SOLUTIONS MANUAL FOR ACCOUNTING FOR DECISION
MAKING AND CONTROL, 10TH EDITION BY ZIMMERMAN
QUESTIONS AND FULLY CORRECT ANSWERS
Managerial Accounting Practice Questions and Answers & ANSWERS
Based on Topics from Accounting for Decision Making and Control
l
Question 1
What are the three primary functions of management accounting?
Answer: The three primary functions are:
1. Decision Making - Providing relevant information for management
decisions
2. Planning - Assisting in budgeting and forecasting
3. Control - Monitoring performance and implementing corrective actions
Question 2
Explain the difference between financial accounting and management
accounting.
Answer:
• Financial Accounting: External reporting, follows GAAP, historical
data, standardized formats
• Management Accounting: Internal reporting, flexible formats, future-
oriented, decision-focused
Question 3
ABC Company is considering whether to make or buy a component. What type
of costs should management focus on?
,Answer: Management should focus on relevant costs - costs that differ
between alternatives and occur in the future. Sunk costs and allocated overhead
that don't change should be ignored.
Chapter 2: Cost Concepts and Behavior
Question 4
Classify the following costs as fixed, variable, or mixed: a) Monthly rent:
$5,000 b) Direct materials: $3 per unit c) Electricity: $500 base + $0.10 per
machine hour
Answer: a) Fixed cost - remains constant regardless of activity level b)
Variable cost - changes proportionally with units produced c) Mixed cost - has
both fixed ($500) and variable ($0.10/hour) components
Question 5
High-Low Method Problem: Month | Machine Hours | Total Cost Jan | 1,000 |
$8,000 Feb | 1,500 | $10,000 Calculate the variable cost per machine hour and
fixed cost.
Answer: Variable cost per hour = ($10,000 - $8,000) ÷ (1,500 - 1,000) = $4 per
hour Fixed cost = $8,000 - (1,000 × $4) = $4,000 Cost equation: Total Cost =
$4,000 + $4 × Machine Hours
Question 6
What is the difference between direct and indirect costs?
Answer:
• Direct costs: Can be easily traced to a specific cost object (e.g., direct
materials, direct labor)
• Indirect costs: Cannot be easily traced and must be allocated (e.g.,
factory overhead, utilities)
Chapter 3: Activity-Based Costing (ABC)
Question 7
Traditional costing allocates overhead based on direct labor hours. Why might
ABC provide better cost information?
Answer: ABC provides better cost information because it:
, • Uses multiple cost drivers that better reflect actual resource consumption
• Identifies activities that cause costs to be incurred
• Provides more accurate product costs, especially for complex products
• Helps identify non-value-added activities
Question 8
ABC Implementation Problem: Activity | Cost Pool | Cost Driver | Total Cost |
Total Driver Units Setup | $50,000 | # of setups | $50,000 | 100 setups
Inspection| $30,000 | # of inspections| $30,000 | 600 inspections
Product A requires 20 setups and 150 inspections. Calculate overhead allocated
to Product A.
Answer: Setup rate = $50,000 ÷ 100 = $500 per setup Inspection rate = $30,000
÷ 600 = $50 per inspection Product A allocation = (20 × $500) + (150 × $50) =
$10,000 + $7,500 = $17,500
Chapter 4: Job Costing
Question 9
Job #123 has the following costs:
• Direct materials: $2,500
• Direct labor: $1,800 (60 hours at $30/hour)
• Overhead is applied at $25 per direct labor hour Calculate total job cost.
Answer: Direct materials: $2,500 Direct labor: $1,800 Applied overhead: 60
hours × $25 = $1,500 Total job cost: $5,800
Question 10
What happens when actual overhead differs from applied overhead?
Answer:
• Underapplied overhead: Actual > Applied (debit to COGS)
• Overapplied overhead: Applied > Actual (credit to COGS) At year-end,
the difference is typically closed to Cost of Goods Sold.
Chapter 5: Process Costing
Question 11
, Department A had 10,000 units in process (60% complete) at month-end. Direct
materials are added at the beginning of the process. Calculate equivalent units
for materials and conversion costs.
Answer:
• Materials: 10,000 equivalent units (added at beginning, so 100%
complete)
• Conversion costs: 10,000 × 60% = 6,000 equivalent units
Question 12
FIFO vs. Weighted Average Process Costing - what's the key difference?
Answer:
• FIFO: Separates beginning inventory costs from current period costs
• Weighted Average: Combines beginning inventory costs with current
period costs FIFO provides more current cost information but is more
complex to calculate.
Chapter 6: Budgeting
Question 13
Sales Budget Problem: Quarter 1: 1,000 units at $50 each Quarter 2: 1,200 units
at $52 each Prepare the sales budget.
Answer: Sales Budget Quarter 1: 1,000 × $50 = $50,000 Quarter 2: 1,200 ×
$52 = $62,400 Total: $112,400
Question 14
Production Budget Problem: Budgeted sales: 5,000 units Desired ending
inventory: 500 units Beginning inventory: 300 units Calculate required
production.
Answer: Required production = Sales + Ending inventory - Beginning
inventory Required production = 5,000 + 500 - 300 = 5,200 units
Question 15
What are the benefits of participatory budgeting?
Answer: Benefits include:
MAKING AND CONTROL, 10TH EDITION BY ZIMMERMAN
QUESTIONS AND FULLY CORRECT ANSWERS
Managerial Accounting Practice Questions and Answers & ANSWERS
Based on Topics from Accounting for Decision Making and Control
l
Question 1
What are the three primary functions of management accounting?
Answer: The three primary functions are:
1. Decision Making - Providing relevant information for management
decisions
2. Planning - Assisting in budgeting and forecasting
3. Control - Monitoring performance and implementing corrective actions
Question 2
Explain the difference between financial accounting and management
accounting.
Answer:
• Financial Accounting: External reporting, follows GAAP, historical
data, standardized formats
• Management Accounting: Internal reporting, flexible formats, future-
oriented, decision-focused
Question 3
ABC Company is considering whether to make or buy a component. What type
of costs should management focus on?
,Answer: Management should focus on relevant costs - costs that differ
between alternatives and occur in the future. Sunk costs and allocated overhead
that don't change should be ignored.
Chapter 2: Cost Concepts and Behavior
Question 4
Classify the following costs as fixed, variable, or mixed: a) Monthly rent:
$5,000 b) Direct materials: $3 per unit c) Electricity: $500 base + $0.10 per
machine hour
Answer: a) Fixed cost - remains constant regardless of activity level b)
Variable cost - changes proportionally with units produced c) Mixed cost - has
both fixed ($500) and variable ($0.10/hour) components
Question 5
High-Low Method Problem: Month | Machine Hours | Total Cost Jan | 1,000 |
$8,000 Feb | 1,500 | $10,000 Calculate the variable cost per machine hour and
fixed cost.
Answer: Variable cost per hour = ($10,000 - $8,000) ÷ (1,500 - 1,000) = $4 per
hour Fixed cost = $8,000 - (1,000 × $4) = $4,000 Cost equation: Total Cost =
$4,000 + $4 × Machine Hours
Question 6
What is the difference between direct and indirect costs?
Answer:
• Direct costs: Can be easily traced to a specific cost object (e.g., direct
materials, direct labor)
• Indirect costs: Cannot be easily traced and must be allocated (e.g.,
factory overhead, utilities)
Chapter 3: Activity-Based Costing (ABC)
Question 7
Traditional costing allocates overhead based on direct labor hours. Why might
ABC provide better cost information?
Answer: ABC provides better cost information because it:
, • Uses multiple cost drivers that better reflect actual resource consumption
• Identifies activities that cause costs to be incurred
• Provides more accurate product costs, especially for complex products
• Helps identify non-value-added activities
Question 8
ABC Implementation Problem: Activity | Cost Pool | Cost Driver | Total Cost |
Total Driver Units Setup | $50,000 | # of setups | $50,000 | 100 setups
Inspection| $30,000 | # of inspections| $30,000 | 600 inspections
Product A requires 20 setups and 150 inspections. Calculate overhead allocated
to Product A.
Answer: Setup rate = $50,000 ÷ 100 = $500 per setup Inspection rate = $30,000
÷ 600 = $50 per inspection Product A allocation = (20 × $500) + (150 × $50) =
$10,000 + $7,500 = $17,500
Chapter 4: Job Costing
Question 9
Job #123 has the following costs:
• Direct materials: $2,500
• Direct labor: $1,800 (60 hours at $30/hour)
• Overhead is applied at $25 per direct labor hour Calculate total job cost.
Answer: Direct materials: $2,500 Direct labor: $1,800 Applied overhead: 60
hours × $25 = $1,500 Total job cost: $5,800
Question 10
What happens when actual overhead differs from applied overhead?
Answer:
• Underapplied overhead: Actual > Applied (debit to COGS)
• Overapplied overhead: Applied > Actual (credit to COGS) At year-end,
the difference is typically closed to Cost of Goods Sold.
Chapter 5: Process Costing
Question 11
, Department A had 10,000 units in process (60% complete) at month-end. Direct
materials are added at the beginning of the process. Calculate equivalent units
for materials and conversion costs.
Answer:
• Materials: 10,000 equivalent units (added at beginning, so 100%
complete)
• Conversion costs: 10,000 × 60% = 6,000 equivalent units
Question 12
FIFO vs. Weighted Average Process Costing - what's the key difference?
Answer:
• FIFO: Separates beginning inventory costs from current period costs
• Weighted Average: Combines beginning inventory costs with current
period costs FIFO provides more current cost information but is more
complex to calculate.
Chapter 6: Budgeting
Question 13
Sales Budget Problem: Quarter 1: 1,000 units at $50 each Quarter 2: 1,200 units
at $52 each Prepare the sales budget.
Answer: Sales Budget Quarter 1: 1,000 × $50 = $50,000 Quarter 2: 1,200 ×
$52 = $62,400 Total: $112,400
Question 14
Production Budget Problem: Budgeted sales: 5,000 units Desired ending
inventory: 500 units Beginning inventory: 300 units Calculate required
production.
Answer: Required production = Sales + Ending inventory - Beginning
inventory Required production = 5,000 + 500 - 300 = 5,200 units
Question 15
What are the benefits of participatory budgeting?
Answer: Benefits include:
