Solution Manual for Managerial Accounting,
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18th Editionj
By Ray Garrison, Eric Noreen and Peter Brewer
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Verified Chapter's 1 - 16 | Complete
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,Table of Contents
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ChapterjOne:jManagerialjAccountingjandjCostjConcepts
ChapterjTwo:jJob-OrderjCosting:jCalculatingjUnitjProductjCosts
ChapterjThree:jJob-OrderjCosting:jCostjFlowsjandjExternaljReporting
ChapterjFour:jProcessjCosting
ChapterjFive:jCost-Volume-ProfitjRelationships
ChapterjSix:jVariablejCostingjandjSegmentjReporting:jToolsjforjManagement
ChapterjSeven:jActivity-BasedjCosting:jAjTooljtojAidjDecisionjMaking
ChapterjEight:jMasterjBudgeting
ChapterjNine:jFlexiblejBudgetsjandjPerformancejAnalysis
ChapterjTen:jStandardjCostsjandjVariances
ChapterjEleven:jResponsibilityjAccountingjSystems
ChapterjTwelve:jStrategicjPerformancejMeasurement
ChapterjThirteen:jDifferentialjAnalysis:jThejKeyjtojDecisionjMaking
ChapterjFourteen:jCapitaljBudgetingjDecisions
ChapterjFifteen:jStatementjofjCashjFlows
ChapterjSixteen:jFinancialjStatementjAnalysis
,Chapter 1 j
Managerial Accounting and Cost Concepts
j j j j
Questions
1-1 Thejthreejmajorjtypesjofjproductjcostsjinj 1-4
ajmanufacturingjcompanyjarejdirectjmaterials,jdi a. Variablejcost:jThejvariablejcostjperjunitjisjco
rectjlabor,jandjmanufacturingjoverhead. nstant,jbutjtotaljvariablejcostjchangesjinjdire
ctjproportionjtojchangesjinjvolume.
1-2 b. Fixedjcost:jThejtotaljfixedjcostjisjconstantjwith
a. Directjmaterialsjarejanjintegraljpartjofjajfin injthejrelevantjrange.jThejaveragejfixedjcostjp
ishedjproductjandjtheirjcostsjcanjbejconveniently erjunitjvariesjinverselyjwithjchangesj injvolum
jtracedjtojit. e.
b. Indirectjmaterialsjarejgenerallyjsmalljitemsj c. Mixedjcost:jAjmixedjcostjcontainsjbothjva
ofjmaterialjsuchjasjgluejandjnails.jTheyjmayjbejanji riablejandjfixedjcostjelements.
ntegraljpartjofjajfinishedjproductjbutjtheirjcostsjcanj
bejtracedjtojthejproductjonlyjatjgreatjcostjorjinconv 1-5
enience. a. Unitjfixedjcostsjdecreasejasjthejactivityjleveljinc
c. Directjlaborjconsistsjofjlaborjcostsjthatjca reases.
njbejeasilyjtracedjtojparticularjproducts. b. Unitjvariablejcostsjremainjconstantjasjthejac
Directjlaborjisjalsojcalledj―touchjlabor.‖ tivityjleveljincreases.
d. Indirectjlaborjconsistsjofjthejlaborjcostsjofj c. Totaljfixedjcostsjremainjconstantjasjthejac
janitors,jsupervisors,jmaterialsjhandlers,jandjoth tivityjleveljincreases.
erjfactoryjworkersjthatjcannotjbejconvenientlyjtra d. Totaljvariablejcostsjincreasejasjthejactivityjle
cedjtojparticularjproducts.jThesejlaborjcostsjareji veljincreases.
ncurredjtojsupportjproduction,jbutjthejworkersjin
volvedjdojnotjdirectlyjworkjonjthejproduct. 1-6
e. Manufacturingjoverheadjincludesjalljmanuf a. Costjbehavior:jCostjbehaviorjrefersjtojthejwa
acturingjcostsjexceptjdirectjmaterialsjandjdirectjla yjinjwhichjcostsjchangejinjresponsejtojchang
bor.jConsequently,jmanufacturingjoverheadjinclu esjinjajmeasurejofjactivityjsuchjasjsalesjvolu
desjindirectjmaterialsjandjindirectjlaborjasjwelljasjo me,jproductionjvolume,jorjordersjprocessed.
therjmanufacturingjcosts. b. Relevantjrange:jThejrelevantjrangejisjthejra
ngejofjactivityjwithinjwhichjassumptionsjabo
1-3 utjvariablejandjfixedjcostjbehaviorjarejvalid.
Ajproductjcostjisjanyjcostjinvolvedjinjpurc
hasingjorjmanufacturingjgoods.jInjthejcasejofjman 1-7 Anjactivityjbasejisjajmeasurejofjwhate
ufacturedjgoods,jthesejcostsjconsistjofjdirectjmate verjcausesjthejincurrencejofjajvariablejcost.jExa
rials,jdirectjlabor,jandjmanufacturingjoverhead.jAj mplesjofjactivityjbasesjincludejunitsjproduced,j
periodjcostjisjajcostjthatjisjtakenjdirectlyjtojthejinco unitsjsold,jlettersjtyped,jbedsjinjajhospital,jmea
mejstatementjasjanjexpensejinjthejperiodjinjwhichj lsjservedjinjajcafe,jservicejcallsjmade,jetc.
itjisjincurred.
1-8 Thejlinearjassumptionjisjreasonablyjvalidj
providingjthatjthejcostjformulajisjusedjonlyjwithinjt
hejrelevantjrange.
, 1-9 Ajdiscretionaryjfixedjcostjhasjajfairlyjsh 1-11 Thejtraditionaljapproachjorganizesjcostsjb
ortjplanningjhorizon— yjfunction,jsuchjasjproduction,jselling,jandjadmini
usuallyjajyear.jSuchjcostsjarisejfromjannualjdeci stration.jWithinjajfunctionaljarea,jfixedjandjvariabl
sionsjbyjmanagementjtojspendjonjcertainjfixedj ejcostsjarejintermingled.jThejcontributionjapproac
costjitems,jsuchjasjadvertising,jresearch,jandjm hjincomejstatementjorganizesjcostsjbyjbehavior,jfi
anagementjdevelopment.jAjcommittedjfixedjcos rstjdeductingjvariablejexpensesjtojobtainjcontribut
tjhasjajlongjplanningjhorizon— ionjmargin,jandjthenjdeductingjfixedjexpensesjtojo
generallyjmanyjyears.jSuchjcostsjrelatejtojajcom btainjnetjoperatingjincome.
pany’sjinvestmentjinjfacilities,jequipment,jandjb
asicjorganization.jOncejsuchjcostsjhavejbeenjin 1-12 Thejcontributionjmarginjisjtotaljsalesjre
curred,jtheyjarej―lockedjin‖jforjmanyjyears. venuejlessjtotaljvariablejexpenses.
1-10 Yes.jAsjthejanticipatedjleveljofjactivityjcha 1-13 Ajdifferentialjcostjisjajcostjthatjdiffersjbetw
nges,jthejleveljofjfixedjcostsjneededjtojsupportjope eenjalternativesjinjajdecision.jAjsunkjcostj isjajcostjt
rationsjmayjalsojchange.jMostjfixedjcostsjarejadju hatjhasjalreadyjbeenjincurredjandjcannotjbejaltere
stedjupwardjandjdownwardjinjlargejsteps,jratherjt djbyjanyjdecisionjtakenjnowjorjinjthejfuture.jAnjopp
hanjbeingjabsolutelyjfixedjatjonejleveljforjalljranges ortunityjcostjisjthejpotentialjbenefitjthatjisjgivenjupj
jofjactivity. whenjonejalternativejisjselectedjoverjanother.
1-14 No,jdifferentialjcostsjcanjbejeitherjvariabl
ejorjfixed.jForjexample,jthejalternativesjmightjcon
sistjofjpurchasingjonejmachinejratherjthanjanothe
rjtojmakejajproduct.jThejdifferencejbetweenjthejfi
xedjcostsjofjpurchasingjthejtwojmachinesjisjajdiff
erentialjcost.
ManagerialjAccountingj18thjEdition,jSolutionsjManual,
j j j j
18th Editionj
By Ray Garrison, Eric Noreen and Peter Brewer
j j j j j j j
Verified Chapter's 1 - 16 | Complete
j j j j j j
,Table of Contents
j j
ChapterjOne:jManagerialjAccountingjandjCostjConcepts
ChapterjTwo:jJob-OrderjCosting:jCalculatingjUnitjProductjCosts
ChapterjThree:jJob-OrderjCosting:jCostjFlowsjandjExternaljReporting
ChapterjFour:jProcessjCosting
ChapterjFive:jCost-Volume-ProfitjRelationships
ChapterjSix:jVariablejCostingjandjSegmentjReporting:jToolsjforjManagement
ChapterjSeven:jActivity-BasedjCosting:jAjTooljtojAidjDecisionjMaking
ChapterjEight:jMasterjBudgeting
ChapterjNine:jFlexiblejBudgetsjandjPerformancejAnalysis
ChapterjTen:jStandardjCostsjandjVariances
ChapterjEleven:jResponsibilityjAccountingjSystems
ChapterjTwelve:jStrategicjPerformancejMeasurement
ChapterjThirteen:jDifferentialjAnalysis:jThejKeyjtojDecisionjMaking
ChapterjFourteen:jCapitaljBudgetingjDecisions
ChapterjFifteen:jStatementjofjCashjFlows
ChapterjSixteen:jFinancialjStatementjAnalysis
,Chapter 1 j
Managerial Accounting and Cost Concepts
j j j j
Questions
1-1 Thejthreejmajorjtypesjofjproductjcostsjinj 1-4
ajmanufacturingjcompanyjarejdirectjmaterials,jdi a. Variablejcost:jThejvariablejcostjperjunitjisjco
rectjlabor,jandjmanufacturingjoverhead. nstant,jbutjtotaljvariablejcostjchangesjinjdire
ctjproportionjtojchangesjinjvolume.
1-2 b. Fixedjcost:jThejtotaljfixedjcostjisjconstantjwith
a. Directjmaterialsjarejanjintegraljpartjofjajfin injthejrelevantjrange.jThejaveragejfixedjcostjp
ishedjproductjandjtheirjcostsjcanjbejconveniently erjunitjvariesjinverselyjwithjchangesj injvolum
jtracedjtojit. e.
b. Indirectjmaterialsjarejgenerallyjsmalljitemsj c. Mixedjcost:jAjmixedjcostjcontainsjbothjva
ofjmaterialjsuchjasjgluejandjnails.jTheyjmayjbejanji riablejandjfixedjcostjelements.
ntegraljpartjofjajfinishedjproductjbutjtheirjcostsjcanj
bejtracedjtojthejproductjonlyjatjgreatjcostjorjinconv 1-5
enience. a. Unitjfixedjcostsjdecreasejasjthejactivityjleveljinc
c. Directjlaborjconsistsjofjlaborjcostsjthatjca reases.
njbejeasilyjtracedjtojparticularjproducts. b. Unitjvariablejcostsjremainjconstantjasjthejac
Directjlaborjisjalsojcalledj―touchjlabor.‖ tivityjleveljincreases.
d. Indirectjlaborjconsistsjofjthejlaborjcostsjofj c. Totaljfixedjcostsjremainjconstantjasjthejac
janitors,jsupervisors,jmaterialsjhandlers,jandjoth tivityjleveljincreases.
erjfactoryjworkersjthatjcannotjbejconvenientlyjtra d. Totaljvariablejcostsjincreasejasjthejactivityjle
cedjtojparticularjproducts.jThesejlaborjcostsjareji veljincreases.
ncurredjtojsupportjproduction,jbutjthejworkersjin
volvedjdojnotjdirectlyjworkjonjthejproduct. 1-6
e. Manufacturingjoverheadjincludesjalljmanuf a. Costjbehavior:jCostjbehaviorjrefersjtojthejwa
acturingjcostsjexceptjdirectjmaterialsjandjdirectjla yjinjwhichjcostsjchangejinjresponsejtojchang
bor.jConsequently,jmanufacturingjoverheadjinclu esjinjajmeasurejofjactivityjsuchjasjsalesjvolu
desjindirectjmaterialsjandjindirectjlaborjasjwelljasjo me,jproductionjvolume,jorjordersjprocessed.
therjmanufacturingjcosts. b. Relevantjrange:jThejrelevantjrangejisjthejra
ngejofjactivityjwithinjwhichjassumptionsjabo
1-3 utjvariablejandjfixedjcostjbehaviorjarejvalid.
Ajproductjcostjisjanyjcostjinvolvedjinjpurc
hasingjorjmanufacturingjgoods.jInjthejcasejofjman 1-7 Anjactivityjbasejisjajmeasurejofjwhate
ufacturedjgoods,jthesejcostsjconsistjofjdirectjmate verjcausesjthejincurrencejofjajvariablejcost.jExa
rials,jdirectjlabor,jandjmanufacturingjoverhead.jAj mplesjofjactivityjbasesjincludejunitsjproduced,j
periodjcostjisjajcostjthatjisjtakenjdirectlyjtojthejinco unitsjsold,jlettersjtyped,jbedsjinjajhospital,jmea
mejstatementjasjanjexpensejinjthejperiodjinjwhichj lsjservedjinjajcafe,jservicejcallsjmade,jetc.
itjisjincurred.
1-8 Thejlinearjassumptionjisjreasonablyjvalidj
providingjthatjthejcostjformulajisjusedjonlyjwithinjt
hejrelevantjrange.
, 1-9 Ajdiscretionaryjfixedjcostjhasjajfairlyjsh 1-11 Thejtraditionaljapproachjorganizesjcostsjb
ortjplanningjhorizon— yjfunction,jsuchjasjproduction,jselling,jandjadmini
usuallyjajyear.jSuchjcostsjarisejfromjannualjdeci stration.jWithinjajfunctionaljarea,jfixedjandjvariabl
sionsjbyjmanagementjtojspendjonjcertainjfixedj ejcostsjarejintermingled.jThejcontributionjapproac
costjitems,jsuchjasjadvertising,jresearch,jandjm hjincomejstatementjorganizesjcostsjbyjbehavior,jfi
anagementjdevelopment.jAjcommittedjfixedjcos rstjdeductingjvariablejexpensesjtojobtainjcontribut
tjhasjajlongjplanningjhorizon— ionjmargin,jandjthenjdeductingjfixedjexpensesjtojo
generallyjmanyjyears.jSuchjcostsjrelatejtojajcom btainjnetjoperatingjincome.
pany’sjinvestmentjinjfacilities,jequipment,jandjb
asicjorganization.jOncejsuchjcostsjhavejbeenjin 1-12 Thejcontributionjmarginjisjtotaljsalesjre
curred,jtheyjarej―lockedjin‖jforjmanyjyears. venuejlessjtotaljvariablejexpenses.
1-10 Yes.jAsjthejanticipatedjleveljofjactivityjcha 1-13 Ajdifferentialjcostjisjajcostjthatjdiffersjbetw
nges,jthejleveljofjfixedjcostsjneededjtojsupportjope eenjalternativesjinjajdecision.jAjsunkjcostj isjajcostjt
rationsjmayjalsojchange.jMostjfixedjcostsjarejadju hatjhasjalreadyjbeenjincurredjandjcannotjbejaltere
stedjupwardjandjdownwardjinjlargejsteps,jratherjt djbyjanyjdecisionjtakenjnowjorjinjthejfuture.jAnjopp
hanjbeingjabsolutelyjfixedjatjonejleveljforjalljranges ortunityjcostjisjthejpotentialjbenefitjthatjisjgivenjupj
jofjactivity. whenjonejalternativejisjselectedjoverjanother.
1-14 No,jdifferentialjcostsjcanjbejeitherjvariabl
ejorjfixed.jForjexample,jthejalternativesjmightjcon
sistjofjpurchasingjonejmachinejratherjthanjanothe
rjtojmakejajproduct.jThejdifferencejbetweenjthejfi
xedjcostsjofjpurchasingjthejtwojmachinesjisjajdiff
erentialjcost.
ManagerialjAccountingj18thjEdition,jSolutionsjManual,
