Solution Manual for Managerial Accounting,
18th Edition by Garrison, Noreen and Brewer
Verified Chapter's 1 - 16 | Complete
,Table of Contents
Chapter One: Managerial Accounting and Cost Concepts
Chapter Two: Job-Order Costing: Calculating Unit Product Costs
Chapter Three: Job-Order Costing: Cost Flows and External Reporting
Chapter Four: Process Costing
Chapter Five: Cost-Volume-Profit Relationships
Chapter Six: Variable Costing and Segment Reporting: Tools for Management
Chapter Seven: Activity-Based Costing: A Tool to Aid Decision Making
Chapter Eight: Master Budgeting
Chapter Nine: Flexible Budgets and Performance Analysis
Chapter Ten: Standard Costs and Variances
Chapter Eleven: Responsibility Accounting Systems
Chapter Twelve: Strategic Performance Measurement
Chapter Thirteen: Differential Analysis: The Key to Decision Making
Chapter Fourteen: Capital Budgeting Decisions
Chapter Fifteen: Statement of Cash Flows
Chapter Sixteen: Financial Statement Analysis
,Chapter 1
Managerial Accounting and Cost Concepts
Questions
1-1 The three major types of product costs in a 1-4
manufacturing company are direct materials, direct a. Variable cost: The variable cost per unit is
labor, and manufacturing overhead. constant, but total variable cost changes in
direct proportion to changes in volume.
1-2 b. Fixed cost: The total fixed cost is constant within
a. Direct materials are an integral part of a the relevant range. The average fixed cost per
finished product and their costs can be conveniently unit varies inversely with changes in volume.
traced to it. c. Mixed cost: A mixed cost contains both
b. Indirect materials are generally small items of variable and fixed cost elements.
material such as glue and nails. They may be an
integral part of a finished product but their costs can 1-5
be traced to the product only at great cost or a. Unit fixed costs decrease as the activity level
inconvenience. increases.
c. Direct labor consists of labor costs that can b. Unit variable costs remain constant as the
be easily traced to particular products. activity level increases.
Direct labor is also called ―touch labor.‖ c. Total fixed costs remain constant as the
d. Indirect labor consists of the labor costs of activity level increases.
janitors, supervisors, materials handlers, and other d. Total variable costs increase as the activity
factory workers that cannot be conveniently traced level increases.
to particular products. These labor costs are incurred
to support production, but the workers involved do
1-6
not directly work on the product.
a. Cost behavior: Cost behavior refers to the way
e. Manufacturing overhead includes all
in which costs change in response to changes in
manufacturing costs except direct materials and
a measure of activity such as sales volume,
direct labor. Consequently, manufacturing overhead
production volume, or orders processed.
includes indirect materials and indirect labor as well
as other manufacturing costs. b. Relevant range: The relevant range is the
range of activity within which assumptions
1-3 A product cost is any cost involved in about variable and fixed cost behavior are
valid.
purchasing or manufacturing goods. In the case of
manufactured goods, these costs consist of direct
materials, direct labor, and manufacturing overhead. 1-7 An activity base is a measure of
A period cost is a cost that is taken directly to the whatever causes the incurrence of a variable cost.
income statement as an expense in the period in Examples of activity bases include units produced,
which it is incurred. units sold, letters typed, beds in a hospital, meals
served in a cafe, service calls made, etc.
1-8 The linear assumption is reasonably valid
providing that the cost formula is used only within the
relevant range.
, 1-9 A discretionary fixed cost has a fairly 1-11 The traditional approach organizes costs by
short planning horizon—usually a year. Such costs function, such as production, selling, and
arise from annual decisions by management to administration. Within a functional area, fixed and
spend on certain fixed cost items, such as variable costs are intermingled. The contribution
advertising, research, and management approach income statement organizes costs by
development. A committed fixed cost has a long behavior, first deducting variable expenses to obtain
planning horizon—generally many years. Such contribution margin, and then deducting fixed
costs relate to a company’s investment in facilities, expenses to obtain net operating income.
equipment, and basic organization. Once such costs
have been incurred, they are ―locked in‖ for many 1-12 The contribution margin is total sales
years. revenue less total variable expenses.
1-10 Yes. As the anticipated level of activity 1-13 A differential cost is a cost that differs
changes, the level of fixed costs needed to support between alternatives in a decision. A sunk cost is a
operations may also change. Most fixed costs are cost that has already been incurred and cannot be
adjusted upward and downward in large steps, altered by any decision taken now or in the future. An
rather than being absolutely fixed at one level for all opportunity cost is the potential benefit that is given
ranges of activity. up when one alternative is selected over another.
1-14 No, differential costs can be either variable
or fixed. For example, the alternatives might consist
of purchasing one machine rather than another to
make a product. The difference between the fixed
costs of purchasing the two machines is a differential
cost.
Managerial Accounting 18th Edition, Solutions Manual,
18th Edition by Garrison, Noreen and Brewer
Verified Chapter's 1 - 16 | Complete
,Table of Contents
Chapter One: Managerial Accounting and Cost Concepts
Chapter Two: Job-Order Costing: Calculating Unit Product Costs
Chapter Three: Job-Order Costing: Cost Flows and External Reporting
Chapter Four: Process Costing
Chapter Five: Cost-Volume-Profit Relationships
Chapter Six: Variable Costing and Segment Reporting: Tools for Management
Chapter Seven: Activity-Based Costing: A Tool to Aid Decision Making
Chapter Eight: Master Budgeting
Chapter Nine: Flexible Budgets and Performance Analysis
Chapter Ten: Standard Costs and Variances
Chapter Eleven: Responsibility Accounting Systems
Chapter Twelve: Strategic Performance Measurement
Chapter Thirteen: Differential Analysis: The Key to Decision Making
Chapter Fourteen: Capital Budgeting Decisions
Chapter Fifteen: Statement of Cash Flows
Chapter Sixteen: Financial Statement Analysis
,Chapter 1
Managerial Accounting and Cost Concepts
Questions
1-1 The three major types of product costs in a 1-4
manufacturing company are direct materials, direct a. Variable cost: The variable cost per unit is
labor, and manufacturing overhead. constant, but total variable cost changes in
direct proportion to changes in volume.
1-2 b. Fixed cost: The total fixed cost is constant within
a. Direct materials are an integral part of a the relevant range. The average fixed cost per
finished product and their costs can be conveniently unit varies inversely with changes in volume.
traced to it. c. Mixed cost: A mixed cost contains both
b. Indirect materials are generally small items of variable and fixed cost elements.
material such as glue and nails. They may be an
integral part of a finished product but their costs can 1-5
be traced to the product only at great cost or a. Unit fixed costs decrease as the activity level
inconvenience. increases.
c. Direct labor consists of labor costs that can b. Unit variable costs remain constant as the
be easily traced to particular products. activity level increases.
Direct labor is also called ―touch labor.‖ c. Total fixed costs remain constant as the
d. Indirect labor consists of the labor costs of activity level increases.
janitors, supervisors, materials handlers, and other d. Total variable costs increase as the activity
factory workers that cannot be conveniently traced level increases.
to particular products. These labor costs are incurred
to support production, but the workers involved do
1-6
not directly work on the product.
a. Cost behavior: Cost behavior refers to the way
e. Manufacturing overhead includes all
in which costs change in response to changes in
manufacturing costs except direct materials and
a measure of activity such as sales volume,
direct labor. Consequently, manufacturing overhead
production volume, or orders processed.
includes indirect materials and indirect labor as well
as other manufacturing costs. b. Relevant range: The relevant range is the
range of activity within which assumptions
1-3 A product cost is any cost involved in about variable and fixed cost behavior are
valid.
purchasing or manufacturing goods. In the case of
manufactured goods, these costs consist of direct
materials, direct labor, and manufacturing overhead. 1-7 An activity base is a measure of
A period cost is a cost that is taken directly to the whatever causes the incurrence of a variable cost.
income statement as an expense in the period in Examples of activity bases include units produced,
which it is incurred. units sold, letters typed, beds in a hospital, meals
served in a cafe, service calls made, etc.
1-8 The linear assumption is reasonably valid
providing that the cost formula is used only within the
relevant range.
, 1-9 A discretionary fixed cost has a fairly 1-11 The traditional approach organizes costs by
short planning horizon—usually a year. Such costs function, such as production, selling, and
arise from annual decisions by management to administration. Within a functional area, fixed and
spend on certain fixed cost items, such as variable costs are intermingled. The contribution
advertising, research, and management approach income statement organizes costs by
development. A committed fixed cost has a long behavior, first deducting variable expenses to obtain
planning horizon—generally many years. Such contribution margin, and then deducting fixed
costs relate to a company’s investment in facilities, expenses to obtain net operating income.
equipment, and basic organization. Once such costs
have been incurred, they are ―locked in‖ for many 1-12 The contribution margin is total sales
years. revenue less total variable expenses.
1-10 Yes. As the anticipated level of activity 1-13 A differential cost is a cost that differs
changes, the level of fixed costs needed to support between alternatives in a decision. A sunk cost is a
operations may also change. Most fixed costs are cost that has already been incurred and cannot be
adjusted upward and downward in large steps, altered by any decision taken now or in the future. An
rather than being absolutely fixed at one level for all opportunity cost is the potential benefit that is given
ranges of activity. up when one alternative is selected over another.
1-14 No, differential costs can be either variable
or fixed. For example, the alternatives might consist
of purchasing one machine rather than another to
make a product. The difference between the fixed
costs of purchasing the two machines is a differential
cost.
Managerial Accounting 18th Edition, Solutions Manual,
