Chapter 1 Answer Key - Managerial Accounting
Chapter 1
Cost Accounting: Information for Decision Making
Solutions to Review Questions
1-1.
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 allows 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).
1-2.
B Providing cost information for financial reporting
A Identifying the best store in a chain
C Determining which plant to use for production
1-3.
The value chain is the set of activities that transforms raw resources into the goods and services end users purchase and consume. The supply chain includes the set of firms and individuals that sells 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.
1-4.
The customers of cost accounting are managers, from plant managers to the CEO.
1-5.
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 way, the cost accounting system can help the manager identify areas (processes) that can be improved, lowering costs and adding value to the organization.
1-6.
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
Cost Accounting: Information for Decision Making
Solutions to Review Questions
1-1.
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 allows 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).
1-2.
B Providing cost information for financial reporting
A Identifying the best store in a chain
C Determining which plant to use for production
1-3.
The value chain is the set of activities that transforms raw resources into the goods and services end users purchase and consume. The supply chain includes the set of firms and individuals that sells 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.
1-4.
The customers of cost accounting are managers, from plant managers to the CEO.
1-5.
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 way, the cost accounting system can help the manager identify areas (processes) that can be improved, lowering costs and adding value to the organization.
1-6.
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