Solutions manual cost accounting

Solutions Manual
M




COST AC M




COUNTING

, CHAPTERM1
THEMMANAGERMANDMMANAGEMENTMACCOUNTING

SeeMtheMfrontMmatterMofMthisMSolutionsMManualMforMsuggestionsMregardingMyourMchoicesMofMassig
nmentMmaterialMforMeachMchapter.

1-1 ManagementMaccountingMmeasures,ManalyzesMandMreportsMfinancialMandMnonfinancialMinf
ormationMthatMhelpsMmanagersMmakeMdecisionsMtoMfulfillMtheMgoalsMofManMorganization.MItMfocuse
sMonMinternalMreportingMandMisMnotMrestrictedMbyMgenerallyMacceptedMaccountingMprinciplesM(GAA
P).
FinancialMaccountingMfocusesMonMreportingMtoMexternalMpartiesMsuchMasMinvestors,Mgover
nmentMagencies,MandMbanks.MItMmeasuresMandMrecordsMbusinessMtransactionsMandMprovidesMfinanc
ialMstatementsMthatMareMbasedMonMgenerallyMacceptedMaccountingMprinciplesM(GAAP).
OtherMdifferencesMincludeM(1)MmanagementMaccountingMemphasizesMtheMfutureM(notMtheMp
ast),MandM(2)MmanagementMaccountingMinfluencesMtheMbehaviorMofMmanagersMandMotherMemploye
esM(ratherMthanMprimarilyMreportingMeconomicMevents).

1-2 FinancialMaccountingMisMconstrainedMbyMgenerallyMacceptedMaccountingMprinciples.MMana
gementMaccountingMisMnotMrestrictedMtoMtheseMprinciples.MTheMresultMisMthat
 managementMaccountingMallowsMmanagersMtoMchargeMinterestMonMowners’McapitalMtoMhe
lpMjudgeMaMdivision’sMperformance,MevenMthoughMsuchMaMchargeMisMnotMallowedM underM
GAAP,
 managementM accountingM canM includeM assetsM orM liabilitiesM (suchM asM “brandM names”Mde
velopedMinternally)MnotMrecognizedMunderMGAAP,Mand
 managementM accountingM canM useM assetM orM liabilityM measurementM rulesM (suchM asM pre
sentMvaluesMorMresaleMprices)MnotMpermittedMunderMGAAP.

1-3 ManagementMaccountantsMcanMhelpMtoMformulateMstrategyMbyMprovidingMinformationMabo
utMtheMsourcesMofMcompetitiveMadvantage—
forMexample,MtheMcost,Mproductivity,MorMefficiencyMadvantageMofMtheirMcompanyMrelativeMtoMcom
petitorsMorMtheMpremiumMpricesMaMcompanyMcanMchargeMrelativeMtoMtheMcostsMofMaddingMfeaturesM
thatMmakeMitsMproductsMorMservicesMdistinctive.

1-4 TheMbusinessMfunctionsMinMtheMvalueMchainMare
 ResearchM andM development—
generatingM andM experimentingMwithM ideasMrelatedM toM newMproducts,Mservices,MorMproces
ses.
 DesignM ofM productsM andMprocesses—
theMdetailedMplanning,Mengineering,MandMtestingM ofMproductsMandMprocesses.
 Production—
procuring,M transporting,M storingM andM assemblingM resourcesM toM produceM aMproductMorM
deliverMaMservice.
 Marketing—
promotingM andM sellingM productsM orM servicesM toM customersM orM prospectiveMcustomers.
 Distribution—processingMordersMandMshippingMproductsMorMservicesMtoMcustomers.
 CustomerMservice—providingMafter-salesMserviceMtoMcustomers.




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,1-5 SupplyMchainMdescribesMtheMflowMofMgoods,Mservices,MandMinformationMfromMtheMinitialMso
urcesMofMmaterialsMandMservicesMtoMtheMdeliveryMofMproductsMtoMconsumers,MregardlessMofMwheth
erMthoseMactivitiesMoccurMinMtheMsameMorganizationMorMinMotherMorganizations.
CostMmanagementMisMmostMeffectiveMwhenMitMintegratesMandMcoordinatesMactivitiesMacross
MallM
companiesMinMtheMsupplyMchainMasMwellMasMacrossMeachMbusinessMfunctionMinManMindividualMc
ompany’sMvalueMchain.MAttemptsMareMmadeMtoMrestructureMallMcostMareasMtoMbeMmoreMcost-
effective.

1-6 “ManagementM accountingM dealsM onlyM withM costs.”M ThisM statementM isM misleadingM atM b
est,MandMwrongMatMworst.MManagementMaccountingMmeasures,Manalyzes,MandMreportsMfinancialMan
dMnon-
MfinancialMinformationMthatMhelpsMmanagersMdefineMtheMorganization’sMgoals,MandMmakeMdecision

sMtoMfulfillMthem.MManagementMaccountingMalsoManalyzesMrevenuesMfromMproductsMandMcustomer
sMinMorderM toM assessM productM andM customerM profitability.M Therefore,M whileM managementM acc
ountingMdoesMuseMcostMinformation,MitMisMonlyMaMpartMofMtheMorganization’sMinformationMrecorded
MandManalyzedMbyMmanagementMaccountants.




1-7 ManagementMaccountantsMcanMhelpMimproveMqualityMandMachieveMtimelyMproductMdeliver
iesMbyMrecordingMandMreportingManMorganization’sMcurrentMqualityMandMtimelinessMlevelsMandMbyM
analyzingMandMevaluatingMtheMcostsMandMbenefits—bothMfinancialMandMnon-financial—
ofMnewMqualityMinitiativesMsuchMasMTQM,MrelievingMbottleneckMconstraintsMorMprovidingMfasterMcu
stomerMservice.

1-8 TheMfive-stepMdecision-
makingMprocessMisM(1)MidentifyMtheMproblemMandMuncertaintiesM(2)MobtainMinformationM(3)Mmak
eMpredictionsMaboutMtheMfutureM(4)MmakeMdecisionsMbyMchoosingMamongMalternativesMandM(5)Mim
plementMtheMdecision,MevaluateMperformanceMandMlearn.

1-9 PlanningMdecisionsMfocusMonMselectingMorganizationMgoalsMandMstrategies,MpredictingMres
ultsMunderMvariousMalternativeMwaysMofMachievingMthoseMgoals,MdecidingMhowMtoMattainMtheMdesire
dMgoals,MandMcommunicatingMtheMgoalsMandMhowMtoMattainMthemMtoMtheMentireMorganization.
ControlMdecisionsMfocusMonMtakingMactionsMthatMimplementMtheMplanningMdecisions,Mdecid
ingMhowMtoMevaluateMperformance,MandMprovidingMfeedbackMandMlearningMtoMhelpMfutureMdecision
making.
M




1-10 TheMthreeMguidelinesMforMmanagementMaccountantsMare
1. EmployMaMcost-benefitMapproach.
2. RecognizeMbehavioralMandMtechnicalMconsiderations.
3. ApplyMtheMnotionMofM“differentMcostsMforMdifferentMpurposes”.

1-11 Agree.MAMsuccessfulMmanagementMaccountantMrequiresMgeneralMbusinessMskillsM(suchMasM
understandingMtheMstrategyMofManMorganization)MandMpeopleMskillsM(suchMasMmotivatingMotherMtea
mMmembers)MasMwellMasMtechnicalMskillsM(suchMasMcomputerMknowledge,McalculatingMcostsMofMpr
oducts,MandMsupportingMplanningMandMcontrolMdecisions).




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, 1-12 TheMnewMcontrollerMcouldMreplyMinMoneMorMmoreMofMtheMfollowingMways:
(a) DemonstrateMtoMtheMplantMmanagerMhowMheMorMsheMcouldMmakeMbetterMdecisionsMifMth
eMplantMcontrollerMwasMviewedMasMaMresourceMratherMthanMaMdeadweight.MInMaMrelatedM
way,MtheMplantMcontrollerMcouldMshowMhowMtheMplantMmanager’sMtimeMandMresourcesM
couldMbeMsavedMbyMviewingMtheMnewMplantMcontrollerMasMaMteamMmember.
(b) DemonstrateMtoMtheMplantMmanagerMaMgoodMknowledgeMofMtheMtechnicalMaspectsMofMth
eMplant.MThisMapproachMmayMinvolveMdoingMbackgroundMreading.MItMcertainlyMwillMinv
olveMspendingMmuchMtimeMonMtheMplantMfloorMspeakingMtoMplantMpersonnel.
(c) ShowMtheMplantMmanagerMexamplesMofMtheMnewMplantMcontroller’sMpastMsuccessesMinM
workingMwithMlineMmanagersMinMotherMplants.MExamplesMcouldMinclude
 assistanceMinMpreparingMtheMbudget,
 assistance in analyzing problem situations and evaluating financial
andMnonfinancialMaspectsMofMdifferentMalternatives,Mand
 assistanceMinMsubmittingMcapitalMbudgetMrequests.
(d) SeekMassistanceMfromMtheMcorporateMcontrollerMtoMhighlightMtoMtheMplantMmanagerMthe
MimportanceMofMmanyMtasksMundertakenMbyMtheMnewMplantMcontroller.MThisMapproachM

isMaMlastMresortMbutMmayMbeMnecessaryMinMsomeMcases.

1-13 TheMcontrollerMisMtheMchiefMmanagementMaccountingMexecutive.MTheMcorporateMcontroller
MreportsMtoMtheMchiefMfinancialMofficer,MaMstaffMfunction.MCompaniesMalsoMhaveMbusiness MunitMcon

trollersMwhoMsupportMbusinessMunitMmanagersMorMregionalMcontrollersMwhoMsupportMregionalMman
agersMinMmajorMgeographicMregions.

1-14 TheM InstituteM ofM ManagementM AccountantsM (IMA)M setsM standardsM ofM ethicalM conduct
M forM
managementMaccountantsMinMtheMfollowingMfourMareas:
 Competence
 Confidentiality
 Integrity
 Credibility

1-15 StepsMtoMtakeMwhenMestablishedMwrittenMpoliciesMprovideMinsufficientMguidanceMare
(a) DiscussM theM problemM withM theM immediateM superiorM (exceptM whenM itM appearsM that
M theMsuperiorMisMinvolved).
(b) ClarifyM relevantM ethicalM issuesM byM confidentialM discussionM withM anM IMAM EthicsMCo
unselorMorMotherMimpartialMadvisor.
(c) ConsultM yourM ownM attorneyM asM toM legalM obligationsM andM rightsM concerningM theM eth
icalMconflicts.




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