Solutions Manual for Accounting for Decision Making and Control 9th Edition By Jerold L. Zimmerman 2026/2027

Accounting for Decision Making and Control, 9e Jerold L. Zimmerman
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(Solutions Manual All Chapters, 100% Original Verified, A+ Grade)
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SOLUTIONS TO PROBLEMS AND CASES L L L L




CHAPTER 1 L



INTRODUCTION


P 1–1:
L Solution to MBA Students (10 minutes) L L L L L



[Using accounting information for decision making and control]
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Together the two observations highlight the extremes in the trade-offs of using L L L L L L L L L L L



Laccounting information for decision and control. In the first case, there is more analysis
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Lof opportunity costs that are hard to capture with typical accounting information. In the
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Lsecond case, there is less intended interest in opportunity cost and greater emphasis on
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Lcontrol.


P 1–2:
L Solution to One Cost System Isn't Enough (15 minutes) L L L L L L L L



[Economic Darwinism]
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The first part of the quote describes the tension (and conflict) that arises when a
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Lsingle accounting system is used for multiple purposes. This part of the statement is an
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Laccurate description of practice. However, the quote has a couple of problems, including:
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•While the quote describes the costs of using a single system ("a single system ...
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Lcan't perform important managerial functions adequately"), the quote does not describe
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Lthe benefits derived from using a single system (lower bookkeeping costs, a single audit,
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Lless confusion).
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•Because the quote ignores the benefits of a single system, it ignores the concept of
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Leconomic Darwinism. It does not address the question of how surviving (successful)
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Lcompanies can compete if a single system "can't perform important managerial functions
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Ladequately."
•Also, the quote assumes that managers are bound to their internal accounting
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Lsystems, that no other alternative information sources are available. Often managers
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Ldevelop their own ad hoc, "off-line" information systems for decision making. These
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Lsystems include spreadsheets, informal observation, and "walking around."
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P 1–3:
L Solution to U.S. and Japanese Tax Laws (15 minutes) L L L L L L L L



[Influence of conflicting demands on cost systems]
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The internal accounting system supports multiple uses, including financial
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reporting, taxes, contracting (debt and management compensation), internal decision
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making, and internal control. Because multiple purposes are served, trade-offs must be
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made among the competing demands. When more emphasis is placed on one purpose
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(taxes), less consideration can be given to other uses (internal decision
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Lmaking and L

,control). By linking taxes to external reporting, Japanese firms’ financial reports will be
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Lbased on accounting procedures that give more weight to tax considerations. In the U.S.,
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Lcompanies can keep two sets of books, one for taxes and the other for financial reporting.
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LThus, in the U.S., there is more of a decoupling of taxes and everything else. Except for
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Lthe additional bookkeeping costs of producing the two separate sets of reports, tax
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considerations are predicted to have less influence on the choice of internal (and thus
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Lexternal) accounting procedures in the U.S. than in Japan.
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The question is raised as to why firms use the same accounting procedures for
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Linternal reports as they do for external reports. Or for that matter, why do tax laws and
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Lexternal financial reporting considerations have any effect on internal accounting
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Lprocedures? Why don’t firms maintain multiple sets of accounts, one for each purpose
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L(e.g., financial reporting, internal decision making, and internal control)? Clearly there
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Lare additional bookkeeping costs for maintaining multiple sets of accounts. But also,
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Lthere are confusion costs and, in many instances, firms explicitly link senior executive
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Lcompensation to externally reported financial statements. Such explicit linkage of
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Lexecutive pay to externally reported net income presumably exists to control agency costs
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between management and shareholders. Once senior management performance and
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rewards are linked to external reports, the internal reporting system will become linked to
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the external reports and basically less consideration will be given to choosing accounting
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Lprocedures that aid in internal decision making and internal control.
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In Japan, the firm’s accounting systems are less likely to be used for internal uses
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L(decision making and control) than in the U.S. Because they cannot rely as much on their
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accounting systems for internal uses (because more weight is placed on using accounting
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Lprocedures to reduce taxes), Japanese managers are more likely to use non-accounting-
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Lbased systems for internal decision making and control.
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P 1-4:
L Solution to Using Accounting for Planning (15 minutes) L L L L L L L



[Usefulness of historical costs]
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a. Historical costs are of limited use in making planning decisions in a rapidly
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changing environment. With changing products, processes and prices, the
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historical costs are inadequate approximations of the opportunity costs of using
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resources.
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Historical costs may, however, be useful for control purposes, as they L L L L L L L L L L



provide information about the activities of managers and can be used as
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performance measures to evaluate managers.
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b. The purpose of accounting systems is to provide information for planning
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purposes and control. Although historical costs are not generally appropriate for
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planning purposes, additional measures are costly to make. An accounting system
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should include additional measures if the benefits of improved decision making are
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greater than the costs of the additional information.
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,P 1–5:
L Solution to Budgeting (15 minutes) L L L L



[Trade-off between decision making and control] L L L L L




In this firm, the bonus is based on meeting the budget. Two incentives
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L exist: sales people will under-forecast future sales and they have little incentive to sell
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Lmore than the budget.
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This firm tries to use the budget for two functions: decision making and control.
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LIn deciding on next year’s production plans, sales peoples’ forecasts of future sales are
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Limportant. However, these same forecasts (after revision by supervisors) are used as part
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Lof the compensation scheme to motivate the sales people to achieve their goals. By using
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the budget (forecasts) as part of the control system, the firm gives up some of the
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Lbudget’s usefulness as a decision making tool to set production plans. While senior
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Lmanagers might recognize that the sales people’s forecasts are low, they don’t know
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Lexactly how low. This introduces more uncertainty into planning for next year’s
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Lproduction.


P 1-6:
L Solution to Golf Specialties (20 minutes) L L L L L



[Average versus variable cost of an incremental order] L L L L L L L




a. Given that the variable cost per head cover is 1.10 euros, the fixed cost per
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weekis:
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AC = FC / Q + VCL L L L L L




3.10 = FC/600 + 1.10 L L L L 3.50 = FC/500 + 1.10 L L L L




FC = 1,200 euros
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b. The change in total cost if the 100 unit Kojo offer is accepted is:
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600 × 3.10 euros – 500 × 3.50 euros = 110 euros
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Or, each head cover has variable cost of 1.10 euro. Since Kojo is willing to pay 2
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euros per head cover or 200 euros for 100 covers, by accepting this order GS
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makes 90 euros a week. Therefore, GS should accept Kojo’s offer if these are all
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the relevant facts.
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c. GS should consider the following non-quantitative factors:
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• What prevents Kojo from reselling the head covers back to dealers in L L L L L L L L L L L



Europe at prices below GS’s current price of 4.25 euros?
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• If GS sells the head covers to Kojo at 2 euros, what prevents GS’s
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European customers from learning of this special deal and demand similar
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price concessions. In other words, why do we expect to be able to
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implement this price discrimination strategy?
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, • Will Kojo purchase other GS products and import them to Japan?
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• What is Kojo’s credit worthiness and will they pay for the head covers
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upon taking delivery? L L




P 1–7:
L Solution to Parkview Hospital (25 minutes) L L L L L



[Changes in the environment cause accounting system changes] L L L L L L L




a. Parkview’s accounting system was probably adequate 10 years ago. It faced little
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competition and had little incentive to have detailed cost and revenue data at the
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clinical levels.
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b. With increased pressure to reduce costs, Parkview management wants detailed cost
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and revenue data at the clinic level to help identify units with excess revenues or
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deficits. This would help guide their decisions as to how to respond to the $3.2
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million shortfall. The accounting system doesn’t provide as much help as
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management would like.
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c. The question of changing the accounting system should be approached as a cost-
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benefit decision. What will such changes cost, how long will they take to
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implement, and what benefits are derived?
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While it is tempting to say more accurate tracking of costs and benefits
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allows better decision making, changing the accounting system, including all the
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data processing changes that are likely necessary, usually is a very costly and time
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consuming process. Often special studies based on approximations of clinical
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department costs and revenues might prove to be faster and cheaper than waiting
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to revamp the accounting system.
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Notice the change in competition in the health insurance market caused by
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Trans Insurance’s entry prompted a series of changes in Parkview, including a re-
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examination of its accounting system.
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P 1–8:
L Solution to Montana Pen (25 minutes) L L L L L



[Incremental cost of outsourcing]
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a. The average cost information given in the problem does not tell us what 400 clips
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cost. Like in the Vortec example from the chapter, the incremental cost of the 400
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clips must be estimated from the following:
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Changein total cost B185  1200 − B212.5 800 L
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= B130/clip
 = LL
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Changein volume L L 1,200−800
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At the current volume of 1,200 clips, the total cost is B222,000 (B185 ×
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1,200).If 400 clips are outsourced, reducing in-house volume to 800, the total cost
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falls toB170,000 (B212.5 × 800). Hence, total cost falls B52,000 (B222,000
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