Solution Manual for Managerial
Accounting,
18th Edition
By Ray Garrison, Eric Noreen and
Peter 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
n
Questions
1-1 The three major types of 1-3 A product cost is any cost
product costs in a manufacturing involved in purchasing or manufacturing
company are direct materials, direct goods. In the case of manufactured
labor, and manufacturing overhead. goods, these costs consist of direct
materials, direct labor, and
1-2 manufacturing overhead. A period cost
a. Direct materials are an is a cost that is taken directly to the
integral part of a finished product income statement as an expense in the
and their costs can be period in which it is incurred.
conveniently traced to it.
b. Indirect materials are generally
small items of material such as glue
and nails. They may be an integral
part of a finished product but their
costs can be traced to the product
only at great cost or inconvenience.
c. Direct labor consists of
labor costs that can be easily
traced to particular products.
Direct labor is also called ―touch
labor.‖
d. Indirect labor consists of the
labor costs of janitors, supervisors,
materials handlers, and other
factory workers that cannot be
conveniently traced to particular
products. These labor costs are
incurred to support production, but
the workers involved do not directly
work on the product.
e. Manufacturing overhead
includes all manufacturing costs
except direct materials and direct
labor. Consequently, manufacturing
overhead includes indirect materials
and indirect labor as well as other
manufacturing costs.
, 1-4 1-8 The linear assumption is
a. Variable cost: The variable reasonably
cost per unit is constant, but
total variable cost changes in
direct proportion to changes in
volume.
b. Fixed cost: The total fixed cost
is constant within the relevant
range. The average fixed cost
per unit varies inversely with
changes in volume.
c. Mixed cost: A mixed cost
contains both variable and
fixed cost elements.
1-5
a. Unit fixed costs decrease
as the activity level
increases.
b. Unit variable costs remain
constant as the activity
level increases.
c. Total fixed costs remain
constant as the activity
level increases.
d. Total variable costs increase
as the activity level
increases.
1-6
a. Cost behavior: Cost behavior
refers to the way in which
costs change in response to
changes in a measure of
activity such as sales volume,
production volume, or orders
processed.
b. Relevant range: The relevant
range is the range of activity
within which assumptions
about variable and fixed cost
behavior are valid.
1-7 An activity base is a
measure of whatever causes
the incurrence of a variable
cost. Examples of activity bases
include units produced, units
sold, letters typed, beds in a
hospital, meals served in a cafe,
service calls made, etc.
Accounting,
18th Edition
By Ray Garrison, Eric Noreen and
Peter 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
n
Questions
1-1 The three major types of 1-3 A product cost is any cost
product costs in a manufacturing involved in purchasing or manufacturing
company are direct materials, direct goods. In the case of manufactured
labor, and manufacturing overhead. goods, these costs consist of direct
materials, direct labor, and
1-2 manufacturing overhead. A period cost
a. Direct materials are an is a cost that is taken directly to the
integral part of a finished product income statement as an expense in the
and their costs can be period in which it is incurred.
conveniently traced to it.
b. Indirect materials are generally
small items of material such as glue
and nails. They may be an integral
part of a finished product but their
costs can be traced to the product
only at great cost or inconvenience.
c. Direct labor consists of
labor costs that can be easily
traced to particular products.
Direct labor is also called ―touch
labor.‖
d. Indirect labor consists of the
labor costs of janitors, supervisors,
materials handlers, and other
factory workers that cannot be
conveniently traced to particular
products. These labor costs are
incurred to support production, but
the workers involved do not directly
work on the product.
e. Manufacturing overhead
includes all manufacturing costs
except direct materials and direct
labor. Consequently, manufacturing
overhead includes indirect materials
and indirect labor as well as other
manufacturing costs.
, 1-4 1-8 The linear assumption is
a. Variable cost: The variable reasonably
cost per unit is constant, but
total variable cost changes in
direct proportion to changes in
volume.
b. Fixed cost: The total fixed cost
is constant within the relevant
range. The average fixed cost
per unit varies inversely with
changes in volume.
c. Mixed cost: A mixed cost
contains both variable and
fixed cost elements.
1-5
a. Unit fixed costs decrease
as the activity level
increases.
b. Unit variable costs remain
constant as the activity
level increases.
c. Total fixed costs remain
constant as the activity
level increases.
d. Total variable costs increase
as the activity level
increases.
1-6
a. Cost behavior: Cost behavior
refers to the way in which
costs change in response to
changes in a measure of
activity such as sales volume,
production volume, or orders
processed.
b. Relevant range: The relevant
range is the range of activity
within which assumptions
about variable and fixed cost
behavior are valid.
1-7 An activity base is a
measure of whatever causes
the incurrence of a variable
cost. Examples of activity bases
include units produced, units
sold, letters typed, beds in a
hospital, meals served in a cafe,
service calls made, etc.
