, SOLUTION MANUAL FOR Cornerstones of
Managerial Accounting , 4th Edition Maryanne M.
Mowen SOLUTION MANUAL
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
,Instructor’s Solutions Manual
to accompany
Prepared by
David J. McConomy
Smith School of Business at Queen's University
Bradley D. Witt
Humber Institute of Technology and Advanced Learning
,Instructor’s Solutions Manual to accompany
Cornerstones of Managerial Accounting, Fourth Canadian Edition
By Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger, David J. McConomy, Bradley
D. Witt
Instructor’s Solutions Manual prepared by David J. McConomy and Bradley D. Witt
Available on the SSO Instructor’s site at login.cengage.com.
COPYRIGHT © 2022 Cengage Canada. Cengage is a registered trademark used herein under licence. All rights
reserved.
For more information, visit our Internet site at cengage.com.
ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced or used in
any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, web
distribution or information storage and retrieval systems—without the written permission of the publisher.
00-ii Copyright © 2022 Cengage Canada
, Table of Contents
Chapter 1 Introduction to Managerial Accounting ........................................................... 1-1
Chapter 2 Basic Managerial Accounting Concepts ......................................................... 2-1
Chapter 3 Cost Behaviour ............................................................................................... 3-1
Chapter 4 Cost–Volume–Profit Analysis: A Managerial Planning Tool ........................... 4-1
Chapter 5 Job-Order Costing .......................................................................................... 5-1
Chapter 6 Process Costing ............................................................................................. 6-1
Chapter 7 Activity-Based Costing and Management ...................................................... 7-1
Chapter 8 Absorption and Variable Costing, and Inventory Management ...................... 8-1
Chapter 9 Budgeting, Production, Cash, and Master Budget ......................................... 9-1
Chapter 10 Standard Costing: A Managerial Control Tool ............................................ 10-1
Chapter 11 Flexible Budgets and Overhead Analysis .................................................. 11-1
Chapter 12 Performance Evaluation and Decentralization ........................................... 12-1
Chapter 13 Short-Run Decision Making: Relevant Costing .......................................... 13-1
Chapter 14 Capital Investment Decisions ..................................................................... 14-1
Integrative Case 1 ........................................................................................................ IC1-iii
Integrative Case 2 ........................................................................................................ IC2-iii
Integrative Case 3 ........................................................................................................ IC3-iii
00-iii Copyright © 2022 Cengage Canada
, CHAPTER 1
INTRODUCTION TO MANAGERIAL ACCOUNTING
DISCUSSION QUESTIONS
1. Managerial accounting is the provision of past 50 years have changed the world
accounting information for internal users in a significantly. Managerial accountants have
firm. had to broaden their focus beyond simple
financial reporting to include the gathering of
2. The three broad objectives of managerial information on all types of costs and of the
accounting are planning, controlling, and
value of the product or service to customers.
decision making. These broader costs are used in planning
3. The users of managerial accounting and decision making.
information are generally managers and
9. Customer value is the difference between
other employees of a firm. Managerial what a customer pays for a product or service
accounting information is typically not and what the customer receives in return.
provided to outsiders but may be in selected
The focus on customer value forces
cases. For example, a bank may require management accounting to look at many
budgeting information for the next few years types of costs, not simply manufacturing cost.
before agreeing to grant a loan.
These may include the price of the good or
4. A managerial accounting information system service, maintenance costs, search costs,
typically provides both financial and learning costs, and disposal costs.
nonfinancial information. For example,
10. Today’s managerial accountant must
financial information on cost of production is
tracked. Other information, such as the understand many functions of the business,
number of warranty returns, may also be from manufacturing to marketing to
tracked by the management information distribution to customer service, in order to
system. provide appropriate information for managing
the value chain. Increased international trade
5. Controlling is sometimes called performance means that the managerial accountant must
evaluation. It involves comparing the actual be familiar not only with business practices
outcome with the expected outcome to see and laws in their own country but also in the
what differences, if any, exist. countries with which their company trades.
6. Planning occurs first. It requires setting 11. Enterprise risk management (ERM) refers to
objectives and identifying the means of
the formal process of identifying the factors
achieving those objectives. Then, the results
or threats, both internal and external to the
of the plan are compared with the plan, which
is called controlling. Clearly, it is also organization, that might prevent the
feedback, in that any impediments or organization from achieving its strategic
unexpected occurrences are noted. This objectives. The managerial accountant plays
feedback is then used to develop the plan for an increasingly important role in ERM by
the next period. providing financial and nonfinancial
measures of these threats and
7. Managerial accounting is internally focused, communicating them to high-level executives
does not follow mandatory rules, keeps track (e.g., chief risk officer, chief financial officer,
of both financial and nonfinancial information, board of directors) in the organization who
emphasizes the future, and relies on a broad manage these factors.
range of disciplines. Financial accounting is
externally focused, follows externally 12. The value chain is the set of activities
imposed rules (such as GAAP), has an required to design, develop, produce, market,
historical orientation, and provides and deliver products and services to
information about the company as a whole. customers. It is important because it helps
8. Huge improvements in technology, the company to understand its role in serving
transportation, and communication over the
Copyright © 2022 Cengage Canada 1-1
, customers and to develop strategic wrongly decided to increase current period
competence. net income by inappropriately decreasing
current period expenses (by recording more
13. Line positions are those that have direct
of the expenditures as an asset that would be
responsibility for the basic objectives of an
expensed in small amounts each period
organization. These typically include
rather than all at once in the current period).
producing and selling a product. Staff
Oftentimes, the high-level executives that
positions are supportive in nature (e.g.,
perpetrate such financial fraud are rewarded
human resources, maintenance) and have
by incentives that overweight current-period
only indirect responsibility for an
net income performance relative to long-term
organization’s basic objectives.
net income performance. Another major
14. Yes, the controller should be a member of theme common to many of the accounting
senior management. This is because the and banking frauds is a lack of sufficient
controller, as the chief accountant for the transparency, or clarification, in the types and
firm, has a wealth of information needed by timing of the information that is reported to
senior management in determining the parties outside of the organization. Some
strategic direction of the firm. business experts also would argue that a
third common theme underlying many of
15. Ethical behaviour involves choosing actions these scandals was the lack of sufficient
that are right, proper, and just. It is possible oversight (i.e., watchdog mentality) by the
to teach aspects of ethical behaviour in a
perpetrating organization’s auditors, board of
managerial accounting classroom. Students
directors, or both.
need to see examples of right and wrong in
business. These examples help them to 17. The Chartered Professional Accountant
recognize ethical dilemmas they will face (CPA) is the Canadian professional
later on the job. accounting designation. The three previous
forms of designation discussed are Certified
16. One major theme or executive pressure
Management Accountant, Chartered
common to many of the accounting scandals Accountant, and Certified General
is a focus on the short-term future, rather than Accountant.
the long-term. For example, WorldCom
1-2 Copyright © 2022 Cengage Canada
, EXERCISES
Exercise 1–1
a. Decision making d. Decision making
b. Controlling e. Planning
c. Planning f. Decision making
Exercise 1–2
a. Managerial accounting–oriented d. Financial accounting–oriented
b. Financial accounting–oriented e. Managerial accounting–oriented
c. Managerial accounting–oriented
Exercise 1–3
1. The total product is the laptop computer (Product) and its features (processing speed,
disk drives, software packages, and so on), the service, the operating and
maintenance requirements, and the delivery speed.
2. One company is emphasizing lower costs, and the other is attempting to differentiate
its laptop by offering faster delivery and higher-quality service.
3. Confiar’s service component and its delivery time appear to be better than Drantex’s.
Thus, the realization of these features appears to outweigh the additional sacrifice (the
additional operating and maintenance cost) associated with the Confiar laptop. The
implications for management accounting are straightforward. The management
accounting information system should collect and report information about customer
realization and sacrifice. Much of this information is external to the firm but clearly
needed by management.
4. Better quality and shorter delivery time increase the value of what the customer
receives, while lowering the price decreases the amount paid. In total, customer value
has increased and presumably this should make the Drantex laptop much more
competitive. This example illustrates how quality, time, and costs are essential
competitive weapons. It also illustrates the importance of the management accounting
system to collect and report data concerning these three dimensions.
Copyright © 2022 Cengage Canada 1-3
,Exercise 1–4
1. Joan Dennison is staff. She is in a support role—she prepares reports and analyzes
them, which helps the line managers to make informed decisions. Her role is to help
the line managers more effectively carry out their responsibilities.
Steven Swasey is a line manager. He has direct responsibility for producing garden
hoses. Clearly, one of the basic objectives for the existence of a manufacturing firm is
to make a product. Thus, Steven has direct responsibility for a basic objective and,
therefore, holds a line position.
2. Line functions typically have a direct role in the delivery of the product or service
offered by a company, while the staff functions fill a support role. Staff function
supports the line functions.
Exercise 1–5
It is obviously not ethical for Mary to agree to Peter’s proposal; in fact, it is illegal. She
should refuse to go along with this scheme, and she should contact a person more senior
than Peter in the athletics and recreation department and inform them of his proposal.
Her customers have an expectation that their employees and suppliers will act in an
ethical manner and, if they do not, that they will be reported by anyone who knows.
Exercise 1–6
1. Brad is not behaving ethically in this situation. By delaying the marketing campaign by
a month, he is simply deferring the problem to a later date: the end of next fiscal year.
If he does not meet his numbers because of poor performance, he should not try to
fool the system by taking action that may make it appear that he has succeeded.
2. Brad could employ any number of legitimate strategies to overcome his dilemma. That
is, he could
• generate much higher sales by increasing the number of calls made by
salespeople;
• cut back on major expenses that will not impact the capability of operating the
division effectively.
Copyright © 2022 Cengage Canada 1-4
, Exercise 1–7
1. By the time most students graduate from high school, they have not had much
exposure to business. Therefore, they do not have full knowledge of acceptable
behaviour in the business environment. Students may not know that certain practices
are unethical because they may not be familiar with the behavioural norms associated
with these practices. Once students begin to learn business practices, they begin to
see what ethical dilemmas can arise in a business context. They then are able to apply
the moral training they have had to deal with the situations. Furthermore, evidence
exists that ethical reasoning can be changed for the better. Thus, instruction in ethics
can be a vital part of a business student’s education.
2. Sacrificing self-interest is a choice that each person must make. Others may be
influenced by those individuals who behave ethically. Individuals committed to ethical
behaviour produce societies committed to ethical behaviour (not vice versa).
3. While this sounds noble, many would disagree that managers are first seeking to
serve others and accept personal financial rewards as a by-product of a good job.
Pursuit of self-interest and personal financial well-being is not necessarily unethical.
It is only when this pursuit is done at the expense of the collective good that the
behaviour becomes questionable.
4. It is often true that unethical firms and individuals suffer financially. In the long run,
some evidence suggests that ethical behaviour does pay. It is doubtful, however, that
every unethical firm or individual is wiped out financially. Too many notable exceptions
to this statement exist (for example, the selling of drugs by organized crime).
Exercise 1–8
Clearly, John wrongly disclosed the confidential information to his employees when the
information was not generally known and the employees were not at such a level that
they ought to know this information. A manager has a duty to preserve the confidentiality
of sensitive information about the company that the manager has learned as a result of
their position.
The employees should not act on the information because it would be unethical for them
to act on insider information. Knowing the information is not wrong on the part of the
employees, but acting on it is.
Exercise 1–9
The approach being used by Reginald is ethically wrong. By insisting that junior staff not
report all of their hours, he is misleading senior management not only of his performance,
but also on the expected performance in the future by other managers.
Copyright © 2022 Cengage Canada 1-5
Managerial Accounting , 4th Edition Maryanne M.
Mowen SOLUTION MANUAL
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
,Instructor’s Solutions Manual
to accompany
Prepared by
David J. McConomy
Smith School of Business at Queen's University
Bradley D. Witt
Humber Institute of Technology and Advanced Learning
,Instructor’s Solutions Manual to accompany
Cornerstones of Managerial Accounting, Fourth Canadian Edition
By Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger, David J. McConomy, Bradley
D. Witt
Instructor’s Solutions Manual prepared by David J. McConomy and Bradley D. Witt
Available on the SSO Instructor’s site at login.cengage.com.
COPYRIGHT © 2022 Cengage Canada. Cengage is a registered trademark used herein under licence. All rights
reserved.
For more information, visit our Internet site at cengage.com.
ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced or used in
any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, web
distribution or information storage and retrieval systems—without the written permission of the publisher.
00-ii Copyright © 2022 Cengage Canada
, Table of Contents
Chapter 1 Introduction to Managerial Accounting ........................................................... 1-1
Chapter 2 Basic Managerial Accounting Concepts ......................................................... 2-1
Chapter 3 Cost Behaviour ............................................................................................... 3-1
Chapter 4 Cost–Volume–Profit Analysis: A Managerial Planning Tool ........................... 4-1
Chapter 5 Job-Order Costing .......................................................................................... 5-1
Chapter 6 Process Costing ............................................................................................. 6-1
Chapter 7 Activity-Based Costing and Management ...................................................... 7-1
Chapter 8 Absorption and Variable Costing, and Inventory Management ...................... 8-1
Chapter 9 Budgeting, Production, Cash, and Master Budget ......................................... 9-1
Chapter 10 Standard Costing: A Managerial Control Tool ............................................ 10-1
Chapter 11 Flexible Budgets and Overhead Analysis .................................................. 11-1
Chapter 12 Performance Evaluation and Decentralization ........................................... 12-1
Chapter 13 Short-Run Decision Making: Relevant Costing .......................................... 13-1
Chapter 14 Capital Investment Decisions ..................................................................... 14-1
Integrative Case 1 ........................................................................................................ IC1-iii
Integrative Case 2 ........................................................................................................ IC2-iii
Integrative Case 3 ........................................................................................................ IC3-iii
00-iii Copyright © 2022 Cengage Canada
, CHAPTER 1
INTRODUCTION TO MANAGERIAL ACCOUNTING
DISCUSSION QUESTIONS
1. Managerial accounting is the provision of past 50 years have changed the world
accounting information for internal users in a significantly. Managerial accountants have
firm. had to broaden their focus beyond simple
financial reporting to include the gathering of
2. The three broad objectives of managerial information on all types of costs and of the
accounting are planning, controlling, and
value of the product or service to customers.
decision making. These broader costs are used in planning
3. The users of managerial accounting and decision making.
information are generally managers and
9. Customer value is the difference between
other employees of a firm. Managerial what a customer pays for a product or service
accounting information is typically not and what the customer receives in return.
provided to outsiders but may be in selected
The focus on customer value forces
cases. For example, a bank may require management accounting to look at many
budgeting information for the next few years types of costs, not simply manufacturing cost.
before agreeing to grant a loan.
These may include the price of the good or
4. A managerial accounting information system service, maintenance costs, search costs,
typically provides both financial and learning costs, and disposal costs.
nonfinancial information. For example,
10. Today’s managerial accountant must
financial information on cost of production is
tracked. Other information, such as the understand many functions of the business,
number of warranty returns, may also be from manufacturing to marketing to
tracked by the management information distribution to customer service, in order to
system. provide appropriate information for managing
the value chain. Increased international trade
5. Controlling is sometimes called performance means that the managerial accountant must
evaluation. It involves comparing the actual be familiar not only with business practices
outcome with the expected outcome to see and laws in their own country but also in the
what differences, if any, exist. countries with which their company trades.
6. Planning occurs first. It requires setting 11. Enterprise risk management (ERM) refers to
objectives and identifying the means of
the formal process of identifying the factors
achieving those objectives. Then, the results
or threats, both internal and external to the
of the plan are compared with the plan, which
is called controlling. Clearly, it is also organization, that might prevent the
feedback, in that any impediments or organization from achieving its strategic
unexpected occurrences are noted. This objectives. The managerial accountant plays
feedback is then used to develop the plan for an increasingly important role in ERM by
the next period. providing financial and nonfinancial
measures of these threats and
7. Managerial accounting is internally focused, communicating them to high-level executives
does not follow mandatory rules, keeps track (e.g., chief risk officer, chief financial officer,
of both financial and nonfinancial information, board of directors) in the organization who
emphasizes the future, and relies on a broad manage these factors.
range of disciplines. Financial accounting is
externally focused, follows externally 12. The value chain is the set of activities
imposed rules (such as GAAP), has an required to design, develop, produce, market,
historical orientation, and provides and deliver products and services to
information about the company as a whole. customers. It is important because it helps
8. Huge improvements in technology, the company to understand its role in serving
transportation, and communication over the
Copyright © 2022 Cengage Canada 1-1
, customers and to develop strategic wrongly decided to increase current period
competence. net income by inappropriately decreasing
current period expenses (by recording more
13. Line positions are those that have direct
of the expenditures as an asset that would be
responsibility for the basic objectives of an
expensed in small amounts each period
organization. These typically include
rather than all at once in the current period).
producing and selling a product. Staff
Oftentimes, the high-level executives that
positions are supportive in nature (e.g.,
perpetrate such financial fraud are rewarded
human resources, maintenance) and have
by incentives that overweight current-period
only indirect responsibility for an
net income performance relative to long-term
organization’s basic objectives.
net income performance. Another major
14. Yes, the controller should be a member of theme common to many of the accounting
senior management. This is because the and banking frauds is a lack of sufficient
controller, as the chief accountant for the transparency, or clarification, in the types and
firm, has a wealth of information needed by timing of the information that is reported to
senior management in determining the parties outside of the organization. Some
strategic direction of the firm. business experts also would argue that a
third common theme underlying many of
15. Ethical behaviour involves choosing actions these scandals was the lack of sufficient
that are right, proper, and just. It is possible oversight (i.e., watchdog mentality) by the
to teach aspects of ethical behaviour in a
perpetrating organization’s auditors, board of
managerial accounting classroom. Students
directors, or both.
need to see examples of right and wrong in
business. These examples help them to 17. The Chartered Professional Accountant
recognize ethical dilemmas they will face (CPA) is the Canadian professional
later on the job. accounting designation. The three previous
forms of designation discussed are Certified
16. One major theme or executive pressure
Management Accountant, Chartered
common to many of the accounting scandals Accountant, and Certified General
is a focus on the short-term future, rather than Accountant.
the long-term. For example, WorldCom
1-2 Copyright © 2022 Cengage Canada
, EXERCISES
Exercise 1–1
a. Decision making d. Decision making
b. Controlling e. Planning
c. Planning f. Decision making
Exercise 1–2
a. Managerial accounting–oriented d. Financial accounting–oriented
b. Financial accounting–oriented e. Managerial accounting–oriented
c. Managerial accounting–oriented
Exercise 1–3
1. The total product is the laptop computer (Product) and its features (processing speed,
disk drives, software packages, and so on), the service, the operating and
maintenance requirements, and the delivery speed.
2. One company is emphasizing lower costs, and the other is attempting to differentiate
its laptop by offering faster delivery and higher-quality service.
3. Confiar’s service component and its delivery time appear to be better than Drantex’s.
Thus, the realization of these features appears to outweigh the additional sacrifice (the
additional operating and maintenance cost) associated with the Confiar laptop. The
implications for management accounting are straightforward. The management
accounting information system should collect and report information about customer
realization and sacrifice. Much of this information is external to the firm but clearly
needed by management.
4. Better quality and shorter delivery time increase the value of what the customer
receives, while lowering the price decreases the amount paid. In total, customer value
has increased and presumably this should make the Drantex laptop much more
competitive. This example illustrates how quality, time, and costs are essential
competitive weapons. It also illustrates the importance of the management accounting
system to collect and report data concerning these three dimensions.
Copyright © 2022 Cengage Canada 1-3
,Exercise 1–4
1. Joan Dennison is staff. She is in a support role—she prepares reports and analyzes
them, which helps the line managers to make informed decisions. Her role is to help
the line managers more effectively carry out their responsibilities.
Steven Swasey is a line manager. He has direct responsibility for producing garden
hoses. Clearly, one of the basic objectives for the existence of a manufacturing firm is
to make a product. Thus, Steven has direct responsibility for a basic objective and,
therefore, holds a line position.
2. Line functions typically have a direct role in the delivery of the product or service
offered by a company, while the staff functions fill a support role. Staff function
supports the line functions.
Exercise 1–5
It is obviously not ethical for Mary to agree to Peter’s proposal; in fact, it is illegal. She
should refuse to go along with this scheme, and she should contact a person more senior
than Peter in the athletics and recreation department and inform them of his proposal.
Her customers have an expectation that their employees and suppliers will act in an
ethical manner and, if they do not, that they will be reported by anyone who knows.
Exercise 1–6
1. Brad is not behaving ethically in this situation. By delaying the marketing campaign by
a month, he is simply deferring the problem to a later date: the end of next fiscal year.
If he does not meet his numbers because of poor performance, he should not try to
fool the system by taking action that may make it appear that he has succeeded.
2. Brad could employ any number of legitimate strategies to overcome his dilemma. That
is, he could
• generate much higher sales by increasing the number of calls made by
salespeople;
• cut back on major expenses that will not impact the capability of operating the
division effectively.
Copyright © 2022 Cengage Canada 1-4
, Exercise 1–7
1. By the time most students graduate from high school, they have not had much
exposure to business. Therefore, they do not have full knowledge of acceptable
behaviour in the business environment. Students may not know that certain practices
are unethical because they may not be familiar with the behavioural norms associated
with these practices. Once students begin to learn business practices, they begin to
see what ethical dilemmas can arise in a business context. They then are able to apply
the moral training they have had to deal with the situations. Furthermore, evidence
exists that ethical reasoning can be changed for the better. Thus, instruction in ethics
can be a vital part of a business student’s education.
2. Sacrificing self-interest is a choice that each person must make. Others may be
influenced by those individuals who behave ethically. Individuals committed to ethical
behaviour produce societies committed to ethical behaviour (not vice versa).
3. While this sounds noble, many would disagree that managers are first seeking to
serve others and accept personal financial rewards as a by-product of a good job.
Pursuit of self-interest and personal financial well-being is not necessarily unethical.
It is only when this pursuit is done at the expense of the collective good that the
behaviour becomes questionable.
4. It is often true that unethical firms and individuals suffer financially. In the long run,
some evidence suggests that ethical behaviour does pay. It is doubtful, however, that
every unethical firm or individual is wiped out financially. Too many notable exceptions
to this statement exist (for example, the selling of drugs by organized crime).
Exercise 1–8
Clearly, John wrongly disclosed the confidential information to his employees when the
information was not generally known and the employees were not at such a level that
they ought to know this information. A manager has a duty to preserve the confidentiality
of sensitive information about the company that the manager has learned as a result of
their position.
The employees should not act on the information because it would be unethical for them
to act on insider information. Knowing the information is not wrong on the part of the
employees, but acting on it is.
Exercise 1–9
The approach being used by Reginald is ethically wrong. By insisting that junior staff not
report all of their hours, he is misleading senior management not only of his performance,
but also on the expected performance in the future by other managers.
Copyright © 2022 Cengage Canada 1-5
