Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual

Page 1 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 1 preview image

Chapter 1The Role of Accounting InformationinEthicalManagement Decision MakingSOLUTIONSLEARNING OBJECTIVESChapter 1 addresses the following learning objectives:LO1Describe the process of strategic management and decision makingLO2Identify the types of control systems that managers useLO3Explain the role of accounting information in strategic managementLO4Explain the information systems and information that is relevant for decision makingLO5Describe how business risk affects management decision makingLO6Appreciate how biases affect management decision makingLO7Determine how managers make higher quality decisionsLO8Explain the importance of ethical decision makingThese learningobjectives (LO1 throughLO8) are cross-referenced in the textbook to individualexercises and problems.

Page 2 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 2 preview image

Page 3 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 3 preview image

QUESTIONS1.1Organizational vision is the core purpose of the organization and shapes the currentorganization and its future. Decisions about the organizational vision are importantbecause they communicate to employees and other stakeholders the overall direction ofoperations. Core competencies are the strengths of the organization relative tocompetitors. The choice of core competencies that an organization focuses upon isimportant to the success of the organization because value is added by thesecompetencies. To be successful, the vision should be guided by the basic strengths of theorganization. Organizational strategies are developed around core competencies. Thesetactics are important because they guide the long-term decisions, such as product linesthat will be offered. Operating plans put into action the organizational strategies in theshort term. These plans guide employees in their day to day operations.1.2Once operating plans are in place, organizations need to know whether the plans are beingmet or need to be changed to take advantage of new opportunities. To do this, actualperformance needs to be measured and compared to the plans (monitored). To helpmanagers move toward the organizational goals, incentives such as performance-basedbonuses are offered (motivating).1.3SeeExhibit 1.9for a list of possible internal and external reports.Studentsmay havethought of other reports as well. Following are examples of internal reports. Capitalbudgets support organizational strategies, the master budget supports operating plans, andvariance reports (actual versus planned performance) help organizations monitor andmotivate performance if they are tied to compensation contracts.Financial statements are external reports that provide creditors and shareholdersinformation about current and past operations. Tax returns are reports prepared for thegovernment that also determine the amount of taxes due. Suppliers need reports aboutinventory levels to keep an organization’s inventory levels up to date.1.4The type of information needed depends on the type of decision. For product-relateddecisions,managersmay need information about competitors’ prices and quality ofproducts. For employee-related decisions,theymay need to know the amount ofexperienceemployeeshave had or estimate costs to lay them off using information aboutlength of service from human resources. Ifmanagersare developing a new good orservice,theyneed information from suppliers about the cost of resources.Studentsmayhave thought of other types of decisions and information needed for them.1.5Cash flows that vary with the available alternatives for a decision are relevant becausethey relate directly to each separate decision that could be made. Summing these relevantcash flows provides quantitative information about the relevant costs and benefits for eachalternative. However, some cash flows will not change, regardless of the decision made.These are irrelevant cash flows because they remain the same under all courses of actionand have no influence on the decision.1.6Business risk is the possibility that an event could occur and interfere with anorganization’s ability to meet strategic goals or operating plans. Examples of business

Page 4 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 4 preview image

risks are shown in Exhibit 1.11. Some events, such as a hurricane or tsunami, may occurinfrequently but have devastating effects. Other events, such as product returns underwarranty, occur regularly but could escalate if production processes become out ofcontrol. The degree of business risk varies across organizations, industries, geographicregions, and time periods. Top managers are responsible for addressing business risks,taking calculated risks across the enterprise, and appropriately managing and mitigatingthe risks for the benefit of the stakeholders(i.e., quality of decision).1.7Biases are preconceived notions adopted without careful thought. This chapter’s boxintroduces non-rational escalation of commitment. Also, the Snow-Blade Snowboardsexample demonstrated a type of information bias: the average cost per unit overestimatedrelevant cost for the manager’s decision to accept or reject a customer order.Predisposition bias was probably a major issue in the RIM case.Poorer quality decisionsresult when managers fail to recognize and control for biases because importantinformation is often overlooked.1.8Higher quality decisions are made by using higher quality information, that is,information that has few uncertainties and is relevant, complete, as certain as possible,and timely. This information needs to be prepared in reports that are easy to understand,readily available,relevantand timely. Then a high quality decision-making process isused. This is a process that is thorough, as unbiased as possible, focused, creative, andvisionary as it relates to strategies.1.9There are many reasons for behaving ethically. From an economic perspective, ifeveryone behaved ethically,lessinvestment would be neededin police and securityprotection. In addition,writtencontractswould be less important, and a court systemwould not be neededto determine whether people are acting unethically and then penalizewrongdoers. More business would probably be transacted because people could trusteach other. From a personal perspective, people would feel their world was more certainif they knew others would always treat them ethically. Even in a world where manypeople are unethical, organizations and individuals who act ethically develop better longterm reputations and self-respect and improve social welfare.1.10Ethical behavior takes into consideration thewellbeingof others and society in makingdecisions and choosing courses of action. Because many different kinds of stakeholdersrely on accounting information, unethical behavior can be very costly through poordecisions that are based on bad information. When accountants are not ethical, investorsno longer believe information produced by firms and are unwilling to invest. The marketcollapses and firms lose their value and society suffers from the losses.1.11In business situations, non-rational escalation of commitment occurs when managersinappropriately use more resources based on the value of an original investment. Thisoften occurs when a poor decision is made in the first place and more money is spentbecause managers hope the project will succeed and make up for past losses, or they maywant to save face and not admit the original decision did not lead to a successful outcome.People exhibit non-rational escalation of commitment in many ways. For example, peoplemay continue repairing a vehicle or household appliance because of money previouslyspent.

Page 5 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 5 preview image

1.12Belief systems provide guidance and motivation that encourages employees to act in waysthat are consistent with the organization’s goals and vision. Boundary systems providelimits on what employees can do. Boundary systems include things like codes of conductand budgets. The two systems are similar in that they both provide information that helpsemployees determine the best courses of action for the organization. They are different inthat belief systems provide encouragement and motivation while boundary systemsprovide limits and a way to monitor employee behavior so that it does not exceed thelimits.1.13Interactive control systems are sets of information that are discussed by managers frommany different levels in an organization. These discussions occur regularly. The managersfocus on interpreting the information and determining what it means and whatopportunities and challenges have arisen. These systems help managers determinewhether organizational strategies and operating plans are appropriate or need to bechanged. They may also lead to reanalysis of organizational vision or core competencies.1.14Diagnostic control systems measure and monitor progress toward managers’pre-setgoals. In addition, these systems motivate employees to reach these goals. Diagnosticcontrol systems provide information about actions taken and allow managers to determinewhether the actions are moving the organization toward its goals. These include budgetsand variances, balanced scorecards, among others.1.15The four levers of control are used together to guide and control business strategy, toinsure that employees are complying with the organization’s plans and policies, and toempower employees to identify opportunities and challenges and to develop strategies forsuccess.

Page 6 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 6 preview image

MULTIPLE-CHOICE QUESTIONS1.16Which of the following statements is true?a)Management accounting is guided byIFRS or Canadian ASPE.b)Management accounting information is mainly for external users.c)Management accounting is futureoriented.d)Management accounting information is mainly quantitative.Ans: C1.17Which of the following statements isnottrue?a)Unavoidable cost is relevant in decision-making.b)Avoidable cost is relevant in decision-making.c)Additional investment is relevant in decision-makingd)Cost saving is relevant in decision-makingAns: A1.18Which of the following is not one of the components of ethical decision making?a)Identify ethical problems as they arise.b)Objectively consider the well-being of others and society when exploring alternatives.c)Clarify and apply ethical values, and choose a course of action which avoids theexposure of wrongdoing.d)Work toward ongoing improvement of personal and organizational ethics.Ans: C1.19Which of the following statements isnottrue?a)Monitoring and motivating is part of an implementation function.b)Budgeting is a part of a control function.c)Performance measure is a part of a control function.d)Budget is a quantitative expression of a plan.Ans: B1.20Which of the following characteristics isnothigh-quality information?a)Timelyb)Relevantc)Completed)CircumventingAns: D

Page 7 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 7 preview image

EXERCISES1.21Types of Manager Decisions-Microsoft CorporationA.(4)Measuring, monitoring & motivating (specifically monitoring) because it iscomparingactual versus expectationsB.(2)Operating plans because it involves looking atshort-term plansC.(3)Actual operations because this is part of normal operations (developing new products)D.(3)Actual operations because this is part of normal operations (customer support forexisting products)E.(2)Operating plans because it involves developingshort-term plansF.(4)Measuring, monitoring & motivating because it involvescomparingactual toexpectations and discussing variances from budget with managers (and measuringtheir performance as managers). Presumably the managers know in advance that theirperformance is measured based (or at least partially based) on these variances frombudget, which shouldmotivatetheir performance.G.(1)Organizational strategies because it involves along-termdecision to expand facilities1.22Types ofPersonal DecisionsA.A student’s vision might be a particular type of career, or job they would like to have aftergraduation.B.A student’s core competencies include his or her knowledge, leadership skills,andabilitiesto communicate, to analyze and solve problems, to sell ideas to colleagues, todevelop spreadsheets, any skill or talent that is well developed.C.A student’s long-term strategies include completing a particular degree in college,acquiring certain licenses (such as CA) and other qualifications, selecting a group oforganizations within which to work, and determining means of financing an education.D.Short term planning includes the particular schedule of classes over the next year,determining whether it is necessary to work during the school year, finding a place to live.E.Actual results are scores on exams and projects, and grades for the semester or quarter.Financial results are the monthly and quarter or semester costs incurred.F.Students might prepare a financial budget and a time management budget and comparetheir actual results to the plans they have made. Some students might set up rewards for

Page 8 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 8 preview image

themselves if they achieve certain goals, such as a good grade for an exam or class, or formeeting planned study goals (set in hours).1.23Relevant Costs-Avery Car RentalThe question calls for a computation to determine the number ofkilometresdriven overfour days so that the rental cost would be the same under the two options. The easiestway to solve this is to first write the total cost for each option using number ofkilometresas an unknown variable. Then set the two costs equal to each other and solve for thenumber ofkilometres. Let x be the number ofkilometresdriven:($26 per day*4 days)+($0.20 perkm*x)=($35 per day*4 days)+($0.08 perkm* x)$104 + $0.20*x= $140 + $0.08*x$0.20 *x-$0.08 *x = $140-$104$0.12 *x = $36x = $36 / $0.12x= 300kilometres1.24Relevant Costs-DrivingA.The current average cost perkilometremost likely includes depreciation and insurance.These would be irrelevant because they would not change depending on the option thatSusan chooses for driving to this client’s office.B.Susan has no cost and receives no reimbursement if she uses a company car. If she usesher own car, her incremental cost will be $0.25 perkilometretimes 100kilometres, or$25. She will receive a reimbursement of $0.30 perkilometretimes 100kilometres, or$30. So, she will be $5 ($30-$25) better off if she drives her own car.(Note:It is not clearwhich option would make Susan’s company better off because theincremental cost of operating the company caris unknown.)

Page 9 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 9 preview image

1.25Relevant Costs, OtherRelevant Factors-NetFlixA.The question calls for a computation to determine the number of DVDs rented per monthso that the total cost would be the same under the two options. The total cost for theNetflix option is $21.95. The total cost of thevideo storeoption is $3.95 times thenumber of DVDs rented. These costs will be the same when:$21.95 per month = $3.95 per DVD * x number of DVDs per month$21.95 / $3.95 = xx = 5.56DVDs per month(students should actually round this to 6 since they cannot rent 0.56 of a DVD)The cost of the Netflix option will be higher ifstudentsrentfewer than6DVDs permonth, and it will be lower ifstudentsrent more than 6DVDs per month.B.Ifstudentsoften pay extra charges becausetheyfail to return DVDs toa video storein atimely manner,theymight prefer NetFlix. Iftheyprefer to order from home,theymayprefer NetFlix. If NetFlix carries moviesthat studentscannot get ata video store,theymay prefer NetFlix. Iftheylike to rent movies spontaneously and do not want to plantheirrentals in advance, thentheywould preferthe video store. Ifstudentslike to rentnewly-released movies,theymight be able to get them more quickly ata video storethanthrough Netflix.1.26Levers of Control, EthicsA.An organization’s culture may be influenced significantly by beliefs systems, whichdefine core values. Two specific beliefs system controls that might discourage managersfrom overlooking unethical behavior are core values statements and ethics statements thatinclude descriptions of the values and ethical practices that managers and other employeesare expected to follow. Students might think of other relevant beliefs systems controls.B.Boundary systems establish limits on individual behavior in response to risk that shouldbe avoided. Specific types of boundary systems that relate to ethics include codes ofconduct and budgets, which limit specific behaviors. Students might think of otherrelevant boundary systems controls.

Page 10 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 10 preview image

1.27Effects of BiasesA.When the quality of information is poor, resulting in data that misestimates ormisrepresents a situation, poor decisions are likely to be made. This is called informationbias. When people’s minds do not appropriately process information, cognitive biasesoccur. A predisposition bias occurs when people do not control their preferences,attitudes, or emotions in making a decision and they are therefore unable to make anobjective analysis of the situation or problem.B.The manager’s forecasts do not seem to appropriately describe potential changes inrevenues and costs, but do make operations appear to be improving, which may beimportant to the manager’sself-image. Changes in sales and costs are driven by manydifferent factors that cannot easily be predicted. Historical data is often useful, and thefast-food store had not been doing that well. Small improvements may be possible, butlarge improvements are unlikely to occur without significant changes in operations.C.The revenues and costs can be benchmarked with other locations of the same chain orother fast-food stores with similar products.Also historical data and economic dataincluding changes in demographics, disposable income, etc., couldassist in checkingreliability.1.28Master Data Management, Control Systems, Quality of InformationA.An enterprise-wide database could be used to develop information for budgets andbalanced scorecards at the levels of both sub-units and the entire organization. Thesewould be used as part of a diagnostic control system. If this information is then sharedamong managers on a periodic basis, along with data about the market and any changes inthe business environment, itcouldbe used for interactive control systems.B.Common rules insure a consistency of data so that when managers are using the data tomeasure, monitor and motivate performance they can reach agreement more quickly wheninterpreting results of analyses using the data. The practice of using a data governancefunction helps managers improve the consistency and accuracy of data used in thediagnostic and interactive control systems. While managers may have differentviewpoints, the underlying data is the same, so that all managers understand thatdifferences are related to viewpoints rather than data differences.

Page 11 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 11 preview image

1.29Ethics,Culture, Belief, and Boundary SystemsA.Corporate culture sets the tone for employees. If the culture sets a high bar regardingethics, the top management will act in ways that provide models and will adopt policiesthat strengthen the overall ethics used in the firm. If top management puts more weight onobjectives other than on ethics, they will expect their employees to do so as well. Thiscould easily weaken ethical behavior among all employees.B.Ethical values are part of both the belief systems and boundary systems withinorganizations. In vision, mission, and values statements, organizations often address andpromote their ethical values. These are part of belief systems. In addition, firms developchecks and balances to ensure that breaches of ethical conduct (e.g., bribery or conflicts ofinterest) will be avoided. These are part of boundary systems.1.30Pace of Change, Historical Data, Control SystemsA.In a rapidly changing environment, historical data may not reflect future operations. Forexample, changes in technology can alter manufacturing costs, and changes in customerpreferences can change required product features and/or selling prices. When thishappens, the historical data is less relevant. While historical data may be used as a base,many adjustments need to be made to reflect changes in the business and economicenvironment.B.Diagnostic control systems use current and historical data to develop information tocompare whether an organization is performing according to established plans. Inresponse to changing conditions, managers may need to continuously modify and adaptoperations. Accordingly, comparisons of actual results to planned results in diagnosticcontrol systems such as budgets and balanced scorecards may provide less usefulinformation in a rapidly changing environment than in a more stable economicenvironment.C.In interactive control systems, managers interactively discuss the meaning of informationrelated to strategic uncertainties. They can focus on changes as they arise and also on howcurrent operations might need to change in response. These systems become much moreimportant in a dynamic business environment so that the organization can respondsuccessfully to external changes.1.31Relevant Costs, Uncertainties-Toys for BoysA.Selling the cars as-is would provide $5 per car * 10,000 cars = $50,000.Painting and selling the cars would provide [($8 selling price–$2 painting cost) per car *10,000 cars] = $60,000.The company would be $10,000 better off if it paints the cars.

Page 12 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 12 preview image

B.The gray cars have not sold well at $8.00, and the managers cannot know whether theywill sell at $5.00. The red cars appear to be selling well for $8.00 each, so that alternativeis probably more certain in terms of selling the cars. However, the managers might not besure whether the cost to paint the cars will be $2 each. If the managers are fairly certainthat the cost will be $2 each, then the painting option probably has less uncertaintyoverall. If the managers believe that the painting costs could vary substantially from the$2 estimate, then the painting option might have more uncertainty.1.32Relevant Costs, Risks, Other Relevant Factors, BiasA.First,students shouldnote thattheywill still own the car under all three alternatives.Therefore, the monthly payments of $220 will exist under all three alternatives and are notrelevant to this decision. The average maintenance costs of $37 per month may containsome costs that are relevant (assuming that maintenance costs increase with the number ofkilometresdriven); however, this cost is also likely to include costs that do not depend onwhether the car is driven to school. For simplicity,this solutionassumesthat none of themaintenance costs are relevant. Second, note that the estimated monthly use of the carabove the 200kilometresfor commuting to campus will be incurred regardless of whichoption is chosen.Based on cost only, the one-ride bus ticket (Bus B) is the best alternative as shown below:Relevant Semester Costs of Three AlternativesDrive to SchoolBus A–Semester passBus B–One-ride ticketsParking$150.00Ticket cost$225.00Ticket costGasoline: 200km/mo*4 mos@ $0.10/km**($60/600km)80.00$2/trip * 24trips/mo*4mos$192.00$230.00$225.00$192.00B.Gasoline costs for drivingthecar might be different than estimated because gasolineprices might rise or fall, andstudentsmight achieve higher or lower mileage perlitre. Inaddition, maintenance costs might be lower if one of the bus optionsis chosen. However,it may be difficult to predict the portion of maintenance costs that are likely to vary withkilometresdriven. Ifstudentschoose either of the bus options,theymight find thattheydrivetheircar to campus sometimes. Iftheychoose the bus semester pass,theymightfind thattheyuse the bus more than expected. During times of bad weather,studentsmayneed to take the bus even thoughtheychose the option to drive.C.Here is a partial list of things that are not necessarily quantifiable in dollars, but could berelevant to this decision:Flexibility of the bus schedule (both times and routes)Howstudentsvaluetheirtime

Page 13 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 13 preview image

The ability to use the bus ride time in a useful manner (for example, by studying orrelaxing)The stressstudentsexperience under each alternative (some people are nervousdriving, and others hate being in a crowded bus)The risk of damage to carsin the school parking lot versus the parking lot atanapartment (studentshave insurance, but there is a deductible)Reliability of bus service, that is, on-time service history,labourrelations, financialsolvencyD.Students who have never ridden a bus may be biased against the bus option because theirinformation about this option is limited. In addition, limited information combined withthe non-rational escalation of commitment bias could encourage students to believe thatusing their cars justifies their investment in a car and they may prefer that option to thebus option.

Page 14 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 14 preview image

PROBLEMS1.33Risks-College Course SequenceA.Many potential uncertainties may be identified, including the following:Which courses teach skills that will be needed in other courses?Will enough class sections be offered at appropriate times?Will enough space be available in a particular course?Who will teach a particular course?B.Many answers are possible for this question. Following are some explanations for theuncertainties listed in Part A:Which courses teach skills that will be needed in other courses?Some courses arespecifically identified as prerequisites for other courses. However, considerableflexibility may exist in the sequence of courses taken. When there is flexibility,students are often uncertain about the types of skills taught in particular coursesand the extent to which skills in one courses are required for another. Forexample, a cost accounting course may teach spreadsheet and communicationskills that will be useful in other accounting courses.Will enough class sections be offered at appropriate times?Sometimes courseofferings change from year to year or even at the last minute based on a variety offactors, including course demand, instructor availability, departmental personnelchanges, university budgets, and so on.Will enough space be available in a particular course?It is not possible to knowfor sure how many other students will attempt to register for a particular course.In addition, it may be uncertain whether a particular professor will be permitted orwill allow students to enroll on an overload basis.Who will teach a particular course?Even when instructors are scheduled for acourse, sometimes there are last minute changes. Students are uncertain whetherthe teacher will be someone from whom they can learn. Even if other studentshave recommended an instructor, students are uncertain about whether they willenjoy the course and learn from the instructor.1.34Relevant Information, Bias-Office Photocopy MachineA.The annual lease payment is relevant since it will not be incurred if the photocopymachine is purchased. Similarly, the purchase price is relevant because it will not beincurred if the machine is leased. There are many other possible answers to this question.

Page 15 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 15 preview image

B.Any cost that would be incurred under both options would be irrelevant. Examplesinclude the cost of supplies such as copier paper and toner. There are many other possibleanswers to this question.C.To choose between options, it is necessary to investigate how the two options woulddiffer. By definition, relevant costs differ across options and help the decision makerchoose between options. If irrelevant information is included, costs would be over-estimated for one or both options which could lead to a poor quality decision.D.When service people are paid based on commission for parts sold, they may tend torecommend use of more parts than necessary, which in turn increases their compensation.A service repair person under this compensation scheme might recommend replacingparts earlier than necessary or recommend using lower quality parts that must be replacedmore frequently.1.35Business Risk,Degree ofRisk, Risk Appetite-Community Children’s HospitalA.There are more possibilities than are listed, but here are some of the uncertainties theCEO faces in the “buy hotel” alternative:Vacancy rates (i.e. demand for rooms)Optimal pricing structure for the roomsHotel operating costsTax consequences of running a for-profit business as a sideline to a not-for-profitbusiness (uncertainty alleviated if she purchases tax advice)Ways that hotel maintenance may differ from hospital maintenanceSecurity in this neighborhood in the futureLong-term future of a hotel in a declining neighborhoodB.There are more possibilities than are listed, but here are some of the uncertainties for the“heart monitor” decision:Future demand for neo-natal equipment at the hospitalExpected wages for the special technician (although she can easily find this out)Maintenance or operating costs for the monitors that are not disclosed by themedical supply vendorExpected useful life of the monitorsHospital’s ability to charge patients for the new equipmentEffect of the new equipment on how nurses spend their timeC.The “buy hotel” alternative probably has a greater degree of uncertainty because it isoutside the core competencies of the hospital and CEO.D.The hospital’s risk appetite affects whether managers are willing to take on more risk forpotentially higher returns. If the hospital has little appetite for risk (i.e., is risk averse), themanagers are likely to choose the less risky alternative. If the hospital is risk neutral, themanagers are likely to choose the alternative that provides the best return for the level ofrisk incurred. If the hospital is risk seeking, the managers are likely to choose a risky

Page 16 of 16

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 16 preview image

alternative with a higher rate of return. However, the managers might or might not makedecisions that are consistent with the hospital’s appetite for risk. Sometimes managersfail to consider the organization’s risk appetite when making decisions.1.36Decision-Maker Bias-Gene HoritaA.Gene is basing his understanding of accounting careers on his father’s experience. Thereare many different types of accounting careers, and not all of them involve long hoursduring tax season or at any other time. In addition, it is possible that Gene’s father wouldhave spent most of his time at work regardless of his career. Gene may not know muchabout careers in information systems, but he is idealizing careers in this field. Sometimeswhen employees are working against a deadline in preparing a new software product, a lotof overtime is incurred.B.Gene could analyze his perspective and control for his biases by doing someinformational interviewing with people in both accounting and information systemscareers. He could check with both the accounting and information systems departments athis college and ask for phone numbers of alumni who have been successful in theircareers. Through conversations with these people he will get a better understanding of thedifferent options available for each career path. He could also secure internships in bothareas to have an inside view of these career paths, although it may be difficult to get aninternship without declaring a major.1.37Identifying RiskA.The managers cannot be certain how much the company will save inlabourand insurancecosts if it decides to purchase the new equipment. There also may be unforeseen costs inmodifying the company’s production processes, such as employee training, systemtesting, and production down time. In addition, a reduction inlabourcost probably meansthat the company will reduce itslabourforce, and the new equipment might requireemployees having different skills than in the past. The managers cannot be certain how areduction will affect the morale and work quality of workers who remain, and the newworkforce might cost more per employee than the old one.B.Either internship would provide work experience for Amira, but she cannot be certainhow much or completely anticipate the types of learning would occur with each option.Also, she might have preferences for living in one location versus the other, but shecannot perfectly foresee the living and social arrangements in each setting.

Preview Mode

This document has 815 pages. Sign in to access the full document!

Report

Learning Tools

Writing Tools

Browse Resources

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Solution Manual - Page 1

Study Now!

Document Details

Related Documents

Cost Management: Measuring, Monitoring, And Motivating Performance, 2nd Edition Lecture Notes

CIS 337 Unit 7 Assignment Final Project Part IV Pr

Analysis of Leadership in Monster Inc

Evaluation of Alphabet's Mission, Vision, and 8-29

Boundless Management

Uncovering the Martha Stewart Tax Scandal Insider

Boundless Business

JetBlue Airlines Case Analysis

Effective Speaker Notes Template for BUS 210 Prese

Leading as a Function of Management

Company

Explore

Study Tools