cost accounting Chapter 1

Topics: Strategic management, Management accounting, Cost accounting Pages: 12 (4866 words) Published: December 11, 2014
CHAPTER 1
INTRODUCTION TO COST ACCOUNTING
QUESTIONS
1. Management accounting stresses the informational needs of internal users over those of external users (the focus of financial accounting). Because of this perspective, management accounting provides information in a format that is flexible and relevant to a particular manager‟s usage. Financial accounting, on the other hand, must provide some uniformity in the manner in which information is presented for it to be comparable among companies and in compliance with generally accepted accounting principles.

2. It is more important to have legally binding cost accounting standards for defense contractors than for other manufacturers because government contracts are often awarded on a low-bid basis. Without legally binding cost accounting standards, different bidders could include costs in different categories, making the bids noncomparable. With specified cost accounting standards, there is a higher probability (although not absolute certainty) that comparison among bids is consistent. Although contracts for nongovernment manufacturers may be awarded on a bid basis, it is more common in this arena to consider a wide variety of factors in addition to cost. 3. A mission statement is important to an organization because it provides a clearly worded view of what the organization wants to accomplish and how the organization uniquely meets or plans to meet its targeted customers‟ needs with products and services. Without a mission statement, an organization may veer away from its “view of itself” and find that it is engaging in activities that are not, and can never be, part of what it wants to do.

4. Organizational strategy is the link between a firm‟s goals and objectives and its operational plans. Strategy is therefore a specification of how a firm intends to compete and survive. Each organization will have a unique strategy because it has unique goals, objectives, opportunities, and constraints.

5. Core competencies are the special proficiencies possessed and valued by an organization. If a particular strategy requires core competencies that are not possessed by a firm, executing such a strategy would be very difficult. For example, a strategy of Internet business expansion would be difficult to execute in a firm that does not possess a core competency in web design or web security. Similarly, a growth strategy would be impossible in a not-for-profit that did not have a core competency in attracting volunteers or donors.

6. Although polluting might be less expensive in the short run, there is no guarantee that such a low-cost tactic may continue in the long run, especially if fines are incurred or 1
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2

Chapter 1

additional legal regulations are enacted that would require retroactive cleanup. Being green may be viewed from a self-serving standpoint: a proactive green strategy may attract environmentally conscious consumers and provide a positive organizational image (which could help attract labor talent). Further, such an approach may actually be less expensive through reduced energy and waste costs. Current research indicates that being green can be profitable to a business. Consumers may, in fact, be willing to pay a bit more for products that are nondamaging to the environment and could cause an organization to refocus on a product differentiation strategy that might be more profitable than a low-cost strategy.

7. Authority is the right, generally because of position or rank, to use resources to accomplish a task or achieve an objective. Responsibility is the obligation to accomplish a task or achieve an objective. Authority can be delegated, but responsibility must be assumed and maintained by the person to whom it is assigned. However, sufficient authority must accompany responsibility or the assignment of...
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