Managerial Accounting 13ce by

Managerial Accounting 13ce by Alan Webb Ray Garrison, Theresa Libby (Solutions Manual All Chapters, 100% Original Verified, A+ Grade) All Chapters Solutions Manual Supplement files download link at the end of this file.Part 1: Ch 11-14+Apps: Page 2-306 Part 2: Ch 1-10: Page 307

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Solutions Manual, Chapter 11 1 Chapter 11 Reporting for Control Discussion Case (30 minutes) Although both businesses are in the same industry (food service), they serve very different markets and target customers that have very different expectations.Consequently, there are likely to be more differences than similarities between measures on the balanced scorecards of these two restaurants. Some examples (although not comprehensive) of the types of measures that might be included are as

follows:

Sam's Pita Place Classic Steakhouse Explanation Number of orders processed per hour Number of special occasion dining reservations taken per week Sam's is focused on speed of service while Classic is focused on special occasion dining offerings; larger dining parties that spend more money per visit.Number of sandwiches sent back - different ingredients than ordered Number of orders sent back as over/under-cooked or due to poor taste.Sam's allows customers to customize their sandwiches. Getting something different than ordered with reduce the probability the customer will return to the restaurant.Classic serves food at a higher price point and customers dine-in. They expect their food to be tasty and cooked to order..Part 1 2 / 4

• Managerial Accounting, 13th Canadian Edition

Discussion Case (continued)

Sam's Pita Place Classic Steakhouse Explanation Customer satisfaction scores received via social media sources.Survey would include measures such as speed of service and variety of food offerings at low prices.Customer satisfaction scores provided at the end of the meal. Survey would include measures of server attentiveness and the quality of the overall dining experience.While both restaurants would likely collect customer satisfaction survey data, each restaurant must collect this data from different sources considering differences in their target markets. The scores collected should reflect differences in these target markets and overall strategies Number of sandwich offerings below $6 Number of menu items that are priced at or slightly above competitors Sam's is concerned with offering enough low-priced menu items while Classic is concerned about ensuring their higher priced items are still price-competitive.

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Solutions Manual, Chapter 11 3 Solutions to Questions

11-1 There are a number of possible disadvantages including decision-making by individuals who don’t necessarily understand the company’s strategy. Also, independent decision- making by managers as part of decentralization may lead to coordination problems, lack of information sharing and possible self-interested behaviour that is not aligned with the organization’s objectives.11-2 A segment is any part or activity of an organization about which a manager seeks cost, revenue, or profit data. Examples of segments include departments, operations, sales territories, divisions, product lines, and so forth.11-3 A common fixed cost is one that supports the operations or activities of more than one segment but is not traceable in whole or in part to any one segment.11-4 The contribution margin is the difference between sales revenue and variable expenses. The segment margin is calculated by deducting traceable fixed expenses from the contribution margin. The contribution margin is useful as a planning tool for many decisions, including those in which fixed costs don’t change. The segment margin is useful in assessing the overall profitability of a segment.11-5 If common costs were allocated to segments, then the costs directly attributable to segments would be overstated and their margins would be understated. As a consequence, some segments could appear to be unprofitable and managers may be tempted to eliminate them. If a segment were eliminated because of the existence of arbitrarily allocated common costs, the overall profit of the company would decline by the amount of the segment margin because the common cost would remain.The common cost that had been allocated to the segment would then be reallocated to the remaining segments—making them appear less profitable.11-6 A traceable fixed cost is one that can be identified with a particular segment and that only arises because a segment exists.

11-7 Three inappropriate methods for

assigning traceable costs are: treating traceable

fixed costs as indirect, using the wrong allocation base and arbitrarily dividing common costs among segments. Each of these practices is inappropriate because they can lead to distorted segment costs and consequently, distorted segment margins.11-8 A cost center manager has control over cost, but not revenue or the use of investment funds. A profit center manager has control over both cost and revenue. An investment center manager has control over cost and revenue and the use of investment funds. To evaluate cost centre performance, standard cost variances and flexible budget variances are often used.Profit centre managers are often evaluated by comparing actual profit to targeted or budgeted profit. Investment centre managers are usually evaluated using return on investment or residual income measures.11-9 The net book value (NBV) approach is in keeping with how plant and equipment are reported on the balance sheet.Also, the NBV approach is consistent with the determination of operating income, which includes depreciation as an expense.11-10 Return on investment (ROI) can be improved by increasing sales, reducing operating expenses or reducing operating assets.11-11 Residual income is the operating income an investment center earns above the company’s minimum required rate of return on operating assets.11-12 If ROI is used to evaluate performance, a manager of an investment center may reject a profitable investment opportunity whose rate of return exceeds the company’s required rate of return but is less than the investment center’s current ROI. The residual income approach overcomes this problem since any project whose rate of return exceeds the company’s minimum required rate of return will result in an increase in residual income.A positive change in residual income will be viewed favourably by management..

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