cost accounting carter 14th edition solution manual

cost accounting carter 14th edition solution manual

To browse Academia.edu and the wider internet faster and more securely, please take a few seconds to upgrade your browser. You can download the paper by clicking the button above. Discover everything Scribd has to offer, including books and audiobooks from major publishers. Start Free Trial Cancel anytime. Report this Document Download Now Save Save Solution Manual Cost Accounting 14th by Carter For Later 83% (12) 83% found this document useful (12 votes) 3K views 720 pages Solution Manual Cost Accounting 14th by Carter Uploaded by Ashy Lee Description: cost acounting Full description Save Save Solution Manual Cost Accounting 14th by Carter For Later 83% 83% found this document useful, Mark this document as useful 17% 17% found this document not useful, Mark this document as not useful Embed Share Print Download Now Jump to Page You are on page 1 of 720 Search inside document Browse Books Site Directory Site Language: English Change Language English Change Language. Planning takes into account the interactions between the organization and its environment in whatever is to be done. Control is the process by which managers assure that resources are obtained and used in an efficient and effective manner to carry out the plan and accomplish the organization’s objectives. Control implies that performance measurements are reviewed to determine if corrective action is required. Planning and control are interrelated. Control is carried out within the established planning framework and serves to evaluate conformance to the plan so that organizational objectives are achieved. Q1-2. Short-range plans usually deal with a period of a quarter or a year, while long-range plans usually cover three to five years. Short-range plans are detailed enough to permit preparation of a complete set of financial statements as of a future date, while long-range plans culminate in a very summarized set of expected results or a few quantified objectives, such as financial ratios. Q1-3.http://www.serviceservice.eu/userfiles/campagnolo-manuals.xml

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Long-range plans contain quantitative results, while strategic plans are the least quantifiable of all plans. Long-range plans usually extend three to five years into the future, while strategic plans may contemplate shorter or much longer periods. Long-range plans covering a three-to-five-year period would be prepared every three to five years, or might be systematically updated each year to maintain a complete plan, while strategic plans are formulated at irregular intervals by an essentially unsystematic process. Q1-4. Accountability is identical with responsibility accounting. Accountability deals with the discharge of an individual’s responsibility to achieve assigned objectives within the costs and expenses allowed for the performance and agreed to by the individual. Q1-5. The controller does not control, but aids the control task of the managerial levels by issuing reports pointing out deviations from the predetermined course of action. Q1-6. The cost department keeps detailed records of materials, labor, factory overhead, and marketing and administrative expenses; analyzes these costs; issues control reports; prepares cost studies for planning and decision making; and coordinates cost and budget data with other departments. Q1-7. For product research and design, the manufacturing departments need estimates of materials, labor, and machine process costs; for measuring and efficiency of scheduling, producing, and inspecting products, the departments need to know the costs incurred. The personnel department supplies employees’ wage rates. The treasury department needs accounting, budgeting, and related reports in scheduling cash requirements. The marketing department needs cost information in setting prices. The public relations department needs information on prices, wages, profits, and dividends in order to inform the public. The legal department needs cost information for keeping many affairs of the company in conformity with the law. Q1-8.http://www.speedski-cz.cz/userfiles/fckeditor/campagnolo-record-rear-derailleur-manual.xml

Modern techniques in communications give the controller and staff the means to transmit information in the form of results, analyses, and forecasts in a way never before possible. Profit opportunities or control actions have been delayed or missed entirely because timely information that might have improved the cost and profit position of the company was poorly communicated. Q1-9. The budget is an essential cost planning tool because it (a) supplies information and serves as a standard of performance for cost control by the supervisors responsible for cost; (b) provides an easy method for anticipating profits at an anticipated sales level; (c) helps in forecasting sales, costs, expenses, and profits for a period of one year or more in advance. 1-1 To download more slides, ebook, solutions and test bank, visit 1-2 Q1-10. These standards will not necessarily be able to prevent management fraud, but they do give internal accountants some guidance on how to proceed if they encounter a questionable practice. Q1-11. CASB standards: (a) enunciate a principle or principles to be followed; (b) establish prac- Chapter 1 tices to be applied; (c) specify criteria to be employed in selecting from alternative principles and practices in estimating, accumulating, and reporting contract costs. The standards are backed by the full force and effect of the law. To download more slides, ebook, solutions and test bank, visit Chapter 1 1-3 EXERCISES E1-1 The exercise requires two examples of the inseparability of planning and control. Three are listed here, and the third one gives two illustrations: The most obvious example of the inseparability of planning and control is found in the definition of control: management’s systematic effort to achieve objectives by comparing performance to plans and taking appropriate action to correct important differences.

The definition shows that the specific results of planning are an essential input to the control phenomenon; there cannot be any such thing as a control effort without reference to some set of plans. A second example of the inseparability of planning and control results from the fact that they are simultaneous. In practice, the implementation of the first steps of a plan, and any control action needed in those steps, are begun before all parts of planning are complete. Early results and the early findings of control activity can then be used in finalizing later parts of the same plan. An example is that a single annual budget is usually not completely finalized before customer orders begin to be received for that year, and consideration of the number of these actual customer orders may point to trends that need to be considered in finalizing the budget. Even actual financial results of the early weeks and months of the year can provide a basis for better establishing the budget for the later portion of the year. The most elegant example of the inseparability of planning and control results from the fact that both planning and control are complex human activities, and almost all complex human activities are planned activities and also controlled activities. In other words, planning can be so complex that the planning effort is itself controlled (and planned), and control can be so complex that control activities are themselves planned (and controlled). Two illustrations of this are provided as follows: (1) A case in which planning is itself planned and controlled is when a complicated budget (plan) is to be prepared. To facilitate the creation of the budget, a detailed weekly schedule (another plan) is first agreed upon, showing which steps in the preparation of the budget are to be carried out during each week.

Because it is desired that the creation of the budget not be allowed to fall far behind schedule, the responsible manager will exercise control by making comparisons between (a) the actual progress made on the budget each week and (b) the schedule. The manager will also take some corrective action if the difference between the schedule and the actual progress is considered important. (2) A case in which control is itself planned is when a manager decides what kinds of control reports will be used to compare actual results with plans in each future period of business operations. That decision, any efforts made to acquire a supply of preprinted report forms to be filled in each period, and any changes in the design of the cost accounting system to capture and compile the needed information about actual results represent evidence that the future control activity is being planned. To download more slides, ebook, solutions and test bank, visit 1-4 Chapter 1 E1-2 (1) (2) (3) (4) (5) (6) B A C A C B—although the time frame involved in this kind of plan may be extremely long, there is nothing strategic about this kind of plan or decision. In fact, the plan and obligation to pay off the bonds when they come due is so routine that management would not consciously approach it as a decision. E1-3 (1) (2) Paragraph (b) comes closest to describing the kind of control used in managing a business, although it is described in a nonbusiness setting. There is a plan formulated in advance, there is a measure of actual results, there is a decision maker who compares actual results with plans, there is a selection of a corrective action to bring results closer in line with the plan, and there is a foreshadowing of repeated periodic control activities (the remaining quizzes). The fact that the measures of planning and actual performance are nonfinancial measures is not the governing consideration.

Much planned and actual information used in controlling a business is non-financial, including some cost accounting information such as the number of units produced, the percentage of units that were defective, and the percentage of available machine time that was utilized. Paragraph (a) is a perfect example of an engineering control, rather than the kind of control managers use in business. The simple device described, which is found in any home bathroom, is the kind of control device designed to monitor a physical condition, and so it is analogous to a thermostat or any of a variety of devices called “industrial controls.” Of course, devices of this kind are used in manufacturing and other businesses, but they do not possess the essential attributes of control in the sense used in business and in cost accounting. The device achieves a continuous monitoring of the results, rather than a periodic comparison of results with plans. There is no human decision maker who selects a corrective action to be taken. A human decision maker is probably the salient attribute of control in managing a business that is missing in paragraph (a). To download more slides, ebook, solutions and test bank, visit Chapter 1 1-5 E1-3 (Concluded) Paragraph (c) could be interpreted as an example of planning, but it lacks some essential ingredients of control (even though the word “control” is used in its last sentence). There is no periodic comparison of actual results with plans and no provision for modifying the treatment based on periodic results. For example, the contract requires five treatments each year, even if no weeds are visible. The actions taken are entirely preemptive. Paragraph (d) refers to the concept of control that applies to police work and military science. It consists of being able to physically determine each event that occurs in some location and being able to prevent certain events from occurring.

The potential use of coercive force, which is very clear in paragraph (d), is always present in achieving this kind of control. In paragraph (d), there is no indication that results were periodically compared with plans. A rule that says “Obtain the objective at any cost” is sometimes associated with these activities. To download more slides, ebook, solutions and test bank, visit 1-6 Chapter 1 CASES C1-1 (1) (2) (3) Yes, Williams has an ethical responsibility to take action. This is the first step he is required to take, unless the superior is involved. Alternative (b), communication of confidential information to persons outside the company, such as the local newspaper, is inappropriate unless there is a legal obligation to do so. If required by law, Williams should contact the proper authorities. Alternative (c), contacting a member of the board of directors, would be inappropriate at this time. Williams should report the problem to successively higher levels within the company and turn to the board of directors only if the problem is not resolved at lower levels. To download more slides, ebook, solutions and test bank, visit Chapter 1 1-7 C1-1 (Concluded) (4) Williams should follow the company’s established policies for resolving such issues, if such policies exist. If the issue is not resolved through existing policies, he should report the problem to successively higher levels within the company until it is resolved. (Williams is not required to report this action to his superior if his superior appears to be involved in the conflict. He is not to disclose the matter to persons outside the organization, unless required by law.) During these steps, Williams may clarify relevant concepts by confidential discussion with an objective advisor to obtain an understanding of possible courses of action.

If the conflict is not resolved after exhausting all these courses of action, Williams may have no other recourse than to resign and submit an informative memorandum to an appropriate representative of the organization. Consultation with one’s personal attorney is also appropriate. If such policies do not exist, or if they are unsuccessful in resolving the problem, Deerling should present the problem to the chairman of the board. Deerling’s immediate superior is involved, so he need not be informed of this action. If the matter remains unresolved, Deerling should report to the audit committee, the board of directors, and finally the majority owners. During these steps, Deerling may clarify relevant concepts by confidential discussion with an objective advisor to obtain an understanding of possible courses of action. If the conflict is not resolved after exhausting all these courses of action, Deerling may have no other recourse than to resign and submit an informative memorandum to an appropriate representative of the organization. The primary responsibility the company must fulfill before taking defensive actions is its fiduciary responsibility to stockholders. Other responsibilities include the effects that the takeover and defensive actions would have on creditors, bondholders, employees, customers, and the community. The company also has a responsibility to inform its external auditors and legal counsel to avoid putting them in a compromising position. In addition, the following apply: Management accountants have a responsibility to: Confidentiality: Refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so. (Foxworth’s suspicions about Dixon’s behavior should not be disclosed inappropriately. See requirement (3)). Objectivity: Communicate information fairly and objectively.

(Foxworth is obligated to make objective hiring recommendations to Dixon, in spite of his belief that Dixon will be prejudiced in acting on them.) Alternative (a), discussion with the director of personnel, who is one of Dixon’s peers, is inappropriate at this time. If, however, Foxworth believes the director of personnel is an objective party, Foxworth may discuss the matter with the director, confidentially, to clarify the relevant concepts and to obtain an understanding of possible courses of action. Alternative (b), informal discussion with a group of MAD senior management accountants, is inappropriate. Alternative (c), private discussion with the CFO, Dixon’s superior, is appropriate. Because Foxworth has already approached his immediate superior, Dixon, who is involved in the conflict, it is not necessary for Foxworth to inform him of this action. Foxworth should follow the company’s established policies for dealing with this type of conflict, if such policies exist. If policies do not exist, or if they are unsuccessful in resolving the conflict, Foxworth should discuss the issue with the CFO. If the matter remains unresolved, discussions with successively higher levels of management, including the audit committee and the board of directors, should follow. During these steps, Foxworth may discuss the matter confidentially with an objective advisor to clarify the relevant concepts and to obtain an understanding of possible courses of action. If the matter remains unresolved after exhausting all of these steps, Foxworth may have no recourse other than to resign and submit an informative memorandum to an appropriate representative of the company. He could have consulted with the marketing manager and production manager at every stage, rather than only upon receiving the initial budget data.

He could present the budget, or a summary of it, in a comparative form to highlight the differences between each quarter’s budget and the actual results of the corresponding quarter of the preceding year, and he could even calculate the percentage increase being budgeted and compare it with actual percentage increases that were achieved annually in the past. He could have consulted with his staff superior at the headquarters of Northwestern (the parent company)—Czeisla is his line superior, according to the second sentence of the case. Jones could have first investigated all her career opportunities with firms that presented no potential conflict of interest of this kind, but for the sake of the argument, it is reasonable to assume she did exactly that before applying for a position at Crimson. Knowing that Crimson is a supplier of computer systems, Jones might have revised her personal vita sheet and the wording of her application for this one job interview to lessen the chances of Crimson’s being tempted to pursue an unethical plan. (Of course, her involvement in SMI’s upcoming purchase might have become known to Crimson anyway, or it might have been known to Crimson from other sources before her interview or even before her application for the position.) In addition to her ethical responsibilities to SMI (and her financial responsibility to the hospital that provides treatment for her child), Jones has ethical responsibilities to: (a) her family (b) the management accounting profession (c) Crimson To download more slides, ebook, solutions and test bank, visit CHAPTER 2 DISCUSSION QUESTIONS Q2-1. (a) Cost is the current monetary value of economic resources given up or to be given up in obtaining goods and services. Economic resources may be given up by transferring cash or other property, issuing capital stock, performing services, or incurring liabilities. Costs are classified as unexpired or expired.

Unexpired costs are assets and apply to the production of future revenues. Examples of unexpired costs are inventories, prepaid expenses, plant and equipment, and investments. Expired costs, which most costs become eventually, are those that are not applicable to the production of future revenues and are deducted from current revenues or charged against retained earnings. Expense in its broadest sense includes all expired costs; i.e., costs which do not have any potential future economic benefit. A more precise definition limits the use of the term “expense” to the expired costs arising from using or consuming goods and services in the process of obtaining revenues; e.g., cost of goods sold and marketing and administrative expenses. (b) (1) Cost of goods sold is an expired cost and may be referred to as an expense in the broad sense of the term. On the income statement, it is most often identified as a cost. Inventory held for sale which is destroyed by an abnormal casualty should be classified as a loss. (2) Uncollectible accounts expense is usually classified as an expense. However, some authorities believe that it is more desirable to classify uncollectible accounts as a direct reduction of sales revenue (an offset to revenue). An uncollectible account which was not provided for in the annual adjustment, such as bankruptcy of a major debtor, may be classified as a loss. (3) Depreciation expense for plant machinery is a component of factory overhead and represents the reclassification of a portion of the machinery cost to product cost (inventory). When the product is sold, the depreciation becomes a part of the cost of goods sold which is an expense. Depreciation of plant machinery during an unplanned and unproductive period of idleness, such as during a strike, should be classified as a loss. The term “expense” should preferably be avoided when making reference to production costs.

(4) Organization costs are those costs that benefit the firm for its entire period of existence and are most appropriately classified as a noncurrent asset. When there is initial evidence that a firm’s life is limited, the organization costs should be allocated over the firm’s life as an expense or should be amortized as a loss when a going concern foresees termination. In practice, however, organization costs are often written off in the early years of a firm’s existence. (5) Spoiled goods resulting from normal manufacturing processing should be treated as a cost of the product manufactured. When the product is sold, the cost becomes an expense. Spoiled goods resulting from an abnormal occurrence should be classified as a loss. Q2-2. Cost objects are units for which an arrangement is made to accumulate and measure cost. They are important because of the need for multiple dimensions of data (e.g., by product, contract, or department) to accomplish the various purposes of cost accounting, including cost finding, planning, and control. Q2-3. (a) To classify costs as direct or indirect, the cost accountant must first know the answers to the questions “Directly traced to what?” and “Indirectly identified with what?” Otherwise, there is no way to assess the direct or indirect nature of a cost. It is the choice of a cost object that answers those two questions. (b) For example, the cost of a department manager’s salary cannot be classified as 2-1 To download more slides, ebook, solutions and test bank, visit 2-2 direct or indirect without selecting the cost object first. If the cost object is a product unit produced in the manager’s department, then the salary is indirect. If the cost object is the department, the salary is direct. Q2-4. (a) The product unit, batch, or lot is the cost object.

(Be careful about the lack of clarity of the term “the product” when it is not known whether it is intended to mean (a) a single unit, batch, or lot of a product, as opposed to (b) any large number of identical units. The significance of this distinction is that some costs, such as product design, prototyping, and initial worker training, are direct costs with respect to the total of all units ever produced, but are indirect with respect to a single unit, batch, or lot.) (b) A disaggregation of overhead would be useful for any study of how to better manage costs, or of what causes costs to be incurred. A chart of accounts is necessary to classify accounting data, so that the data may be uniformly recorded in journals and posted to the ledger accounts. Advantages of the electronic data processing system for record keeping are: speed, larger storage, single entry of multiple transactions, automatic control features, and flexibility in report formats. The following perceived weaknesses were mentioned in the text: (a) Traditional measures attempt to serve many purposes, and as a result they are not universally regarded as serving any one purpose ideally. (b) Traditional measures are affected by accounting choices that are not always relevant to the purpose at hand; examples of these choices are cost flow assumptions and arbitrary fixed cost allocations. (c) Traditional measures are calculated by systems that are usually slow to respond to changing conditions. (d) Traditional measures of plant utilization can seem to encourage overutilization of capacity. (e) Traditional measures of efficiency are often reported too late, are too aggregated, and are easy to misinterpret. Nonfinancial performance measures are based on simple counts or other physical data rather than allocated accounting data, they are unconnected to the general financial accounting system, and they are chosen to reflect one specific aspect of performance.

Four examples of nonfinancial performance measures given in the text, and the aspects of performance they might be used to monitor, are (a) scrap weight as a percentage of total shipped weight; to monitor efficiency of a process, particularly efficiency of material usage (b) processing time as a percentage of total time; to monitor cycle efficiency or inventory velocity (c) distance moved by a unit while inside the plant; to monitor simplification of a process (d) suggestions per year per employee; to monitor employee involvement To download more slides, ebook, solutions and test bank, visit Chapter 2 Q2-12. For example, nails used to make the product are indirect materials. Q2-15. Indirect labor, in contrast to direct labor, is labor expended that does not affect the construction or the composition of the finished product. For example, the labor of custodians is indirect labor. Q2-16. (a) A service department is one that is not directly engaged in production, but renders a particular type of service for the benefit of other departments. Examples of service departments are receiving, storerooms, maintenance, timekeeping, payroll, and cafeteria. (b) Producing departments classify their share of service department expenses as indirect overhead expenses. Q2-17. (a) Capital expenditures are intended to benefit more than one accounting period. The expenditures should therefore be recorded by a charge to an asset account for allocation to the periods benefited. Revenue expenditures benefit the operations of the current period only. They should be recorded by charges to the appropriate expense accounts. (b) If a capital expenditure is improperly classified as an expense, assets, retained earnings, and income for the period will be understated. In future periods, income will be overstated by any amount that would have been amortized had the expenditure been properly capitalized.

Assets and retained earnings will be understated on future balance sheets by 2-3 successively smaller amounts until the error has been fully counterbalanced. If a revenue expenditure is improperly capitalized, assets, retained earnings, and income for the period will be overstated. Income will be understated in subsequent periods as the improperly capitalized item is charged to the operations of those periods. Assets and retained earnings will continue to be overstated in subsequent balance sheets by successively smaller amounts until the improperly capitalized item has been completely written off. (c) The basic criterion for classifying outlays as revenue or capital expenditures is the period of benefit. The amount of detail necessary to maintain subsidiary records, the materiality of the expenditures, and the consistency with which various expenditures recur from period to period are other criteria generally considered in establishing a capitalization policy. Firms frequently establish an arbitrary amount below which all expenditures are expensed, irrespective of their period of benefit. The level at which this amount is set is determined by its materiality in relation to the size of the firm. The objective of such a policy is to avoid the expense of maintaining excessively detailed subsidiary records. Expenditures for items that fall below the set amount but are material in the aggregate should be capitalized, if total expenditures for these items vary significantly from period to period. A capitalization policy that reasonably applies these criteria, although it disregards the period of benefit and is therefore lacking in theoretical justification, will not significantly misstate periodic income. Q2-18. Appendix In a typical balanced scorecard, the names of the four perspectives are growth and learning, internal business process, customer, and financial. Q2-19.