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Atkinson, Solutions Manual t/a Management Accounting, 6th Edition Chapter 07: Management Accounting and Control Systems: Assessing Performance Over the Value Chain$15.49
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Atkinson, Solutions Manual t/a Management Accounting, 6th Edition Chapter 07: Management Accounting and Control Systems: Assessing Performance Over the Value Chain
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Course
Management Accounting
Institution
Management Accounting
Book
Management Accounting
Atkinson, Solutions Manual t/a Management Accounting, 6th Edition Chapter 07: Management Accounting and Control Systems: Assessing Performance Over the Value Chain
Chapter 7
Management Accounting
and Control Systems:
Assessing Performance
Over the Value Chain
QUESTIONS
7-1 In the context of a management accounting and control system, control
refers to the set of procedures, tools, performance measures, and systems
that organizations use to guide and motivate all employees to achieve
organizational objectives.
7-2 The text indicates five steps that are needed to keep the organization in
control:
Step 1: plan, which consists of developing the organization’s primary and
secondary objectives and identifying the processes to accomplish
them;
Step2: execute, which consists of implementing the plan;
Step3: monitor, which consists of measuring the system’s current level
of performance;
Step 4: evaluate, which consists of comparing the system’s current level
of performance to the objective to identify any variance between
the system’s objective and actual performance; and
Step 5: correct, which consists of taking any corrective action needed to
return the system to being in control.
7-3 The two broad technical considerations that designers of management
accounting and control systems must address are the relevancy of the
information generated and the scope of the system.
– 217 –
,Atkinson, Solution Manual t/a Management Accounting, 4E
7-4 When addressing the relevancy of a management accounting and control
system, designers should develop a system that provides information that is
timely and accurate enough to be relevant and useful for decision making. The
system should provide a consistent framework for the organization, in the
sense that the language used and the methods of producing management
accounting information do not conflict within various parts of the organization.
Finally, employees should be able to use the system’s available information in a
flexible manner, customized for the decisions at hand.
7-5 The total life cycle costing approach is a comprehensive way for managers to
understand and manage costs through a product’s design, development,
manufacturing, marketing, distribution, maintenance, service, and disposal
stages.
7-6 The three major cycles of the total life cycle costing approach are (1)
research development and engineering, (2) manufacturing, and (3) post-sale
service and disposal.
7-7 Committed costs are those that the organization agrees must be set aside
(or committed) to cover product costs through the three major stages of the
life cycle. Costs incurred are the actual costs that the organization has to
pay out over the three major stages of the product life cycle.
7-8 The three stages of the research development and engineering cycle are (1)
using market research to assess emerging customer needs that lead to idea
generation for new products, (2) product design, in which scientists and
engineers develop the technical aspects of the product, and (3) product
development, in which the company creates the features critical to customer
satisfaction and designs prototypes, production processes, and any special
tooling required.
7-9 The post-sale service and disposal cycle is the last major cycle for the
product. During this cycle, organizations have to consider both the costs
involved in providing service to products as soon as they are in the hands of
customers, as well as the costs of ultimately disposing of the product.
7-10 Target costing is a method of cost planning that focuses on reducing costs
for products that require discrete manufacturing processes and reasonably
short product life cycles. Target costing usually is used during the research
development and engineering stage of the total life cycle of a product.
– 218 –
, Chapter 7: Management Accounting and Control Systems: Assessing Performance Over the Value Chain
7-11 The two essential elements needed to arrive at a target cost are determining
a target selling price and the target profit margin. The target cost is the
difference between the two.
7-12 Value engineering is a process in which each component of a product is
scrutinized to determine whether it is possible to reduce costs while
maintaining functionality and performance.
7-13 Target costing is most applicable during the research development and
engineering stage of the total life cycle of a product.
7-14 Cross-functional teams guide the target costing process. These teams may
include, for example, representatives from the organization’s design
engineering, manufacturing, management accounting, and marketing areas,
as well as representatives from among suppliers, customers, distributors,
and waste disposal. Supply chain management, which involves developing
cooperative, mutually beneficial long-term relations between buyers and
suppliers, plays a critical role in target costing when suppliers actively
participate in resolving cost reduction problems.
7-15 Kaizen costing is a method to reduce the cost of a product through small,
continuous improvements during the manufacturing stage of the total life
cycle of a product.
7-16 A cost variance investigation is undertaken under Kaizen costing in order to
compare actual cost reduction amounts to target Kaizen costs. Variance
investigation occurs whenever this comparison is needed.
7-17 The Kaizen costing system operates outside of the standard costing system
because the standard costing system is oriented to complying with Japanese
financial accounting standards and not internal operations, per se.
7-18 Explicit environmental costs include the direct costs of modifying
technology and processes, costs of cleanup and disposal, costs of permits to
operate a facility, fines levied by government agencies, and litigation fees.
Implicit environmental costs often pertain to the infrastructure required to
monitor environmental issues. Examples of implicit environmental costs
include legal counsel, employee education and awareness, and the loss of
goodwill if environmental disasters occur.
– 219 –
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