Cost Acconting

Chapter 01 - Cost Accounting: Information for Decision Making

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Cost Accounting: Information for Decision Making

Solutions to Review Questions

1-1. 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). 1-2. B C A 1-3. 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 sell goods and services to the firm. Identifying the best performing subsidiary Determining whether to accept a special order Providing cost information for tax reporting

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Chapter 01 - Cost Accounting: Information for Decision Making

1-4. 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. 1-5. No. Sarbanes-Oxley is a law and violations of it are legal issues. Codes of ethics are necessary to help accountants and managers identify situations that might develop into ethical conflicts, understand what they could do in these situations, and to learn what to do when they believe that an ethical...