Cost Accounting 4/e

Chapter 01 - Cost Accounting: Information for Decision Making
Chapter 1 Cost Accounting: Information for Decision Making

Learning Objectives
1 % ' * + Describe the !a" managers use accounting information to create va#ue in organi$ations Distinguish bet!een the uses an& users of cost accounting an& financia# accounting information ()p#ain ho! cost accounting information is use& for &ecision making an& performance eva#uation in organi$ations I&entif" current tren&s in cost accounting ,n&erstan& ethica# issues face& b" accountants an& !a"s to &ea# !ith ethica# prob#ems that "ou face in "our career
Chapter Out#ine
I -AL,( C.(A/IO0 I0 O.1A0I2A/IO03 A 4h" start !ith va#ue creation5 6 -a#ue chain C 3upp#" chain an& &istribution chain D ,sing cost information to increase va#ue ( Accounting an& the va#ue chain ACCO,0/I01 373/(M3 A 8inancia# accounting 6 Cost accounting C Cost accounting9 1AA:9 an& I8.3 D Customers of cost accounting O,. 8.AM(4O.; 8O. A33(33I01 CO3/ ACCO,0/I01 373/(M3 A /he manager<s job is to make &ecisions 6 Decision making re=uires information C 8in&ing an& e#iminating activities that &on<t a&& va#ue D I&entif"ing strategic opportunities using cost ana#"sis ( O!ners use cost information to eva#uate managers CO3/ DA/A 8O. MA0A1(.IAL D(CI3IO03 A Costs for &ecision making 6 Costs for contro# an& eva#uation > 6u&geting C Different &ata for &ifferent &ecisions
1-1
? %01* b" Mc1ra!-@i## (&ucation /his is proprietar" materia# so#e#" for authori$e& instructor use 0ot authori$e& for sa#e or &istribution in an" manner /his &ocument ma" not be copie&9 scanne&9 &up#icate&9 for!ar&e&9 &istribute&9 or poste& on a !ebsite9 in !ho#e or part
II
III
I-
-I -II
-III ID D
/.(0D3 I0 CO3/ ACCO,0/I01 /@.O,1@O,/ /@( -AL,( C@AI0 A Cost accounting in research an& &eve#opment A.BDC 6 Cost accounting in &esign C Cost accounting in purchasing D Cost accounting in pro&uction ( Cost accounting in marketing 8 Cost accounting in &istribution 1 Cost accounting in customer service @ (nterprise resource p#anning I Creating va#ue in the organi$ation ;(7 8I0A0CIAL :LA7(.3 I0 /@( O.1A0I2A/IO0 C@OIC(3: (/@ICAL I33,(3 8O. ACCO,0/A0/3 A 4hat makes ethics so important5 6 (thics C 3arbanes-O)#e" Act of %00% an& ethics CO3/ ACCO,0/I01 A0D O/@(. 6,3I0(33 DI3CI:LI0(3 3,MMA.7 A::(0DID: Institute of Management Accountants Co&e of (thics A 3tatements of ethica# professiona# practice 6 :rincip#es C 3tan&ar&s D .eso#ution of ethica# conf#ict
1-%
;e" Concepts
LO1 Describe the way managers use accounting information to create value in organizations.
> Cost accounting he#ps manages achieve the ma)imum va#ue for their organi$ations b" provi&ing information for &ecision making an& b" measuring the effects of &ecisions on the va#ue creation of the organi$ations > Value chain is the set of activities that transforms ra! resources into the goo&s an& services en& users purchase an& consume9 an& inc#u&es the treatment or &isposa# of an" !aste generate& b" the en& users ()amp#e 1: /he va#ue chain for the gaso#ine in&ustr" ma" inc#u&e the fo##o!ing Oi# search an& &ri##ing Oi# refining 1aso#ine &istribution .etai# out#ets (n& users (mission treatment
E /he entire va#ue chain consists of ven&ors an& supp#iers in the upstream an& &istributors an& customers in the &o!nstream of an organi$ation !hose efficient coor&ination &epen&s on the information provi&e& b" the cost accounting s"stem > Value-added activities are those that customers perceive as a&&ing uti#it" to the goo&s or services the" purchase9 inc#u&ing Asee ()hibit 1 1C
1-'
E .esearch an& &eve#opment A.BDC: /he creation an& &eve#opment of i&eas re#ate& to ne! pro&ucts9 services9 or processes E Design: /he &etai#e& &eve#opment an& engineering of pro&ucts9 services9 or processes E :urchasing: /he ac=uisition of goo&s an& services nee&e& to pro&uce a goo& or service E :ro&uction: /he co##ection an& assemb#" of resources to pro&uce a pro&uct or &e#iver a service E Marketing an& 3a#es: /he process of informing potentia# customers about the attributes of pro&ucts or services that #ea&s to their sa#e E Distribution: /he process for &e#ivering pro&ucts or services to customers E Customer service: /he support activities provi&e& to customers concerning a pro&uct or service > -a#ue is create& !hen an i&ea is estab#ishe& an& continues to increase a#ong the !a" (ach of the va#ue chain components a&&s va#ue to the pro&uct or service E A&ministrative functions9 such as human resource management an& accounting9 are inc#u&e& in ever" business function of the va#ue chain > Supply chain is the set of firms an& in&ivi&ua#s that se## goo&s an& services to the firm Distribution chain is the set of firms an& in&ivi&ua#s that bu" an& &istribute goo&s an& services from the firm E /hese supp#iers an& customers are on the firm<s boun&aries E /he supp#" chain an& &istribution chain are the parts of the va#ue chain outsi&e the firm > -a#ue chain creates va#ue for !hich the customer is !i##ing to pa" E Customers are concerne& !ith the tota# cost of pro&ucing a pro&uct or service but not !ith !hich firm in the supp#" chain incurre& the cost E 8irms must &eci&e !here in the va#ue chain a va#ue-a&&e& component is performe& most cost effective#" > Cost accounting focuses on ho! the in&ivi&ua# stages contribute to the va#ue an& ho! to !ork !ith other managers to improve performance
1-*
FAssign ()ercises 1-1+9 1-1GH
LO
Distinguish between the uses and users of cost accounting and financial accounting information.
> Accounting s"stems provi&e information for &ecision makers Depen&ing on the perspectives of the primar" user of the information Aoutsi&e versus insi&e the organi$ationC9 the accounting s"stems can be c#assifie& into financia# an& cost Aor manageria#C s"stems E Investors9 cre&itors9 government agencies9 ta) authorities9 etc are outsi&e the organi$ation Managers are insi&e the organi$ation E !inancial accounting is the fie#& of accounting that reports financia# position an& income accor&ing to accounting ru#es9 !hich make financia# accounting &ata comparab#e across firms E Managers are intereste& in financia# accounting information as !e## 6ut such information is not sufficient for making operationa# &ecisions E "ost accounting is the fie#& of accounting that measures9 recor&s9 an& reports information about costs E Cost accounting information must be re#evant for the particu#ar &ecisions to be ma&e b" managers in a particu#ar business environment /his perspective shapes ho! a cost accounting s"stem is &esigne& to provi&e goo& information an& to a&& va#ue to the organi$ation E Managers a&& va#ue to the organi$ation b" the &ecisions the" make9 !hi#e accountants a&& va#ue b" provi&ing goo& information to managers making the &ecision E /he major &ifferences bet!een financia# an& cost accounting are summari$e& in ()hibit 1% > ()terna# parties such as investors an& cre&itors eva#uate compan" an& management performance b" using financia# accounting information as governe& b" generally accepted accounting principles #$%%&' an& international financial reporting standards #(!)S' E $%%& an& (!)S represent the ru#es9 stan&ar&s9 an& conventions that gui&e the preparation of financia# accounting statements for firms registere& in the , 3 an& in man" other countries9 respective#"
1-+
E 8inancia# accounting information thus prepare&9 is consistent an& comparab#e across &ifferent companies9 but ma" not be appropriate for manageria# &ecision making E Cost &ata for manageria# use !ithin the organi$ation are not constraine& b" 1AA: or I8.3 Instea&9 &ecision re#evanc"9 !hich affects the future9 &etermines the t"pe of cost information suitab#e for the prob#ems at han& > Cost accounting information is in &eman& throughout the organi$ation ,sers of such information must be i&entifie& an& provi&e& !ith best possib#e information for manageria# purposes E At the pro&uction #eve#9 cost accounting information is provi&e& fre=uent#" an& is use& to contro# an& improve operations E At the mi&&#e management #eve#9 &eviations from the e)pectations Abu&getsC necessitate investigation an& corrective actions E At the e)ecutive #eve#9 cost accounting information is integrate& into financia# information to assess the compan"<s overa## success strategica##" an& is provi&e& on a month#"9 =uarter#"9 or annua# basis > /he most serious prob#ems !ith accounting s"stems appear to occur !hen managers attempt to use accounting information that !as &eve#ope& for e)terna# reporting for &ecision making E Different uses of accounting information re=uire &ifferent t"pes of accounting information
LO* +,plain how cost accounting information is used for decision ma-ing and performance evaluation in organizations.
> /he goa#s of an organi$ation are achieve& through the &ecisions ma&e b" managers E .ecurring themes: A1C /he manager<s job is to make &ecisions that &etermine the performance of the organi$ation A%C /he accounting s"stem is a primar" source of information for managers to make &ecisions A'C Accounting s"stems a#so provi&e information to the o!ners of the organi$ation9 !ho are not managers9 to eva#uate the performance of the organi$ation an& the managers
1-G
> .onvalue-added activities are activities that &o not a&& va#ue to the goo&s or services from the customer<s perspective ()amp#es inc#u&e moving inventor" aroun& an& re!orking &efective units E Activities cause costs E /hese nonva#ue-a&&e& activities shou#& be i&entifie& an& e#iminate&9 therefore the costs associate& !ith them can a#so be e#iminate& Cost re&uction can be trans#ate& into #o!er price an&Ior better service to customers E A !e##-&esigne& cost accounting s"stem can a#so i&entif" nonva#ue-a&&e& activities that cross boun&aries in the va#ue chain > "ost-benefit analysis is the process of comparing benefits Aoften measure& in savings or increase& profitsC !ith costs associate& !ith a propose& change !ithin an organi$ation E Managers shou#& perform cost-benefit ana#"ses to assess !hether propose& changes in an organi$ation are !orth!hi#e > Companies use the va#ue chain an& other information about the costs of activities to i&entif" strategic a&vantages in the market p#ace E A compan" can proactive#" i&entif" activities that customers va#ue !hi#e provi&ing such activities at #o!er cost > 4hen o!ners of a business are not a#so managers9 both parties< interests ma" not be proper#" a#igne& /he accounting information s"stem provi&es information to the o!ners about the performance of the organi$ation an& the managers > Cost &ata can be use& for &ecision making9 for contro# an& eva#uation9 an& for preparing bu&gets9 among others E /o eva#uate the financia# conse=uences of a#ternatives9 estimates have to be ma&e for future costs9 revenues9 an&Ior assets base& on past information E I&entification of the proper cost driver J factor that causes9 or K&rives9L costs J a#so he#ps pre&ict future resu#ts E Differential costs and revenues are costs an& revenues that change in response to a particu#ar course of action Items that &o not change !i## not affect outcome9 an& are therefore irre#evant to the &ecision
1-M
NNNNNNNNNNNNNNNNNNNNNN
Demonstration :rob#em
Oim is a f#orist !ho runs 6ountifu# 8#o!er 3hop as a so#e o!ner @is t"pica# month#" operating resu#ts inc#u&e the fo##o!ing: 3a#es revenue P*90009 8#o!er costs P Q009 3upp#ies P'009 Labor costs PG009 ,ti#ities P%+09 .ent PM%09 an& Other costs P'+0 @e recent#" atten&e& a tra&e sho! an& !as attracte& b" a nationa# chain that offere& him referra# service9 baskets9 an& ne! f#o!er arrangements in e)change for a month#" #icensing fee of P19000 @e figures that the a&&itiona# business from referra#s !i## increase his revenues b" *0 percent9 f#o!er materia#s9 supp#ies9 an& #abor costs b" *+ percent9 uti#ities b" 10 percent9 an& other costs b" %0 percent .ent !i## not change as he sti## uses the same faci#it" .e=uire&: 1 3hou#& Oim e)pan& his business to be associate& !ith the nationa# chain5 :#ease e)p#ain % If Oim can negotiate a &ifferent term !ith the nationa# chain9 !hat #icensing fee makes him in&ifferent bet!een the t!o choices Ai e 9 the status =uo of going so#o vs the a#ternative of being associate& !ith the nationa# chainC5 3o#ution: 6ountifu# 8#o!er 3hop :rojecte& Income 3tatement 8or One Month 3tatus Ruo A1C P*9000 Q00 '00 G00 %+0 M%0 0 '+0 '90%0 PSQ0 A#ternative A%C P+9G00a 191G0b *'+b QM0b %M+c M%0 19000 *%0& *9QQ0 PM%0 Difference A'C N A%C J A1C P19G00 'G0 1'+ %M0 %+ 0 19000 M0 19QG0 PA%G0C
3a#es revenue Costs: 8#o!er 3upp#ies Labor ,ti#ities .ent Licensing fee Other costs /ota# costs Operating profits
a
Increase b" *0T Increase b" *+T c Increase b" 10T

b
1-Q
&
Increase b" %0T
Oim shou#& not e)pan& his business because the projecte& resu#ts sho! that he !i## be !orse off b" P%G0 per month .ent remains the same un&er either option an& is irre#evant to the &ecision
/aking into account the #oss of P%G0 !ith the a#ternative9 a #icensing fee of PM*0 AN P19000 - P%G0C per month !i## pro&uce the same operating profits as before APSQ0C An" amount #ess than PM*0 per month !i## make e)pansion a better a#ternative NNNNNNNNNNNNNNNNNNNNNN E 6usinesses ten& to group specific functions among emp#o"ees into organi$ationa# units such as &epartments9 &ivisions9 segments9 or subsi&iaries as sho!n on an organi$ation chart E A responsibility center is a specific unit of an organi$ation assigne& to a manager !ho is he#& accountab#e for its operations an& resources ()amp#e %: /he fo##o!ing organi$ation chart sho!s ho! a home bui#&er organi$es its business units /he sa#es manager an& the construction manager of 8o) .un (state are responsib#e for revenues an& costs9 respective#"9 an& report to the project manager9 !ho is responsib#e for the financia# success of the 8o) .un (state project an& in turn reports9 a#ong !ith other project managers9 to a regiona# manager in charge of the Mi&At#antic region A## regiona# managers report to the genera# manager
General Manager
Regional Manager (Mid-Atlantic Region)
Other Regional Managers
Project Manager (Fox Run Estate)
Other Project Managers
Sales Manager (Fox Run Estate)
Construction Manager (Fox Run Estate)
1-S
E As seen in ()hibit 1 *9 the managers of the retai# an& the !ho#esa#e operations are responsib#e for their o!n Center Margin9 the &ifference bet!een revenues an& costs attributab#e to a center /he genera# an& a&ministrative costs of running the compan" as a !ho#e are the responsibi#it" of the genera# manager an& are not assigne& to the &epartment managers E A budget sho!s a financia# p#an of the revenues an& resources nee&e& to carr" out the responsibi#it" center<s tasks an& meet financia# goa#s E Managers are committe& to the targets set in the bu&get as part of the p#anning process Later9 a comparison of actua# resu#ts !ith the bu&get at the en& of each perio& &etermines !hether managers fu#fi## their responsibi#ities an& !hether changes can be ma&e to improve future operations E ()hibit 1 + &emonstrates bu&get versus actua# resu#ts for a responsibi#it" center > Cost accounting re=uires &ifferent accounting &ata for &ifferent &ecision purposes KOne si$e fits a##L &oes not app#" to cost accounting
LO/ (dentify current trends in cost accounting.

> Cost accounting un&ergoes &"namic changes over time to accommo&ate shifting manageria# emphases an& &ecision conte)ts in a## stages of the va#ue chain9 from research an& &eve#opment A.BDC9 &esign9 purchasing9 pro&uction9 marketing9 &istribution9 a## the !a" to customer service E In the &eve#opment stage9 companies partner !ith supp#iers to ensure cost-efficient &esigns an& materia#s for pro&ucts E Design for manufacturing AD8MC is the concept that manufacturing cost an& comp#e)it" nee& to be consi&ere& in the &esign of the pro&uct E /he tra&eoff bet!een comp#e) &esign for a more &esirab#e pro&uct an& &ifficu#t an& e)pensive manufacturing process can be manifeste& through cost accounting metho&s such as activity-based costing #%0"' J a costing metho& that first assigns costs to activities an& then assigns them to pro&ucts base& on the pro&ucts< consumption of activities E Activit"-base& costing provi&es more &etai#e& an& accurate cost information than tra&itiona# costing metho&s an& enab#es managers to make more informe& &ecisions9 #ea&ing to activit"-base& management that i&entifies an& e#iminates nonva#ue-a&&e& activities
1-10
E In purchasing9 performance measures Ametrics that in&icates ho! !e## an in&ivi&ua#9 business unit9 pro&uct9 or firm is !orkingC are use& to eva#uate performance of ke" supp#iers an& business partners E 0enchmar-ing is the continuous process of measuring a compan"<s o!n pro&ucts9 services9 an& activities against best practices either insi&e or outsi&e the organi$ation Continuous improvement sets the performance stan&ar& ever higher to achieve better resu#ts throughout the supp#" chain E 1ust-in-time #1(2' method ma" be use& in pro&uction or purchasing !here each unit is purchase& or pro&uce& just in time for its use Cost accountants &eve#op uni=ue treatment for the just-in-time environment !hi#e &eemphasi$ing the nee& for inventor" va#uation E Lean accounting is a cost accounting s"stem that provi&es measures at the !ork ce## or process #eve# an& minimi$es !astefu# or unnecessar" transaction processes Lean accounting provi&es support for #ean manufacturing techni=ues E "ustomer relationship management #")3' is a s"stem that a##o!s firms to target customers b" assessing customer revenues an& costs Marketing managers use cost accounting &ata to better manage &ifferent customer groups base& on their profitabi#it" E In the &istribution stage9 managers fre=uent#" consi&er activities for outsourcing9 !ith !hich one or more of the firm<s activities !i## be performe& b" another firm or in&ivi&ua# in the supp#" or &istribution chain for improve& efficienc" an& cost savings E 2otal 4uality management #253' is a management metho& b" !hich the organi$ation seeks to e)ce# on a## &imensions9 !ith the customer u#timate#" &efining =ua#it" E "ost of 4uality #"O5' is a s"stem that i&entifies the costs associate& !ith pro&ucing #o! =ua#it" items9 inc#u&ing re!ork9 returns9 an& #ost sa#es E +nterprise resource planning #+)&' systems represent the information techno#og" that #inks the various s"stems of the enterprise into a sing#e comprehensive information s"stem 6" integrating purchasing9 pro&uction9 human resources9 an& finance9 managers hope to avoi& #ost or&ers9 &up#ication of effort9 an& cost#" stu&ies to &etermine !hat the current state of the enterprise is E A## these too#s are meant to a&& va#ue to the organi$ation /he" a#so provi&e opportunities for peop#e intereste& in cost accounting to contribute to the organi$ation > As sho!n in ()hibit 1 G9 ke" financia# managers in an organi$ation an& their activities inc#u&e:
1-11
E Chief financia# officer AC8OC: /he top financia# personne# an& usua##" a senior vice presi&entU in charge of the entire accounting an& finance function of a compan" E /reasurer: /he person responsib#e for managing #i=ui& assets Asuch as cash an& shortterm investmentsCU con&ucting business !ith banks an& other financia# institutionsU overseeing pub#ic issues of stock an& &ebt E Contro##er: /he person in charge of accounting functions9 inc#u&ing p#anning9 &ecision making9 &esigning information s"stems an& incentive s"stems9 an& he#ping managers make operating &ecisions E Interna# au&itors: :art of an interna# au&it &epartment that ensures comp#iance !ith #a!s9 regu#ations9 an& compan" po#icies an& proce&uresU provi&es consu#ting an& au&iting services !ithin the firmU a#so assists e)terna# au&itors e)amining e)terna# financia# reports an& revie!ing companies< interna# contro# s"stemsU often reports &irect#" to the au&it committee of the 6oar& of Directors as K!hist#eb#o!ers L E Cost accountants: A group of peop#e !ho recor&9 measure9 &etermine9 an& ana#"$e costsU !ork !ith financia# an& operationa# managers to provi&e re#evant information for &ecisions > :eop#e from engineering9 pro&uction9 marketing9 finance9 an& accounting often !ork together in cross-functiona# teams to so#ve prob#ems E -a#ue is a&&e& b" A1C bringing a variet" of e)pertise an& perspectives to a prob#em9 A%C ensuring that the pro&uct is appropriate for its customer base9 A'C giving pro&uction a chance to formu#ate an efficient pro&uction process9 A*C obtaining financing for the project9 an& A+C &etermining !hether the project is economica##" feasib#e
LO6 7nderstand ethical issues faced by accountants and ways to deal with ethical problems that you face in your career.
> Cost assignment to activities9 pro&ucts9 projects9 corporate units9 an& peop#e9 as the resu#t of the &esign of cost s"stems9 affects price9 reimbursement9 an& pa"9 among others It has the potentia# to be misuse& to &efrau& customers9 emp#o"ees9 or shareho#&ers > Accounting information is use& to eva#uate the performance of managers Accountants !ho prepare the numbers are un&er constant pressure to make accounting choices that !i## inf#uence performance reports
1-1%
E 6oth the preparers an& users of cost information nee& to be a!are of the incentives create& b" performance measurement s"stems an& ho! those incentives ma" #ea& to unethica# Aor even i##ega#C con&uct E :rofessiona# organi$ations such as the Institute of Management Accountants AIMAC9 Institute of Interna# Au&itors AIIAC an& the American Institute of Certifie& :ub#ic Accountants AAIC:AC have &eve#ope& co&es of ethics to he#p their members maintain the highest #eve#s of ethica# con&ucts an& reso#ve ethica# &i#emmas Man" businesses a#so use these co&es to train their emp#o"ees an& to &emonstrate their commitment to certain business practices !ith respect to their customers an& as a gui&e for their emp#o"ees E /he Appen&i) to this chapter sho!s the IMA co&e of ethics in &etai# Members of the IMA are e)pecte& to maintain an appropriate #eve# of professiona# competence9 refrain from &isc#osing confi&entia# information ac=uire& in the course of their !ork9 an& maintain integrit" an& objectivit" in their !ork An" reso#ution of ethica# conf#ict shou#& fo##o! the estab#ishe& po#icies of the organi$ation 3uitab#e courses of action are a#so recommen&e& if the po#icies &o not reso#ve the ethica# conf#ict E /he IMA co&e of ethics &iscusses the steps cost accountants shou#& take !hen face& !ith an ethica# conf#ict9 inc#u&ing A1C &iscuss the conf#ict !ith the imme&iate superior9 or9 if the conf#ict invo#ves the superior9 the ne)t #eve# in authorit"9 A%C c#arif" the re#evant issues an& concepts b" &iscussions !ith a &isintereste& part"9 an& A'C consu#t an attorne" about rights an& ob#igations > Congress passe& the 3arbanes-O)#e" Act of %00% to counter man" i##ega# practices9 inc#u&ing manipu#ation of accounting resu#ts9 &esigne& to increase the compensation of managers at the e)pense of the investing an& consuming pub#ic E :rovisions in /it#e III an& I- of the Act &ea# !ith corporate responsibi#it" an& enhance& financia# &isc#osure9 respective#" E /he C(O an& C8O are responsib#e for signing financia# statements an& stipu#ating that the financia# statements &o not omit materia# information E /he C(O an& C8O must further &isc#ose that the" have eva#uate& the compan"<s interna# contro#s an& that the" have notifie& the compan"<s au&itors an& the au&it committee of the boar& of an" frau& that invo#ves management E 3ection *0* of /it#e I- re=uires managers to attest to the a&e=uac" of their interna# contro#s
1-1'
E /he 3arbanes-O)#e" Act of %00% has important imp#ications for managers !ho &esign cost information s"stems /he managers must be a!are of the potentia# for the resu#ting information to be mis#ea&ing or to further frau&u#ent activit" 3ee In Action bo) for a &iscussion of options back&ating at App#e9 Inc an& its pitfa##s > Cost accounting information interacts !ith other business &iscip#ines in the organi$ation to so#ve prob#ems Cost accounting s"stem permeates the organi$ation an& inf#uences a m"ria& of &ecisions A goo& grasp of other &iscip#ines such as organi$ationa# behavior an& marketing !i## he#p enrich the stu&" of cost accounting
Matching
A 6 C D ( 8 6enchmarking Cost accounting Cost-benefit ana#"sis Cost &river Differentia# revenues Distribution chain 1 @ I O ; L (nterprise resource p#anning Oust-in-time metho& Outsourcing .esponsibi#it" center 3upp#" chain -a#ue chain
VVVVV 1
/he set of activities that transforms ra! resources into the goo&s an& services en& users purchase an& consume9 an& inc#u&es the treatment or &isposa# of an" !aste generate& b" the en& users /he fie#& of accounting that measures9 recor&s9 an& reports information about costs 8actor that causes9 or K&rives9L costs /he set of firms an& in&ivi&ua#s that bu" an& &istribute goo&s an& services from the firm A specific unit of an organi$ation assigne& to a manager !ho is he#& accountab#e for its operations an& resources /he continuous process of measuring a compan"<s o!n pro&ucts9 services9 an& activities against best practices either insi&e or outsi&e the organi$ation Ma" be use& in pro&uction or purchasing !here each unit is purchase& or pro&uce& just in time for its use
VVVVV % VVVVV ' VVVVV * VVVVV + VVVVV G VVVVV M
1-1*
VVVVV Q VVVVV S
.epresents the information techno#og" that #inks the various s"stems of the enterprise into a sing#e comprehensive information s"stem One or more of the firm<s activities !i## be performe& b" another firm or in&ivi&ua# in the supp#" or &istribution chain for improve& efficienc" an& cost savings
VVVVV 10 .evenues that change in response to a particu#ar course of action VVVVV 11 /he process of comparing benefits Aoften measure& in savings or increase& profitsC !ith costs associate& !ith a propose& change !ithin an organi$ation VVVVV 1% /he set of firms an& in&ivi&ua#s that se## goo&s an& services to the firm
Ans!ers
1 % ' * + G M Q S L 6 D 8 O A @ 1 I
10 ( 11 C 1% ;
1-1+
Mu#tip#e Choice
1 a b c & % a b c & ' Cost accounting :rovi&es information to managers for &ecision making Information is not comparab#e across organi$ations Is not base& on 1AA: A## of the above Cost accounting s"stem A&&s va#ue to the organi$ation Is part of (nterprise .esource :#anning A(.:C s"stems Is be"on& an" ethica# issues 6oth a an& b
4hich of the fo##o!ing positionsIfunctions is not un&er the supervision of the Chief 8inancia# Officer AC8OC5 a /reasurer b Contro##er c @uman resources & Cost accountants a b c & 4hich of the fo##o!ing statements is correct5 A## activities a&& va#ue to the organi$ation A## va#ue chain functions are !ithin the organi$ation 3upp#" chain an& va#ue chain &o not over#ap Cost information re&uces va#ue In cost-benefit ana#"sis9 6enefits are often measure& in savings or increase& profits :ropose& changes !ithin the organi$ationa# structure are eva#uate& 6enefits shou#& out!eigh costs to be acceptab#e A## of the above Cost &rivers Are factors that &rive costs Are activities that consume resources in Activit"-6ase& Costing AA6CC Are fe! in tra&itiona# costing s"stems A## of the above
+ a b c & G a b c &
/he fo##o!ing information is for =uestions M J Q

1-1G
Compan" A<s =uarter#" sa#es revenue an& operating costs are P1%9000 an& PS9+009 respective#" Operating costs inc#u&e P19+00 of #easing charge for computers A ne! pro&uct #ine !i## increase sa#es revenue b" '0 percent an& costs Aother than the #easing charge !hich remains unchange&C b" '+ percent M a b c & Q a b c & S a b c & 10 a b c & 11 a b c & 1% a b c & If Compan" A inc#u&es the ne! pro&uct #ine9 3a#es revenue !i## increase b" P'9%00 Operating costs !i## increase to P1%9'00 Operating profits !i## increase b" P19100 Operating costs are not re#evant /he #easing charge Is &ifferentia# Is re#evant to the &ecision :#a"s no ro#e in the &ecision 4i## not change in the future 0e! tren&s in cost accounting inc#u&e Oust-in-time metho& /ota# =ua#it" management 6enchmarking an& continuous improvement A## of the above (thica# conf#icts in cost accounting Are governe& b" the co&e of ethics of the professiona# organi$ations 4i## not have imp#ications for cost accountants< &ecisions 3hou#& be reso#ve& to meet the &eman&s of managers 4i## never #ea& to resignation of cost accountants 8inancia# statements for e)terna# users are characteri$e& as ,ser-specific Manageria# reports 1enera#-purpose 0ot consistent !ith 1AA: 4hich of the fo##o!ing statements is correct5 Design for manufacturabi#it" is not compatib#e !ith activit"-base& costing :erformance of ke" supp#iers an& business partners must be constant#" eva#uate& Cost of =ua#it" is a s"stem that i&entifies the costs of pro&ucing high =ua#it" items (nterprise resource p#anning s"stem &up#icates the effort an& costs of stan&-a#one s"stems
1-1M
Ans!ers
1 % ' * + G M & & c b & & b LO1 LO1 LO* LO1 LO1 LO%9 LO' LO'
3a#es revenue increase N P1%9000 W '0T N P'9G00 Operating cost increase N APS9+00 - P19+00C W '+T N P%9Q00 Operating cost N PS9+00 X P%9Q00 N P1%9'00 Operating profit increase N P'9G00 - P%9Q00 N PQ00 Q S c & LO' LO* LO+ LO% LO*
10 a 11 c 1% b
1-1Q

Cost Accounting 4/e

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Cost Accounting 4/e

Uploaded by

Copyright:

Available Formats

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 1 Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

FAssign ()ercises 1-1+9 1-1GH

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

Increase b" *0T Increase b" *+T c Increase b" 10T

Chapter 01 - Cost Accounting: Information for Decision Making

Increase b" %0T

Regional Manager (Mid-Atlantic Region)

Other Regional Managers

Project Manager (Fox Run Estate)

Other Project Managers

Sales Manager (Fox Run Estate)

Construction Manager (Fox Run Estate)

Chapter 01 - Cost Accounting: Information for Decision Making

LO/ (dentify current trends in cost accounting.

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

VVVVV % VVVVV ' VVVVV * VVVVV + VVVVV G VVVVV M

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

/he fo##o!ing information is for =uestions M J Q

Chapter 01 - Cost Accounting: Information for Decision Making

Chapter 01 - Cost Accounting: Information for Decision Making

You might also like

Increase b" 0T Increase b" +T c Increase b" 10T