SOLUTION MANUAL FOR
Fundamentals Of Cost Accounting 7th Edition
William Lanen
1
Cost Accounting: Information for Decision
Making
Solutions to Review Questions
1-1.
Among the goals of an organization, a central one is
to create and increase value. Cost accounting
systems are designed to provide information to
decision makers in the organization with the
information they need to accomplish this goal.
Therefore, the designers of the cost accounting
system need to understand how value is created in
the organization to design systems for their
organization.
Solutions Manual, Chapter 4 1
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw Hill LLC.
,1-2.
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).
1-3.
B Providing cost information
for financial reporting A
Identifying the best store in
a chain
2 Fundamentals of Cost Accounting, 7e
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw Hill LLC.
,C Determining which plant to use for production
1-4.
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.
1-5.
The customers of cost accounting are managers,
from plant managers to the CEO.
1-6.
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.
Solutions Manual, Chapter 4 3
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw Hill LLC.
, 1-7.
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................................. Manages liquid
assets
Conducts business with
banks and other
financial institutions
Oversees public issues of
stock and debt
Controller................................. Plans and
designs information and
incentive systems
Internal auditor ........................ Ensures
compliance with laws, regulations, and
company policies and
procedures
4 Fundamentals of Cost Accounting, 7e
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw Hill LLC.
Fundamentals Of Cost Accounting 7th Edition
William Lanen
1
Cost Accounting: Information for Decision
Making
Solutions to Review Questions
1-1.
Among the goals of an organization, a central one is
to create and increase value. Cost accounting
systems are designed to provide information to
decision makers in the organization with the
information they need to accomplish this goal.
Therefore, the designers of the cost accounting
system need to understand how value is created in
the organization to design systems for their
organization.
Solutions Manual, Chapter 4 1
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw Hill LLC.
,1-2.
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).
1-3.
B Providing cost information
for financial reporting A
Identifying the best store in
a chain
2 Fundamentals of Cost Accounting, 7e
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw Hill LLC.
,C Determining which plant to use for production
1-4.
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.
1-5.
The customers of cost accounting are managers,
from plant managers to the CEO.
1-6.
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.
Solutions Manual, Chapter 4 3
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw Hill LLC.
, 1-7.
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................................. Manages liquid
assets
Conducts business with
banks and other
financial institutions
Oversees public issues of
stock and debt
Controller................................. Plans and
designs information and
incentive systems
Internal auditor ........................ Ensures
compliance with laws, regulations, and
company policies and
procedures
4 Fundamentals of Cost Accounting, 7e
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw Hill LLC.
