Solution Manual for Managerial Accounting 6th Edition, James Jiambalvo

Chapter 1 Managerial Accounting in the Information Age QUESTIONS 1. The goal of managerial accounting is to provide information needed for planning, control, and decision making. 2. Budgeted performance is a useful benchmark for evaluating current period performance. 3. This question asks students to identify three differences between financial and managerial accounting. In the text, five differences are noted: a) Managerial accounting is directed at internal rather than external users of accounting information. b) Managerial accounting may deviate from generally accepted accounting principles (GAAP). c) Managerial accounting may present more detailed information. d) Managerial accounting may present more nonmonetary information. e) Managerial accounting places more emphasis on the future. 4. Examples of nonmonetary information that might appear in managerial accounting reports include: the quantity of material consumed in production, the number of hours worked by the office staff, and the number of product defects. EXERCISES E1. [LO 3] Suppose the company selected is Microsoft. Measure 1: Number of errors in a piece of software. Favorable outcome: Number of errors is reduced. Unfavorable outcome: Software products are not released on a timely basis. Measure 2: Sales to new customers as a percent of total sales. Favorable outcome: Sales staff works hard to develop new clients. Unfavorable outcome: Company loses existing customers who receive less attention from the sales staff. Measure 3: Average time spent handling customer service calls. Favorable outcome: Customer service representatives handle more calls per hour. Unfavorable outcome: Customer questions are not fully addressed and customer satisfaction decreases. E2. [LO 2] The only costs that are relevant to a decision are incremental costs—that is, costs that change when an action is taken. The cost of the old copier is a sunk cost and will not change. Therefore, it is irrelevant to Rachel’s decision. E3. [LO 4] The code suggests that Guthrie clarify the ethical issue by confidential discussion with an objective advisor (this might be the IMA Ethics Counseling service) to obtain a better understanding of possible courses of action. Guthrie should then discuss the problem with the manager to whom his boss reports (since his boss is involved in the ethical dilemma). Unless required by law, communication of the problem to authorities or individuals outside the organization is not appropriate.