Chapter 1, Problem 1Q

To determine

Provide four examples of firms that uses cost management information and explain the reasons for using cost management information.

Explanation of Solution

Cost management information: Cost management information contains financial information regarding costs and revenues and non-financial information regarding quality, productivity, customer retention and other main factors for the organization.

“Some of the examples of firms that uses cost management information and reasons for using cost management information are as follows”:

Company W: To reduce costs by streamlining restocking and sales.

A municipality or public agency: To maintain costs at a lower rate for providing the best possible service with the given funds available.

P and G or any similar large, diversified manufacturer: To measure the profitability of its wide range of different products.

Company D: To maintain costs at a lower rate by developing manufacturing performance, by using target costing, and other management skills.

Corporation C: To maintain costs at a lower rate by using activity analysis to recognize main operations and to find those that add little or no value.

A small machine shop: To ascertain whether it must repair or replace a machine.

A dance studio: To examine and select among different compensation plans for its teachers; and to ascertain whether it must open a new studio.