2013 John Wiley Sons Canada, Ltd. 1

© 2013 John Wiley & Sons Canada, Ltd. 1

CHAPTER 1

Solutions to Problems Problem 1.1 The Information Age has provided business with an increased quantity and improved quality of the information that is available in real time for planning, decision making, and control. As a result, more people in the organization are now involved in decision making, and timelier and more accurate decisions can be made.This has also facilitated an expansion in the scope of business decisions beyond cost accounting to include strategic performance measurement, risk management, connecting strategy with operations, looking to the future, and environmental awareness. In response, accounting practices have expanded to include systems that

measure and support this new realm of business practices, such as: value-based

management, quality management, environmental accounting, activity-based management, strategic management and lean accounting.Problem 1.2 Arising from the Industrial Revolution were large, complex companies that were characterized by multiple product lines, automation and complex processes, and large- scale operations. As organizations became more diversified and decentralized, more emphasis was placed on measuring profitability and addressing other issues such as performance measurement, quality management, and customer service. This created a need for different and more accurate information for decision making.It is quite possible that many companies could not succeed in our current business environment without having the benefit of management accounting to assist in planning, decision making and control.Problem 1.3 a)Scorekeeping b)Problem solving c)Problem solving d)Decision making e)Scorekeeping f)Scorekeeping Accounting for Managers, 1st Canadian Edition 1e Paul Collier Sandy Kizan Eckhard Schumann (Solutions Manual All Chapters, 100% Original Verified, A+ Grade) 1 / 4

Collier, Accounting for Managers, 1ce © 2013 John Wiley & Sons Canada, Ltd. 2 Problem 1.4 a)Scorekeeping b)Scorekeeping c)Problem solving d)Decision making e)Decision making f)Problem solving Problem 1.5 a)Planning, control b)Planning, control c)Control, decision-making d)Control e)Planning, decision-making f)Control g)Control h)Planning, control, decision-making Problem 1.6 a)The way a company costs its products is an internal issue and does not concern external shareholders.b)It was not necessary to report these changes to external stakeholders because the changes would not have impacted the final results reported in the financial statements. In the future, the effect should be increased profit assuming the new costing method provides for more accurate pricing.Problem 1.7 The best action Chang could take would be to engage external auditors to review the statements for accuracy and reliability. But that could be expensive, so she may first want to discuss with Mr. Rosen any anomalies that might have arisen during the year, such as a)Have all the year-end accruals been recorded correctly?b)Were there any significant changes in accounting methods, like depreciation or inventory?c)Were there any significant events that might have an impact on profit (flood, inflation, market conditions)? 2 / 4

Collier, Accounting for Managers, 1ce

© 2013 John Wiley & Sons Canada, Ltd. 3 Problem 1.8

Both are correct. The financial indicators that Aldo is proposing are important for assessing past performance and are considered lagging indicators. Non-financial measures, as proposed by Belinda, are leading indicators and are better for showing trends. They help to predict future performance.

In reality, both financial and non-financial performance measures are important in evaluating divisional performance as indicated by the popular balance scorecard.

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Collier, Accounting for Managers, 1ce

© 2013 John Wiley & Sons Canada, Ltd. 4

CHAPTER 2

Solutions to Problems

Problem 2.1

Value-based management uses a variety of techniques to measure increases in shareholder value, which is assumed to be the primary goal of all business organizations. Shareholder value refers to the economic value of an investment by discounting future cash flows to their present value using the cost of capital for the business. To achieve shareholder value, a business must generate profits in their markets for goods and services (product markets) that exceed the cost of capital (the weighted average cost of equity and borrowings) in the capital market.

Problem 2.2

The responsibilities of the board include setting the company’s strategic goals, providing leadership to senior management, monitoring business performance, and reporting to shareholders. This means the board should set the company’s strategic aims and ensure that the necessary financial and human resources are in place for the company to meet its objectives and review management performance.

The role of a Board is to provide leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed. These controls include many accounting controls including budgets, capital expenditure evaluations, etc.

Under governance legislation, the financial reports of a company are the responsibility of the directors. Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy the financial position of the company at any time and to ensure that financial reports comply with generally accepted accounting principles.They are also responsible for safeguarding the company’s assets and for taking reasonable steps to prevent and detect fraud.

Problem 2.3

Shareholder value analysis emphasizes the processes by which shareholder value is achieved. Shareholder value can be determined by using such measures as total shareholder return, market value added, shareholder value added, and economic value added. This form of value analysis compares cost with the value to the customer.Consequently, improving shareholder value is inextricably linked with both strategy and accounting.

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