Essay about Chapter 1 Answer Key - Managerial Accounting

4294 Words Oct 15th, 2013 18 Pages
Chapter 1
Cost Accounting: Information for Decision Making
Solutions to Review Questions
Financial accounting is designed to provide information about the firm to external users. External users include investors, creditors, government authorities, regulators, customers, competitors, suppliers, labor unions, and so on. Cost accounting systems are designed to provide information to internal users (managers).
This difference is important, because it affects the design of the systems. Financial accounting systems are based on standards or rules. This allows the user to compare the results of different firms. Managerial accounting systems do not require rules. Each firm is free to develop managerial accounting systems that best
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The systems should be flexible to adapt to the circumstances that exist in that company. A common set of accounting principles would tend to reduce flexibility and usefulness of these systems. As long as all parties know the accounting basis used by the system, the exact rules can be designed in whatever manner the parties deem appropriate.

Airlines are characterized by the need to own a substantial amount of capacity costs. Managers at airlines require very sophisticated load management information that predicts the number of passengers flying on a particular route on a particular day. If they set a single price that would cover their costs given a certain number of passengers, they risk flying with empty seats. Once the plane takes off, they cannot sell the seat. Therefore, they need a flexible pricing system. Such a system requires detailed cost information about passengers and aircraft.

The costs are unlikely to be much different among passengers. The variable costs are relatively low (per passenger) and may include food and beverage, some baggage handling cost, some ticket processing costs, and, depending on the plane, a (very) small amount of fuel.
The cost accounting issues for Nabisco are the same as for Carmen’s Cookies in the sense that managers at Nabisco want the same kind of information as Carmen: what are the costs of cookies, who is performing the best, and so on.
The cost accounting issues are different in the size and

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