Solution Manual for t t
Horngren's Managerial Chapters Accounting, 7th Edition by Tracie
t t t t t t t
Chapter t1-11
Chapter 1 t
Introduction to Managerial Accounting
t t t
Review Questions
t
1. The tprimary tpurpose tof tmanagerial taccounting tis tto tprovide tinformation tto thelp tmanagers
tplan,tdirect, tcontrol, tand tmake tdecisions.
2. Financial taccounting tand tmanagerial taccounting tdiffer ton tthe tfollowing t6 tdimensions: t(1) tprimarytusers,
t(2) tpurpose tof tinformation, t(3) tfocus tand ttime tdimension tof tthe tinformation, t(4) trules tand trestrictions,
t(5) tscope tof tinformation, tand t(6) tbehavioral.
3. Line tpositions tare tdirectly tinvolved tin tproviding tgoods tor tservices tto tcustomers. tStaff
tpositionstsupport tline tpositions.
4. Planning tmeans tchoosing tgoals tand tdeciding thow tto tachieve tthem. tDirecting tinvolves trunning tthe tday-
to-day toperations tof ta tbusiness. tControlling tis tthe tprocess tof tmonitoring toperations tand tkeepingtthe
tcompany ton ttrack.
5. The tfour tIMA tstandards tof tethical tpractice tand ta tdescription tof teach tfollow.
I. Competence.
Maintain tan tappropriate tlevel tof tprofessional tleadership tand texpertise tby
tenhancingtknowledge tand tskills.
Perform tprofessional tduties tin taccordance twith trelevant tlaws, tregulations, tand
ttechnicaltstandards.
Provide tdecision tsupport tinformation tand trecommendations tthat tare taccurate, tclear, tconcise,tand
ttimely.
Recognise tand thelp tmange trisk.
II. Confidentiality.
Keep tinformation tconfidential texcept twhen tdisclosure tis tauthorized tor tlegally trequired.
Inform tall trelevant tparties tregarding tappropriate tuse tof tconfidential tinformation. t Monitor
ttotensure tcompliance.
Refrain tfrom tusing tconfidential tinformation tfor tunethical tor tillegal tadvantage.
III. Integrity.
Mitigate tactual tconflicts tof tinterest. tRegularly tcommunicate twith tbusiness tassociates tto
tavoidtapparent tconflicts tof tinterest. t tAdvise tall tparties tof tany tpotential tconflicts.
Refrain tfrom tengaging tin tany tconduct tthat twould tprejudice tcarrying tout tduties tethically.
Abstain tfrom tengaging tin tor tsupporting tany tactivity tthat tmight tdiscredit tthe tprofession.
© t2021 tPearson tEducation, tInc. 1-1
, Contribute tto ta tpositive tethical tculture tand tplace tintegrity tof tthe tprofession tabove
tpersonaltinterest.
5, tcont.
IV. Credibility.
Communicate tinformation tfairly tand tobjectively.
Provide tall trelevant tinformation tthat tcould treasonably tbe texpected tto tinfluence tan
tintendedtuser’s tunderstanding tof tthe treports, tanalyses, tor trecommendations.
Report tany tdelays tor tdeficiencies tin tinformation, ttimeliness, tprocessing, tor tinternal tcontrolstin
tconformance twith torganization tpolicy tand/or tapplicable tlaw.
Communicate tany tprofessional tlimitations tor tother tconstraints tthat twould tpreclude tresponsi-tble
tjudgment tor tsuccessful tperformance tof tan tactivity.
6. Service tcompanies tsell ttime, tskills, tand tknowledge. t Examples tof tservice tcompanies tinclude
tphonetservice tcompanies, tbanks, tcleaning tservice tcompanies, taccounting tfirms, tlaw tfirms, tmedical
tphysicians, tand tonline tauction tservices.
7. Merchandising tcompanies tresell tproducts tthey tbuy tfrom tsuppliers. tMerchandisers tkeep tan tinventorytof
tproducts, tand tmanagers tare taccountable tfor tthe tpurchasing, tstorage, tand tsale tof tthe tproducts. tExamples
tof tmerchandising tcompanies tinclude ttoy tstores, tgrocery tstores, tand tclothing tstores.
8. Merchandising tcompanies tresell tproducts tthey tpreviously tbought tfrom tsuppliers, twhereas
tmanufacturing tcompanies tuse tlabor, tequipment, tsupplies, tand tfacilities tto tconvert traw tmaterials tintotnew
tfinished tproducts. tIn tcontrast tto tmerchandising tcompanies, tmanufacturing tcompanies thave ta tbroad
trange tof tproduction tactivities tthat trequire ttracking tcosts ton tthree tkinds tof tinventory.
9. The tthree tinventory taccounts tused tby tmanufacturing tcompanies tare tRaw tMaterials tInventory, tWork-tin-
Process tInventory, tand tFinished tGoods tInventory.
Raw tMaterials tInventory tincludes tmaterials tused tto tmanufacture ta tproduct. tWork-in-
ProcesstInventory tincludes tgoods tthat thave tbeen tstarted tin tthe tmanufacturing tprocess tbut tare tnot
tyet tcomplete. t Finished tGoods tInventory tincludes tcompleted tgoods tthat thave tnot tyet tbeen tsold.
10. A tdirect tcost tis ta tcost tthat tcan tbe teasily tand tcost-effectively ttraced tto ta tcost tobject t(which tis tanything
tfor twhich tmanagers twant ta tseparate tmeasurement tof tcost). tAn tindirect tcost tis ta tcost tthattcannot tbe
teasily tor tcost-effectively ttraced tto ta tcost tobject.
11. The tthree tmanufacturing tcosts tfor ta tmanufacturing tcompany tare tdirect tmaterials, tdirect tlabor, tand
tmanufacturing toverhead. tDirect tmaterials tare tmaterials tthat tbecome ta tphysical tpart tof ta tfinished tproduct
tand twhose tcosts tare teasily ttraceable tto tthe tfinished tproduct. t Direct tlabor tis tthe tlabor tcost toftthe
temployees twho tconvert tmaterials tinto tfinished tproducts. t Manufacturing toverhead tincludes tall
© t2021 tPearson tEducation, tInc. 1-2
, manufacturing tcosts texcept tdirect tmaterials tand tdirect tlabor, tsuch tas tindirect tmaterials,
tindirecttlabor, tfactory tdepreciation, tfactory trent, tand tfactory tproperty ttaxes.
12. Examples tof tmanufacturing toverhead tinclude tcosts tof tindirect tmaterials, tindirect tlabor, trepair
tandtmaintenance tin tfactory, tfactory tutilities, tfactory trent, tfactory tinsurance, tfactory tproperty ttaxes,
tmanufacturing tplant tmanagers’ tsalaries, tand tdepreciation ton tmanufacturing tbuildings tand tequipment.
13. Prime tcosts tare tdirect tmaterials tplus tdirect tlabor. tConversion tcosts tare tdirect tlabor tplus
tmanufacturing toverhead. tNote tthat tdirect tlabor tis tclassified tas tboth ta tprime tcost tand ta
tconversiontcost.
14. Product tcosts tare tthe tcost tof tpurchasing tor tmaking ta tproduct. t These tcosts tare trecorded tas tan
tasset tand tnot texpensed tuntil tthe tproduct tis tsold. tProduct tcosts tinclude tdirect tmaterials, tdirect tlabor,
tandtmanufacturing toverhead.
15. Period tcosts tare tnon-manufacturing tcosts tthat tare texpensed tin tthe tsame taccounting tperiod tin
twhichtthey tare tincurred, twhereas tproduct tcosts tare trecorded tas tan tasset tand tnot texpensed tuntil tthe
taccounting tperiod tin twhich tthe tproduct tis tsold.
16. Cost tof tGoods tManufactured tis tcalculated tas tBeginning tWork-in-Process tInventory t+
tTotaltManufacturing tCosts tIncurred tduring tthe tYear t– tEnding tWork-in-Process tInventory.
tTotaltManufacturing tCosts tIncurred tduring tthe tYear t= tDirect tMaterials tUsed t+ tDirect tLabor t+
tManufacturing tOverhead.
17. For ta tmanufacturing tcompany, tthe tactivity tin tthe tFinished tGoods tInventory taccount tprovides
tthetinformation tfor tdetermining tCost tof tGoods tSold. tA tmanufacturing tcompany tcalculates tCost tof
tGoods tSold tas tBeginning tFinished tGoods tInventory t+ tCost tof tGoods tManufactured t– tEnding
tFinished tGood tInventory. tIn taddition, ta tmanufacturing tcompany tmust ttrack tcosts tfrom tRaw
tMaterials tInventory tand tWork-in-Process tInventory tin torder tto tcompute tCost tof tGoods
tManufactured tused tin tthe tprevious tequation.
For ta tmerchandising tcompany, tthe tactivity tin tthe tMerchandise tInventory taccount tprovides tthe
tinformation tfor tdetermining tCost tof tGoods tSold. tA tmerchandising tcompany tcalculates tCost tof tGoods
tSold tas tBeginning tMerchandise tInventory t+ tPurchases tand tFreight tIn t– tEnding tMerchandisetInventory.
18. A tmanufacturing tcompany tcalculates tunit tproduct tcost tas tCost tof tGoods tManufactured t/
tTotaltnumber tof tunits tproduced.
19. A tservice tcompany tcalculates tunit tcost tper tservice tas tTotal toperating tcosts t/ tTotal tnumber
toftservices tprovided.
© t2021 tPearson tEducation, tInc. 1-3
, 20. A tmerchandising tcompany tcalculates tunit tcost tper titem tas tTotal tcost tof tgoods tsold t/ tTotal tnumber
toftitems tsold.
Short Exercises
t
S-M:1-1
a. FA
b. MA
c. MA
d. FA
e. FA
S-M:1-2
a. Confidentiality
b. Integrity
c. Competence t(skipping tthe tsession); t Integrity t(company-paid tconference)
d. Competence
e. Credibility; t Integrity
S-M:1-3
a. 2
b. 4
c. 1
d. 5
e. 4
f. 5
g. 3
S-M:1-4
Glue tfor tframes $ 250
Plant tdepreciation 7,500
Plant tforeman’s tsalary 3,500
Plant tjanitor’s twages 1,300
Oil tfor tmanufacturing tequipment t 150 t t
Total tmanufacturing toverhead t $ t12,700 t t
© t2021 tPearson tEducation, tInc. 1-4
Horngren's Managerial Chapters Accounting, 7th Edition by Tracie
t t t t t t t
Chapter t1-11
Chapter 1 t
Introduction to Managerial Accounting
t t t
Review Questions
t
1. The tprimary tpurpose tof tmanagerial taccounting tis tto tprovide tinformation tto thelp tmanagers
tplan,tdirect, tcontrol, tand tmake tdecisions.
2. Financial taccounting tand tmanagerial taccounting tdiffer ton tthe tfollowing t6 tdimensions: t(1) tprimarytusers,
t(2) tpurpose tof tinformation, t(3) tfocus tand ttime tdimension tof tthe tinformation, t(4) trules tand trestrictions,
t(5) tscope tof tinformation, tand t(6) tbehavioral.
3. Line tpositions tare tdirectly tinvolved tin tproviding tgoods tor tservices tto tcustomers. tStaff
tpositionstsupport tline tpositions.
4. Planning tmeans tchoosing tgoals tand tdeciding thow tto tachieve tthem. tDirecting tinvolves trunning tthe tday-
to-day toperations tof ta tbusiness. tControlling tis tthe tprocess tof tmonitoring toperations tand tkeepingtthe
tcompany ton ttrack.
5. The tfour tIMA tstandards tof tethical tpractice tand ta tdescription tof teach tfollow.
I. Competence.
Maintain tan tappropriate tlevel tof tprofessional tleadership tand texpertise tby
tenhancingtknowledge tand tskills.
Perform tprofessional tduties tin taccordance twith trelevant tlaws, tregulations, tand
ttechnicaltstandards.
Provide tdecision tsupport tinformation tand trecommendations tthat tare taccurate, tclear, tconcise,tand
ttimely.
Recognise tand thelp tmange trisk.
II. Confidentiality.
Keep tinformation tconfidential texcept twhen tdisclosure tis tauthorized tor tlegally trequired.
Inform tall trelevant tparties tregarding tappropriate tuse tof tconfidential tinformation. t Monitor
ttotensure tcompliance.
Refrain tfrom tusing tconfidential tinformation tfor tunethical tor tillegal tadvantage.
III. Integrity.
Mitigate tactual tconflicts tof tinterest. tRegularly tcommunicate twith tbusiness tassociates tto
tavoidtapparent tconflicts tof tinterest. t tAdvise tall tparties tof tany tpotential tconflicts.
Refrain tfrom tengaging tin tany tconduct tthat twould tprejudice tcarrying tout tduties tethically.
Abstain tfrom tengaging tin tor tsupporting tany tactivity tthat tmight tdiscredit tthe tprofession.
© t2021 tPearson tEducation, tInc. 1-1
, Contribute tto ta tpositive tethical tculture tand tplace tintegrity tof tthe tprofession tabove
tpersonaltinterest.
5, tcont.
IV. Credibility.
Communicate tinformation tfairly tand tobjectively.
Provide tall trelevant tinformation tthat tcould treasonably tbe texpected tto tinfluence tan
tintendedtuser’s tunderstanding tof tthe treports, tanalyses, tor trecommendations.
Report tany tdelays tor tdeficiencies tin tinformation, ttimeliness, tprocessing, tor tinternal tcontrolstin
tconformance twith torganization tpolicy tand/or tapplicable tlaw.
Communicate tany tprofessional tlimitations tor tother tconstraints tthat twould tpreclude tresponsi-tble
tjudgment tor tsuccessful tperformance tof tan tactivity.
6. Service tcompanies tsell ttime, tskills, tand tknowledge. t Examples tof tservice tcompanies tinclude
tphonetservice tcompanies, tbanks, tcleaning tservice tcompanies, taccounting tfirms, tlaw tfirms, tmedical
tphysicians, tand tonline tauction tservices.
7. Merchandising tcompanies tresell tproducts tthey tbuy tfrom tsuppliers. tMerchandisers tkeep tan tinventorytof
tproducts, tand tmanagers tare taccountable tfor tthe tpurchasing, tstorage, tand tsale tof tthe tproducts. tExamples
tof tmerchandising tcompanies tinclude ttoy tstores, tgrocery tstores, tand tclothing tstores.
8. Merchandising tcompanies tresell tproducts tthey tpreviously tbought tfrom tsuppliers, twhereas
tmanufacturing tcompanies tuse tlabor, tequipment, tsupplies, tand tfacilities tto tconvert traw tmaterials tintotnew
tfinished tproducts. tIn tcontrast tto tmerchandising tcompanies, tmanufacturing tcompanies thave ta tbroad
trange tof tproduction tactivities tthat trequire ttracking tcosts ton tthree tkinds tof tinventory.
9. The tthree tinventory taccounts tused tby tmanufacturing tcompanies tare tRaw tMaterials tInventory, tWork-tin-
Process tInventory, tand tFinished tGoods tInventory.
Raw tMaterials tInventory tincludes tmaterials tused tto tmanufacture ta tproduct. tWork-in-
ProcesstInventory tincludes tgoods tthat thave tbeen tstarted tin tthe tmanufacturing tprocess tbut tare tnot
tyet tcomplete. t Finished tGoods tInventory tincludes tcompleted tgoods tthat thave tnot tyet tbeen tsold.
10. A tdirect tcost tis ta tcost tthat tcan tbe teasily tand tcost-effectively ttraced tto ta tcost tobject t(which tis tanything
tfor twhich tmanagers twant ta tseparate tmeasurement tof tcost). tAn tindirect tcost tis ta tcost tthattcannot tbe
teasily tor tcost-effectively ttraced tto ta tcost tobject.
11. The tthree tmanufacturing tcosts tfor ta tmanufacturing tcompany tare tdirect tmaterials, tdirect tlabor, tand
tmanufacturing toverhead. tDirect tmaterials tare tmaterials tthat tbecome ta tphysical tpart tof ta tfinished tproduct
tand twhose tcosts tare teasily ttraceable tto tthe tfinished tproduct. t Direct tlabor tis tthe tlabor tcost toftthe
temployees twho tconvert tmaterials tinto tfinished tproducts. t Manufacturing toverhead tincludes tall
© t2021 tPearson tEducation, tInc. 1-2
, manufacturing tcosts texcept tdirect tmaterials tand tdirect tlabor, tsuch tas tindirect tmaterials,
tindirecttlabor, tfactory tdepreciation, tfactory trent, tand tfactory tproperty ttaxes.
12. Examples tof tmanufacturing toverhead tinclude tcosts tof tindirect tmaterials, tindirect tlabor, trepair
tandtmaintenance tin tfactory, tfactory tutilities, tfactory trent, tfactory tinsurance, tfactory tproperty ttaxes,
tmanufacturing tplant tmanagers’ tsalaries, tand tdepreciation ton tmanufacturing tbuildings tand tequipment.
13. Prime tcosts tare tdirect tmaterials tplus tdirect tlabor. tConversion tcosts tare tdirect tlabor tplus
tmanufacturing toverhead. tNote tthat tdirect tlabor tis tclassified tas tboth ta tprime tcost tand ta
tconversiontcost.
14. Product tcosts tare tthe tcost tof tpurchasing tor tmaking ta tproduct. t These tcosts tare trecorded tas tan
tasset tand tnot texpensed tuntil tthe tproduct tis tsold. tProduct tcosts tinclude tdirect tmaterials, tdirect tlabor,
tandtmanufacturing toverhead.
15. Period tcosts tare tnon-manufacturing tcosts tthat tare texpensed tin tthe tsame taccounting tperiod tin
twhichtthey tare tincurred, twhereas tproduct tcosts tare trecorded tas tan tasset tand tnot texpensed tuntil tthe
taccounting tperiod tin twhich tthe tproduct tis tsold.
16. Cost tof tGoods tManufactured tis tcalculated tas tBeginning tWork-in-Process tInventory t+
tTotaltManufacturing tCosts tIncurred tduring tthe tYear t– tEnding tWork-in-Process tInventory.
tTotaltManufacturing tCosts tIncurred tduring tthe tYear t= tDirect tMaterials tUsed t+ tDirect tLabor t+
tManufacturing tOverhead.
17. For ta tmanufacturing tcompany, tthe tactivity tin tthe tFinished tGoods tInventory taccount tprovides
tthetinformation tfor tdetermining tCost tof tGoods tSold. tA tmanufacturing tcompany tcalculates tCost tof
tGoods tSold tas tBeginning tFinished tGoods tInventory t+ tCost tof tGoods tManufactured t– tEnding
tFinished tGood tInventory. tIn taddition, ta tmanufacturing tcompany tmust ttrack tcosts tfrom tRaw
tMaterials tInventory tand tWork-in-Process tInventory tin torder tto tcompute tCost tof tGoods
tManufactured tused tin tthe tprevious tequation.
For ta tmerchandising tcompany, tthe tactivity tin tthe tMerchandise tInventory taccount tprovides tthe
tinformation tfor tdetermining tCost tof tGoods tSold. tA tmerchandising tcompany tcalculates tCost tof tGoods
tSold tas tBeginning tMerchandise tInventory t+ tPurchases tand tFreight tIn t– tEnding tMerchandisetInventory.
18. A tmanufacturing tcompany tcalculates tunit tproduct tcost tas tCost tof tGoods tManufactured t/
tTotaltnumber tof tunits tproduced.
19. A tservice tcompany tcalculates tunit tcost tper tservice tas tTotal toperating tcosts t/ tTotal tnumber
toftservices tprovided.
© t2021 tPearson tEducation, tInc. 1-3
, 20. A tmerchandising tcompany tcalculates tunit tcost tper titem tas tTotal tcost tof tgoods tsold t/ tTotal tnumber
toftitems tsold.
Short Exercises
t
S-M:1-1
a. FA
b. MA
c. MA
d. FA
e. FA
S-M:1-2
a. Confidentiality
b. Integrity
c. Competence t(skipping tthe tsession); t Integrity t(company-paid tconference)
d. Competence
e. Credibility; t Integrity
S-M:1-3
a. 2
b. 4
c. 1
d. 5
e. 4
f. 5
g. 3
S-M:1-4
Glue tfor tframes $ 250
Plant tdepreciation 7,500
Plant tforeman’s tsalary 3,500
Plant tjanitor’s twages 1,300
Oil tfor tmanufacturing tequipment t 150 t t
Total tmanufacturing toverhead t $ t12,700 t t
© t2021 tPearson tEducation, tInc. 1-4
