Edrftgyihu jiuh
ST TU
Accounting for
UV V
S
Decision Making and
Control, 8th Edition
IAIA
SOLUTIONS
?_?_
AAP
MANUAL
PPPR
Jerold Zimmerman
ROOV
Comprehensive Solutions Manual for Instructors
VE D
and Students
E
||| ||| || ||| || | || ||| | || ||| |
D? ?
9780078025747
© Jerold Zimmerman. All rights reserved. Reproduction or
?
distribution without permission is prohibited.
© MEDGEEK
,ST TU
TABLE OF CONTENTS
Solutions Manual – Accounting for Decision Making and Control (8th Edition)
Author: Jerold Zimmerman
UV V
S
ISBN: 9780078025747
PART I: FOUNDATIONS AND NATURE OF COSTS
Chapter 1: Introduction
Chapter 2: The Nature of Costs
Chapter 3: Opportunity Cost of Capital and Capital Budgeting
IAIA
PART II: ORGANIZATIONAL ARCHITECTURE AND CONTROL
Chapter 4: Organizational Architecture
?_?_
Chapter 5: Responsibility Accounting and Transfer Pricing
Chapter 6: Budgeting
PART III: COST ALLOCATION THEORY AND PRACTICE
Chapter 7: Cost Allocation: Theory
AAP
Chapter 8: Cost Allocation: Practices
Chapter 9: Absorption Cost Systems
Chapter 10: Criticisms of Absorption Cost Systems: Incentive to Overproduce
Chapter 11: Criticisms of Absorption Cost Systems: Inaccurate Product Costs
PPPR
PART IV: VARIANCE ANALYSIS AND FUTURE TRENDS
Chapter 12: Standard Costs: Direct Labor and Materials
Chapter 13: Overhead and Marketing Variances
Chapter 14: Management Accounting in a Changing Environment
ROOV
VE D
E
D? ?
?
, Solutions Manual For Accounting for Decision Making and Control
ST TU 8e Jerold Zimmerman All Chapters
UV V SOLUTIONS TO PROBLEMS AND CASES
S
CHAPTER 1
INTRODUCTION
P 1–1: Solution to MBA Students (10 minutes)
IAIA
[Using accounting information for decision making and control]
Together the two observations highlight the extremes in the trade-offs of using
accounting information for decision and control. In the first case, there is more analysis
?_?_
of opportunity costs that are hard to capture with typical accounting information. In the
second case, there is less intended interest in opportunity cost and greater emphasis on
control.
P 1–2: Solution to One Cost System Isn't Enough (15 minutes)
AAP
[Economic Darwinism]
The first part of the quote describes the tension (and conflict) that arises when a
single accounting system is used for multiple purposes. This part of the statement is an
accurate description of practice. However, the quote has a couple of problems, including:
PPPR
•While the quote describes the costs of using a single system ("a single system ...
can't perform important managerial functions adequately"), the quote does not describe
the benefits derived from using a single system (lower bookkeeping costs, a single audit,
less confusion).
•Because the quote ignores the benefits of a single system, it ignores the concept
ROOV
of economic Darwinism. It does not address the question of how surviving (successful)
companies can compete if a single system "can't perform important managerial functions
adequately."
•Also, the quote assumes that managers are bound to their internal accounting
systems, that no other alternative information sources are available. Often managers
develop their own ad hoc, "off-line" information systems for decision making. These
VE D
systems include spreadsheets, informal observation, and "walking around."
E
P 1–3: Solution to U.S. and Japanese Tax Laws (15 minutes)
[Influence of conflicting demands on cost systems]
D? ?
The internal accounting system supports multiple uses, including financial
reporting, taxes, contracting (debt and management compensation), internal decision
making, and internal control. Because multiple purposes are served, trade-offs must be
?
made among the competing demands. When more emphasis is placed on one purpose
(taxes), less consideration can be given to other uses (internal decision making and
control). By linking taxes to external reporting, Japanese firms’ financial reports will be
1-1
,ST TU Chapter 01 - Introduction
based on accounting procedures that give more weight to tax considerations. In the U.S.,
companies can keep two sets of books, one for taxes and the other for financial reporting.
UV V
S
Thus, in the U.S., there is more of a decoupling of taxes and everything else. Except for
the additional bookkeeping costs of producing the two separate sets of reports, tax
considerations are predicted to have less influence on the choice of internal (and thus
external) accounting procedures in the U.S. than in Japan.
The question is raised as to why firms use the same accounting procedures for
internal reports as they do for external reports. Or for that matter, why do tax laws and
IAIA
external financial reporting considerations have any effect on internal accounting
procedures? Why don’t firms maintain multiple sets of accounts, one for each purpose
(e.g., financial reporting, internal decision making, and internal control)? Clearly there
are additional bookkeeping costs for maintaining multiple sets of accounts. But also,
there are confusion costs and, in many instances, firms explicitly link senior executive
?_?_
compensation to externally reported financial statements. Such explicit linkage of
executive pay to externally reported net income presumably exists to control agency costs
between management and shareholders. Once senior management performance and
rewards are linked to external reports, the internal reporting system will become linked to
the external reports and basically less consideration will be given to choosing accounting
AAP
procedures that aid in internal decision making and internal control.
In Japan, the firm’s accounting systems are less likely to be used for internal uses
(decision making and control) than in the U.S. Because they cannot rely as much on their
accounting systems for internal uses (because more weight is placed on using accounting
procedures to reduce taxes), Japanese managers are more likely to use non-accounting-
PPPR
based systems for internal decision making and control.
P 1-4: Solution to Using Accounting for Planning (15 minutes)
[Usefulness of historical costs]
ROOV
a. Historical costs are of limited use in making planning decisions in a rapidly
changing environment. With changing products, processes and prices, the
historical costs are inadequate approximations of the opportunity costs of using
resources.
Historical costs may, however, be useful for control purposes, as they
VE D
provide information about the activities of managers and can be used as
performance measures to evaluate managers.
E
b. The purpose of accounting systems is to provide information for planning
purposes and control. Although historical costs are not generally appropriate for
D? ?
planning purposes, additional measures are costly to make. An accounting system
should include additional measures if the benefits of improved decision making
are greater than the costs of the additional information.
?
1-2
ST TU
Accounting for
UV V
S
Decision Making and
Control, 8th Edition
IAIA
SOLUTIONS
?_?_
AAP
MANUAL
PPPR
Jerold Zimmerman
ROOV
Comprehensive Solutions Manual for Instructors
VE D
and Students
E
||| ||| || ||| || | || ||| | || ||| |
D? ?
9780078025747
© Jerold Zimmerman. All rights reserved. Reproduction or
?
distribution without permission is prohibited.
© MEDGEEK
,ST TU
TABLE OF CONTENTS
Solutions Manual – Accounting for Decision Making and Control (8th Edition)
Author: Jerold Zimmerman
UV V
S
ISBN: 9780078025747
PART I: FOUNDATIONS AND NATURE OF COSTS
Chapter 1: Introduction
Chapter 2: The Nature of Costs
Chapter 3: Opportunity Cost of Capital and Capital Budgeting
IAIA
PART II: ORGANIZATIONAL ARCHITECTURE AND CONTROL
Chapter 4: Organizational Architecture
?_?_
Chapter 5: Responsibility Accounting and Transfer Pricing
Chapter 6: Budgeting
PART III: COST ALLOCATION THEORY AND PRACTICE
Chapter 7: Cost Allocation: Theory
AAP
Chapter 8: Cost Allocation: Practices
Chapter 9: Absorption Cost Systems
Chapter 10: Criticisms of Absorption Cost Systems: Incentive to Overproduce
Chapter 11: Criticisms of Absorption Cost Systems: Inaccurate Product Costs
PPPR
PART IV: VARIANCE ANALYSIS AND FUTURE TRENDS
Chapter 12: Standard Costs: Direct Labor and Materials
Chapter 13: Overhead and Marketing Variances
Chapter 14: Management Accounting in a Changing Environment
ROOV
VE D
E
D? ?
?
, Solutions Manual For Accounting for Decision Making and Control
ST TU 8e Jerold Zimmerman All Chapters
UV V SOLUTIONS TO PROBLEMS AND CASES
S
CHAPTER 1
INTRODUCTION
P 1–1: Solution to MBA Students (10 minutes)
IAIA
[Using accounting information for decision making and control]
Together the two observations highlight the extremes in the trade-offs of using
accounting information for decision and control. In the first case, there is more analysis
?_?_
of opportunity costs that are hard to capture with typical accounting information. In the
second case, there is less intended interest in opportunity cost and greater emphasis on
control.
P 1–2: Solution to One Cost System Isn't Enough (15 minutes)
AAP
[Economic Darwinism]
The first part of the quote describes the tension (and conflict) that arises when a
single accounting system is used for multiple purposes. This part of the statement is an
accurate description of practice. However, the quote has a couple of problems, including:
PPPR
•While the quote describes the costs of using a single system ("a single system ...
can't perform important managerial functions adequately"), the quote does not describe
the benefits derived from using a single system (lower bookkeeping costs, a single audit,
less confusion).
•Because the quote ignores the benefits of a single system, it ignores the concept
ROOV
of economic Darwinism. It does not address the question of how surviving (successful)
companies can compete if a single system "can't perform important managerial functions
adequately."
•Also, the quote assumes that managers are bound to their internal accounting
systems, that no other alternative information sources are available. Often managers
develop their own ad hoc, "off-line" information systems for decision making. These
VE D
systems include spreadsheets, informal observation, and "walking around."
E
P 1–3: Solution to U.S. and Japanese Tax Laws (15 minutes)
[Influence of conflicting demands on cost systems]
D? ?
The internal accounting system supports multiple uses, including financial
reporting, taxes, contracting (debt and management compensation), internal decision
making, and internal control. Because multiple purposes are served, trade-offs must be
?
made among the competing demands. When more emphasis is placed on one purpose
(taxes), less consideration can be given to other uses (internal decision making and
control). By linking taxes to external reporting, Japanese firms’ financial reports will be
1-1
,ST TU Chapter 01 - Introduction
based on accounting procedures that give more weight to tax considerations. In the U.S.,
companies can keep two sets of books, one for taxes and the other for financial reporting.
UV V
S
Thus, in the U.S., there is more of a decoupling of taxes and everything else. Except for
the additional bookkeeping costs of producing the two separate sets of reports, tax
considerations are predicted to have less influence on the choice of internal (and thus
external) accounting procedures in the U.S. than in Japan.
The question is raised as to why firms use the same accounting procedures for
internal reports as they do for external reports. Or for that matter, why do tax laws and
IAIA
external financial reporting considerations have any effect on internal accounting
procedures? Why don’t firms maintain multiple sets of accounts, one for each purpose
(e.g., financial reporting, internal decision making, and internal control)? Clearly there
are additional bookkeeping costs for maintaining multiple sets of accounts. But also,
there are confusion costs and, in many instances, firms explicitly link senior executive
?_?_
compensation to externally reported financial statements. Such explicit linkage of
executive pay to externally reported net income presumably exists to control agency costs
between management and shareholders. Once senior management performance and
rewards are linked to external reports, the internal reporting system will become linked to
the external reports and basically less consideration will be given to choosing accounting
AAP
procedures that aid in internal decision making and internal control.
In Japan, the firm’s accounting systems are less likely to be used for internal uses
(decision making and control) than in the U.S. Because they cannot rely as much on their
accounting systems for internal uses (because more weight is placed on using accounting
procedures to reduce taxes), Japanese managers are more likely to use non-accounting-
PPPR
based systems for internal decision making and control.
P 1-4: Solution to Using Accounting for Planning (15 minutes)
[Usefulness of historical costs]
ROOV
a. Historical costs are of limited use in making planning decisions in a rapidly
changing environment. With changing products, processes and prices, the
historical costs are inadequate approximations of the opportunity costs of using
resources.
Historical costs may, however, be useful for control purposes, as they
VE D
provide information about the activities of managers and can be used as
performance measures to evaluate managers.
E
b. The purpose of accounting systems is to provide information for planning
purposes and control. Although historical costs are not generally appropriate for
D? ?
planning purposes, additional measures are costly to make. An accounting system
should include additional measures if the benefits of improved decision making
are greater than the costs of the additional information.
?
1-2
