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1、buy this full document at Chapter 1The Role of Accounting Informationin Management Decision MakingSOLUTIONSEldenburg & Wolcott 2eAugust 2010LEARNING OBJECTIVESChapter 1 addresses the following questions:QI What is the process of strategic management and decision making?Q2 What types of control syste
2、ms do managers use?Q3 What is the role of accounting information in strategic management?Q4 What information is relevant for decision making?Q5 How does business risk affect management decision making?Q6 How do biases affect management decision making?Q7 How can managers make higher-quality decision
3、s?Q8 What is ethical decision making, and why is it important?These learning questions (QI through Q8) are cross-referenced in the textbook to individual exercises and problems.COMPLEXITY SYMBOLSThe textbook uses a coding system to identify the complexity of individual requirements in the exercises
4、and problems. This question requires the ability to identify and explore problems and also prioritize among competing alternatives.O This question requires the ability to identify, explore, and prioritize and also envision ways to address ongoing risks and opportunities.KEY TO SYMBOLSQ This question
5、 requires students to extend knowledge beyond the applications shown in the textbook.O This question requires the ability to identify problems involving business risks, ethical dilemmas, or uncertainties.O This question requires the ability to identify problems and also explore perspectives, biases,
6、 strengths and weaknesses, etc.See Appendix 1A for more information about identifying, exploring, prioritizing, and envisioning skills.buy this full document at 1.26 Toys for BoysSelling the cars as-is would provide incremental profit of $5 per car x 10,000 cars = $50,000. Painting and selling the c
7、ars would provide incremental profit of ($8 selling price 一 $2 painting cost) per car x 10,000 cars = $60,000. The company would be $10,000 better off if it paints the cars.A. This question requires analysis of risk under both options, and multiple conclusions are possible. Managers should consider
8、risk associated with the calculations performed in Part A. The gray cars have not sold well at $8.00, and the managers cannot know whether they will sell at $5.00. The red cars appear to be selling well for $8.00 each, so that alternative is probably less risky in terms of selling the cars. However,
9、 the managers might not be sure whether the cost to paint the cars will be $2 each or whether the quality after repainting will be acceptable to customers. If the managers are fairly certain that the cost will be $2 each and will be acceptable to customers, then the painting option probably has less
10、 risk overall. If the managers believe that quality may be an issue or that the painting costs could vary substantially from the $2 estimate, then the sell as-is option might be less risky.1.27 College Living ArrangementsFirst, note that the student will still own the car under all three alternative
11、s. Therefore, the monthly payments of $220 will exist under all three alternatives and are not relevant to this decision. The average maintenance costs of $37 per month may contain some costs that are relevant (assuming that maintenance costs increase with the number of miles driven); however, this
12、cost is also likely to include costs that do not depend on whether the car is driven to school. For simplicity, this solution assumes that none of the maintenance costs arc relevant. However, students may estimate a portion of the maintenance costs as relevant in their calculations.Second, note that
13、 the estimated monthly use of the car above the 200 miles for commuting to campus will be incurred regardless of which option is chosen.Based on cost only, the one-ride bus ticket (Bus B) is the best alternative as shown below:Relevant Semester Costs of Three AlternativesDrive to SchoolParking$150.0
14、0Gasoline: 200mi/mox4 mos $0.10/mix ($60/600 mi) 80.00$230.00$225.00Bus B - One-ride tickets Ticket cost $2/trip x 24 trips/mox4 mos$192.00$192.00Bus A 一 Semester DassTicket cost $225.00A. Gasoline costs for driving the car might be different than estimated because gasoline prices might rise or fall
15、, and the student might achieve higher or lower mileage per gallon In addition, maintenance costs might be lower if one of the bus options is chosen. However, it may be difficult to predict the portion of maintenance costs that are likely to vary with miles driven. If students choose either of the b
16、us options, they might find that they drive their car to campus sometimes (for example, when planning to go somewhere directly after school). If they choose the bus semester pass, they might find that they use the bus more than expected. During times of bad weather, students may need to take the bus even though they chose the option to drive.B. Here is a partial list of things that are not necessarily quant
