Chapter 1
Managerial Accounting and the Business Environment

Solutions to Questions

1-1 A strategy is a game plan that enables a company to attract customers by distinguishing itself from competitors. The focal point of a company’s strategy should be its target customers.

1-2 Customer value propositions fall into three broad categories—customer intimacy, operational excellence, and product leadership. A company with a customer intimacy strategy attempts to better understand and respond to its customers’ individual needs than its competitors. A company that adopts an operational excellence strategy attempts to deliver products faster, more conveniently, and at a lower price than its competitors. A company that has a product leadership strategy attempts to offer higher quality products than its competitors.

1-3 A person in a line position is directly involved in achieving the basic objectives of the organization. A person in a staff position provides services and assistance to other parts of the organization, but is not directly involved in achieving the basic objectives of the organization.

1-4 The Chief Financial Officer is responsible for providing timely and relevant data to support planning and control activities and for preparing financial statements for external users.

1-5 The three main categories of inventories in a manufacturing company are raw materials, work in process, and finished goods.

1-6 The five steps in the lean thinking model are: (1) identify value in specific products and services; (2) identify the business process that delivers value; (3) organize work arrangements around the flow of the business process; (4) create a pull system that responds to customer orders; and (5) continuously pursue perfection in the business process.

1-7 Successful implementation of the lean thinking model should result in lower inventories,