Solution Manual for ManagerialAccounting, 17th Edition,Ra
f f f f f f f
y Garrison, Eric Noreen, Peter Brewer, ISBN10: 1260247783,
f f f f f f f
ISBN13: 9781260247787
f f
1
,Chapter 1 f
Managerial Accounting and Cost Concepts
f f f f
Questions
1-1 Thefthreefmajorftypesfoffproductfcostsfinf 1-4
afmanufacturingfcompanyfarefdirectfmaterials,fdi a. Variablefcost:fThefvariablefcostfperfunitfisfco
rectflabor,fandfmanufacturingfoverhead. nstant,fbutftotalfvariablefcostfchangesfinfdire
ctfproportionftofchangesfinfvolume.
1-2 b. Fixedfcost:fTheftotalffixedfcostfisfconstantfwith
a. Directfmaterialsfarefanfintegralfpartfoffaffin infthefrelevantfrange.fThefaverageffixedfcostfp
ishedfproductfandftheirfcostsfcanfbefconvenientl erfunitf variesfinverselyfwithfchangesfinfvolum
yftracedftofit. e.
b. Indirectfmaterialsfarefgenerallyfsmallfitemsf c. Mixedfcost:fAfmixedfcostfcontainsfbothfv
offmaterialfsuchfasfgluefandfnails.fTheyfmayfbefanfi ariablefandffixedfcostfelements.
ntegralfpartfoffaffinishedfproductfbutftheirfcostsfcan
fbeftracedftofthefproductfonlyfatfgreatfcostforfincon 1-5
venience. a. Unitffixedfcostsfdecreasefasfthefactivityflevelfin
c. Directflaborfconsistsfofflaborfcostsfthatfca creases.
nfbefeasilyftracedftofparticularfproducts.fDirectfl b. Unitfvariablefcostsfremainfconstantfasfthefac
aborfisfalsofcalledf“touchflabor.” tivityflevelfincreases.
d. Indirectflaborfconsistsfofftheflaborfcostsfoff c. Totalffixedfcostsfremainfconstantfasfthefac
janitors,fsupervisors,fmaterialsfhandlers,fandfoth tivityflevelfincreases.
erffactoryfworkersfthatfcannotfbefconvenientlyftr d. Totalfvariablefcostsfincreasefasfthefactivityfle
acedftofparticularfproducts.fTheseflaborfcostsfaref velfincreases.
incurredftofsupportfproduction,fbutfthefworkersfi
nvolvedfdofnotfdirectlyfworkfonfthefproduct. 1-6
e. Manufacturingfoverheadfincludesfallfmanu a. Costfbehavior:fCostfbehaviorfrefersftofthefwa
facturingfcostsfexceptfdirectfmaterialsfandfdirectfla yfinfwhichfcostsfchangefinfresponseftofchang
bor.fConsequently,fmanufacturingfoverheadfinclu esfinfafmeasurefoffactivityfsuchfasfsalesfvolu
desfindirectfmaterialsfandfindirectflaborfasfwellfasfo me,fproductionfvolume,forfordersfprocessed.
therfmanufacturingfcosts. b. Relevantfrange:fThefrelevantfrangefisfthefra
ngefoffactivityfwithinfwhichfassumptionsfabo
1-3 utfvariablefandffixedfcostfbehaviorfarefvalid.
Afproductfcostfisfanyfcostfinvolvedfinfpurc
hasingforfmanufacturingfgoods.fInfthefcasefoffman 1-7 Anfactivityfbasefisfafmeasurefoffwhate
ufacturedfgoods,fthesefcostsfconsistfoffdirectfmat verfcausesfthefincurrencefoffafvariablefcost.fEx
erials,fdirectflabor,fandfmanufacturingfoverhead.fA amplesfoffactivityfbasesfincludefunitsfproduced
fperiodfcostfisfafcostfthatfisftakenfdirectlyftofthe finc ,funitsfsold,flettersftyped,fbedsfinfafhospital,fme
omefstatementfasfanfexpensefinfthefperiodfinfwhic alsfservedfinfafcafe,fservicefcallsfmade,fetc.
hfitfisfincurred.
1-8 Theflinearfassumptionfisfreasonablyfvalidf
providingfthatfthefcostfformulafisfusedfonlyfwithinft
hefrelevantfrange.
,1-9 Afdiscretionaryffixedfcostfhasfaffairlyfsh 1-11 Theftraditionalfapproachforganizesfcostsfb
ortfplanningfhorizon— yffunction,fsuchfasfproduction,fselling,fandfadmini
usuallyfafyear.fSuchfcostsfariseffromfannualfdeci stration.fWithinfaffunctionalfarea,ffixedfandfvariabl
sionsfbyfmanagementftofspendfonfcertainffixedf efcostsfarefintermingled.fThefcontributionfapproac
costfitems,fsuchfasfadvertising,fresearch,fandfm hfincomefstatementforganizesfcostsfbyfbehavior,ffi
anagementfdevelopment.fAfcommittedffixedfcos rstfdeductingfvariablefexpensesftofobtainfcontribu
tfhasfaflongfplanningfhorizon— tionfmargin,fandfthenfdeductingffixedfexpensesftof
generallyfmanyfyears.fSuchfcostsfrelateftofafco obtainfnetfoperatingfincome.
mpany’sfinvestmentfinffacilities,fequipment,fand
fbasicforganization.fOncefsuchfcostsfhavefbeenfi 1-12 Thefcontributionfmarginfisftotalfsalesfr
ncurred,ftheyfaref“lockedfin”fforfmanyfyears. evenueflessftotalfvariablefexpenses.
1-10 Yes.fAsfthefanticipatedflevelfoffactivityfcha 1-13 Afdifferentialfcostfisfafcostfthatfdiffersfbe
nges,ftheflevelfofffixedfcostsfneededftofsupportfop tweenfalternativesfinfafdecision.fAnfopportunityf
erationsfmayfalsofchange.fMostffixedfcostsfarefadj costfisfthefpotentialfbenefitfthatfisfgivenfupfwhenf
ustedfupwardfandfdownwardfinflargefsteps,fratherf onefalternativefisfselectedfoverfanother.fAfsunkfc
thanfbeingfabsolutelyffixedfatfoneflevelfforfallfrange ostfisfafcostfthatfhasfalreadyfbeenfincurredfandfc
sfoffactivity. annotfbefalteredfbyfanyfdecisionftakenfnowforfinf
theffuture.
1-14 No,fdifferentialfcostsfcanfbefeitherfvariab
leforffixed.fForfexample,fthefalternativesfmightfco
nsistfoffpurchasingfonefmachinefratherfthanfanoth
erftofmakefafproduct.fThefdifferencefbetweenfthef
fixedfcostsfoffpurchasingftheftwofmachinesfisfafdif
ferentialfcost.
3
, Chapter 1: Applying Excel
f f f
The completed worksheet is shown below.
f f f f f
f f f f f f f
y Garrison, Eric Noreen, Peter Brewer, ISBN10: 1260247783,
f f f f f f f
ISBN13: 9781260247787
f f
1
,Chapter 1 f
Managerial Accounting and Cost Concepts
f f f f
Questions
1-1 Thefthreefmajorftypesfoffproductfcostsfinf 1-4
afmanufacturingfcompanyfarefdirectfmaterials,fdi a. Variablefcost:fThefvariablefcostfperfunitfisfco
rectflabor,fandfmanufacturingfoverhead. nstant,fbutftotalfvariablefcostfchangesfinfdire
ctfproportionftofchangesfinfvolume.
1-2 b. Fixedfcost:fTheftotalffixedfcostfisfconstantfwith
a. Directfmaterialsfarefanfintegralfpartfoffaffin infthefrelevantfrange.fThefaverageffixedfcostfp
ishedfproductfandftheirfcostsfcanfbefconvenientl erfunitf variesfinverselyfwithfchangesfinfvolum
yftracedftofit. e.
b. Indirectfmaterialsfarefgenerallyfsmallfitemsf c. Mixedfcost:fAfmixedfcostfcontainsfbothfv
offmaterialfsuchfasfgluefandfnails.fTheyfmayfbefanfi ariablefandffixedfcostfelements.
ntegralfpartfoffaffinishedfproductfbutftheirfcostsfcan
fbeftracedftofthefproductfonlyfatfgreatfcostforfincon 1-5
venience. a. Unitffixedfcostsfdecreasefasfthefactivityflevelfin
c. Directflaborfconsistsfofflaborfcostsfthatfca creases.
nfbefeasilyftracedftofparticularfproducts.fDirectfl b. Unitfvariablefcostsfremainfconstantfasfthefac
aborfisfalsofcalledf“touchflabor.” tivityflevelfincreases.
d. Indirectflaborfconsistsfofftheflaborfcostsfoff c. Totalffixedfcostsfremainfconstantfasfthefac
janitors,fsupervisors,fmaterialsfhandlers,fandfoth tivityflevelfincreases.
erffactoryfworkersfthatfcannotfbefconvenientlyftr d. Totalfvariablefcostsfincreasefasfthefactivityfle
acedftofparticularfproducts.fTheseflaborfcostsfaref velfincreases.
incurredftofsupportfproduction,fbutfthefworkersfi
nvolvedfdofnotfdirectlyfworkfonfthefproduct. 1-6
e. Manufacturingfoverheadfincludesfallfmanu a. Costfbehavior:fCostfbehaviorfrefersftofthefwa
facturingfcostsfexceptfdirectfmaterialsfandfdirectfla yfinfwhichfcostsfchangefinfresponseftofchang
bor.fConsequently,fmanufacturingfoverheadfinclu esfinfafmeasurefoffactivityfsuchfasfsalesfvolu
desfindirectfmaterialsfandfindirectflaborfasfwellfasfo me,fproductionfvolume,forfordersfprocessed.
therfmanufacturingfcosts. b. Relevantfrange:fThefrelevantfrangefisfthefra
ngefoffactivityfwithinfwhichfassumptionsfabo
1-3 utfvariablefandffixedfcostfbehaviorfarefvalid.
Afproductfcostfisfanyfcostfinvolvedfinfpurc
hasingforfmanufacturingfgoods.fInfthefcasefoffman 1-7 Anfactivityfbasefisfafmeasurefoffwhate
ufacturedfgoods,fthesefcostsfconsistfoffdirectfmat verfcausesfthefincurrencefoffafvariablefcost.fEx
erials,fdirectflabor,fandfmanufacturingfoverhead.fA amplesfoffactivityfbasesfincludefunitsfproduced
fperiodfcostfisfafcostfthatfisftakenfdirectlyftofthe finc ,funitsfsold,flettersftyped,fbedsfinfafhospital,fme
omefstatementfasfanfexpensefinfthefperiodfinfwhic alsfservedfinfafcafe,fservicefcallsfmade,fetc.
hfitfisfincurred.
1-8 Theflinearfassumptionfisfreasonablyfvalidf
providingfthatfthefcostfformulafisfusedfonlyfwithinft
hefrelevantfrange.
,1-9 Afdiscretionaryffixedfcostfhasfaffairlyfsh 1-11 Theftraditionalfapproachforganizesfcostsfb
ortfplanningfhorizon— yffunction,fsuchfasfproduction,fselling,fandfadmini
usuallyfafyear.fSuchfcostsfariseffromfannualfdeci stration.fWithinfaffunctionalfarea,ffixedfandfvariabl
sionsfbyfmanagementftofspendfonfcertainffixedf efcostsfarefintermingled.fThefcontributionfapproac
costfitems,fsuchfasfadvertising,fresearch,fandfm hfincomefstatementforganizesfcostsfbyfbehavior,ffi
anagementfdevelopment.fAfcommittedffixedfcos rstfdeductingfvariablefexpensesftofobtainfcontribu
tfhasfaflongfplanningfhorizon— tionfmargin,fandfthenfdeductingffixedfexpensesftof
generallyfmanyfyears.fSuchfcostsfrelateftofafco obtainfnetfoperatingfincome.
mpany’sfinvestmentfinffacilities,fequipment,fand
fbasicforganization.fOncefsuchfcostsfhavefbeenfi 1-12 Thefcontributionfmarginfisftotalfsalesfr
ncurred,ftheyfaref“lockedfin”fforfmanyfyears. evenueflessftotalfvariablefexpenses.
1-10 Yes.fAsfthefanticipatedflevelfoffactivityfcha 1-13 Afdifferentialfcostfisfafcostfthatfdiffersfbe
nges,ftheflevelfofffixedfcostsfneededftofsupportfop tweenfalternativesfinfafdecision.fAnfopportunityf
erationsfmayfalsofchange.fMostffixedfcostsfarefadj costfisfthefpotentialfbenefitfthatfisfgivenfupfwhenf
ustedfupwardfandfdownwardfinflargefsteps,fratherf onefalternativefisfselectedfoverfanother.fAfsunkfc
thanfbeingfabsolutelyffixedfatfoneflevelfforfallfrange ostfisfafcostfthatfhasfalreadyfbeenfincurredfandfc
sfoffactivity. annotfbefalteredfbyfanyfdecisionftakenfnowforfinf
theffuture.
1-14 No,fdifferentialfcostsfcanfbefeitherfvariab
leforffixed.fForfexample,fthefalternativesfmightfco
nsistfoffpurchasingfonefmachinefratherfthanfanoth
erftofmakefafproduct.fThefdifferencefbetweenfthef
fixedfcostsfoffpurchasingftheftwofmachinesfisfafdif
ferentialfcost.
3
, Chapter 1: Applying Excel
f f f
The completed worksheet is shown below.
f f f f f
