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Solution Manual for Managerial Accounting, 6th Edition

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    Managerial Accounting Sixth Edition Karen Wilken Braun Wendy M. Tietz Instructor’s Solutions Manual Jennifer Allen

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    Contents Chapter 1 Introd uction to Managerial Accounting ................................ ............ 1 - 1 Chapter 2 Building Blocks of Managerial Accounting ................................ ..... 2 - 1 Chapter 3 Job Costing ................................ ................................ ........................ 3 - 1 Chapter 4 Activity - Based Costing, Lean Operations, and the Costs of Quality ................................ ................................ .............. 4 - 1 Chapter 5 Process Costing ................................ ................................ .................. 5 - 1 Chapter 6 Cost Behavior ................................ ................................ ..................... 6 - 1 Chapter 7 Cost - Volume - Profit Analysis ................................ ............................ 7 - 1 Chapter 8 Relevant Costs for Short - Term Decisions ................................ ........ 8 - 1 Chapter 9 The Master Budget ................................ ................................ ........... 9 - 1 Chapter 10 Performance Evaluation ................................ ................................ . 10 - 1 Chapter 11 Standard Costs and Variances ................................ ......................... 11 - 1 Chapter 12 Capital Investment Decisions and the Time Value of Money ........ 12 - 1 Chapter 13 Statement of Cash Flows ................................ ................................ 13 - 1 Chapter 14 Financial Statement Analysis ................................ ........................... 14 - 1 Chapter 15 Sustainability ................................ ................................ .................... 15 - 1

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    1 - 1 Chapter 1 Introduction to Managerial Accounting Quick Check Answers QC1 - 1. c QC1 - 2. d QC1 - 3. b QC1 - 4. d QC1 - 5. d QC1 - 6. c QC1 - 7. a QC1 - 8. c QC1 - 9. b QC1 - 10. a QC1 - 11. c QC1 - 12. b Short Exercises (5 – 10 min.) S1 - 1 a. Planning b. Controlling c. Directing d. Directing e. Directing, Controlling (5 – 10 min.) S1 - 2 a. Financial accounting b. Financial accounting c. Financial accounting d. Managerial accounting e. Managerial accounting f. Managerial accounting g. Financial accounting h. Financial accounting i. Managerial accounting j. Managerial accounting k. Financial accounting l. Managerial accounting m. Financial accounting

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    Managerial Ac counting 6e Solutions Manual 1 - 2 (5 – 10 min.) S1 - 3 a. Internal Auditing Department b. Controller c. Internal Auditing Department d. Internal Auditing Department e. Treasurer f. Controller g. Controller h. Controller i. Controller j. Controller k. Controller l. Treasurer m. Treasurer (5 – 10 min.) S1 - 4 Characteristic Check (√) if related to internal auditing a. Reports directly to the audit committee √ b. Reports to treasurer or controller c. Is part of the Accounting Department d. Helps to ensure that company’s internal controls are functioning properly √ e. Performs the same function as independent certified public accountants f. Usually reports to a senior executive (CFO or CEO) for administrative matters √ g. External audits can be performed by the internal auditing department h. Required by the New York Stock Exchange if company stock is publicly traded on the NYSE √ i. Ensures that the company achieves its profit goals

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    Chapter 1 Introduction to Managerial Accounting 1 - 3 (10 min.) S1 - 5 a. The CEO is hired by the board of d irectors . b. A subcommittee of the board of directors is called the audit committee . c. Raising capital and investing funds are the direct responsibilities of the treasurer . d. The CFO and the COO report to the CEO. e. Financial accounting, managerial accounting, and tax reporting are the direct responsibilities of the controller . f. Management accountants often work on cross - functional teams . g. The internal audit function reports to the CFO or the CEO and the audit committee . h. The company’s operations are the direct responsibility of the COO . (5 min.) S1 - 6 1 . The Institute of Management Accountants (IMA) issues the Certified Management Accountant (CMA) certification. 2 . The certification offered by I MA , focuses on accounting and finance topics . 3 . The monthly professional magazine published by the Institute of Management Accountants is called Strategic Finance . 4 . The certification launched in 2012 jointly by the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA) is called the Chartered Global Management Accountant ( CGMA ) . 5 . To earn CMA certification, a candidate must have a(n) baccalaureate degree. The CMA exam can be taken, however, before finishing this degree. (5 min.) S1 - 7 a. Failing to provide job description information to management because you fear it may be used to cut a position in your department violates the credibility standard. b. Providing e arnings information to your sister before it is publicly announced violates the confidentiality standard. c. Failing to read the specifications of the software package before purchasing it violates the competence standard . d. Stealing from your employer is a violation of the integrity standard. e. Skipping continuing education sessions could violate the requirement to maintain professional competence . If your company paid for you to attend the conference, skipping the sessions also violates the integrity standard.

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    Managerial Ac counting 6e Solutions Manual 1 - 4 (5 min.) S1 - 8 a. Sustainability b. Sarbanes - Oxley Act (SOX) c . Enterprise resource planning (ERP) system d . D ata analytics (5 min.) S1 - 9 Letter Scenario Standard violated a. Jack , an accountant for a s martphone manufacturer, told his friends about a new model of smartphone being released by the company in the following quarter. For competitive reasons, the company keeps its models shrouded in secrecy until release date. Confidentiality b. The CFO directed that certain expenses be reclassified as assets, so that target profit could be achieved. The CFO rationalized that jobs would be saved by reaching the targeted income figures. Integrity c. Even though Meagan 's company is adopting a new ERP system that impacts the accounting system, Meagan (a management accountant) has not completed the required ERP training from the vendor . Competence d. Oliver provides an analysis of the profitability of a company - owned store that is managed by Oliver’s best friend, Bob. Oliver neglects to include allocated fixed costs in Bob’s report. If Oliver includes those allocated fixed costs, the store will show a loss and Bob’s job could be in danger . Credibility e. Yimeng , a purchasing agent for h er company, received two tickets from a supplier to the upcoming Ohio State v er s us University of Michigan football game. These tickets sell for over $500 each . Integrity (10 min.) S1 - 1 0 a. Financial accounting system b. Critical thinking c. IMA d. Treasurer e. Economic, environmental, and social f. Controller g. Internal audit h. Sarbanes - Oxley Act of 2002 i. Triple Bottom Line j. Controlling k. Directing l. ERP m. Sustainability n. CEO o. Planning p. CFO

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    Chapter 1 Introduction to Managerial Accounting 1 - 5 ( 5 min.) S1 - 1 1 a. D escriptive b. D escriptive c. P rescriptive d. D iagnostic e. P redictive f. D iagnostic g. A daptive and A utonomous (10 min.) S1 - 12 Item Term Definition 1 . Adaptive and autonomous analytics k. Analytics that collect, analyze , learn, and adjust without human intervention. 2 . Big data d. Data characterized by five Vs: volume, velocity, variety, veracity, and value. 3 . Categorical ( nominal data) h. Data that represents things that have no numerical value (such as customer name, state, and distribution channel). 4 . Data i. A collection of observations. 5 . Data analytics b. The process of turning raw data into actionable insights that lead to good business decisions. 6 . Data visualization j. The art and science of communicating quantitative information through visual presentations. 7 . Descriptive analytics m. Analytics that describe what has or is happening. 8 . Diagnostic analytics f. Analytics that help uncover the root cause of the current state. 9 . Ordinal data c. Data that has a clearly defined order and may or may not have numbers associated with it (such as customer satisfaction rankings and employee rank). 10 . Predictive analytics g. Analytics that seek to predict what will happen in the future. 11 . Prescriptive analytics a. Analytics that seek to determine what should be done. 12 . Quantitative data n . Data that can be measured, counted, and aggregated (such as sales revenue, number of customers, and cost of product). 13 . Structured data l. Data that is highly organized into predefined discreet categories, often contains labels, and is fairly easy to search and manipulate. 14 . Unstructured data e. Data that is not organized into predefined categories.

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    Managerial Ac counting 6e Solutions Manual 1 - 6 (10 min.) S1 - 13 Item Task Screen shot letter 1 . Format as a ccounting number K 2 . Insert new workbook I 3 . Insert function D 4 . Worksheet name H 5 . Decrease decimal J 6 . Active cell E 7 . Ribbon A 8 . Name of workbook (file name) G 9 . Cell reference C 10 . Formula bar F 11 . Name box B (10 min.) S1 - 14 Task Description of how to do the task in Excel (Windows) 1. Change the order of the worksheets in the workbook c. Drag and drop worksheet to desired location. 2. Copy and paste the contents of one cell to another cell j. In the first cell, hold down Ctrl + C, then navigate to the desired cell and hold down Ctrl + V. 3. Copy the contents of a cell to a range of cell a. Drag the fill handle down the column or across the row. 4. Go to the end of the data set in a worksheet g. Hold down the Ctrl and End keys simultaneously. 5. Move between worksheets i. Click on a worksheet tab. 6. Refer to a cell as an absolute reference d. Put dollar signs in front of both the column and row reference in the formula. 7. Rename a worksheet h. Right click worksheet tab and select option to give the worksheet a new name. 8. Select a range of cells b. Click on the first cell in a range and drag your cursor to the final cell you are selecting. 9. Select all data in a worksheet e. Hold down the Ctrl and A keys simultaneously. 10. Select one cell f. Click on a cell.

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    Chapter 1 Introduction to Managerial Accounting 1 - 7 (10 min.) S1 - 15 a. =B2*C2 b. Drag the cell handle in the lower right corner of Cell D2 down to Cell D5. c. =SUM(B2:B5) d. =SUM(D2:D5) e. =B2+B4 f. =D2+D4 g. =B10/B9 h. =B3 - B5 i. =D3 - D5 (10 min.) S1 - 16 a. To quickly navigate to the end of the data in a worksheet when using Excel in a Windows environment, use the Ctrl + End keystrokes. b. The top bar in an Excel workbook that contains File, Home, Insert, and other tabs is called the ribbon . c. File, Home, Insert, Page Layout, Formulas, and Data are examples of tabs . d. The formula bar displays how the content of the active cell was generated. e. To select all data in a worksheet when using Excel in a Windows environment, use the Ctrl + A keystrokes. f. The worksheet tab is right clicked to rename it. g. The active cell will have a colored border around it and the cell reference will appear in the name box. h. A unique address for each cell in an Excel worksheet is called a cell reference . i. The cell reference for the active cell will appear in the name box . j. To quickly navigate to the first column of a row in Excel when using Excel in a Windows environment, use the Ctrl + arrow left keystrokes. k. There are separate tabs for each worksheet in a workbook.

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    Managerial Ac counting 6e Solutions Manual 1 - 8 Exercises (Group A) (10 min.) E1 - 1 7 A a. Information on a company’s past performance is provided to external parties by financial accounting . b. Managerial accounting systems are chosen by comparing the costs versus the benefits of the system and are not restricted by GAAP (or International Financial Reporting Standards, IFRS , in the case of companies headquartered in many countries outside of the United States) . c. Managerial accounting systems report on various segments or business units of the company. d. Financial accounting develops reports for external parties such as creditors and shareholders . e. When managers evaluate the company’s performance compared to the plan, they are performing the controlling role of management. f. CPAs audit the financial accounting statements of public companies. g. Companies must follow GAAP ( or International Financial Reporting Standards, IFRS , in the case of companies headquartered in many countries outside of the Unites States) in their financial accounting systems. h. Choosing goals and the means to achieve them is the planning function of management. i. Decision makers inside a company are the managers . (10 min.) E1 - 1 8 A a. Technical b. Non t echnical c. Technical d. Non t echnical e. Non t echnical f. Non t echnical g. Technical h. Technical i. Technical j. Technical k. Non t echnical l. Non t echnical m. Technical n. Non t echnical o. Technical p. Technical q. Non t echnical r. Non t echnical s. Technical t. Non t echnical

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    Chapter 1 Introduction to Managerial Accounting 1 - 9 (10 min.) E1 - 1 9 A 1. Financial accounting information 2. Managerial accounting information 3. Financial accounting information 4. Financial accounting information 5. Managerial accounting information 6. Financial accounting information 7. Both 8. Financial accounting information 9. Financial accounting information 10. Financial accounting information 11. Both 12. Both 13. Financial accounting information 14. Financial accounting information (10 min.) E1 - 20 A 1. C onfidentiality 2. Credibility 3. Credibility 4. Credibility 5. Confidentiality 6. Confidentiality 7. Integrity 8. Competence 9. Competence 10. Competence 11. Integrity 12. Integrity 13. Competence (10 min.) E1 - 2 1A Expected benefit (cost savings) Wages (20 worke r s x 40 hrs. x $15/ hr. ) $12,000 Payroll taxes ($12,000 x 7.65%) 918 Total expected c ost savings $12,918 Expected costs Lettuce B ot cost (machine cost) $8,000 Lettuce B ot delivery cost 500 Cost of operating the lettuce bot 1,500 Total expected costs $10,000 Net expected benefit in fi r st year $2,918

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    Managerial Ac counting 6e Solutions Manual 1 - 10 (10 min.) E1 - 22 A a. E conomic b. Social c. Environmental d. Social e. Environmental f. Social g. Economic h. Environmental i. Environmental j. Social k. Social l. Social m. Social n. Environmental (10 min.) E1 - 23A a. C ategorical b. O rdinal c. C ategorical d. Q uantitative e. Q uantitative f. O rdinal g. Q uantitative h. O rdinal i. C ategorical j. Q uantitative k. C ategorical l. O rdinal

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    Chapter 1 Introduction to Managerial Accounting 1 - 11 ( 2 0 min.) E1 - 24A Excel file should show: Formulas in each cell should be:

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    Managerial Ac counting 6e Solutions Manual 1 - 12 (10 min.) E1 - 25A 1. 985 2. MD - Disability 3. 389 4. 3 5. 49926 6. See below a. $636.10 b. 12 c. $7,633.20 7. 80840 8. Click in the cell in the upper left corner of the worksheet (the intersection of the row and column headers)

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    Chapter 1 Introduction to Managerial Accounting 1 - 13 (10 min.) E1 - 26A Excel file should show:

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    Managerial Ac counting 6e Solutions Manual 1 - 14 (continued) E1 - 26A Formulas in each cell should be:

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    Chapter 1 Introduction to Managerial Accounting 1 - 15 Exercises (Group B) (5 min.) E1 - 27 B a. U.S. companies must follow GAAP (or International Financial Reporting Standards, IFRS , in the case of companies headquartered in many countries outside of the United States) in their financial accounting systems. b. Financial accounting develops reports for external parties, such as creditors and shareholders . c. When managers evaluate the company’s performance compared to the plan, they are performing the controlling role of management. d. Managers are decision makers inside a company. e. Financial accounting provides information on a company’s past performance to external parties. f. Managerial accounting systems are not restricted by GAAP ( or International Financial Reporting Standards, IFRS, in the case of companies headquartered in many countries outside of the United States) but are chosen by comparing the costs versus the benefits of the system. g. Choosing goals and the means to achieve them is the planning function of management. h. Managerial accounting systems report on various segments or business units of the company. i. Financial accounting statements of public companies are audited annually by CPAs. (5 – 10 min.) E1 - 28 B a. Non t echnical b. Non t echnical c. Non t echnical d. Technical e. Non t echnical f. Technical g. Technical h. Technical i. Non t echnical j. Technical k. Non t echnical l. Technical m. Non t echnical n. Technical o. Technical p. Technical q. Technical r. Non t echnical s. Non t echnical t. Non t echnical

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    Managerial Ac counting 6e Solutions Manual 1 - 16 (5 – 10 min.) E1 - 2 9 B 1. Both 2. Financial accounting information 3. Financial accounting information 4. Managerial accounting information 5. Financial accounting information 6. Managerial accounting information 7. Financial accounting information 8 . Financial accounting information 9 . Financial accounting information 10 . Financial accounting information 11 . Both 12 . Both 13 . Financial accounting information 14 . Financial accounting information (10 min.) E1 - 30 B 1. Credibility 2. Competence 3. Integrity 4. Competence 5. Integrity 6. Credibility 7. Confidentiality 8. Competence 9. Integrity 10. Confidentiality 11. Credibility 12. Confidentiality 13. Compe tence (10 min.) E1 - 31 B Expected benefit (cost savings) Wages (25 worke r s x 50 hrs. x $15/ hr. ) $18,750 Payroll taxes ($18,750 x 7.65%) 1,434 Total expected cost savings $20,184 Expected costs Lettuce bot cost (machine cost) $ 9,500 Lettuce bot delivery cost 1,000 Cost of operating the lettuce bot 2,500 Total expected costs $13,000 Net expected benefit in fi r st year $7,184

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    Chapter 1 Introduction to Managerial Accounting 1 - 17 (10 min.) E1 - 3 2B a. Social b. Environmental c. Environmental d. E conomic e. E nvironmental f. Social g. Environmental h. Social i. Environmental j. Social k. Economic l. Social m. Environmental n. Social (10 min.) E1 - 33B a. Categorical b. Quantitative c. Categorical d. Categorical e. Ordinal f. Ordinal g. Quantitative h. Ordinal i. Quantitative j. Categorical k. Quantitative l. Ordinal

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    Managerial Ac counting 6e Solutions Manual 1 - 18 ( 2 0 min.) E1 - 34B Excel file should show: Formulas in each cell should be:

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    Chapter 1 Introduction to Managerial Accounting 1 - 19 (10 min.) E1 - 35B 1. 386 2. NJ - Disability 3. 693 4. 9 5. 57516 6. See below a. $679.55 b. 12 c. $8,154.59 7. 56243 8. Click in the cell in the upper left corner of the worksheet (the intersection of the row and column headers)

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    Managerial Ac counting 6e Solutions Manual 1 - 20 (10 min.) E1 - 36B Excel file should show:

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    Chapter 1 Introduction to Managerial Accounting 1 - 21 (continued) E1 - 36B Formulas in each cell should be:

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    Managerial Ac counting 6e Solutions Manual 1 - 22 Problems (Group A) (45 – 60 min.) P1 - 37 A Req. 1 Planning Directing Controlling Sales Increase s ales Setting competitive prices . Examine sales reports . Monitor sales numbers and prices from different products and locations over time. Investigate variances. Repairs Increase volume of repairs Streamline process to save time. Set competitive prices; generate reports showing time used for each type of repair. Track total number of repairs and see if more repairs are being made and if time is utilized efficiently. Lessons Increase number of lessons given Find out what customers want and need. Observe competitors for prices and lessons offered. Improve teacher qualifications . Examine number of lessons given per instrument . Web d evelopment Increase W eb traffic Improve design of website. Offer more products online. Make shopping easier and more intuitive. Increase marketing efforts. Monitor W eb traffic by having an online counting device. Look at sales numbers to see if people are just surfing or actually buying merchandise. Accounting Implement ERP system to monitor department activities and record finances Train employees on new system. Find potential flaws in the system and fix before implementation. Track employee work schedules to stay on time. Double - check entries to ensure system is working properly. Human r esources Decrease employee turnover Hire employees who are “a good fit” for the company. Raise employee morale; set clear job descriptions. Give feedback to employees. Monitor both involuntary and voluntary turnover. Interview employees to determine potential problems with the workplace.

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    Chapter 1 Introduction to Managerial Accounting 1 - 23 (continued) P1 - 37 A Req. 2 Planning Directing Controlling Sales A sales budget for the entire company and each individual product at each location is needed. Analyze sales reports to monitor type and amount of sales made. Prices would be analyzed using these reports and market analysis of competitors. Compare budgets with actual sales numbers. Investigate variances to take corrective actions if needed. Change prices if deemed appropriate. Repairs Labor budgets would be needed to determine the time taken to repair instruments and if hiring more repair staff would be feasible. Employee training programs would be used. Monitor time taken per repair for each member of repair staff. Compare budgets with actual results. Investigate variances and take corrective action if needed. Lessons Budgets for types of lessons offered, time needed per lesson taught, and market analysis to determine which lessons potential customers want. Ensure customer satisfaction by hiring qualified staff. Analyze market analysis to determine market needs and proper pricing schemes. Compare budgets with actual results. Use customer feedback to improve lessons. Make changes if needed. Web d evelopment An expense budget is needed to ensure money is spent efficiently. A budget would also be needed to set W eb traffic goals. Monitor department expenses and website visits using online counting program. Compare budgeted expenses with actual and compare expected W eb traffic with actual. Investigate variances and make changes as needed. Accounting Time budgets as well as expense budgets are needed. Train employees on new system to keep within time budget. Monitor expenses closely. Compare budget with actual numbers. Investigate variances and make changes if needed. Human r esources Employee satisfaction surveys and feedback reports. Active relationship between management and employees. Management would record needs and suggestions made by employees in feedback system. Consider employee suggestions and enact changes if needed. Note: All the information needed in the table above would be generated almost entirely by the managerial accounting system. Managerial accounting systems provide much of the information needed for internal decision making, while financial accounting systems are geared towards external financ ial reporting.

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    Managerial Ac counting 6e Solutions Manual 1 - 24 (15 – 20 min.) P1 - 38 A a. If the goods have been received, postponing recording of the purchases understates liabilities. This is unethical and inconsistent with the IMA standards even if the supplier agrees to delay billing. b. The software has not been sold. Therefore, it would be inconsistent with the IMA standards to record it as sales. c. Delaying year - end closing incorrectly records next year’s sales as this year’s sales. This is clearly wrong and unethical, and it is inconsistent with the IMA standards. d. The appropriate allowance for bad debts is a difficult judgment. The decision should not be driven by the desire to meet a profit goal. It should be based on the likelihood that the company will collect. We cannot determine this without more information. H owever, because the company emphasizes earnings growth, which can lead to sales to customers with weaker credit records, reducing the allowance seems questionable. This strategy is likely inconsistent with the IMA standards. e. If the maintenance is postponed, there is no transaction to record. This strategy is beyond the responsibility of the controller, so it does not violate IMA standards. Strategies a, b, and c are clearly unethical and inconsistent with the IMA standards of integrity, credibility, and perhaps competence. Strategy d is likely unethical, but we cannot be certain without more information. The controller should resist attempts to implement a, b, and c, and she should gather more information about d. If the president ignores the controller’s concerns and still insists that these strategies be implemented, then the controller should probably resign rather than continuing to work for a company that engages in unethical behavior.

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    Chapter 1 Introduction to Managerial Accounting 1 - 25 (15 – 20 min.) P1 - 39 A Req. 1 Benefits if the project is successful: Savings from more efficient order processing………………………… $ 1 05 ,000 Savings from streamlining the manufacturing process……………… 125 ,000 Savings from inventory reduction……………………………………….. 2 25 ,000 Profits from increased sales...........…………………………………….... 15 5 ,000 Total benefits if the project is successful……………………………… $ 610 ,000 Req. 2 Costs of implementing the project: Software costs…………………………………………………………………. $ 435 ,000 Customizing ERP and loading data……………………...………………… 95 ,000 Employee training…………………………………………………………….. 1 05 ,000 Total costs…………………………………..………………………………….. $ 635 ,000 Now compare the value of benefits to the costs: Expected benefits………….................................................. $ 610 ,000 Expected costs...…………………………….......................... ( 635 ,000 ) Net benefits (costs)…………..…...…………………………... $ ( 25 ,000 ) Because the expected value of the benefits is less than the total costs, the company should not undertake the project. Req. 3 The CEO formed a team to evaluate the feasibility of installing an ERP system for two reasons. First, the project was probably too big for one person. Second, representatives of the different functional business areas have different knowledge and informati on to contribute. a. Estimating software costs systems specialist b. Estimating cost of loading data into the new ERP system management accountant systems specialist c. Customize the ERP software management accountant systems specialist d. Estimate customization costs all team members e. Estimate training costs human resource director f. Savings from more efficient order processing systems specialist management accountant g. Savings from streamlining the manufacturing process plant engineer plant foreman h. Evaluate the effects of integrating purchasing, production, marketing, and distribution into a single system plant foreman i. Estimate increase in sales from higher customer satisfaction marketing director j. Estimate benefits and costs a ll team members Student answers may vary. The main point is that different team members contribute different knowledge.

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    Managerial Ac counting 6e Solutions Manual 1 - 26 (10 – 15 min.) P1 - 40 A Costs: Financial assistance to dealers...............………….. $ 7 6 0 ,000 Computer hardware upgrade………………….......... 1 60 ,000 Software and consulting fees……………………….. 2 20 ,000 Total costs...........................………………………............ $1, 1 4 0 ,000 Value of benefits (lower labor costs)………….……….. $1, 34 0 ,000 Total costs...............................………………………….… (1, 1 4 0 ,000) Excess of benefits over costs…………………………… $ 20 0 ,000 Because the benefits exceed the costs, a cost - benefit analysis suggests that the company should proceed with the online ordering system. (20 – 25 min.) P1 - 41 A Req. 1 The expected value of the benefits is the labor cost savings of $ 9 35 ,000. This is a downward revision from what was originally estimated in P1 - 2 8 A. Req. 2 Expected value of benefits……….……………............ $ 9 35 ,000 Total costs (from P1 - 2 8 A)………………...……………. (1, 1 4 0 ,000) Net cost..........................………………………………… $ ( 205 ,000) The revised estimates mean the expected costs are greater than the expected benefits. The quantitative analysis suggests that the company should not undertake the project. Before deciding , the company should carefully consider other factors like those listed in Req. 3 . Req. 3 Other factors management should consider before making a final decision include the following : • The difficulty and costs of laying off employees may reduce the expected benefits. • Employee layoffs may hurt morale and efficiency in other areas of the company, thus increasing costs. • Electronic order processing should reduce human errors, thereby reducing costs. • Providing dealers with current availability, price information, and timely order processing will help the company manage and reduce its inventories. Student answers to Req. 3 may vary.

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    Chapter 1 Introduction to Managerial Accounting 1 - 27 Problems (Group B) (45 – 60 min.) P1 - 42 B Req. 1 Planning Directing Controlling Sales Increase s ales Setting competitive prices . Examine sales reports . Monitor sales numbers and prices from different products and locations over time. Investigate variances. Repairs Increase volume of repairs Streamline process to save time. Set competitive prices; generate reports showing time used for each type of repair. Track total number of repairs and see if more repairs are being made and if time is utilized efficiently. Customization Increase number of custom systems built Find out what customers want and need. Observe competitors for prices and options offered. Improve employee certification and offer higher - quality parts. Examine number of computer systems built per type (multimedia, gaming, etc.). Web d evelopment Increase W eb traffic Improve design of website. Offer more products online. Make shopping easier and more intuitive. Increase marketing efforts. Monitor W eb traffic by having an online counting device. Look at sales numbers to see if people are just surfing or actually buying merchandise. Accounting Implement ERP system to monitor department activities and record finances Train employees on new system. Find potential flaws in the system and fix before implementation. Track employee work schedules to stay on time. Double check entries to ensure system is working properly. Human r esources Decrease employee turnover Hire employees who are “a good fit” for the company. Raise employee morale; set clear job descriptions. Give feedback to employees. Monitor both involuntary and voluntary turnover. Interview employees to determine potential problems with the workplace.

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    Managerial Ac counting 6e Solutions Manual 1 - 28 (continued) P1 - 42 B Req. 2 Planning Directing Controlling Sales Haas would need a sales budget for the entire company and each individual product at each location. Analyze sales reports to monitor type and amount of sales made. Prices would be analyzed using these reports and market analysis of competitors. Compare budgets with actual sales numbers. Investigate variances to take corrective actions if needed. Change prices if deemed appropriate. Customization Budgets for types of computers offered, time needed per job, and market analysis to determine which computers potential customers want. Ensure customer satisfaction by hiring qualified staff. Research quality of available parts. Analyze market analysis to determine market needs and proper pricing schemes. Compare budgets with actual results. Use customer feedback to improve custom builds. Make changes if needed. Repairs Labor budgets would be needed to determine the time taken to repair instruments and if hiring more repair staff would be feasible. Employee training programs would be used. Monitor time taken per repair for each member of repair staff. Compare budgets with actual results. Investigate variances and take corrective action if needed. Web d evelopment Haas would need an expense budget to ensure money is spent efficiently. A budget would also be needed to set W eb traffic goals. Monitor department expenses and website visits using online counting program. Compare budgeted expenses with actual and compare expected W eb traffic with actual. Investigate variances and make changes as needed. Accounting Haas would need time budgets as well as expense budgets. Train employees on new system to keep within time budget. Monitor expenses closely. Compare budget with actual numbers. Investigate variances and make changes if needed. Human r esources Employee satisfaction surveys and feedback reports. Active relationship between management and employees. Management would record needs and suggestions made by employees in feedback system. Consider employee suggestions and enact changes if needed. Note: All the information needed in the table above would be generated almost entirely by the managerial accounting system. Managerial accounting systems provide much of the information needed for internal decision making, while financial accounting systems are geared toward external financial reporting.

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