavily involved with the recordkeeping and reporting of assets, liabilities, and
stockholders’ equity.
2. Focuses on planning, control, decision making, and performance evaluation.
3. Is heavily regulated.
4. A field that is becoming more "cross-functional" in nature.
5. Much of the field is based on costs and benefits.
6. Is involved almost exclusively with past transactions and events.
7. Much of the information provided is directed toward stockholders, financial analysts,
creditors, and other external parties.
8. Tends to focus more on subunits within an entity rather than the organization as a
whole.
9. May become involved with measures of customer satisfaction, and the amount of
actual cost incurred vs. budgeted targets.
Required:
Determine whether the descriptors are most closely associated with financial accounting or
managerial accounting.
II. Present several examples of managerial accounting information that could help a
manager make each of the following decisions:
A. A manufacturing company is currently making a part that is a production headache.

The firm is deciding whether to abandon production and buy the part from an
outside supplier.
B. An operator of fast-food restaurants is deciding whether to open a new store in

Davao City.
III. Ken Rama is the sales manager of KR Enterprises, a very profitable distributor of office
furniture to local businesses. A recent economic downturn has created an extremely
tight cash position, and the company has been hurt by the bankruptcy of two key
customers.
In late October, anticipating an economic recovery, Rama began an extensive

remodeling of the company's sales floor. Construction costs, decorating, and equipment
purchases are projected to cost P250,000.
Davidson has a policy that individual expenditures in excess of P200,000 must be

approved by the firm's board of directors. Rama, unfortunately, missed the deadline to
have the board consider this project at its regular September meeting. Not wanting to
wait until the next meeting in December, he subdivided the project in two parts—
construction and decorating (P190,000) and equipment purchases (P60,000)—neither of
which needed board approval because of the dollar amounts involved.
The project was recently completed and sales have begun to recover. Customers have
raved about the new sales area, noting that it is far superior to those of Davidson's
competitors.
Required:
A. Would Rama's approach of subdividing the project in two parts have any effect on
the company's financial statements? Explain.
B. Briefly discuss whether Rama behaved in an ethical manner.
C. Which, if any, of the following standards of conduct would have applicability to
Rama's conduct: competence, confidentiality, integrity, or credibility? Explain.
IV. Volumetrica, a producer of audio equipment for large computer systems, is reviewing its
policies as part of a biannual self-examination of the company. As part of this process, all
managers have been asked to carefully examine costs and determine as closely as
possible which costs are direct and which are indirect.
Marie Ramsey and Dan Wilson, managers of different manufacturing departments in the same
building, have been working together. They found the following four costs that could be
economically traced to the products, but have historically been a part of overhead:
• Cost of setting up the machinery for a different production run.
• Cost of minor assembly components such as knobs and switches.
• Cost of packaging, which is quite different for each model.
• Cost of inspecting and testing each model.
None of the costs is significant by itself, but together these four costs make up between 10 and
15% of the total cost of the product. Marie favors "leaving well enough alone," as she puts it,
and leaving these costs in overhead. She is afraid that her volunteering to trace these costs will
result in her having to trace many more costs in the future. Dan, on the other hand, prefers to
have the product cost as accurate as possible. He points out that these costs are already
known, and the process would require little extra work.
Required:
You have been called on in your function as accounting manager to resolve the dispute. Write a
memo to Marie and Dan, supporting one or the other position. Be sure to adequately defend
your position.

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I. Consider the descriptors that follow.

A. A manufacturing company is currently making a part that is a production headache.

B. An operator of fast-food restaurants is deciding whether to open a new store in

In late October, anticipating an economic recovery, Rama began an extensive

Davidson has a policy that individual expenditures in excess of P200,000 must be

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