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In this document you can expect the solutions of the first four chapters of the book '' Cost accounting - a managerial emphasis 15th edition ''
Summary finance & control year 2 book material and class material
Cost accounting - a managerial emphasis book solutions 15th edition CH5 - CH8 ( Horngren, Datar, Rajan )
Cost accounting - a managerial emphasis book solutions 15th edition CH9 - CH12 ( Horngren, Datar, Rajan )
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Accountancy
Management Accounting
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CHAPTER 1
THE MANAGER AND MANAGEMENT ACCOUNTING
See the front matter of this Solutions Manual for suggestions regarding your choices of assignment
material for each chapter.
1-1 Management 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).
1-2 Financial 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.
1-3 Management 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.
1-4 The 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.
3-1
,1-5 Supply 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
nonfinancial information that helps managers define the organization’s goals and make decisions
to fulfill those goals. 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 nonfinancial—of new quality initiatives,
such as TQM, relieving bottleneck constraints, or providing faster customer service.
1-8 The 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.
1-9 Planning 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.
1-10 The three guidelines for management accountants are as follows:
1. Employ a cost-benefit approach.
2. Recognize technical and behavioral considerations.
3. Apply the notion of “different costs for different purposes.”
1-11 Agree. 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).
3-2
, 1-12 The 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.
1-13 The 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.
1-14 The Institute of Management Accountants (IMA) sets standards of ethical conduct for
management accountants in the following four areas:
Competence
Confidentiality
Integrity
Credibility
1-15 Steps to take when established written policies provide insufficient guidance are as follows:
(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.
3-3
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