Solutions Manual
a
COST AC a
COUNTING
, CHAPTERa1
THEaMANAGERaANDaMANAGEMENTaACCOUNTING
SeeatheafrontamatteraofathisaSolutionsaManualaforasuggestionsaregardingayourachoicesaofaassignmen
tamaterialaforaeachachapter.
1-1 Managementaaccountingameasures,aanalyzesaandareportsafinancialaandanonfinancialainform
ationathatahelpsamanagersamakeadecisionsatoafulfillatheagoalsaofaanaorganization.aItafocusesaonaintern
alareportingaandaisanotarestrictedabyagenerallyaacceptedaaccountingaprinciplesa(GAAP).
Financialaaccountingafocusesaonareportingatoaexternalapartiesasuchaasainvestors,agovernmen
taagencies,aandabanks.aItameasuresaandarecordsabusinessatransactionsaandaprovidesafinancialastateme
ntsathataareabasedaonagenerallyaacceptedaaccountingaprinciplesa(GAAP).
Otheradifferencesaincludea(1)amanagementaaccountingaemphasizesatheafuturea(notatheapast),a
anda(2)amanagementaaccountingainfluencesatheabehavioraofamanagersaandaotheraemployeesa(ratherat
hanaprimarilyareportingaeconomicaevents).
1-2 Financialaaccountingaisaconstrainedabyagenerallyaacceptedaaccountingaprinciples.aManagem
entaaccountingaisanotarestrictedatoatheseaprinciples.aThearesultaisathat
managementaaccountingaallowsamanagersatoachargeainterestaonaowners’acapitalatoahelpaju
dgeaaadivision’saperformance,aevenathoughasuchaaachargeaisanotaalloweda underaGAAP,
managementa accountinga cana includea assetsa ora liabilitiesa (sucha asa “branda names”adevelop
edainternally)anotarecognizedaunderaGAAP,aand
managementa accountinga cana usea asseta ora liabilitya measurementa rulesa (sucha asa presentav
aluesaoraresaleaprices)anotapermittedaunderaGAAP.
1-3 Managementaaccountantsacanahelpatoaformulateastrategyabyaprovidingainformationaaboutathe
asourcesaofacompetitiveaadvantage—
foraexample,atheacost,aproductivity,aoraefficiencyaadvantageaofatheiracompanyarelativeatoacompetitor
saoratheapremiumapricesaaacompanyacanachargearelativeatoatheacostsaofaaddingafeaturesathatamakeaitsap
roductsaoraservicesadistinctive.
1-4 Theabusinessafunctionsainatheavalueachainaare
Researchaandadevelopment—
generatinga anda experimentinga witha ideasa relateda toa newaproducts,aservices,aoraprocesses.
Designa ofaproductsa andaprocesses—
thea detaileda planning,a engineering,a anda testinga ofaproductsaandaprocesses.
Production—
procuring,a transporting,a storinga anda assemblinga resourcesa toa producea aaproductaoradeliv
eraaaservice.
Marketing—
promotinga anda sellinga productsa ora servicesa toa customersa ora prospectiveacustomers.
Distribution—processingaordersaandashippingaproductsaoraservicesatoacustomers.
Customeraservice—providingaafter-salesaserviceatoacustomers.
1-1
,1-5 Supplyachainadescribesatheaflowaofagoods,aservices,aandainformationafromatheainitialasourcesa
ofamaterialsaandaservicesatoatheadeliveryaofaproductsatoaconsumers,aregardlessaofawhetherathoseaactiv
itiesaoccurainatheasameaorganizationaorainaotheraorganizations.
Costamanagementaisamostaeffectiveawhenaitaintegratesaandacoordinatesaactivitiesaacrossaallaco
mpaniesainatheasupplyachainaasawellaasaacrossaeachabusinessafunctionainaanaindividualacompany’saval
ueachain.aAttemptsaareamadeatoarestructureaallacostaareasatoabeamoreacost-effective.
1-6 “Managementa accountinga dealsa onlya witha costs.”a Thisa statementa isa misleadinga ata best,aa
ndawrongaataworst.aManagementaaccountingameasures,aanalyzes,aandareportsafinancialaandanon-
afinancialainformationathatahelpsamanagersadefineatheaorganization’sagoals,aandamakeadecisionsatoaf
ulfillathem.aManagementaaccountingaalsoaanalyzesarevenuesafromaproductsaandacustomersainaordera
toa assessa producta anda customera profitability.a Therefore,a whilea managementa accountingadoesaus
eacostainformation,aitaisaonlyaaapartaofatheaorganization’sainformationarecordedaandaanalyzedabyaman
agementaaccountants.
1-7 Managementaaccountantsacanahelpaimproveaqualityaandaachieveatimelyaproductadeliveriesab
yarecordingaandareportingaanaorganization’sacurrentaqualityaandatimelinessalevelsaandabyaanalyzingaa
ndaevaluatingatheacostsaandabenefits—bothafinancialaandanon-financial—
ofanewaqualityainitiativesasuchaasaTQM,arelievingabottleneckaconstraintsaoraprovidingafasteracustome
raservice.
1-8 Theafive-stepadecision-
makingaprocessaisa(1)aidentifyatheaproblemaandauncertaintiesa(2)aobtainainformationa(3)amakeapredi
ctionsaaboutatheafuturea(4)amakeadecisionsabyachoosingaamongaalternativesaanda(5)aimplementathead
ecision,aevaluateaperformanceaandalearn.
1-9 Planningadecisionsafocusaonaselectingaorganizationagoalsaandastrategies,apredictingaresultsau
nderavariousaalternativeawaysaofaachievingathoseagoals,adecidingahowatoaattainatheadesiredagoals,aand
acommunicatingatheagoalsaandahowatoaattainathematoatheaentireaorganization.
Controladecisionsafocusaonatakingaactionsathataimplementatheaplanningadecisions,adecidingah
owatoaevaluateaperformance,aandaprovidingafeedbackaandalearningatoahelpafutureadecisionamaking.
1-10 Theathreeaguidelinesaforamanagementaaccountantsaare
1. Employaaacost-benefitaapproach.
2. Recognizeabehavioralaandatechnicalaconsiderations.
3. Applyatheanotionaofa“differentacostsaforadifferentapurposes”.
1-11 Agree.aAasuccessfulamanagementaaccountantarequiresageneralabusinessaskillsa(suchaasaunder
standingatheastrategyaofaanaorganization)aandapeopleaskillsa(suchaasamotivatingaotherateamamembers
)aasawellaasatechnicalaskillsa(suchaasacomputeraknowledge,acalculatingacostsaofaproducts,aandasupport
ingaplanningaandacontroladecisions).
1-2
, 1-12 Theanewacontrolleracouldareplyainaoneaoramoreaofatheafollowingaways:
(a) Demonstrateatoatheaplantamanagerahowaheaorasheacouldamakeabetteradecisionsaifatheaplant
acontrollerawasaviewedaasaaaresourcearatherathanaaadeadweight.a Inaaarelatedaway,atheaplant
acontrolleracouldashowahowatheaplantamanager’satimeaandaresourcesacouldabeasavedabyavi
ewingatheanewaplantacontrolleraasaaateamamember.
(b) Demonstrateatoatheaplantamanageraaagoodaknowledgeaofatheatechnicalaaspectsaofatheaplan
t.aThisaapproachamayainvolveadoingabackgroundareading.aItacertainlyawillainvolveaspendi
ngamuchatimeaonatheaplantaflooraspeakingatoaplantapersonnel.
(c) Showatheaplantamanageraexamplesaofatheanewaplantacontroller’sapastasuccessesainaworkin
gawithalineamanagersainaotheraplants.aExamplesacouldainclude
assistanceainapreparingatheabudget,
assistance in analyzing problem situations and evaluating financial
andanonfinancialaaspectsaofadifferentaalternatives,aand
assistanceainasubmittingacapitalabudgetarequests.
(d) Seekaassistanceafromatheacorporateacontrolleratoahighlightatoatheaplantamanageratheaimpo
rtanceaofamanyatasksaundertakenabyatheanewaplantacontroller.aThisaapproachaisaaalastareso
rtabutamayabeanecessaryainasomeacases.
1-13 Theacontrolleraisatheachiefamanagementaaccountingaexecutive.aTheacorporateacontrollerarepo
rtsatoatheachiefafinancialaofficer,aaastaffafunction.aCompaniesaalsoahaveabusinessaunitacontrollersawho
asupportabusinessaunitamanagersaoraregionalacontrollersawhoasupportaregionala managersainamajorage
ographicaregions.
1-14 Thea Institutea ofa Managementa Accountantsa (IMA)a setsa standardsa ofa ethicala conducta foram
anagementaaccountantsainatheafollowingafouraareas:
Competence
Confidentiality
Integrity
Credibility
1-15 Stepsatoatakeawhenaestablishedawrittenapoliciesaprovideainsufficientaguidanceaare
(a) Discussa thea problema witha thea immediatea superiora (excepta whena ita appearsa thata theas
uperioraisainvolved).
(b) Clarifya relevanta ethicala issuesa bya confidentiala discussiona witha ana IMAa EthicsaCounse
loraoraotheraimpartialaadvisor.
(c) Consulta youra owna attorneya asa toa legala obligationsa anda rightsa concerninga thea ethicalac
onflicts.
1-3
a
COST AC a
COUNTING
, CHAPTERa1
THEaMANAGERaANDaMANAGEMENTaACCOUNTING
SeeatheafrontamatteraofathisaSolutionsaManualaforasuggestionsaregardingayourachoicesaofaassignmen
tamaterialaforaeachachapter.
1-1 Managementaaccountingameasures,aanalyzesaandareportsafinancialaandanonfinancialainform
ationathatahelpsamanagersamakeadecisionsatoafulfillatheagoalsaofaanaorganization.aItafocusesaonaintern
alareportingaandaisanotarestrictedabyagenerallyaacceptedaaccountingaprinciplesa(GAAP).
Financialaaccountingafocusesaonareportingatoaexternalapartiesasuchaasainvestors,agovernmen
taagencies,aandabanks.aItameasuresaandarecordsabusinessatransactionsaandaprovidesafinancialastateme
ntsathataareabasedaonagenerallyaacceptedaaccountingaprinciplesa(GAAP).
Otheradifferencesaincludea(1)amanagementaaccountingaemphasizesatheafuturea(notatheapast),a
anda(2)amanagementaaccountingainfluencesatheabehavioraofamanagersaandaotheraemployeesa(ratherat
hanaprimarilyareportingaeconomicaevents).
1-2 Financialaaccountingaisaconstrainedabyagenerallyaacceptedaaccountingaprinciples.aManagem
entaaccountingaisanotarestrictedatoatheseaprinciples.aThearesultaisathat
managementaaccountingaallowsamanagersatoachargeainterestaonaowners’acapitalatoahelpaju
dgeaaadivision’saperformance,aevenathoughasuchaaachargeaisanotaalloweda underaGAAP,
managementa accountinga cana includea assetsa ora liabilitiesa (sucha asa “branda names”adevelop
edainternally)anotarecognizedaunderaGAAP,aand
managementa accountinga cana usea asseta ora liabilitya measurementa rulesa (sucha asa presentav
aluesaoraresaleaprices)anotapermittedaunderaGAAP.
1-3 Managementaaccountantsacanahelpatoaformulateastrategyabyaprovidingainformationaaboutathe
asourcesaofacompetitiveaadvantage—
foraexample,atheacost,aproductivity,aoraefficiencyaadvantageaofatheiracompanyarelativeatoacompetitor
saoratheapremiumapricesaaacompanyacanachargearelativeatoatheacostsaofaaddingafeaturesathatamakeaitsap
roductsaoraservicesadistinctive.
1-4 Theabusinessafunctionsainatheavalueachainaare
Researchaandadevelopment—
generatinga anda experimentinga witha ideasa relateda toa newaproducts,aservices,aoraprocesses.
Designa ofaproductsa andaprocesses—
thea detaileda planning,a engineering,a anda testinga ofaproductsaandaprocesses.
Production—
procuring,a transporting,a storinga anda assemblinga resourcesa toa producea aaproductaoradeliv
eraaaservice.
Marketing—
promotinga anda sellinga productsa ora servicesa toa customersa ora prospectiveacustomers.
Distribution—processingaordersaandashippingaproductsaoraservicesatoacustomers.
Customeraservice—providingaafter-salesaserviceatoacustomers.
1-1
,1-5 Supplyachainadescribesatheaflowaofagoods,aservices,aandainformationafromatheainitialasourcesa
ofamaterialsaandaservicesatoatheadeliveryaofaproductsatoaconsumers,aregardlessaofawhetherathoseaactiv
itiesaoccurainatheasameaorganizationaorainaotheraorganizations.
Costamanagementaisamostaeffectiveawhenaitaintegratesaandacoordinatesaactivitiesaacrossaallaco
mpaniesainatheasupplyachainaasawellaasaacrossaeachabusinessafunctionainaanaindividualacompany’saval
ueachain.aAttemptsaareamadeatoarestructureaallacostaareasatoabeamoreacost-effective.
1-6 “Managementa accountinga dealsa onlya witha costs.”a Thisa statementa isa misleadinga ata best,aa
ndawrongaataworst.aManagementaaccountingameasures,aanalyzes,aandareportsafinancialaandanon-
afinancialainformationathatahelpsamanagersadefineatheaorganization’sagoals,aandamakeadecisionsatoaf
ulfillathem.aManagementaaccountingaalsoaanalyzesarevenuesafromaproductsaandacustomersainaordera
toa assessa producta anda customera profitability.a Therefore,a whilea managementa accountingadoesaus
eacostainformation,aitaisaonlyaaapartaofatheaorganization’sainformationarecordedaandaanalyzedabyaman
agementaaccountants.
1-7 Managementaaccountantsacanahelpaimproveaqualityaandaachieveatimelyaproductadeliveriesab
yarecordingaandareportingaanaorganization’sacurrentaqualityaandatimelinessalevelsaandabyaanalyzingaa
ndaevaluatingatheacostsaandabenefits—bothafinancialaandanon-financial—
ofanewaqualityainitiativesasuchaasaTQM,arelievingabottleneckaconstraintsaoraprovidingafasteracustome
raservice.
1-8 Theafive-stepadecision-
makingaprocessaisa(1)aidentifyatheaproblemaandauncertaintiesa(2)aobtainainformationa(3)amakeapredi
ctionsaaboutatheafuturea(4)amakeadecisionsabyachoosingaamongaalternativesaanda(5)aimplementathead
ecision,aevaluateaperformanceaandalearn.
1-9 Planningadecisionsafocusaonaselectingaorganizationagoalsaandastrategies,apredictingaresultsau
nderavariousaalternativeawaysaofaachievingathoseagoals,adecidingahowatoaattainatheadesiredagoals,aand
acommunicatingatheagoalsaandahowatoaattainathematoatheaentireaorganization.
Controladecisionsafocusaonatakingaactionsathataimplementatheaplanningadecisions,adecidingah
owatoaevaluateaperformance,aandaprovidingafeedbackaandalearningatoahelpafutureadecisionamaking.
1-10 Theathreeaguidelinesaforamanagementaaccountantsaare
1. Employaaacost-benefitaapproach.
2. Recognizeabehavioralaandatechnicalaconsiderations.
3. Applyatheanotionaofa“differentacostsaforadifferentapurposes”.
1-11 Agree.aAasuccessfulamanagementaaccountantarequiresageneralabusinessaskillsa(suchaasaunder
standingatheastrategyaofaanaorganization)aandapeopleaskillsa(suchaasamotivatingaotherateamamembers
)aasawellaasatechnicalaskillsa(suchaasacomputeraknowledge,acalculatingacostsaofaproducts,aandasupport
ingaplanningaandacontroladecisions).
1-2
, 1-12 Theanewacontrolleracouldareplyainaoneaoramoreaofatheafollowingaways:
(a) Demonstrateatoatheaplantamanagerahowaheaorasheacouldamakeabetteradecisionsaifatheaplant
acontrollerawasaviewedaasaaaresourcearatherathanaaadeadweight.a Inaaarelatedaway,atheaplant
acontrolleracouldashowahowatheaplantamanager’satimeaandaresourcesacouldabeasavedabyavi
ewingatheanewaplantacontrolleraasaaateamamember.
(b) Demonstrateatoatheaplantamanageraaagoodaknowledgeaofatheatechnicalaaspectsaofatheaplan
t.aThisaapproachamayainvolveadoingabackgroundareading.aItacertainlyawillainvolveaspendi
ngamuchatimeaonatheaplantaflooraspeakingatoaplantapersonnel.
(c) Showatheaplantamanageraexamplesaofatheanewaplantacontroller’sapastasuccessesainaworkin
gawithalineamanagersainaotheraplants.aExamplesacouldainclude
assistanceainapreparingatheabudget,
assistance in analyzing problem situations and evaluating financial
andanonfinancialaaspectsaofadifferentaalternatives,aand
assistanceainasubmittingacapitalabudgetarequests.
(d) Seekaassistanceafromatheacorporateacontrolleratoahighlightatoatheaplantamanageratheaimpo
rtanceaofamanyatasksaundertakenabyatheanewaplantacontroller.aThisaapproachaisaaalastareso
rtabutamayabeanecessaryainasomeacases.
1-13 Theacontrolleraisatheachiefamanagementaaccountingaexecutive.aTheacorporateacontrollerarepo
rtsatoatheachiefafinancialaofficer,aaastaffafunction.aCompaniesaalsoahaveabusinessaunitacontrollersawho
asupportabusinessaunitamanagersaoraregionalacontrollersawhoasupportaregionala managersainamajorage
ographicaregions.
1-14 Thea Institutea ofa Managementa Accountantsa (IMA)a setsa standardsa ofa ethicala conducta foram
anagementaaccountantsainatheafollowingafouraareas:
Competence
Confidentiality
Integrity
Credibility
1-15 Stepsatoatakeawhenaestablishedawrittenapoliciesaprovideainsufficientaguidanceaare
(a) Discussa thea problema witha thea immediatea superiora (excepta whena ita appearsa thata theas
uperioraisainvolved).
(b) Clarifya relevanta ethicala issuesa bya confidentiala discussiona witha ana IMAa EthicsaCounse
loraoraotheraimpartialaadvisor.
(c) Consulta youra owna attorneya asa toa legala obligationsa anda rightsa concerninga thea ethicalac
onflicts.
1-3
