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SOLUTION MANUAL FOR Fundamentals Of Cost Accounting 7th Edition William Lanen 2024 / All Chapters A+
SOLUTION MANUAL FOR Fundamentals Of Cost Accounting 7th Edition William Lanen 2024 / All Chapters A+
1
Cost Accounting: Information for Decision
Making
Solutions to Review Questions
1-1.
Among the goals of an organization, a central one is to create and increase value. Cost
accounting system...
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fundamentals of cost accounting
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Fundamentals Of Cost Accounting 7th Edition
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Solutions Manual, Chapter 4 1 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hi ll LLC. SOLUTION MANUAL FOR Fundamentals Of Cost Accounting 7th Edition William Lanen 1 Cost Accounting: Information for Decision Making Solutions to Review Questions 1-1. Among the goals of an organization, a central one is to create and increase value . Cost account ing systems are designed to provide information to decision makers in the organization with the information they need to accomplish this goal. Therefore, the designers of the cost accounting system need to understand how value is created in the organizatio n to design systems for their organization. 1-2. Financial accounting is designed to provide information about the firm to external users. External users include investors, creditors, government authorities, regulators, customers, competitors, suppliers, labor unions, and so on. Cost accounting systems are designed to provide information to internal users (managers). This difference is important, because it affects the design of the systems. Financial accounting systems are based on standards or rules. This all ows the user to compare the results of different firms. Managerial accounting systems do not require rules. Each firm is free to develop managerial accounting systems that best serve the needs of the decision makers (managers). 1-3. B Providing cost informatio n for financial reporting A Identifying the best store in a chain 2 Fundamentals of Cost Accounting , 7e © McGraw Hill LLC. All right s reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. C Determining which plant to use for production 1-4. The value chain is the set of activities that transforms raw resources into the goods and services end users purchase and consume. The supp ly chain includes the set of firms and individuals that sell s goods and services to the firm. The distribution chain is the set of firms and individuals that buys and distributes goods and services from the firm. 1-5. The customers of cost accounting are mana gers, from plant managers to the CEO. 1-6. Value -added activities are activities that customers perceive as adding utility to the goods or services they purchase. Nonvalue -added activities do not add value to the goods or services. By classifying costs this wa y, the cost accounting system can help the manager identify areas (processes) that can be improved, lowering costs and adding value to the organization. 1-7. Answers will vary, but should include some of the following: Title Major Responsibilities and Major Duties Chief financial officer (CFO) .... Manages entire finance and accounting function Treasurer ................................ . Manages liquid assets Conducts business with banks and other financial institutions Oversees public issues of stock and debt Controller ................................ . Plans and designs information and incentive systems Internal auditor ........................ Ensures compliance with laws, regulations, and company policies and procedures Provides consulting and auditing services within the firm Cost accountant ...................... Records, measures, estimates, and analyzes costs Works with financial and operational manager to Solutions Manual, Chapter 4 3 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hi ll LLC. provide relevant information for decisions 1-8. The four questions of the critical thinking framework are: 1. What are the relevant questions (what decisions do I need to make)? 2. What are the data relevant to the analysis and where do I find them? 3. What are the appropriate tools for analyzing data? 4. How can I effectively and persuasively communicate the results of my analysis? 1-9. No. Sarbanes -Oxley is a law and violations of it are legal issues . Codes of ethics are necessary to help accountants and managers identify situations that might develop into ethical conflicts, understand what they could do in these situations, and to learn what to do when they believe that an ethical violation has occur red. Solutions to Critical Analysis and Discussion Questions 1-10. The role of cost accountants is to help manage the organization. Part of that role is to report results. Another part is to design systems that assist other managers in making decisions to imp rove performance. This role requires that accountants understand how value is created in their organizations. Identifying and reporting how the decisions managers make affect value creation lead to better decisions. 1-11. Yes, you should be interested in the ef ficiency of your customers. The consumer (the customer of the retailers) is interested in receiving the most value. If one of the links in the supply chain is inefficient, the customer may choose to buy from a different retailer (who might use a different wholesaler). 1-12. Costs that you could ask to be reimbursed might include the fuel, a share of the maintenance costs, ―wear and tear,‖ or depreciation, and insurance. To avoid disagreements, it would be necessary to negotiate an agreement (even if only inform ally) between you and your friend considering all factors. For example, you might agree that she should pay for the gas and any other supplies (e.g., oil) needed on the trip. 4 Fundamentals of Cost Accounting , 7e © McGraw Hill LLC. All right s reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. If you are going along, you might change the agreement so that you split these co sts. Alternatively, you might say that because you are going anyway, she can ride along for nothing. 1-13. Cost accounting provides important information to those who determine strategy. If the cost accounting system provides inaccurate information, the organiz ation may end up with an unintended strategy, because managers are making decisions based on faulty information. 1-14. Executive performance evaluation systems are designed for a specific company‘s needs. The systems should be flexible to adapt to the circumsta nces that exist in that company. A common set of accounting principles would tend to reduce flexibility and usefulness of these systems. If all parties know the accounting basis used by the system, the exact rules can be designed in whatever manner the par ties deem appropriate. 1-15. Although not -for-profit organizations are not seeking to make a profit, they must remain financially viable to accomplish their missions. Cost accounting information can help managers of not -for-profit organizations by highlighting the costs of various activities, identifying sources of revenue, and measuring performance of managers. In terms of organizational survival, cost accounting information can be just as (or more) important for a not -for-profit as for a for -profit firm. 1-16. Both Goodyear and Pep Boys needs to determine the cost of tire to determine cost of goods sold on the income statement and inventory amounts on the balance sheet . Perhaps the biggest difference is that for a retailer, such as Pep Boys, the cost of a tire is what was paid to the supplier (Goodyear) for the tire. For Goodyear, the problem is not quite as simple. Goodyear does not buy a tire. It buys materials (rubber , for example ) and labor and combines them in a manufacturing plant. These resources cost money a nd Goodyear needs to determine what resources went into the tires. A second, though perhaps less important, difference is that Goodyear may have some tires that have been started in the production process but have not been completed when the fiscal year e nds. As a result, Goodyear also needs to determine the value of this incomplete work, the work in process.
