The opening paragraph of an accounting textbook says, “Managers need accounting information and need to know how to use it.”10 Critically evaluate this statement.
Using Accounting for Planning
The owner of a small software company felt his accounting system was useless. He stated, “Account- ing systems only generate historical costs. Historical costs are useless in my business because every- thing changes so rapidly.”
a. Are historical costs useless in rapidly changing environments?
b. Should accounting systems be limited to historical costs?
Goals of a Corporation
A finance professor and a marketing professor were recently comparing notes on their perceptions of corporations. The finance professor claimed that the goal of a corporation should be to maximize the value to the shareholders. The marketing professor claimed that the goal of a corporation should be to satisfy customers.
What are the similarities and differences in these two goals?
Salespeople at a particular firm forecast what they expect to sell next period. Their supervisors then review the forecasts and make revisions. These forecasts are used to set production and purchasing plans. In addition, salespeople receive a fixed bonus of 20 percent of their salary if they exceed their forecasts.
Discuss the incentives of the salespeople to forecast next-period sales accurately. Discuss the trade-off between using the budget for decision making versus using it as a control device.
Golf Specialties (GS), a Belgian company, manufactures a variety of golf paraphernalia, such as head covers for woods, embroidered golf towels, and umbrellas.
12 Standard Costs: Direct Labor and Materials 554
A. Standard Costs 555
1. Reasons for Standard Costing 556 2. Setting and Revising Standards 557 3. Target Costing 561
B. Direct Labor and Materials Variances 562
1. Direct Labor Variances 563
2. Direct Materials Variances 567