Accounting Cases- Kaplan

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Chapter 1

Question 1.1

When Mr. Drucker says, "Be data literate" he means that one should know how to use data effectively to the company's benefit. There are two challenges that one faces in attempting to be data literate. The first challenge is deciding what information to use, what is should be used for and how it should be used. The second challenge is how to test and put the data together with the existing information system to make them effective in a company's decision process. The most difficult challenge will be bringing the computer based data processing and the accounting system together to ensure the most beneficial decisions for a company.

Question 1.2

The best combination of paradigms for the 21st century as Ferrara sees it is a combination of Paradigms C and D. This may even be amplified by adding elements of Paradigm B. Although Paradigm D is effective and efficient it is not sufficient alone. Paradigm D uses the concept of price led costing and focuses on the issue of continuous improvement but it does not take into consideration the actual costs which should be determined by using the ABC method because it is more precise. This is where the notion of Paradigm C comes in. Using these two Paradigms in conjunction with each other gives real meaning to ABC's role of forcing consideration of alternative cost structures. To more effectively consider the entire scope adding in elements from Paradigm B will be beneficial. Distinguishing between fixed and variable costs will more accurately portray totals in the product-line income statement. Combining elements from these three paradigms will allow us to include aspects of product life cycles and products that are expected to be cash users versus cash generators during different stages of their life cycles in our analysis of product-line income statements.

Question 1.3

According to Mersereau it is often accountants who are the first to resist accounting change. Accountants are afraid that radical change might endanger existing systems and processes. An effective way to combat this thought in accountants mind is through the implementation of top bottom change and to ensure the the change is committed to by all within the organization once it has been implemented.

Question 1.4

Controllers are concerned with the impacts of downsizing and how it will affect productive capabilities as well as the overall operational and control environment. In addition, financial functions and the people that may be associated with financial organizations are a concern to controllers. Controllers need to be informed of impacts and have alternative procedures in placed as employees leave the company to make the transition process go smoother. Monetary controls are a huge focus of Controllers during a company's downsizing efforts. Managing internal controls over financial reporting is also a critical aspect of downsizing that Controllers should not lose sight of and have a potential solution to make sure many of the more essential tasks are completed. If some of the seemingly mundane and routine tasks do not get completeted there is potential for end adjusting adjustment which can be bad.

Chapter 2

Question 2.1a

The value added concept begins with purchases and ends with sales. The key within this concept is to maximize the difference between purchases and sales. The value chain concept breaks down the chain from suppliers of basic raw materials to end use customers into relevant activities to understand the behavior of costs and the sources of differentiation. In the value added concept, management accounting relies on a single cost driver whereas in the value chain concept multiple cost drivers are used based on the different activities in the chain.

Question 2.1b

Structural and executional cost drivers are the cost drivers that are based on different activities throughout the value chain....
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