SOLUTION MANUAL FOR M b b b
ANAGERIAL ACCOUNTING b b
18th EDITIONBY RAY GARRI
b b b b
SON, ERIC NOREEN AND PE
b b b b
TER BREWERR ALL CHAPT
b b b
ERSINCLUDED 2023/2024.
b b
ManagerialbAccountingb18thbEdition,bSolutionsbManual,bChapterb1 1
,Chapter 1 b
Managerial Accounting and Cost Concepts
b b b b
Questions
1-1 Thebthreebmajorbtypesbofbproductbcostsbi 1-4
nbabmanufacturingbcompanybarebdirectbmaterial a. Variablebcost:bThebvariablebcostbperbunitbisb
s,bdirectblabor,bandbmanufacturingboverhead. constant,bbutbtotalbvariablebcostbchangesbinb
directbproportionbtobchangesbinbvolume.
1-2 b. Fixedbcost:bThebtotalbfixedbcostbisbconstantbw
a. Directbmaterialsbarebanbintegralbpartbofbabf ithinbthebrelevantbrange.bThebaveragebfixedbco
inishedbproductbandbtheirbcostsbcanbbebconveni stbperbunitbvariesbinverselybwithbchangesbinbv
entlybtracedbtobit. olume.
b. Indirectbmaterialsbarebgenerallybsmallbitem c. Mixedbcost:bAbmixedbcostbcontainsbbothb
sbofbmaterialbsuchbasbgluebandbnails.bTheybmaybb variablebandbfixedbcostbelements.
ebanbintegralbpartbofbabfinishedbproductbbutbtheirbc
ostsbcanbbebtracedbtobthebproductbonlybatbgreatbc 1-5
ostborbinconvenience. a. Unitbfixedbcostsbdecreasebasbthebactivityblevelbi
c. Directblaborbconsistsbofblaborbcostsbthatb ncreases.
canbbebeasilybtracedbtobparticularbproducts. b. Unitbvariablebcostsbremainbconstantbasbtheb
Directb laborb isb alsob calledb ―touchb labor.‖ activityblevelbincreases.
d. Indirectblaborbconsistsbofbtheblaborbcostsb c. Totalbfixedbcostsbremainbconstantbasbtheb
ofbjanitors,bsupervisors,bmaterialsbhandlers,bandb activityblevelbincreases.
otherbfactorybworkersbthatbcannotbbebconvenien d. Totalbvariablebcostsbincreasebasbthebactivitybl
tlybtracedbtobparticularbproducts.bTheseblaborbco evelbincreases.
stsbarebincurredbtobsupportbproduction,bbutbtheb
workersbinvolvedbdobnotbdirectlybworkbonbthebpr 1-6
oduct. a. Costbbehavior:bCostbbehaviorbrefersbtobtheb
e. Manufacturingboverheadbincludesballbman waybinbwhichbcostsbchangebinbresponsebtobc
ufacturingbcostsbexceptbdirectbmaterialsbandbdirec hangesbinbabmeasurebofbactivitybsuchbasbsal
tblabor.bConsequently,bmanufacturingboverheadbi esbvolume,bproductionbvolume,borbordersbpro
ncludesbindirectbmaterialsbandbindirectblaborbasbw cessed.
ellbasbotherbmanufacturingbcosts. b. Relevantbrange:bThebrelevantbrangebisbthebr
angebofbactivitybwithinbwhichbassumptionsba
1-3 boutbvariablebandbfixedbcostbbehaviorbarebv
Abproductbcostbisbanybcostbinvolvedbinbpu alid.
rchasingborbmanufacturingbgoods.bInbthebcasebofb
manufacturedbgoods,bthesebcostsbconsistbofbdire 1-7 Anbactivitybbasebisbabmeasurebofbwha
ctbmaterials,bdirectblabor,bandbmanufacturingbover teverbcausesbthebincurrencebofbabvariablebcost.
head.bAbperiodbcostbisbabcostbthatbisbtakenbdirectl bExamplesbofbactivitybbasesbincludebunitsb prod
ybtobthebincomebstatementbasbanbexpensebinbtheb uced,bunitsbsold,blettersbtyped,bbedsbinbabhosp
periodbinbwhichbitbisbincurred. ital,bmealsbservedbinbabcafe,bservicebcallsbmade
,betc.
1-8 Theblinearbassumptionbisbreasonablybvali
dbprovidingbthatbthebcostbformulabisbusedbonlybwit
hinbthebrelevantbrange.
ManagerialbAccountingb18thbEdition,bSolutionsbManual,bChapterb1 1
,©bMcGrawbHillbLLC.bAllbrightsbreserved.bNobreproductionborbdistributionbwithoutbthebpriorbwrittenbconsentbofb
McGrawbHillbLLC.
ManagerialbAccountingb18thbEdition,bSolutionsbManual,bChapterb1 1
, 1-9 Abdiscretionarybfixedbcostbhasbabfairlyb 1-11 Thebtraditionalbapproachborganizesbcostsb
shortbplanningbhorizon— bybfunction,bsuchbasbproduction,bselling,bandbad
usuallybabyear.bSuchbcostsbarisebfrombannualbd ministration.bWithinbabfunctionalbarea,bfixedbandb
ecisionsbbybmanagementbtobspendbonbcertainbf variablebcostsbarebintermingled.bThebcontribution
ixedbcostbitems,bsuchbasbadvertising,bresearch, bapproachbincomebstatementborganizesbcostsbbyb
bandbmanagementbdevelopment.bAbcommittedb behavior,bfirstbdeductingbvariablebexpensesbtobob
fixedbcostbhasbablongbplanningbhorizon— tainbcontributionbmargin,bandbthenbdeductingbfixe
generallybmanybyears.bSuchbcostsbrelatebtobabc dbexpensesbtobobtainbnetboperatingbincome.
ompany’sbinvestmentbinbfacilities,bequipment,ba
ndbbasicborganization.bOncebsuchbcostsbhavebb 1-12 Thebcontributionbmarginbisbtotalbsalesb
eenbincurred,btheybareb―lockedbin‖bforbmanybyea revenueblessbtotalbvariablebexpenses.
rs.
1-13 Abdifferentialbcostbisbabcostbthatbdiffersbbe
1-10 Yes.bAsbthebanticipatedblevelbofbactivitybc tweenbalternativesbinbabdecision.b Absunkb costbisba
hanges,btheblevelbofbfixedbcostsbneededbtobsuppo bcostbthatbhasbalreadybbeenbincurredbandbcannotb
rtboperationsbmaybalsobchange.bMostbfixedbcostsba bebalteredbbybanybdecisionbtakenbnowborbinbthebfu
rebadjustedbupwardbandbdownwardbinblargebstep ture.bAnbopportunitybcostbisbthebpotentialbbenefitbt
s,bratherbthanbbeingbabsolutelybfixedbatboneblevelbf hatbisbgivenbupbwhenbonebalternativebisbselectedb
orballbrangesbofbactivity. overbanother.
1-14 No,bdifferentialbcostsbcanbbebeitherbvari
ableborbfixed.bForbexample,bthebalternativesbmig
htbconsistbofbpurchasingbonebmachinebratherbtha
nbanotherbtobmakebabproduct.bThebdifferencebbet
weenbthebfixedbcostsbofbpurchasingbthebtwobmac
hinesbisbabdifferentialbcost.
©bMcGrawbHillbLLC.bAllbrightsbreserved.bNobreproductionborbdistributionbwithoutbthebpriorbwrittenbconsentbofb
McGrawbHillbLLC.
ManagerialbAccountingb18thbEdition,bSolutionsbManual,bChapterb1
ANAGERIAL ACCOUNTING b b
18th EDITIONBY RAY GARRI
b b b b
SON, ERIC NOREEN AND PE
b b b b
TER BREWERR ALL CHAPT
b b b
ERSINCLUDED 2023/2024.
b b
ManagerialbAccountingb18thbEdition,bSolutionsbManual,bChapterb1 1
,Chapter 1 b
Managerial Accounting and Cost Concepts
b b b b
Questions
1-1 Thebthreebmajorbtypesbofbproductbcostsbi 1-4
nbabmanufacturingbcompanybarebdirectbmaterial a. Variablebcost:bThebvariablebcostbperbunitbisb
s,bdirectblabor,bandbmanufacturingboverhead. constant,bbutbtotalbvariablebcostbchangesbinb
directbproportionbtobchangesbinbvolume.
1-2 b. Fixedbcost:bThebtotalbfixedbcostbisbconstantbw
a. Directbmaterialsbarebanbintegralbpartbofbabf ithinbthebrelevantbrange.bThebaveragebfixedbco
inishedbproductbandbtheirbcostsbcanbbebconveni stbperbunitbvariesbinverselybwithbchangesbinbv
entlybtracedbtobit. olume.
b. Indirectbmaterialsbarebgenerallybsmallbitem c. Mixedbcost:bAbmixedbcostbcontainsbbothb
sbofbmaterialbsuchbasbgluebandbnails.bTheybmaybb variablebandbfixedbcostbelements.
ebanbintegralbpartbofbabfinishedbproductbbutbtheirbc
ostsbcanbbebtracedbtobthebproductbonlybatbgreatbc 1-5
ostborbinconvenience. a. Unitbfixedbcostsbdecreasebasbthebactivityblevelbi
c. Directblaborbconsistsbofblaborbcostsbthatb ncreases.
canbbebeasilybtracedbtobparticularbproducts. b. Unitbvariablebcostsbremainbconstantbasbtheb
Directb laborb isb alsob calledb ―touchb labor.‖ activityblevelbincreases.
d. Indirectblaborbconsistsbofbtheblaborbcostsb c. Totalbfixedbcostsbremainbconstantbasbtheb
ofbjanitors,bsupervisors,bmaterialsbhandlers,bandb activityblevelbincreases.
otherbfactorybworkersbthatbcannotbbebconvenien d. Totalbvariablebcostsbincreasebasbthebactivitybl
tlybtracedbtobparticularbproducts.bTheseblaborbco evelbincreases.
stsbarebincurredbtobsupportbproduction,bbutbtheb
workersbinvolvedbdobnotbdirectlybworkbonbthebpr 1-6
oduct. a. Costbbehavior:bCostbbehaviorbrefersbtobtheb
e. Manufacturingboverheadbincludesballbman waybinbwhichbcostsbchangebinbresponsebtobc
ufacturingbcostsbexceptbdirectbmaterialsbandbdirec hangesbinbabmeasurebofbactivitybsuchbasbsal
tblabor.bConsequently,bmanufacturingboverheadbi esbvolume,bproductionbvolume,borbordersbpro
ncludesbindirectbmaterialsbandbindirectblaborbasbw cessed.
ellbasbotherbmanufacturingbcosts. b. Relevantbrange:bThebrelevantbrangebisbthebr
angebofbactivitybwithinbwhichbassumptionsba
1-3 boutbvariablebandbfixedbcostbbehaviorbarebv
Abproductbcostbisbanybcostbinvolvedbinbpu alid.
rchasingborbmanufacturingbgoods.bInbthebcasebofb
manufacturedbgoods,bthesebcostsbconsistbofbdire 1-7 Anbactivitybbasebisbabmeasurebofbwha
ctbmaterials,bdirectblabor,bandbmanufacturingbover teverbcausesbthebincurrencebofbabvariablebcost.
head.bAbperiodbcostbisbabcostbthatbisbtakenbdirectl bExamplesbofbactivitybbasesbincludebunitsb prod
ybtobthebincomebstatementbasbanbexpensebinbtheb uced,bunitsbsold,blettersbtyped,bbedsbinbabhosp
periodbinbwhichbitbisbincurred. ital,bmealsbservedbinbabcafe,bservicebcallsbmade
,betc.
1-8 Theblinearbassumptionbisbreasonablybvali
dbprovidingbthatbthebcostbformulabisbusedbonlybwit
hinbthebrelevantbrange.
ManagerialbAccountingb18thbEdition,bSolutionsbManual,bChapterb1 1
,©bMcGrawbHillbLLC.bAllbrightsbreserved.bNobreproductionborbdistributionbwithoutbthebpriorbwrittenbconsentbofb
McGrawbHillbLLC.
ManagerialbAccountingb18thbEdition,bSolutionsbManual,bChapterb1 1
, 1-9 Abdiscretionarybfixedbcostbhasbabfairlyb 1-11 Thebtraditionalbapproachborganizesbcostsb
shortbplanningbhorizon— bybfunction,bsuchbasbproduction,bselling,bandbad
usuallybabyear.bSuchbcostsbarisebfrombannualbd ministration.bWithinbabfunctionalbarea,bfixedbandb
ecisionsbbybmanagementbtobspendbonbcertainbf variablebcostsbarebintermingled.bThebcontribution
ixedbcostbitems,bsuchbasbadvertising,bresearch, bapproachbincomebstatementborganizesbcostsbbyb
bandbmanagementbdevelopment.bAbcommittedb behavior,bfirstbdeductingbvariablebexpensesbtobob
fixedbcostbhasbablongbplanningbhorizon— tainbcontributionbmargin,bandbthenbdeductingbfixe
generallybmanybyears.bSuchbcostsbrelatebtobabc dbexpensesbtobobtainbnetboperatingbincome.
ompany’sbinvestmentbinbfacilities,bequipment,ba
ndbbasicborganization.bOncebsuchbcostsbhavebb 1-12 Thebcontributionbmarginbisbtotalbsalesb
eenbincurred,btheybareb―lockedbin‖bforbmanybyea revenueblessbtotalbvariablebexpenses.
rs.
1-13 Abdifferentialbcostbisbabcostbthatbdiffersbbe
1-10 Yes.bAsbthebanticipatedblevelbofbactivitybc tweenbalternativesbinbabdecision.b Absunkb costbisba
hanges,btheblevelbofbfixedbcostsbneededbtobsuppo bcostbthatbhasbalreadybbeenbincurredbandbcannotb
rtboperationsbmaybalsobchange.bMostbfixedbcostsba bebalteredbbybanybdecisionbtakenbnowborbinbthebfu
rebadjustedbupwardbandbdownwardbinblargebstep ture.bAnbopportunitybcostbisbthebpotentialbbenefitbt
s,bratherbthanbbeingbabsolutelybfixedbatboneblevelbf hatbisbgivenbupbwhenbonebalternativebisbselectedb
orballbrangesbofbactivity. overbanother.
1-14 No,bdifferentialbcostsbcanbbebeitherbvari
ableborbfixed.bForbexample,bthebalternativesbmig
htbconsistbofbpurchasingbonebmachinebratherbtha
nbanotherbtobmakebabproduct.bThebdifferencebbet
weenbthebfixedbcostsbofbpurchasingbthebtwobmac
hinesbisbabdifferentialbcost.
©bMcGrawbHillbLLC.bAllbrightsbreserved.bNobreproductionborbdistributionbwithoutbthebpriorbwrittenbconsentbofb
McGrawbHillbLLC.
ManagerialbAccountingb18thbEdition,bSolutionsbManual,bChapterb1
