Solution Manual for Managerial Accounting,
ii ii ii ii
18th Edition ii
By Ray Garrison, Eric Noreen and Peter Brewer
ii ii ii ii ii ii ii
,Table ofContents W
D W
D
Chapter One: Managerial Accounting and Cost Concepts
W D W D W D W D W D W D W D Ch
apter Two: Job-
W D W D
Order Costing: Calculating Unit Product Costs
W D W D W D W D W D
Chapter Three: Job- W D W D
Order Costing: Cost Flows and External Reporting Chapter Four: Pr
W D W D W D W D W D W D WD W D W D
ocess Costing
W D
Chapter Five: Cost-Volume-Profit Relationships
W D W D W D
Chapter Six: Variable Costing and Segment Reporting: Tools for Manage
W D W D W D W D W D W D W D W D W D
ment Chapter Seven: Activity-
WD W D W D
Based Costing: A Tool to Aid Decision Making Chapter Eight: Master Bu
W D W D W D W D W D W D W D WD W D W D W D
dgeting
Chapter Nine: Flexible Budgets and Performance Analysis Ch
W D W D W D W D W D W D WD
apter Ten: Standard Costs and Variances
W D W D W D W D W D
Chapter Eleven: Responsibility Accounting Systems C
W D W D W D W D WD
hapter Twelve: Strategic Performance Measurement
W D W D W D W D
Chapter Thirteen: Differential Analysis: The Key to Decision Makin
W D W D W D W D W D W D W D W D
g Chapter Fourteen: Capital Budgeting Decisions
WD W D W D W D W D
Chapter Fifteen: Statement of Cash Flows Cha
W D W D W D W D W D WD
pter Sixteen: Financial Statement Analysis
W D W D W D W D
,Chapter 1 W
D
ManagerialAccounting and Cost Concepts W
D WD W
D WD
Questions
1-1 The three major types of product WD WD WD WD WD WD
which it is incurred.
W D W D W D
costs in a manufacturing company ar
W D W D W D W D W D
e direct materials, direct labor, and m
WD W D W D W D W D WD
anufacturing overhead. W D
1-2
a. Direct materials are an integral part of WD WD WD WD WD WD W D
a finished product and their costs can b
W D W D W D W D W D W D W D
e conveniently traced to it.
WD W D W D W D
b. Indirect materials are generally small W D W D W D W D W
Ditems of material such as glue and nails.
W D W D W D W D W D W D W D W
DThey may be an integral part of a finished pro
W D WD WD WD WD WD WD WD WD
duct but their costs can be traced to the
WD W D W D W D W D W D W D W D WD
product only at great cost or inconvenienc
W D W D W D W D W D W D
e.
c. Direct labor consists of labor costs WD WD WD WD WD WD
that can be easily traced to particul
W D W D W D W D W D W D
ar products.
WD
Direct labor is also called ―touch labor.‖
WD WD WD WD WD WD
d. Indirect labor consists of the labor W D W D W D W D W D WD
costs of janitors, supervisors, materials handl
W D WD WD WD WD
ers, and other factory workers that cannot
WD W D W D W D W D WD
W Dbe conveniently traced to particular prod
W D W D W D W D WD
ucts. These labor costs are incurred to s
W D W D W D W D W D W D WD
upport production, but the workers involv
W D W D W D W D WD
ed do not directly work on the product.
W D W D W D W D W D W D WD
e. Manufacturing overhead includes all W D W D W D WD
manufacturing costs except direct material W D W D W D W D
s and direct labor. Consequently, manufact
WD W D W D W D WD
uring overhead includes indirect materials an
W D WD WD WD WD
d indirect labor as well as other manufact
WD W D W D W D W D W D WD
uring costs. W D
1-3
A product cost is any cost involve W D W D W D W D W D W D
d in purchasing or manufacturing goods. In t
W D W D WD WD WD WD WD
he case of manufactured goods, these cost
WD W D W D W D W D W D
s consist of direct materials, direct labor, and
WD W D W D WD WD WD WD WD
manufacturing overhead. A period cost is W D W D W D W D W D W D
a cost that is taken directly to the incom
WD W D W D W D W D W D W D W D
e statement as an expense in the period
WD W D W D W D W D W D W D W D
in
, 1-4
a. Variable cost: The variable cost per W D W D W D W D W D WD
unit is constant, but total variable cost
W D W D WD WD WD WD
changes in direct proportion to chan
WD WD W D W D W D WD
ges in volume. W D W D
b. Fixed cost: The total fixed cost is c W D W D W D W D W D W D WD
onstant within the relevant range. The W D WD WD WD WD WD
average fixed cost per unit varies in WD W D W D W D W D WD
versely with changes in volume. W D W D W D
c. Mixed cost: A mixed cost contains WD WD WD WD WD WD
both variable and fixed cost el W D W D W D W D WD
ements.
1-5
a. Unit fixed costs decrease as the activity
WD WD WD WD W D WD W
level increases.D W D
b. Unit variable costs remain constant as
WD WD WD WD WD WD
the activity level increases. W D W D W D
c. Total fixed costs remain constant as WD WD WD WD WD WD
the activity level increases. W D W D W D
d. Total variable costs increase as the WD WD WD WD WD WD
activity level increases. W D W D
1-6
a. Cost behavior: Cost behavior refers W D W D W D W D W D
to the way in which costs change i
WD W D W D W D W D W D W D
n response to changes in a measure
WD W D W D W D W D W D
of activity such as sales volume, pro
W D WD W D W D W D WD WD
duction volume, or orders processed. WD WD WD W D
b. Relevant range: The relevant range W D W D W D W D W
is the range of activity within which a
D WD W D WD WD WD WD WD
ssumptions about variable and fixed c W D WD WD W D WD
ost behavior are valid. WD WD W D
1-7 An activity base is a measure W D W D W D W D W D W
Dof whatever causes the incurrence of a va
WD WD WD WD WD WD WD
riable cost. Examples of activity bases inc
W D WD WD WD WD WD
lude units produced, units sold, letter
W D W D W D W D W D
s typed, beds in a hospital, meals served
WD WD WD WD W D WD WD WD
in a cafe, service calls made,
WD WD WD WD W D
etc.
1-8 The linear assumption is reasonably v WD WD WD WD WD
alid providing that the cost formula is used o
WD WD WD WD WD WD WD WD
nly within the relevant range.
W D W D W D W D
ii ii ii ii
18th Edition ii
By Ray Garrison, Eric Noreen and Peter Brewer
ii ii ii ii ii ii ii
,Table ofContents W
D W
D
Chapter One: Managerial Accounting and Cost Concepts
W D W D W D W D W D W D W D Ch
apter Two: Job-
W D W D
Order Costing: Calculating Unit Product Costs
W D W D W D W D W D
Chapter Three: Job- W D W D
Order Costing: Cost Flows and External Reporting Chapter Four: Pr
W D W D W D W D W D W D WD W D W D
ocess Costing
W D
Chapter Five: Cost-Volume-Profit Relationships
W D W D W D
Chapter Six: Variable Costing and Segment Reporting: Tools for Manage
W D W D W D W D W D W D W D W D W D
ment Chapter Seven: Activity-
WD W D W D
Based Costing: A Tool to Aid Decision Making Chapter Eight: Master Bu
W D W D W D W D W D W D W D WD W D W D W D
dgeting
Chapter Nine: Flexible Budgets and Performance Analysis Ch
W D W D W D W D W D W D WD
apter Ten: Standard Costs and Variances
W D W D W D W D W D
Chapter Eleven: Responsibility Accounting Systems C
W D W D W D W D WD
hapter Twelve: Strategic Performance Measurement
W D W D W D W D
Chapter Thirteen: Differential Analysis: The Key to Decision Makin
W D W D W D W D W D W D W D W D
g Chapter Fourteen: Capital Budgeting Decisions
WD W D W D W D W D
Chapter Fifteen: Statement of Cash Flows Cha
W D W D W D W D W D WD
pter Sixteen: Financial Statement Analysis
W D W D W D W D
,Chapter 1 W
D
ManagerialAccounting and Cost Concepts W
D WD W
D WD
Questions
1-1 The three major types of product WD WD WD WD WD WD
which it is incurred.
W D W D W D
costs in a manufacturing company ar
W D W D W D W D W D
e direct materials, direct labor, and m
WD W D W D W D W D WD
anufacturing overhead. W D
1-2
a. Direct materials are an integral part of WD WD WD WD WD WD W D
a finished product and their costs can b
W D W D W D W D W D W D W D
e conveniently traced to it.
WD W D W D W D
b. Indirect materials are generally small W D W D W D W D W
Ditems of material such as glue and nails.
W D W D W D W D W D W D W D W
DThey may be an integral part of a finished pro
W D WD WD WD WD WD WD WD WD
duct but their costs can be traced to the
WD W D W D W D W D W D W D W D WD
product only at great cost or inconvenienc
W D W D W D W D W D W D
e.
c. Direct labor consists of labor costs WD WD WD WD WD WD
that can be easily traced to particul
W D W D W D W D W D W D
ar products.
WD
Direct labor is also called ―touch labor.‖
WD WD WD WD WD WD
d. Indirect labor consists of the labor W D W D W D W D W D WD
costs of janitors, supervisors, materials handl
W D WD WD WD WD
ers, and other factory workers that cannot
WD W D W D W D W D WD
W Dbe conveniently traced to particular prod
W D W D W D W D WD
ucts. These labor costs are incurred to s
W D W D W D W D W D W D WD
upport production, but the workers involv
W D W D W D W D WD
ed do not directly work on the product.
W D W D W D W D W D W D WD
e. Manufacturing overhead includes all W D W D W D WD
manufacturing costs except direct material W D W D W D W D
s and direct labor. Consequently, manufact
WD W D W D W D WD
uring overhead includes indirect materials an
W D WD WD WD WD
d indirect labor as well as other manufact
WD W D W D W D W D W D WD
uring costs. W D
1-3
A product cost is any cost involve W D W D W D W D W D W D
d in purchasing or manufacturing goods. In t
W D W D WD WD WD WD WD
he case of manufactured goods, these cost
WD W D W D W D W D W D
s consist of direct materials, direct labor, and
WD W D W D WD WD WD WD WD
manufacturing overhead. A period cost is W D W D W D W D W D W D
a cost that is taken directly to the incom
WD W D W D W D W D W D W D W D
e statement as an expense in the period
WD W D W D W D W D W D W D W D
in
, 1-4
a. Variable cost: The variable cost per W D W D W D W D W D WD
unit is constant, but total variable cost
W D W D WD WD WD WD
changes in direct proportion to chan
WD WD W D W D W D WD
ges in volume. W D W D
b. Fixed cost: The total fixed cost is c W D W D W D W D W D W D WD
onstant within the relevant range. The W D WD WD WD WD WD
average fixed cost per unit varies in WD W D W D W D W D WD
versely with changes in volume. W D W D W D
c. Mixed cost: A mixed cost contains WD WD WD WD WD WD
both variable and fixed cost el W D W D W D W D WD
ements.
1-5
a. Unit fixed costs decrease as the activity
WD WD WD WD W D WD W
level increases.D W D
b. Unit variable costs remain constant as
WD WD WD WD WD WD
the activity level increases. W D W D W D
c. Total fixed costs remain constant as WD WD WD WD WD WD
the activity level increases. W D W D W D
d. Total variable costs increase as the WD WD WD WD WD WD
activity level increases. W D W D
1-6
a. Cost behavior: Cost behavior refers W D W D W D W D W D
to the way in which costs change i
WD W D W D W D W D W D W D
n response to changes in a measure
WD W D W D W D W D W D
of activity such as sales volume, pro
W D WD W D W D W D WD WD
duction volume, or orders processed. WD WD WD W D
b. Relevant range: The relevant range W D W D W D W D W
is the range of activity within which a
D WD W D WD WD WD WD WD
ssumptions about variable and fixed c W D WD WD W D WD
ost behavior are valid. WD WD W D
1-7 An activity base is a measure W D W D W D W D W D W
Dof whatever causes the incurrence of a va
WD WD WD WD WD WD WD
riable cost. Examples of activity bases inc
W D WD WD WD WD WD
lude units produced, units sold, letter
W D W D W D W D W D
s typed, beds in a hospital, meals served
WD WD WD WD W D WD WD WD
in a cafe, service calls made,
WD WD WD WD W D
etc.
1-8 The linear assumption is reasonably v WD WD WD WD WD
alid providing that the cost formula is used o
WD WD WD WD WD WD WD WD
nly within the relevant range.
W D W D W D W D
