Solution manual cost and managerial accounting by barfield 3rd introduction to cost and management accounting

Chapter 1
Introduction to Cost and Management Accounting in a
Global Business Environment
Questions
1.

Financial accounting focuses on the needs of external users
(stockholders, creditors, etc.) and is dedicated to processing
information about historical, monetary transactions. Cost
accounting is a subset of both financial and managerial
accounting. It provides information on product/service cost
that is used on the balance sheet and income statement.
Managerial accounting focuses on the information needs of an
organization’s internal managers, needs that are related to
the planning, controlling, and decision-making functions of
those managers.
None of these accounting areas is more “important” than
the other; each simply provides different information for
different needs. Thus, the determination of “importance” lies
with the user and the user’s purposes.

2.

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.

3.

Cost accounting is a subset of management accounting. Cost
accounting focuses on the determination of product or service
cost. Management accounting includes the provision of all
internal accounting information to managers to help them
perform their functions of planning, controlling, evaluating
performance, and making decisions. Some information generated
by cost accounting is used in management accounting and some
in financial accounting. Thus, cost essentially links
financial and management accounting.
1


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4.

Operating in a global environment means that more decision and
control variables must be tracked. For example, a firm
operating in many countries must track variables such as
national rules of income taxation, sets of local laws of
commerce, production and sourcing sites, and currencies. In
addition, the multinational firm must monitor markets in many
countries, deal with a multitude of local cultures and
customs, and communicate in several languages.
Some other valuable information for the global firm would

be: currency exchange rates; national inflation rates; details
of import/export laws; prices for commodities in likely
sourcing sites; distribution costs for various modes of moving
goods, components, equipment, and materials; political issues
in all relevant markets; and competitors’ prices in all
markets. These types of information are important to managers
in safeguarding the firm’s assets and in allocating the firm’s
resources to generate an optimal return on capital.

5.

This statement is false. Even small companies now have
opportunities to arrange partnering with companies in other
countries. These opportunities have become available, in part,
because of the reduction in tariffs among countries, the
ability to travel and communicate easily among countries, and
the use of the Internet for business purposes.

6.

Student answers will vary. No solution provided.


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7.

The sites listed under WebTrust (see also

)have been examined by a licensed CPA or
chartered accountant. According to the principles of the
WebTrust program, these sites are periodically examined by a
WebTrust licensed CPA to ensure compliance with the WebTrust
principles, which include:
• Business practices disclosure
• Transaction integrity
• Information protection
The VeriSign Secure Server ID installed at these sites allows
consumers to perform electronic transactions securely. All
information sent to these sites will be electronically
encrypted, to help ensure that nobody but the intended
recipient can read your credit card number or other sensitive
personal information. It also provides assurance that you are
doing business with a site that can legitimately display the
WebTrust Seal.
The WebTrust Site Index includes the following sites:
• Alpine Bank
• Altus Mortgage Corporation
• The American Institute of Certified Public Accountants
• Bell Canada
• Canada.etrade.com
• Colegio de Contadores Públicos Autorizados de Puerto Rico
• Colorado Society of CPAs
• Competitor Communications Inc.
• E-Trade Group, Inc.
• Flexlease V.O.F.
• Fortune1000.ca
• GalaxiWorld Casino
• Innovation.pbnet.com

• Les Systemes Fortune 1000 ltee
• Main Net, Inc.
• National Tax Institute
• Pennsylvania Institute for Certified Public Accountants
• Portera.com
• Resource Marketing, Inc.
• Shop-csc.com
• The Ohio Society of CPAs
• VERSUS Technologies, Inc.
• Webcoach Internet Services
• Zurich Financial Services Australia Limited


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8.

Economic trade agreements are essential to the globalization
of business. In the past, trade barriers (whether tariffs or
import/export limitations) kept countries separate and more
focused only on opportunities within their own geographic
boundaries. Trade agreements reduce the fiscal and physical

barriers and, thus, provide companies with greater
opportunities for sales and/or production and provide
individuals with greater opportunities to compare
product/service quality, price, and delivery so as to make
more rational decisions.

9.

Student answers will vary. No solution provided.

10.

Student answers will vary. No solution provided.

11.

An American (or Canadian) company operating in a long-time
capitalist country might find “capitalist” conditions in
Russia to be different. There is still a distinct involvement
of the political system in the business arena in Russia; for
example, in the need to obtain permits, etc. Culturally, the
Russian people have traditionally worked, not for themselves,
but for the state; this might create an organizational culture
that delivers less than the normal American/Canadian work
ethic. Alternatively, the newly created opportunities for
capitalism and personal wealth could induce the Russian people
to work harder than their American/Canadian counterparts who
have always operated under these conditions.

12.

Each student will have different answers. No solution
provided.

13.

Each student will have different answers. No solution
provided.

14.

In general, government regulations exist to protect the people
and the environment and to provide a climate for fair business
competition. Typically, regulations exist that prescribe
practices with respect to labor, product safety, appropriate
conduct in foreign business transactions, and fair trade.
Students from different countries should be asked to compare
their answers and perceptions.

15.

There are many self-serving reasons to be a nonpolluter. For
example, a proactive strategy to reduce pollution may attract
environmentally conscious consumers. Further, such an approach
may avoid subsequent regulation of operations by government
and the legal entanglements caused by retroactive application


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of new laws.


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16.

A legal standard is codified, compliance is mandatory, and
violations of it may invoke sanctions. Because legal standards
generally vary by legal jurisdictions, no common set of global
laws exists for personal or business conduct. An ethical
standard is inherently personal, is transportable across legal
jurisdictions, and may be a basis for consistent personal
conduct in global transactions. It represents a moral view of
what is acceptable and unacceptable in personal behavior.
Legal and ethical standards are similar in that legal
standards generally represent the common element in a
society’s moral view of behaviors. On the other hand, legal
standards apply to all members of a specified society, and
sanctions exist for violations. Ethical standards are
nonbinding, may differ between individuals, and no explicit
sanctions are imposed for violations of ethical standards.

17.

Each student will have different answers. No solution

provided.

18.

Factors that impede the development of an international code
of ethics for profit-oriented businesses include differing
political climates, standards of living, the ability to move
from and into alternative societal classes, inflation rates
that may destroy currency valuations, and (possibly most
importantly) the ability to punish violators of the code. The
Caux Principles are an attempt to establish an international
code of ethics; whether it can succeed will be determined in
the future.
Each student will have different answers for these
questions as well as whether they believe that laws will be
able to overcome ethical differences. (Note: Laws are for a
populace; ethics are for a person–no law will ever MAKE an
unethical person ethical!)

19.

An organizational code of ethics is essential so that each
member of the organization understands his/her moral
obligations to other members. A code of ethics will help frame
organizational culture—if organizational members at all levels
truly believe in and abide by it and if there are penalties
that are enforced for code violations.

20.

Each student will have different answers. No solution
provided.

21.

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 its


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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.


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22.

Each student will have different answers. No solution
provided.

23.

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.

24.

Because of the fiduciary nature of not-for-profit
organizations, it is essential that strategic planning be
performed to ensure longevity and fiscal responsibility. Thus,
it is probably more important (at least legally) for not-forprofit, than for-profit, entities.

25.

Goals are qualitative expressions of desired results.
Objectives are quantifiable expressions of desired results.
With respect to this course, your goal may be to demonstrate
basic competency in the field of cost and management
accounting. Consistent with this goal, your objective may be
to achieve a minimum grade of B.

26.

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 responsibility
cannot endure.

27.

Pure centralization is appropriate in very small firms that
lack a pool of talented managers to make decisions. In such a
setting, decisions are best made by experienced decision
makers who possess the “vision” of the organization’s future.
Pure decentralization is appropriate in an organization
that has diverse global, cultural, and political operations as
well as in firms that face very competitive local markets that
are sensitive to local information. Because they are in the
best position to have all information required to identify and
evaluate the decision alternatives, local managers make most
decisions under pure decentralization.

28.

Each student will have different answers. No solution
provided.

29.

Although student responses will vary, most will address


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curriculum design, faculty evaluations, faculty appointments
and dismissals, tuition, resource allocations for students
fees, and so forth.


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30.

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 diversification would be impossible to execute in
a firm that did not possess core competencies in mergers,
acquisitions, and investment analysis.

31.

This statement is false. All firms have capital constraints,
although the constraints are more binding for some firms than
others. For any firm, as the amount of capital raised through
either stock or bond offerings increases, the perceived
riskiness of the offerings also rises. The perceived risk
rises because there is greater uncertainty associated with the
new investment relative to the firm’s existing investments.

As the perceived risk rises, the rate of return required by
investors rises. At some point, the return required by the
investors will exceed the return that the firm can generate
with the new funds.

32.

Human, structural, and relationship capital are elements of a
firm’s intellectual capital. Human capital reflects the
knowledge and creativity of an organization’s people, serves
as the source of strategic innovation and renewal, and
provides the foundation for core competencies. Structural
capital consists of information systems, organizational
structure, and “hard” organizational capabilities (items that
can be owned and exchanged). Structural capital allows human
capital to be utilized. Relationship capital reflects ongoing
interactions between the organization and its customers and
suppliers.
Students will have differing answers to the second part
of this question, but some observations follow:
• To a start-up software development company, human capital is
absolutely essential. But without structural capital
software ideas cannot be tested and debugged.
• To a car dealership, structural capital is probably more
important because it allows the dealership to determine
where a specific automobile is, when it can be obtained, and
how financing can be arranged. (Note: Cars can now be
purchased from the Internet without interacting with other
humans.)
• A university may find human capital more important. Consider

that the University of Phoenix operates with little
structural capital but takes advantage of the skills of many
humans in course design, development, and presentation.
• In a hospital, human capital may be more important because


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•

machines are not currently available that can do surgery or
comfort patients. However, a hospital that lacks significant
structural capital in today’s world is probably not a place
to which someone wants to go.
At Coca-Cola, structural capital may be more important
because of the need for product consistency throughout the
world. Although new products are important, Coke’s primary
products (Coca-Cola Classic, Diet Coke, and Sprite) are
possibly world-class enough to ensure the organization’s
longevity.

In all cases, however, the customer element of relationship
capital is the most valuable part of an organization’s
intellectual capital. Without customers to purchase products
and services, an organization would have no need to employ
human or structural capital.
33.

A change in laws or regulations may remove a constraint to
competition or to a particular strategy. For example, the cost
of labor has traditionally been much cheaper in Mexico than
elsewhere in North America. However, tariffs and taxes have
historically constrained the extent to which North American
businesses could exploit that labor cost advantage. With the
implementation of NAFTA, these costs have been dramatically
reduced. Consequently, more North American businesses are
moving labor-intensive operations to Mexico.

34.

A company may choose to avoid competition through compression
of competitive scope (focusing on a specific market segment to
the exclusion of others), differentiation (adding enough
market value to charge a higher price), and cost leadership
(becoming the low-cost producer and, thus, low-price seller).
The benefits of compressing scope allow for limited
advertising and a more complete understanding of the
organization’s customers. The latter lets the organization
focus on delivering new products that are designed to appeal
to the specific customer base.
Differentiation is beneficial because the additional
value allows the firm to charge a higher price and, hopefully,
make a greater return than nondifferentiated companies.
Cost leadership is beneficial because, at least until
competitors benchmark the organization to learn its cost
“secrets,” the organization should be able to increase volume
and generate higher profits. These organizations commonly take

full advantage of the economies of scale.

35.

A business intelligence system needs substantial information


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about competitors because such information is crucial to
strategic and tactical planning. Without knowing who its
competitors are, what they are doing, and how they are
pricing, an organization cannot take initiatives to compete
effectively or efficiently.


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36.

The three generic missions are build, hold, and harvest. The
build mission is to acquire market share and establish a
position for future profitability. The hold mission is to hold
existing market share or existing profitability. The harvest
mission is to generate cash and profits for the organization
that can be used to fund the growth areas of the firm.

The generic mission, and product life cycle may be highly
correlated. For example, if divisions are established along
product lines, each division’s mission can be defined relative
to the product line. Divisions with product lines that
represent the company’s future are likely to have build
missions. Similarly, divisions with product lines that
represent a large portion of current profits and cash inflows
are likely to have hold or harvest missions.

37.

Strategic resource management (SRM) involves the
organizational planning for deployment of organizational
resources to create value for customers and shareholders. Key
variables in the success of SRM are the management of
information and the management of change in responding to
threats and opportunities. These areas of concern cannot be
measured by financial accounting because they are often
concerned with nonmonetary information and measurements. Thus,
managerial accounting is used to provide the necessary
estimates and information for management to focus on strategic
objectives.

38.

The value chain of an organization is the set of processes
that convert inputs into products and services for the firm’s
customers. The value chain includes both internal and supplier
processes, and it creates the foundation of strategic resource
management, which involves the deployment of organizational

resources. The linkage between SRM and the value chain is that
optimizing value is the objective of SRM. Thus, value chain
effects are the concern of managers in the strategic
deployment of organizational resources.

Exercises
39.

a.
b.
c.
d.
e.

2
6
4
10
8

f.
g.
h.
i.
j.

5
3
1
9

7

40.

a.
b.

7
6

f.
g.

1
5


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c.
d.
e.

9
10
2

h.

i.
j.

4
3
8


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41.

a.

The bank would want information about the firm’s ability
to repay the loan. Potentially, the loan could be repaid
from either of two sources: (1) by liquidating an asset
that is not crucial to business operations or (2) from
future operating cash flows. Useful information for the
bank would allow the loan officer to evaluate the
probability that the firm could repay the loan from
either of these sources. Consequently, the most useful
items of information would be a balance sheet, income
statement, statement of cash flows, and perhaps a cash
budget. The balance sheet provides information about the
types of assets owned by the firm and the cash
commitments for debt repayments and payments to
suppliers. The income statement is useful for assessing

profitability and projecting future cash flows. The
statement of cash flows and the cash budget provide
information about the sources and uses of cash.
Information about accounts receivable turnover, or
the average time to collect accounts receivable, can be
determined by examining the history of accounts
receivable collections. Collectibility of accounts
receivable can be assessed by determining the extent to
which the accounts receivable are past due.
A trend for supplier price increases can be assessed by
examining purchases over time. Prices of specific,
routine inputs can be obtained from supplier invoices and
purchase order data.
Qualitative information that would interest the bank
might include the borrower’s character, his or her
history in handling borrowed funds, management skills in
the firm, stability of business conditions, work backlog,
financial strength of large-volume customers, and
supplier willingness to provide favorable credit terms on
purchases.


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b.

An example of accumulating the information to address
customers’ complaints regarding delays in completing auto

repair jobs can be found on the customer order documents.
The customer order document should be designed to capture
the promised time of completion of the job and also to
capture the actual completion time. The time variances
can be accumulated systematically on a log or,
alternatively, can be determined by inspection of the
customer order documents. In this way, these documents,
that comprise part of the accounting system, can be used
to track such nonfinancial data.
Price changes are usually justified by management on
the basis of one or more of the following: (1) Competitor
price changes; (2) Willingness by customers to pay higher
prices on the basis of quality or other types of
differentiation of products or services; (3) Governmental
regulations or requirements; and (4) Changes in the
prices of material, labor, or other elements of
production such as utilities, taxes and insurance.
Information regarding the first three justifications must
usually be obtained from sources outside the accounting
system. However, changes of prices and therefore costs
of the factors of production described in justification
(4) can be found from accounting records and documents.
For example, examining purchases over time can
assess a trend for supplier price increases. Prices of
specific, routine inputs can be obtained from supplier
invoices and purchase order data. A trend for labor
costs can be obtained by examining labor costs by
comparing personnel and payroll records for mechanics and
support workers over time. Examining and comparing
invoices and tax reports can obtain a trend for

utilities, insurance and taxes over time.
c.

Most of the data can be gathered directly from the
accounting records or from the documents that support the
accounting records such as original-transactions
documents (invoices, shipping records, etc.). However,
none of the qualitative data would be obtainable from the
accounting records. This type of information would
require the bank to query others such as character
references, suppliers, and customers.


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42.

43.

a.

Translating and reviewing the translation would be the
largest costs associated with the additional information.
(Cost of the additional pages would be nominal.)
EDS competes globally in providing financial
information services using a differentiation strategy
through the use of technology that produces innovative
unique solutions demonstrably superior to, and different

from, its competition. Given this strategy and the fact
that a large percentage of company sales in 2000 were in
non-U.S. markets, the benefits derived from such
translations were probably substantial. The translations
indicated the high degree of importance that the company
places on its international focus and business
opportunities. By making the management letter more
readable by foreign investors, there could be increased
investment interest.

b.

Each student will have a different answer but may
indicate a need for the company’s mission statement,
future international acquisition or diversification
plans, product development and introduction plans,
utilization of international suppliers within the
company’s value chain, and expected changes in the
worldwide market for financial information services.

See www.netgrocer.com and www.peapod.com.
a.
One problem with on-line ordering is time; this can be
solved by eliminating pictures of goods and providing
different ways to sort items (by brand, price, etc.).
Another problem is limited selection; this can be solved
by asking customers and using market data to determine
which goods should be stocked. Another problem is
substitutions; this can be solved by deleting items from
the site that are not available or having a secondary

supplier provide items that are out of stock.
b.

44.

Two delivery problems are that the customer must be home
and the goods must arrive quickly. These can both be
solved by using an overnight delivery service, so the
customer can sign for goods to be left in a specific
location. Alternatively, you can provide delivery by
courier service, assuming no traffic problems.

Each student will have a different answer but may address
technology infrastructures, regulatory and tax environments,
use of the euro as a currency, niche markets, creditworthiness
assessment, and so forth. You may want to access Forrester


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Research Inc. (which prepared the “Europe’s eZones” report) at
www.forrester.com.


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45.

Each student will have a different answer but may address
political climates, import/export restrictions to protect
“sensitive industries,” currency fluctuations, product quality
issues, environmental issues, and so forth.

46.

a.

Each student will have a different answer but may include
the following: strategic (competitors, diversity,
reputation, enforcement of a standard code of ethics,
etc.); operating (worker availability, worker training,
physical plant protection, size of branch location,
installation and quantity of technology such as ATMs,
etc.); financial (loan management, availability of
capital, fund reserve requirements, etc.); and
information (reliability of video camera operations for
branch and ATMs, accuracy of strategic assumptions,
accuracy of recordkeeping, etc.).

b.

Each student will have a different answer depending on
what items were selected for discussion. No solution
provided.

47.

Each student will have a different answer. No solution
provided.

48.

Each student will have a different answer. No solution
provided.

49.

a.

You might want to have information on age levels of your
primary patrons, their food preferences, the offerings of
your competitors (as to quality and price), and the
abilities of your chef.

b.

Age level is important because chicken fajitas might be
more favorably received by younger or more weightconscious patrons. Competitors’ offerings are important
to determine whether you can compete on quality and price
or whether either of the offerings is unavailable at your
competitors’ restaurants (product differentiation). The
abilities of your chef are crucial because, regardless of
preference or need, if the chef cannot prepare the dish
properly, customers will not want to eat it.

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50.

Each student will have a different answer; however, the
following items may be mentioned.
a.
Employees might be empowered to decide how long it will
take to clean the houses to which they are assigned, how
their schedules will be arranged so that all assigned
houses are cleaned on time, what activities need to be
performed to make the house clean, what equipment and
supplies are to be used in the cleaning process, and
where (and what) supplies are to be purchased. Employees
are in a much better position to judge these issues than
an absentee owner. With the input of the employees (as
well as approval by your customer), a standard definition
of “clean” that all employees would agree on should be
determined.
b.

As the owner, you may retain the billing and supply
purchasing processes as well as marketing and customer
service. You would also probably want to retain the
determination of customer satisfaction through surveys or
telephone calls. These matters will be essential to your
business profitability and longevity, and the employees
that you have may not have the expertise or ability (in

the form of equipment or knowledge) to engage in these
matters.

51.

Each student will have a different answer. No solution
provided.

52.

Each student will have a different answer. No solution
provided. Access or order Human Capital
in Transformation – Intellectual Capital Prototype Report,
1998 and read Stewart, Intellectual Capital
(Currency/Doubleday 1997) for references to Skandia and Leif
Edvinsson.

53.

Each student will have a different answer. No solution
provided. Access and read Jones, “Herb’s
Flight Plan,” Texas Monthly (March 1999); Dunlap Godsey, “Slow
Climb to New Heights,” Success (October 1996); and DeSimone,
“Adventures in the Air,” Today’s CPA (January/February 1999).

54.

Each student will choose different companies and, thus,
suggest different benefits; however, the following items may
be mentioned.

a.
Differentiation is beneficial because the additional
value allows the firm to charge a higher price and,
hopefully, make a greater return than nondifferentiated


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companies.


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55.

56.

b.

Cost leadership is beneficial because, at least until
competitors benchmark the organization to learn its cost
“secrets,” the organization should be able to increase
volume and generate higher profits. These organizations
commonly take full advantage of the economies of scale.

c.

Confrontation is beneficial because the organization is
aware that all sources of positive returns are shortterm. Thus, the organization must engage in continual
improvement so that the “next” competitive advantage can
be realized.

Each student will have a different answer; however, the
following items may be mentioned.
a.
The upstream value chain would include shareholders/bond
holders, farmers/wholesale grocers, equipment
manufacturers, transportation companies, and so forth.
b.

Internal activities would include purchasing, receiving,
product design (including nutritional content and
package), manufacturing, packaging, and so forth.

c.

The downstream value chain would include wholesalers and
retailers, transportation companies, market research,
advertising firms, customers, and so forth.

a.

Each student will have a different answer; however, the
following items may be mentioned:
Then

Now
“Number cruncher”
Decision support specialist
Staff member with limited
“Business partner”
responsibilities
Controller of costs
Analyst of costs
Provider of internal reports Developer of models
Impediment to change
Implementer of change
Provider of data
Provider of information
Work in relative isolation
Member of cross-functional
teams
Accountant
Member of the finance
function
Reactive
Proactive
See Siegel & Kulesza, “Practice Analysis of Management
Accounting,” Management Accounting (April 1996) and visit
the IMA Web site at www.imanet.org.


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b.

Each student will have a different answer; however, the
following items may be mentioned: interpersonal skills,
communication skills, technological skills, critical
thinking and analysis skills, planning and decisionmaking skills, broad-based learning, performance
measurement and evaluation skills, and knowledge of the
international marketplace.

Cases
57.

Each student will have a different answer. No solution
provided.

58.

a.

A mission statement adds strength to an organization’s
strategic planning process by providing a clear view of
what the organization wants to accomplish and how it
uniquely meets customers’ needs with products and
services. Without a mission statement, an organization
may find that it is engaging in activities that are not,
or can never be, part of what it wants to do or is most
competent to do.

b.

A mission statement should be developed using input from
everyone in the organization. If handled in this manner,
the statement will become internalized by the
organization members and become a distinct part of the
organizational culture.

c.

In developing a mission statement, organizational members
need to consider the organization’s strengths (including
core competencies) and weaknesses, opportunities for
growth, customer base (current and desired), competition,
constraints (whether physical, financial, technological,
regulatory, etc.), profitability, and employees’ skills
(current and those that can be obtained through training
or hiring).

d.

Each student will have a different answer. No solution
provided.


Chapter 1
25
Introduction to Cost and Management Accounting in a Global Business
Environment
59.

60.

a.

Long-range goals enable an organization to develop a
business philosophy that should state the direction of
the organization and the limits within which management
is free to exercise discretion. The development of longrange goals is important for providing the basis for
plans, enhancing efficiency of organization decision
makers, and providing a basis by which alternative
courses of action can be evaluated.
Long-range goals serve as a means to orient
individuals within the firm to the organizational goals
and provide the basis for individual goals and goal
congruence. Goals also serve as standards against which
long-term progress can be measured and evaluated.

b.

Long-range goals are normally set by persons at the
highest level of the organization. However, input should
be solicited from employees at all levels of the
organization. The goals are developed by weighing various
constraints such as present and future economic
conditions, the desires of owners and management, and the
firm’s resources.

c.

Strategic planning is the development of a consistent set
of goals, plans, resources, and measurements by which

goal achievement can be assessed. Strategic planning
recognizes that an organization functions in an
environment and takes into account the interactions
between the organization and its environment in
everything the organization does or plans to do.
Management control is the process by which managers
ensure that resources are obtained and used in an
efficient and effective manner to accomplish the
organization’s goals. Management control implies that
performance measurements are reviewed to determine if
corrective action is necessary.
Strategic planning and management control are
interrelated. Management control is carried out within
the framework established by strategic planning and is
the process by which management evaluates resource usage
and whether the plans and long-range goals will be
achieved. The purpose of management control is to
encourage managers to take actions in the best interest
of the organization so that the goals can be achieved.
(CMA)

a.

Overseas customers may not have access to the information
needed to call up Dell and order a computer. They might