Managerial Accounting Creating Value in a Dynamic Business Environment Hilton 10th Edition Solutions Manual

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Product Details:

• ISBN-10 ‏ : ‎ 0078025664
• ISBN-13 ‏ : ‎ 978-0078025662
• Author:   Ronald W. Hilton (Author), David E. Platt (Author)

The emphasis of Managerial Accounting, 10th edition is on teaching students to use accounting information to best manage an organization. In a practice Hilton pioneered in the first edition, each chapter is written around a realistic business or focus company that guides the reader through the topics of that chapter. Known for balanced examples of Service, Retail, Nonprofit and Manufacturing companies, Hilton/Platt offers a clear, engaging writing style that has been praised by instructors and students alike. As in previous editions, there is significant coverage of contemporary topics such as activity-based costing, target costing, the value chain, customer profitability analysis, and throughput costing while also including traditional topics such as job-order costing, budgeting and performance evaluation.

 

Table of Content:

CHAPTER 1

The Changing Role of Managerial Accounting in a Dynamic Business Environment
ANSWERS TO REVIEW QUESTIONS

1-1 The explosion in e-commerce will affect managerial accounting in significant ways. One effect will be a drastic reduction in paper work. Millions of transactions between businesses will be conducted electronically with no hard-copy documentation. Along with this method of communicating for business transactions comes the very significant issue of information security. Businesses need to find ways to protect confidential information in their own computers, while at the same time sharing the information necessary to complete transactions. Another effect of e-commerce is the dramatically increased speed with which business transactions can be conducted. In addition to these business-to-business transactional issues, there will be dramatic changes in the way managerial accounting procedures are carried out, one example being e-budgeting, which is the enterprise-wide and electronic completion of a company’s budgeting process.
1-2 Plausible goals for the organizations listed are as follows:
(a) Amazon.com: (1) To achieve and maintain profitability, and (2) to grow on-line sales of books, music, and other goods.
(b) American Red Cross: (1) To raise funds from the general public sufficient to have resources available to meet any disaster that may occur, and (2) to provide assistance to people who are victims of a disaster anywhere in the country on short notice.
(c) General Motors: (1) To earn income sufficient to provide a good return on the investment of the company’s stockholders, and (2) to provide the highest-quality product possible.
(d) Walmart: (1) To penetrate the retail market in virtually every location in the United States, and (2) to grow over time in terms of number of retail locations, total assets, and earnings.
(e) City of Seattle: (1) To maintain an urban environment as free of pollution as possible, and (2) to provide public safety, police, and fire protection to the city’s citizens.
(f) Hertz: (1) To be a recognizable household name associated with rental car services, and (2) to provide reliable and economical transportation services to the company’s customers.
1-3 The four basic management activities are listed and defined as follows:
(a) Decision making: Choosing among the available alternatives.
(b) Planning: Developing a detailed financial and operational description of anticipated operations.
(c) Directing operations: Running the organization on a day-to-day basis.
(d) Controlling: Ensuring that the organization operates in the intended manner and achieves its goals.
1-4 Examples of the four primary management activities in the context of a national fast-food chain are as follows:
(a) Decision making: Choosing among several possible locations for a new fast-food outlet.
(b) Planning: Developing a cost budget for the food and paper products to be used during the next quarter in a particular fast-food restaurant.
(c) Directing operations: Developing detailed schedules for personnel for the next month to provide counter service in a particular fast-food restaurant.
(d) Controlling: Comparing the actual cost of paper products used during a particular month in a restaurant with the anticipated cost of paper products for that same time period.
1-5 Examples of the objectives of managerial-accounting activity in an airline company are described below:
(a) Providing information for decision making and planning, and proactively participating as part of the management team in the decision making and planning processes: Managerial accountants provide estimates of the cost of adding a flight on the route from New York to Miami and actively participate in making the decision about adding the flight.
(b) Assisting managers in directing and controlling operations: Managerial accountants provide information about the actual costs of flying the routes in the airline’s northeastern geographical sector during a particular month.
(c) Motivating managers and other employees toward the organization’s goals: A budget is provided for the cost of handling baggage at O’Hare Airport in Chicago. The budget is given to the airline’s baggage handling manager, who is expected to strive to achieve the budget.
(d) Measuring the performance of activities, subunits, managers, and other employees within the organization: Quarterly income statements are prepared for each of the airline’s major geographical sectors, and these income reports are used to evaluate the earnings performance of each sector during the relevant time period.
(e) Assessing the organization’s competitive position and working with other managers to ensure the organization’s long-run competitiveness in its industry: Information about industry-wide performance standards is obtained and compared with the airline’s own performance. For example, how does the airline stack up against its competitors in ticket prices, on-time departures, mishandled baggage, customer complaints, and safety?
1-6 Four important differences between managerial accounting and financial accounting are listed below:
(a) Managerial-accounting information is provided to managers within the organization, whereas financial-accounting information is provided to interested parties outside the organization.
(b) Managerial-accounting reports are not required and are unregulated, whereas financial-accounting reports are required and must conform to generally accepted accounting principles.
(c) The primary source of data for managerial-accounting information is the organization’s basic accounting system, plus various other sources. These sources include such data as rates of defective products manufactured, physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average takeoff delays in airlines. The primary source of data for financial-accounting information is almost exclusively the organization’s basic accounting system, which accumulates financial information.
(d) Managerial-accounting reports often focus on subunits within the organization, such as departments, divisions, geographical regions, or product lines. These reports are based on a combination of historical data, estimates, and projections of future events. Financial-accounting reports focus on the enterprise in its entirety. These reports are based almost exclusively on historical transaction data.
1-7 The cost-accounting system is one part of an organization’s overall accounting system, the purpose of which is to accumulate cost information. Cost information accumulated by the cost-accounting system is used for both managerial-accounting and financial-accounting purposes. Managerial accounting is the broad task of preparing information for making decisions about planning, directing, and controlling an organization’s operations.
1-8 Managers in line positions are directly involved in the provision of services or the production of goods in an organization. Managers in staff positions support the organization’s overall objectives, but they are indirectly involved in operations. Examples of line positions in a university are the president, who is the university’s chief executive officer, and the provost, who is the university’s chief academic officer. Examples of staff positions in a university are the university counsel, who is the university’s chief lawyer, and the director of maintenance, who is charged with maintaining the university’s facilities.
1-9 An organization’s controller (or comptroller) is the chief managerial and financial accountant. The controller usually is responsible for supervising the personnel in the accounting department and for preparing the information and reports used in both managerial and financial accounting. The treasurer typically is responsible for raising capital and safeguarding the organization’s assets. Among the treasurer’s responsibilities is the management of an organization’s investments, credit policy, and insurance coverage.
1-10 A college or university could use the balanced scorecard as a management tool just like any other business. There is one important difference, however, between a profit-seeking enterprise and a nonprofit organization like a university. A profit-seeking enterprise generally has long-term profitability as its foremost goal, and the other points on the balanced scorecard are oriented toward helping the enterprise achieve that goal of profitability. Universities, on the other hand, usually have multiple goals, which are sometimes in competition with each other. For example, a land-grant university may have teaching, research and public service as its three primary goals. Nevertheless, it is possible for a college or university to develop performance measures for each of the areas in the balanced scorecard. Some examples follow:
? Financial: Amount of the unrestricted endowment supporting the university’s activities, and the extent to which the university operates with a balanced budget.
? Internal operations: Tenure rates for faculty, and the extent to which the university’s facilities are up to date and well maintained.
? Customer: Class evaluations by students, and job placement rates for students.
? Innovation and learning: Dollars of research grants obtained, and publication of journal articles and books by faculty.
1-11 This quote from a managerial accountant at Caterpillar suggests that managerial accountants are physically located throughout an organization where the day-to-day work is being done, rather than being sequestered off by themselves as was the tendency some years ago. Managerial accountants are increasingly deployed as key members of management teams.
1-12 Managerial-accounting information often brings to the attention of managers important issues that need their managerial experience and skills. In many cases, managerial-accounting information will not answer the question or solve the problem, but rather make management aware that the issue or problem exists. In this sense, managerial accounting sometimes is said to serve an attention-directing role.
1-13 Both manufacturing and service industry firms are engaged in production. The primary difference between these types of companies is that manufacturing firms produce inventoriable goods, whereas the services produced by service industry firms are not inventoriable. Services, such as air transportation or hotel service, are consumed as they are produced.
1-14 (a) In a just-in-time (or JIT) production environment, raw materials and components are purchased or produced just in time to be used at each stage in the production process.
(b) A computer-integrated manufacturing (CIM) system is the most advanced form of automated manufacturing system, with computers controlling the entire production process.
(c) A cost management system is a management planning and control system with the following objectives: to measure the cost of the resources consumed in performing the organization’s significant activities; to identify and eliminate non-value-added costs; to determine the efficiency and effectiveness of all major activities; and to identify and evaluate new activities that can improve the future performance of the organization.
(d) Empowerment is the concept of encouraging and authorizing workers to take their own initiative to improve operations, reduce costs, and improve product quality and customer service.
(e) Total quality management (or TQM) is the broad set of management and control processes designed to focus the entire organization and all of its employees on providing products or services that do the best possible job of satisfying the customer.
1-15 The statement is accurate: capacity supplied in the current period but not used for production is gone. If a pizza maker is available for four hours to make pizzas but only one pizza is ordered, she still has to be paid for four hours. There is no way to store that capacity to use it another time. However if an experienced store manager, realizing it is going to be a slow night, tells her after an hour to “go home and we’ll schedule you for three extra hours tomorrow,” then the capacity is never supplied, and therefore it does not go unused and is not “lost forever.” But the employee is only paid for one hour of work.
1-16 CMA stands for Certified Management Accountant. This title is the professional certification for managerial accountants administered by the Institute of Management Accountants. The requirements for becoming a CMA include fulfilling specified educational requirements and successfully passing the CMA examination.
1-17 (a) Competence: Ongoing development of knowledge and skills, performance of duties in accordance with relevant laws, adherence to regulations and technical standards, and preparation of complete and clear reports for management.
(b) Confidentiality: Refraining from disclosing, using, or appearing to use confidential information acquired in the course of the managerial accountant’s work.
(c) Integrity: Avoiding conflicts of interest in activities that would prejudice the managerial accountant’s ability to carry out his or her duties ethically, and refraining from other activities that would discredit the profession.
(d) Credibility: Communication of information fairly, objectively, and fully.
1-18 Non-value-added costs are the costs of activities that can be eliminated with no deterioration of product quality, performance, or perceived value.
1-19 Managers rely on many information systems in addition to managerial-accounting information. Examples of other information systems include economic analysis and forecasting, marketing research, legal research and analysis, and technical information provided by engineers and production specialists.
1-20 Managerial accounting is just as important in nonprofit organizations as it is in profit-seeking enterprises. Managers in nonprofit organizations also need managerial-accounting information for decision making, planning, directing, and controlling operations.
1-21 Becoming the low-cost producer in an industry requires a clear understanding by management of the costs incurred in its production process. Reports and analysis of these costs are a primary function of managerial accounting.
1-22 A professional is a person engaged in a specified occupation that requires advanced training, skill, and a well-defined body of knowledge. According to this definition from Webster, a managerial accountant is a professional.

1-23 Some activities in the value chain of a manufacturer of cotton shirts are as follows:
(a) Growing and harvesting cotton
(b) Transporting raw materials
(c) Designing shirts
(d) Weaving cotton material
(e) Manufacturing shirts
(f ) Transporting shirts to retailers
(g) Advertising cotton shirts
Some activities in the value chain of an airline are as follows:
(a) Making reservations and ticketing
(b) Designing the route network
(c) Scheduling
(d) Purchasing aircraft
(e) Maintaining aircraft
(f) Running airport operations, including handling baggage
(g) Serving food and beverages in flight
(h) Flying passengers and cargo
1-24 Strategic cost management is the process of understanding and managing, to the organization’s advantage, the cost relationships among the activities in an organization’s value chain.

SOLUTIONS TO EXERCISES
EXERCISE 1-25 (25 MINUTES)
1. Measuring inventory costs is most closely associated with the first two objectives of managerial accounting activity: (1) providing information for decision making and planning, and (2) assisting managers in directing and controlling operational activities. Since inventory costs are used in external financial reports, they are also relevant to measuring the performance of managers and subunits within the organization.
2. Estimating costs is particularly relevant to the objective of providing information for decision making and planning.
3. Measuring operating costs is relevant to all of the objectives of managerial accounting activity.
4. Comparing operating statistics such as those mentioned for a hotel is particularly relevant to the following objective of managerial accounting: Assessing the organization’s competitive position and working with other managers to ensure the organization’s long-run competitiveness in its industry.
5. Developing a bonus reward system for managerial personnel is an example of motivating managers and other employees toward the organization’s goals. To be effective, the bonus system must provide incentives for managers to work toward achieving those goals.
6. Comparing actual and planned costs is consistent with two objectives of managerial accounting activity: (1) assisting managers in controlling operations, and (2) measuring the performance of activities, subunits, managers, and other employees within the organization.
7. Determining manufacturing costs is related to all of the objectives of managerial accounting. It is especially closely related to the objective of providing information for decision making and planning.
EXERCISE 1-26 (20 MINUTES)
1. Data about the cost of maintaining the machine weekly or biweekly would be relevant. In addition, the production manager should consider information about the likely rates of defective products under each maintenance alternative.
2. Estimates of the cost of lost merchandise due to shoplifting and the cost of employing security personnel would be relevant to this decision.
3. Estimates of building costs for the library addition as well as estimates of benefits to the population from having the addition would be useful. Estimating the benefits may require value judgments about the benefits to the public from having additional library space and more books.
4. Estimates of any operating costs associated with the proposed luxury cars would be relevant. For example, estimates of the cost of gasoline, routine maintenance, and insurance on the new vehicles would be useful.

EXERCISE 1-27 (30 MINUTES)
Answers will vary widely for this exercise, depending on the company chosen by each student. Companies’ financial goals often include profitability, earnings per share, growth in the stock price, sales growth, and so forth. Managerial accounting can make an important contribution to all of these goals.

 

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