Solution Manual For Management Accounting for Business, 8th Edition by Colin Drury, Mike Tayles

CHAPTER 2 AN INTRODUCTION TO COST TERMS AND CONCEPTS SOLUTIONS In addition to the Instructor's Manual the Cognero Testbank also provides over 1,000 questions (with solutions) tailored to the content of this chapter and the rest of the book. Please contact your local Cengage Learning EMEA learning consultant to ascertain how you can access this resource. Students can obtain the answers to questions 2.25, 2.27–2.29 from Management and Cost Accounting. Care should therefore be exercised in using these questions for assessment purposes. 2.25 See the description of cost behaviour in Chapter 2 for the answer to these questions. In particular the answer should provide graphs for fixed costs, variable costs, semi-fixed costs and semi-variable costs. 2.26 You will find the answer to this question in Chapter 2. In particular the answer should describe the classification of costs for stock valuation and profit measurement; classification for decisionmaking and planning; classification for control. In addition the answer should illustrate methods of classification (see Chapter 2 for examples) within the above categories and describe the benefits arising from classifying costs in the manner illustrated. 2.27 See Chapter 2 for the answer to this question. 2.28 (a) See 'Functions of management accounting' in Chapter 1 for the answer to this question. In particular your answer should stress that the cost accountant provides financial information for stock valuation purposes and also presents relevant information to management for decisionmaking and planning and cost control purposes. For example, the cost accountant provides information on the costs and revenues of alternative courses of action to assist management in selecting the course of action which will maximize future cash flows. By coordinating plans together in the form of budgets and comparing actual performance with plans the accountant can pinpoint those activities which are not proceeding according to plan. (b) (i) Direct costs are those costs which can be traced to a cost objective. If the cost objective is a sales territory then fixed salaries of salesmen will be a direct cost. Therefore the statement is incorrect. (ii)Whether a cost is controllable depends on the level of authority and time span being considered. For example, a departmental foreman may have no control over the number of supervisors employed in his department but this decision may be made by his superior. In the long term such costs are controllable. (iii) This statement is correct. See 'Sunk costs' in Chapter 2 for an explanation of why this statement is correct. 2.29 See Chapter 2 for the answer to this question.