..
After Completing This Chapter...
The students should be able to:
· Describe the links between engineering economy and accounting.
· Describe the objectives of general accounting, explain what financial transactions are,
and show how they are important.
·Use a firm's balance sheet and associated financialratios to evaluate the firm's health.
..Use a firm's income statement and associated financial ratios to evaluate the firm's
performance.
· Use traditional absorption costing to calculate product costs.
· Understand the greater accuracy in product costs available with activity-based costing
(ABC).
QUESTIONS TO CONSIDER ~
- ABB's adoption of activity-based costing received widespread publicity and boosted
the company's reputation for innovative inanagement. How might this have affected.
investors' assumptions about the company's other accounting practices?
- Outside analysts estimated that ABB lost over $690 million in 2001. Yet many investors
were still stunned by its poor showing in late 2002. What does this say about the rela-
tionship between financial accounting and investorconfidence?
- ABB was not alone in its financial misery, of course. How did ABB's accounting
problems compare with those of well-known American companies such as Eoron and
WorldCom? .,..
