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Solution Manual for Cost Accounting 14th Edition / All Chapters 1 - 23 / Full Complete 2023
Solution Manual for Cost Accounting 14th Edition / All Chapters 1 - 23 / Full Complete 2023
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CHAPTER 1THE MANAGER AND MANAGEMENT ACCOUNTING
See the front matter of this Solutions Manual for suggestions regarding your choices of
assignment material for each chapter. 1-1Management accounting measures, analyzes and reports financial and nonfinancial
information that helps managers make decisions to fulfill the goals of an organization. It focuses
on internal reporting and is not restricted by generally accepted accounting principles (GAAP).
Financial accounting focuses on reporting to external parties such as investors,
government agencies, and banks. It measures and records business transactions and provides
financial statements that are based on generally accepted accounting principles (GAAP).
Other differences include (1) management accounting emphasizes the future (not the
past), and (2) management accounting influences the behavior of managers and other employees
(rather than primarily reporting economic events).
1-2Financial accounting is constrained by generally accepted accounting principles.
Management accounting is not restricted to these principles. The result is that
management accounting allows managers to charge interest on owners’ capital to help
judge a division’s performance, even though such a charge is not allowed under
GAAP,
management accounting can include assets or liabilities (such as “brand names”
developed internally) not recognized under GAAP, and
management accounting can use asset or liability measurement rules (such as present
values or resale prices) not permitted under GAAP. 1-3Management accountants can help to formulate strategy by providing information about
the sources of competitive advantage—for example, the cost, productivity, or efficiency
advantage of their company relative to competitors or the premium prices a company can charge
relative to the costs of adding features that make its products or services distinctive.
1-4The business functions in the value chain are
Research and development —generating and experimenting with ideas related to new
products, services, or processes.
Design of products and processes —the detailed planning, engineering, and testing of
products and processes.
Production—procuring, transporting, storing and assembling resources to produce a
product or deliver a service.
Marketing—promoting and selling products or services to customers or prospective
customers.
Distribution—processing orders and shipping products or services to customers.
Customer service—providing after-sales service to customers.
1-1 1-5Supply chain describes the flow of goods, services, and information from the initial
sources of materials and services to the delivery of products to consumers, regardless of whether
those activities occur in the same organization or in other organizations.
Cost management is most effective when it integrates and coordinates activities across all
companies in the supply chain as well as across each business function in an individual
company’s value chain. Attempts are made to restructure all cost areas to be more cost-effective.
1-6“Management accounting deals only with costs.” This statement is misleading at best,
and wrong at worst. Management accounting measures, analyzes, and reports financial and non-
financial information that helps managers define the organization’s goals, and make decisions to
fulfill them. Management accounting also analyzes revenues from products and customers in
order to assess product and customer profitability. Therefore, while management accounting
does use cost information, it is only a part of the organization’s information recorded and
analyzed by management accountants.
1-7 Management accountants can help improve quality and achieve timely product deliveries
by recording and reporting an organization’s current quality and timeliness levels and by
analyzing and evaluating the costs and benefits—both financial and non-financial—of new
quality initiatives such as TQM, relieving bottleneck constraints or providing faster customer
service.
1-8The five-step decision-making process is (1) identify the problem and uncertainties (2) obtain information (3) make predictions about the future (4) make decisions by choosing among alternatives and (5) implement the decision, evaluate performance and learn.
1-9Planning decisions focus on selecting organization goals and strategies, predicting results
under various alternative ways of achieving those goals, deciding how to attain the desired goals,
and communicating the goals and how to attain them to the entire organization.
Control decisions focus on taking actions that implement the planning decisions, deciding
how to evaluate performance, and providing feedback and learning to help future decision
making.
1-10The three guidelines for management accountants are
1.Employ a cost-benefit approach.
2.Recognize behavioral and technical considerations.
3.Apply the notion of “different costs for different purposes”.
1-11Agree. A successful management accountant requires general business skills (such as
understanding the strategy of an organization) and people skills (such as motivating other team
members) as well as technical skills (such as computer knowledge, calculating costs of products,
and supporting planning and control decisions).
1-2 1-12The new controller could reply in one or more of the following ways:
(a)Demonstrate to the plant manager how he or she could make better decisions if the
plant controller was viewed as a resource rather than a deadweight. In a related way,
the plant controller could show how the plant manager’s time and resources could be
saved by viewing the new plant controller as a team member.
(b)Demonstrate to the plant manager a good knowledge of the technical aspects of the
plant. This approach may involve doing background reading. It certainly will involve
spending much time on the plant floor speaking to plant personnel.
(c)Show the plant manager examples of the new plant controller’s past successes in
working with line managers in other plants. Examples could include
assistance in preparing the budget,
assistance in analyzing problem situations and evaluating financial and
nonfinancial aspects of different alternatives, and
assistance in submitting capital budget requests.
(d)Seek assistance from the corporate controller to highlight to the plant manager the
importance of many tasks undertaken by the new plant controller. This approach is a
last resort but may be necessary in some cases.
1-13The controller is the chief management accounting executive. The corporate controller
reports to the chief financial officer, a staff function. Companies also have business unit
controllers who support business unit managers or regional controllers who support regional
managers in major geographic regions.
1-14The Institute of Management Accountants (IMA) sets standards of ethical conduct for
management accountants in the following four areas:
Competence
Confidentiality
Integrity
Credibility
1-15Steps to take when established written policies provide insufficient guidance are
(a)Discuss the problem with the immediate superior (except when it appears that the
superior is involved).
(b)Clarify relevant ethical issues by confidential discussion with an IMA Ethics
Counselor or other impartial advisor.
(c)Consult your own attorney as to legal obligations and rights concerning the ethical
conflicts.
1-3 1-16(15 min.)Value chain and classification of costs, computer company.
Cost ItemValue Chain Business Function
a.
b.
c.
d.
e.
f.
g.
h.Production
Distribution
Design of products and processes
Research and Development
Customer Service or Marketing
Design of products and processes (or Research and Development)
Marketing
Production
1-17(15 min.)Value chain and classification of costs, pharmaceutical company.
Cost ItemValue Chain Business Function
a.
b.
c.
d.
e.
f.
g.
h.Design of products and processes
Marketing
Customer Service
Research and Development
Marketing
Production
Marketing
Distribution
1-18 (15 min.) Value chain and classification of costs, fast food restaurant.
Cost ItemValue Chain Business Function
a.
b.
c.
d.
e.
f. g.
h.Production
Distribution
Marketing
Marketing
Marketing
Production
Design of products and processes (or Research and Development)
Customer service
1-19(15 min.)Key success factors.
Change in Operations/
Management Accounting Key Success Factor
a.
b.
c.
d.
e.Innovation
Cost and Quality
Time
Time and Cost
Cost
1-4
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