Solution Manual of
Chapter 1 - Managerial
Accounting 15th Edition
(Ray H. Garrison, Eric
W. Noreen and Peter
C.)
,Chapter 1
Managerial Accounting: An Overview
Solutions to Questions the actual costs of running a production studio
to the budget, and (5) comparing the actual cost
of providing global, on-location news coverage
1-1 Financial accounting is concerned with to the budget.
reporting financial information to external 1-3 The quantitative analysis would focus on
parties, such as stockholders, creditors, and determining the potential cost savings from
regulators. Managerial accounting is concerned buying the part rather than making it. The
with providing information to managers for use qualitative analysis would focus on broader
within the organization. Financial accounting issues such as strategy, risks, and corporate
emphasizes the financial consequences of past social responsibility. For example, if the part is
transactions, objectivity and verifiability, critical to the organization’s strategy, it may
precision, and companywide performance, continue making the part regardless of any
whereas managerial accounting emphasizes potential cost savings from outsourcing. If the
decisions affecting the future, relevance, overseas supplier might create quality control
timeliness, and segment performance. Financial problems that could threaten the end
accounting is mandatory for external reports and consumers’ welfare, then the risks of
it needs to comply with rules, such as generally outsourcing may swamp any cost savings.
accepted accounting principles (GAAP) and Finally, from a social responsibility standpoint, a
international financial reporting standards company may decide against outsourcing if it
(IFRS), whereas managerial accounting is not would result in layoffs at its domestic
mandatory and it does not need to comply with manufacturing facility.
externally imposed rules.
1-4 Companies prepare budgets to translate
1-2 Five examples of planning activities plans into formal quantitative terms. Budgets are
include (1) estimating the advertising revenues used for various purposes, such as forcing
for a future period, (2) estimating the total managers to plan ahead, allocating resources
expenses for a future period, including the across departments, coordinating activities
salaries of all actors, news reporters, and across departments, establishing goals that
sportscasters, (3) planning how many new motivate people, and evaluating and rewarding
television shows to introduce to the market, (4) employees. These various purposes often
planning each television show’s designated conflict with one another, which makes
broadcast time slot, and (5) planning the budgeting one of management’s most
network’s advertising activities and challenging activities.
expenditures.
Five examples of controlling activities 1-5 Managerial accounting is relevant to all
include (1) comparing the actual number of business students because all managers engage
viewers for each show to its viewership in planning, controlling, and decision making
projections, (2) comparing the actual costs of activities. If managers wish to influence
producing a made-for-television movie to its coworkers across the organization, they must be
budget, (3) comparing the revenues earned able to speak in financial terms to justify their
from broadcasting a sporting event to the costs proposed courses of action.
incurred to broadcast that event, (4) comparing
1
, 1-6 The Institute of Management customers will not like its new products. The
Accountants estimates that 80% of accountants company uses focus group research to
work in non-public accounting environments. proactively assess the customers’ reaction to its
Accountants that work in corporate, non-profit, new products.
and governmental organizations are expected to
use their planning, controlling, and 1-10 Airlines face the risk that large spikes in
decisionmaking skills to help improve fuel prices will lower their profitability.
performance. Therefore, they may reduce this risk by
spending money on hedging contracts that
1-7 Deere & Company is an example of a enable them to lock-in future fuel prices that will
company that competes in terms of product not change even if the market price increases.
leadership. The company’s slogan “nothing runs Steel manufacturers face major risks
like a Deere” emphasizes its product leadership related to employee safety, so they create and
customer value proposition. monitor control measures related to
Amazon.com competes in terms of occupational safety compliance and
operational excellence. The company focuses on performance.
delivering products faster, more conveniently, Restaurants face the risk that an
and at a lower price than competitors. economic downturn will reduce customer traffic
Charles Schwab competes in terms of and lower sales. They reduce this risk by
customer intimacy. It focuses on building choosing to create menus during economic
personal relationships with clients so that it can downturns that offer more low-priced entrees.
tailor investment strategies to individual needs.
1-11 Barnes & Noble could segment its
1-8 Planning, controlling, and decision companywide performance by individual store,
making must be performed within the context of by sales channel (i.e., bricks-and-mortar versus
a company’s strategy. For example, if a on-line), and by product line (e.g. non-fiction
company that competes as a product leader books, fiction books, music CDs, toys, etc.).
plans to grow too quickly, it may diminish quality Procter & Gamble could segment its
and threaten the company’s customer value performance by product category (e.g., beauty
proposition. A company that competes in terms and grooming, household care, and health and
of operational excellence would select control well-being), product line (e.g., Crest, Tide, and
measures that focus on time-based Bounty), and stock keeping units (e.g., Crest
performance, convenience, and cost. A company Cavity Protection toothpaste, Crest Extra
that competes in terms of customer intimacy Whitening toothpaste, and Crest Sensitivity
may decide against outsourcing employee toothpaste).
training to cut costs because it might diminish
the quality of customer service. 1-12 Timberland publishes quarterly
corporate social responsibility (CSR) metrics (see
1-9 This answer is based on Nike, which has www.earthkeeper.com/CSR/csrdownloads. Three
suppliers in over 40 countries. One risk that Nike of those metrics include metric tons of carbon
faces is that its suppliers will fail to manage their emissions, the percentage of total cotton
employees in a socially responsible manner. Nike sourced that is organic, and renewable energy
conducts Management Audit Verifications at its use as a percent of total energy usage.
overseas plants to minimize this risk. Nike Timberland’s corporate slogan of “doing
faces the risk that unsatisfactory environmental well by doing good” suggests that the company
performance will diminish its brand image. The publishes CSR reports because it believes that
company is investing substantial resources to its financial success (i.e., doing well) is positively
develop products that minimize adverse impacts influenced by its social and environmental
on the environment. Nike faces the risk that performance (i.e., doing good).
Chapter 1 - Managerial
Accounting 15th Edition
(Ray H. Garrison, Eric
W. Noreen and Peter
C.)
,Chapter 1
Managerial Accounting: An Overview
Solutions to Questions the actual costs of running a production studio
to the budget, and (5) comparing the actual cost
of providing global, on-location news coverage
1-1 Financial accounting is concerned with to the budget.
reporting financial information to external 1-3 The quantitative analysis would focus on
parties, such as stockholders, creditors, and determining the potential cost savings from
regulators. Managerial accounting is concerned buying the part rather than making it. The
with providing information to managers for use qualitative analysis would focus on broader
within the organization. Financial accounting issues such as strategy, risks, and corporate
emphasizes the financial consequences of past social responsibility. For example, if the part is
transactions, objectivity and verifiability, critical to the organization’s strategy, it may
precision, and companywide performance, continue making the part regardless of any
whereas managerial accounting emphasizes potential cost savings from outsourcing. If the
decisions affecting the future, relevance, overseas supplier might create quality control
timeliness, and segment performance. Financial problems that could threaten the end
accounting is mandatory for external reports and consumers’ welfare, then the risks of
it needs to comply with rules, such as generally outsourcing may swamp any cost savings.
accepted accounting principles (GAAP) and Finally, from a social responsibility standpoint, a
international financial reporting standards company may decide against outsourcing if it
(IFRS), whereas managerial accounting is not would result in layoffs at its domestic
mandatory and it does not need to comply with manufacturing facility.
externally imposed rules.
1-4 Companies prepare budgets to translate
1-2 Five examples of planning activities plans into formal quantitative terms. Budgets are
include (1) estimating the advertising revenues used for various purposes, such as forcing
for a future period, (2) estimating the total managers to plan ahead, allocating resources
expenses for a future period, including the across departments, coordinating activities
salaries of all actors, news reporters, and across departments, establishing goals that
sportscasters, (3) planning how many new motivate people, and evaluating and rewarding
television shows to introduce to the market, (4) employees. These various purposes often
planning each television show’s designated conflict with one another, which makes
broadcast time slot, and (5) planning the budgeting one of management’s most
network’s advertising activities and challenging activities.
expenditures.
Five examples of controlling activities 1-5 Managerial accounting is relevant to all
include (1) comparing the actual number of business students because all managers engage
viewers for each show to its viewership in planning, controlling, and decision making
projections, (2) comparing the actual costs of activities. If managers wish to influence
producing a made-for-television movie to its coworkers across the organization, they must be
budget, (3) comparing the revenues earned able to speak in financial terms to justify their
from broadcasting a sporting event to the costs proposed courses of action.
incurred to broadcast that event, (4) comparing
1
, 1-6 The Institute of Management customers will not like its new products. The
Accountants estimates that 80% of accountants company uses focus group research to
work in non-public accounting environments. proactively assess the customers’ reaction to its
Accountants that work in corporate, non-profit, new products.
and governmental organizations are expected to
use their planning, controlling, and 1-10 Airlines face the risk that large spikes in
decisionmaking skills to help improve fuel prices will lower their profitability.
performance. Therefore, they may reduce this risk by
spending money on hedging contracts that
1-7 Deere & Company is an example of a enable them to lock-in future fuel prices that will
company that competes in terms of product not change even if the market price increases.
leadership. The company’s slogan “nothing runs Steel manufacturers face major risks
like a Deere” emphasizes its product leadership related to employee safety, so they create and
customer value proposition. monitor control measures related to
Amazon.com competes in terms of occupational safety compliance and
operational excellence. The company focuses on performance.
delivering products faster, more conveniently, Restaurants face the risk that an
and at a lower price than competitors. economic downturn will reduce customer traffic
Charles Schwab competes in terms of and lower sales. They reduce this risk by
customer intimacy. It focuses on building choosing to create menus during economic
personal relationships with clients so that it can downturns that offer more low-priced entrees.
tailor investment strategies to individual needs.
1-11 Barnes & Noble could segment its
1-8 Planning, controlling, and decision companywide performance by individual store,
making must be performed within the context of by sales channel (i.e., bricks-and-mortar versus
a company’s strategy. For example, if a on-line), and by product line (e.g. non-fiction
company that competes as a product leader books, fiction books, music CDs, toys, etc.).
plans to grow too quickly, it may diminish quality Procter & Gamble could segment its
and threaten the company’s customer value performance by product category (e.g., beauty
proposition. A company that competes in terms and grooming, household care, and health and
of operational excellence would select control well-being), product line (e.g., Crest, Tide, and
measures that focus on time-based Bounty), and stock keeping units (e.g., Crest
performance, convenience, and cost. A company Cavity Protection toothpaste, Crest Extra
that competes in terms of customer intimacy Whitening toothpaste, and Crest Sensitivity
may decide against outsourcing employee toothpaste).
training to cut costs because it might diminish
the quality of customer service. 1-12 Timberland publishes quarterly
corporate social responsibility (CSR) metrics (see
1-9 This answer is based on Nike, which has www.earthkeeper.com/CSR/csrdownloads. Three
suppliers in over 40 countries. One risk that Nike of those metrics include metric tons of carbon
faces is that its suppliers will fail to manage their emissions, the percentage of total cotton
employees in a socially responsible manner. Nike sourced that is organic, and renewable energy
conducts Management Audit Verifications at its use as a percent of total energy usage.
overseas plants to minimize this risk. Nike Timberland’s corporate slogan of “doing
faces the risk that unsatisfactory environmental well by doing good” suggests that the company
performance will diminish its brand image. The publishes CSR reports because it believes that
company is investing substantial resources to its financial success (i.e., doing well) is positively
develop products that minimize adverse impacts influenced by its social and environmental
on the environment. Nike faces the risk that performance (i.e., doing good).
