Horngren’s Cost Accounting A Managerial Emphasis 17th Global Edition by Srikant M. Datar solution ma

a.
b.
c.
d.
e. Planning
Planning
Control
Planning
Control    
1-24     (10 mins.) Five-step decision-making process.
 
            The five-step decision-making process includes:
 

1. Identification of the problem and uncertainties.
2. Obtaining relevant information.
3. Make predictions about the future.
4. Make decisions by choosing among alternatives.
5. Implementation of decision, evaluation of performance and learning curve.

 
Identification of the problem and uncertainties: they have to identify where to obtain the additional $15,000 from. What is the certainty that the bank will offer them the loan? Are there other alternative sources of finance if the bank refuses to offer them the loan?
Obtaining relevant information: they have to obtain information on the number of customers which justifies the expansion. Would this expansion increase demand or require an increase in price?
Make predictions about the future: how many units will be produced following the expansion? What will be the sales figure and demand? They will need to estimate the breakeven units required to cover the costs of the expansion.
Make decisions by choosing among alternatives: based on the above analysis, they have to decide whether to go ahead with the expansion or maintain the current level of production.
Implementation of decision, evaluation of performance and learning curve: if the loan is obtained and the expansion is carried out, they will compare and analyze the actual sales with the breakeven. Where the actual sales vary from the breakeven, investigation of the variances will be carried out to establish the cause and correct further shortfalls.
 

1-25     (15 min.) Five-step decision-making process, service firm.
      

Action	Step in Decision-Making Process
a. b.   c. d. e. f.	Make decisions by choosing among alternatives. Identify the problem and uncertainties through obtaining information. Obtain information and/or make predictions about the future. Obtain information and/or make predictions about the future. Make predictions about the future. Obtain information.

 
1-26     (10–15 min.)   Professional ethics and reporting division performance.
 
1. Wilson’s ethical responsibilities are well summarized in the IMA’s “Standards of Ethical Conduct for Management Accountants” (Exhibit 1-7 of text). Areas of ethical responsibility include the following:

• Competence
• Confidentiality
• Integrity
• Credibility

The ethical standards related to Wilson’s current dilemma are integrity, competence, and credibility. Using the integrity standard, Wilson should carry out duties ethically and communicate unfavorable as well as favorable information and exercise his professional judgments and/or opinions. Competence requires Wilson to perform his professional duties in accordance with relevant laws, regulations, and technical standards and provide decision support information that is accurate. Credibility requires that Wilson report information fairly and objectively and disclose deficiencies in internal controls in conformance with organizational policy and/or applicable law. Wilson should refuse to include the $150,000 of defective inventory. Both financial accounting and management accounting principles maintain that once inventory is determined to be unfit for sale, it must be written off. It may be just a timing issue but reporting the $150,000 of inventory as an asset would be misleading to the users of the company’s financial statements.
 
2. Wilson should refuse to follow Leonard’s orders. If Leonard persists, the incident should be reported to the corporate controller of Garman Enterprises. Wilson should support his line management wholeheartedly without jeopardising his ethical conduct.
 
1-27