Solution Manual for Managerial Accounting,
18th Edition
By Ray Garrison, Eric Noreen and Peter Brewer
Verified Chapter's 1 - 16 | Complete
,ChapterxzOne:xzManagerialxzAccountingxzandxzCostxzConcepts
ChapterxzTwo:xzJob-OrderxzCosting:xzCalculatingxzUnitxzProductxzCosts
ChapterxzThree:xzJob-OrderxzCosting:xzCostxzFlowsxzandxzExternalxzReporting
ChapterxzFour:xzProcessxzCosting
ChapterxzFive:xzCost-Volume-ProfitxzRelationships
ChapterxzSix:xzVariablexzCostingxzandxzSegmentxzReporting:xzToolsxzforxzManagement
ChapterxzSeven:xzActivity-BasedxzCosting:xzAxzToolxztoxzAidxzDecisionxzMaking
ChapterxzEight:xzMasterxzBudgeting
ChapterxzNine:xzFlexiblexzBudgetsxzandxzPerformancexzAnalysis
ChapterxzTen:xzStandardxzCostsxzandxzVariances
ChapterxzEleven:xzResponsibilityxzAccountingxzSystems
ChapterxzTwelve:xzStrategicxzPerformancexzMeasurement
ChapterxzThirteen:xzDifferentialxzAnalysis:xzThexzKeyxztoxzDecisionxzMaking
ChapterxzFourteen:xzCapitalxzBudgetingxzDecisions
ChapterxzFifteen:xzStatementxzofxzCashxzFlows
ChapterxzSixteen:xzFinancialxzStatementxzAnalysis
,Chapter 1 xz
Managerial Accounting and Cost Concepts
xz xz xz xz
Questions
1-1 Thexzthreexzmajorxztypesxzofxzproductxzco it isxzincurred.
z xz
stsxzinxzaxzmanufacturingxzcompanyxzarexzdirectxz
materials,xzdirectxzlabor,xzandxzmanufacturingxzo
verhead.
1-2
a. Directxzmaterialsxzarexzanxzintegralxzpartxz
ofxzaxzfinishedxzproductxzandxztheirxzcostsxzcanxzb
exzconvenientlyxztracedxztoxzit.
b. Indirectxzmaterialsxzarexzgenerallyxzsmallxzit
emsxzofxzmaterialxzsuchxzasxzgluexzandxznails.xzThe
yxzmayxzbexzanxzintegralxzpartxzofxzaxzfinishedxzprod
uctxzbutxztheirxzcostsxzcanxzbexztracedxztoxzthexzpro
ductxzonlyxzatxzgreatxzcostxzorxzinconvenience.
c. Directxzlaborxzconsistsxzofxzlaborxzcostsxzt
hatxzcanxzbexzeasilyxztracedxztoxzparticularxzpro
ducts.
Directxzlaborxzisxzalsoxzcalledxz―touchxzlabor.‖
d. Indirectxzlaborxzconsistsxzofxzthexzlaborxzco
stsxzofxzjanitors,xzsupervisors,xzmaterialsxzhandler
s,xzandxzotherxzfactoryxzworkersxzthatxzcannotxzbe
xzconvenientlyxztracedxztoxzparticularxzproducts.xz
Thesexzlaborxzcostsxzarexzincurredxztoxzsupportxzp
roduction,xzbutxzthexzworkersxzinvolvedxzdoxznotxz
directlyxzworkxzonxzthexzproduct.
e. Manufacturingxzoverheadxzincludesxzallxzm
anufacturingxzcostsxzexceptxzdirectxzmaterialsxzan
dxzdirectxzlabor.xzConsequently,xzmanufacturingxz
overheadxzincludesxzindirectxzmaterialsxzandxzindir
ectxzlaborxzasxzwellxzasxzotherxzmanufacturingxzcos
ts.
1-3
Axzproductxzcostxzisxzanyxzcostxzinvolvedxzi
nxzpurchasingxzorxzmanufacturingxzgoods.xzInxzthe
xzcasexzofxzmanufacturedxzgoods,xzthesexzcostsxzc
onsistxzofxzdirectxzmaterials,xzdirectxzlabor,xzandxzm
anufacturingxzoverhead.xzAxzperiodxzcostxzisxzaxzco
stxzthatxzisxztakenxzdirectlyxztoxzthexzincomexzstate
mentxzasxzanxzexpensexzinxzthexzperiodxzinxzwhichx
, 1-4
a. Variablexzcost:xzThexzvariablexzcostxzperxzu
nitxzisxzconstant,xzbutxztotalxzvariablexzcostxz
changesxzinxzdirectxzproportionxztoxzchange
sxzinxzvolume.
b. Fixedxzcost:xzThexztotalxzfixedxzcostxzisxzcons
tantxzwithinxzthexzrelevantxzrange.xzThexzaver
agexzfixedxzcostxzperxzunitxzvariesxzinverselyx
zwithxzchangesx z inxzvolume.
c. Mixedxzcost:xzAxzmixedxzcostxzcontainsxz
bothxzvariablexzandxzfixedxzcostxzeleme
nts.
1-5
a. Unitxzfixedxzcostsxzdecreasexzasxzthexzactivityxz
levelxzincreases.
b. Unitxzvariablexzcostsxzremainxzconstantxzas
xzthexzactivityxzlevelxzincreases.
c. Totalxzfixedxzcostsxzremainxzconstantxzas
xzthexzactivityxzlevelxzincreases.
d. Totalxzvariablexzcostsxzincreasexzasxzthexzact
ivityxzlevelxzincreases.
1-6
a. Costxzbehavior:xzCostxzbehaviorxzrefersxztox
zthexzwayxzinxzwhichxzcostsxzchangexzinxzres
ponsexztoxzchangesxzinxzaxzmeasurexzofxzact
ivityxzsuchxzasxzsalesxzvolume,xzproductionxz
volume,xzorxzordersxzprocessed.
b. Relevantxzrange:xzThexzrelevantxzrangexzis
xzthexzrangexzofxzactivityxzwithinxzwhichxzass
umptionsxzaboutxzvariablexzandxzfixedxzcos
txzbehaviorxzarexzvalid.
1-7 Anxzactivityxzbasexzisxzaxzmeasurexzo
fxzwhateverxzcausesxzthexzincurrencexzofxzaxzv
ariablexzcost.xzExamplesxzofxzactivityxzbasesxzi
ncludexzunitsxzproduced,xzunitsxzsold,xzletters
xztyped,xzbedsxzinxzaxzhospital,xzmealsxzserved
xzinxzaxzcafe,xzservicexzcallsxzmade,xzetc.
1-8 Thexzlinearxzassumptionxzisxzreasonablyx
zvalidxzprovidingxzthatxzthexzcostxzformulaxzisxzuse
dxzonlyxzwithinxzthexzrelevantxzrange.
18th Edition
By Ray Garrison, Eric Noreen and Peter Brewer
Verified Chapter's 1 - 16 | Complete
,ChapterxzOne:xzManagerialxzAccountingxzandxzCostxzConcepts
ChapterxzTwo:xzJob-OrderxzCosting:xzCalculatingxzUnitxzProductxzCosts
ChapterxzThree:xzJob-OrderxzCosting:xzCostxzFlowsxzandxzExternalxzReporting
ChapterxzFour:xzProcessxzCosting
ChapterxzFive:xzCost-Volume-ProfitxzRelationships
ChapterxzSix:xzVariablexzCostingxzandxzSegmentxzReporting:xzToolsxzforxzManagement
ChapterxzSeven:xzActivity-BasedxzCosting:xzAxzToolxztoxzAidxzDecisionxzMaking
ChapterxzEight:xzMasterxzBudgeting
ChapterxzNine:xzFlexiblexzBudgetsxzandxzPerformancexzAnalysis
ChapterxzTen:xzStandardxzCostsxzandxzVariances
ChapterxzEleven:xzResponsibilityxzAccountingxzSystems
ChapterxzTwelve:xzStrategicxzPerformancexzMeasurement
ChapterxzThirteen:xzDifferentialxzAnalysis:xzThexzKeyxztoxzDecisionxzMaking
ChapterxzFourteen:xzCapitalxzBudgetingxzDecisions
ChapterxzFifteen:xzStatementxzofxzCashxzFlows
ChapterxzSixteen:xzFinancialxzStatementxzAnalysis
,Chapter 1 xz
Managerial Accounting and Cost Concepts
xz xz xz xz
Questions
1-1 Thexzthreexzmajorxztypesxzofxzproductxzco it isxzincurred.
z xz
stsxzinxzaxzmanufacturingxzcompanyxzarexzdirectxz
materials,xzdirectxzlabor,xzandxzmanufacturingxzo
verhead.
1-2
a. Directxzmaterialsxzarexzanxzintegralxzpartxz
ofxzaxzfinishedxzproductxzandxztheirxzcostsxzcanxzb
exzconvenientlyxztracedxztoxzit.
b. Indirectxzmaterialsxzarexzgenerallyxzsmallxzit
emsxzofxzmaterialxzsuchxzasxzgluexzandxznails.xzThe
yxzmayxzbexzanxzintegralxzpartxzofxzaxzfinishedxzprod
uctxzbutxztheirxzcostsxzcanxzbexztracedxztoxzthexzpro
ductxzonlyxzatxzgreatxzcostxzorxzinconvenience.
c. Directxzlaborxzconsistsxzofxzlaborxzcostsxzt
hatxzcanxzbexzeasilyxztracedxztoxzparticularxzpro
ducts.
Directxzlaborxzisxzalsoxzcalledxz―touchxzlabor.‖
d. Indirectxzlaborxzconsistsxzofxzthexzlaborxzco
stsxzofxzjanitors,xzsupervisors,xzmaterialsxzhandler
s,xzandxzotherxzfactoryxzworkersxzthatxzcannotxzbe
xzconvenientlyxztracedxztoxzparticularxzproducts.xz
Thesexzlaborxzcostsxzarexzincurredxztoxzsupportxzp
roduction,xzbutxzthexzworkersxzinvolvedxzdoxznotxz
directlyxzworkxzonxzthexzproduct.
e. Manufacturingxzoverheadxzincludesxzallxzm
anufacturingxzcostsxzexceptxzdirectxzmaterialsxzan
dxzdirectxzlabor.xzConsequently,xzmanufacturingxz
overheadxzincludesxzindirectxzmaterialsxzandxzindir
ectxzlaborxzasxzwellxzasxzotherxzmanufacturingxzcos
ts.
1-3
Axzproductxzcostxzisxzanyxzcostxzinvolvedxzi
nxzpurchasingxzorxzmanufacturingxzgoods.xzInxzthe
xzcasexzofxzmanufacturedxzgoods,xzthesexzcostsxzc
onsistxzofxzdirectxzmaterials,xzdirectxzlabor,xzandxzm
anufacturingxzoverhead.xzAxzperiodxzcostxzisxzaxzco
stxzthatxzisxztakenxzdirectlyxztoxzthexzincomexzstate
mentxzasxzanxzexpensexzinxzthexzperiodxzinxzwhichx
, 1-4
a. Variablexzcost:xzThexzvariablexzcostxzperxzu
nitxzisxzconstant,xzbutxztotalxzvariablexzcostxz
changesxzinxzdirectxzproportionxztoxzchange
sxzinxzvolume.
b. Fixedxzcost:xzThexztotalxzfixedxzcostxzisxzcons
tantxzwithinxzthexzrelevantxzrange.xzThexzaver
agexzfixedxzcostxzperxzunitxzvariesxzinverselyx
zwithxzchangesx z inxzvolume.
c. Mixedxzcost:xzAxzmixedxzcostxzcontainsxz
bothxzvariablexzandxzfixedxzcostxzeleme
nts.
1-5
a. Unitxzfixedxzcostsxzdecreasexzasxzthexzactivityxz
levelxzincreases.
b. Unitxzvariablexzcostsxzremainxzconstantxzas
xzthexzactivityxzlevelxzincreases.
c. Totalxzfixedxzcostsxzremainxzconstantxzas
xzthexzactivityxzlevelxzincreases.
d. Totalxzvariablexzcostsxzincreasexzasxzthexzact
ivityxzlevelxzincreases.
1-6
a. Costxzbehavior:xzCostxzbehaviorxzrefersxztox
zthexzwayxzinxzwhichxzcostsxzchangexzinxzres
ponsexztoxzchangesxzinxzaxzmeasurexzofxzact
ivityxzsuchxzasxzsalesxzvolume,xzproductionxz
volume,xzorxzordersxzprocessed.
b. Relevantxzrange:xzThexzrelevantxzrangexzis
xzthexzrangexzofxzactivityxzwithinxzwhichxzass
umptionsxzaboutxzvariablexzandxzfixedxzcos
txzbehaviorxzarexzvalid.
1-7 Anxzactivityxzbasexzisxzaxzmeasurexzo
fxzwhateverxzcausesxzthexzincurrencexzofxzaxzv
ariablexzcost.xzExamplesxzofxzactivityxzbasesxzi
ncludexzunitsxzproduced,xzunitsxzsold,xzletters
xztyped,xzbedsxzinxzaxzhospital,xzmealsxzserved
xzinxzaxzcafe,xzservicexzcallsxzmade,xzetc.
1-8 Thexzlinearxzassumptionxzisxzreasonablyx
zvalidxzprovidingxzthatxzthexzcostxzformulaxzisxzuse
dxzonlyxzwithinxzthexzrelevantxzrange.
