Solution Manual for Fundamentals of Cost Accounting 6th Edition By Lanen
Solutions to Critical Analysis and Discussion Questions
We would not agree. The role of accountants is to help manage the organization. Part of
that role is to report results. Another part is to design systems that assist other
managers in making decisions to improve performance. This role requires that
accountants understand how value is created in their organizations.
The calculation of cost depends on the decision being made. Therefore, the first
question to ask is, “What decision (or decisions) are you trying to make?”
Costs that you could ask to be reimbursed might include the fuel, a share of the
maintenance costs, “wear and tear,” or depreciation, and insurance. To avoid
disagreements, it would be necessary to negotiate an agreement (even if only
informally) between you and your friend considering all factors. For example, you might
agree that she should pay for the gas and any other supplies (e.g., oil) needed on the
If you are going along, you might change the agreement so that you split these costs.
Alternatively, you might say that because you are going anyway, she can ride along for
Although it is not the “job” of accounting to determine strategy, accounting provides
important information to those who do determine strategy. If the cost accounting system
provides inaccurate information, the firm may end up with an unintended strategy,
because managers are making decisions based on faulty information.
Executive performance evaluation systems are designed for a specific company’s
needs. 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
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