Cost Accounting Essay

Decent Essays
Solutions Manual for

Creating Value for Management
Fifth Edition

University of California, Davis

Table of Contents
Chapter 1
Cost Accounting: How Managers User Cost Accounting Information

Chapter 15
Using Differential Analysis for Production Decisions

Chapter 2
Cost Concepts and Behaviour

Chapter 16
Managing Quality and Time

Chapter 3
Cost System Design: An Overview

Chapter 17
Planning and Budgeting

Chapter 4
Job Costing

Chapter 18
Flexible Budgeting and Performance Evaluation

Chapter 5
Process Costing

Chapter 19
Performance Evaluation: Cost Variances

Chapter 6
Spoilage and Quality Management

Chapter 20 Chapter 7
Allocating Costs to Departments
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Nonvalue-added activities do not add value to the goods or services. 1–4. Differential costs are important for managerial decision making, but other cost data can provide management with additional important information. For example, inventory values and costs of goods sold are important for income tax and financial reporting purposes as well as for most bonus and cost-plus contracting purposes. Costs for performance evaluation are not necessarily differential costs. Companies try to recover all costs, hence some estimate of total costs is needed. (This could be an opportunity to discuss short-run and long-run costs with students, noting that in the long run, all costs must be covered.)

© The McGraw-Hill Companies, Inc., 1997 Solutions Manual, Chapter 1 1

1–5. Costs that could be shared among housemates might include a share of the rent, food, utilities, and other related costs. Costs that would differ with the addition of another person are the differential costs. These differential costs might include food. It would be necessary to negotiate an agreement between you and the other person considering all factors. For example, should you split the total costs or charge only the differential costs of the additional person. Businesses are often faced with similar decisions on finding the appropriate cost base for splitting costs. There are no generally accepted
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