SOLUTIONS MANUAL
Managerial Accounting
RAY H. GARRISON, ERIC NOREEN, PETER C. BREWER
18th Edition
,SOLUTION MANUAL FOR MANAGERIAL ACCOUNTING 18th EDITION BY RAY GARRISON,
ERIC NOREEN AND PETER BREWERR ALL CHAPTERS INCLUDED 2023/2024.
Chapter 1
Managerial Accounting and Cost Concepts
Questions
1-1 The three major types of product costs in a 1-4
manufacturing company are direct materials, direct a. Variable cost: The variable cost per unit is
labor, and manufacturing overhead. constant, but total variable cost changes in
direct proportion to changes in volume.
1-2 b. Fixed cost: The total fixed cost is constant
a. Direct materials are an integral part of a within the relevant range. The average fixed cost
finished product and their costs can be per unit varies inversely with changes in
conveniently traced to it. volume.
b. Indirect materials are generally small items of c. Mixed cost: A mixed cost contains both
material such as glue and nails. They may be an variable and fixed cost elements.
integral part of a finished product but their costs can
be traced to the product only at great cost or 1-5
inconvenience. a. Unit fixed costs decrease as the activity level
c. Direct labor consists of labor costs that can increases.
be easily traced to particular products. b. Unit variable costs remain constant as the
Direct labor is also called ―touch labor.‖ activity level increases.
d. Indirect labor consists of the labor costs of c. Total fixed costs remain constant as the
janitors, supervisors, materials handlers, and other activity level increases.
factory workers that cannot be conveniently traced d. Total variable costs increase as the activity
to particular products. These labor costs are level increases.
incurred to support production, but the workers
involved do not directly work on the product. 1-6
e. Manufacturing overhead includes all a. Cost behavior: Cost behavior refers to the way
manufacturing costs except direct materials and in which costs change in response to changes
direct labor. Consequently, manufacturing overhead in a measure of activity such as sales volume,
includes indirect materials and indirect labor as well production volume, or orders processed.
as other manufacturing costs. b. Relevant range: The relevant range is the
range of activity within which assumptions
1-3 A product cost is any cost involved in about variable and fixed cost behavior are
purchasing or manufacturing goods. In the case of valid.
manufactured goods, these costs consist of direct
materials, direct labor, and manufacturing overhead. 1-7 An activity base is a measure of
A period cost is a cost that is taken directly to the whatever causes the incurrence of a variable cost.
income statement as an expense in the period in Examples of activity bases include units
which it is incurred. produced, units sold, letters typed, beds in a
hospital, meals served in a cafe, service calls
made, etc.
1-8 The linear assumption is reasonably valid
providing that the cost formula is used only within
the relevant range.
Managerial Accounting 18th Edition, Solutions Manual, Chapter 1 1
,SOLUTION MANUAL FOR MANAGERIAL ACCOUNTING 18th EDITION BY RAY GARRISON,
ERIC NOREEN AND PETER BREWERR ALL CHAPTERS INCLUDED 2023/2024.
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
Managerial Accounting 18th Edition, Solutions Manual, Chapter 1 1
, SOLUTION MANUAL FOR MANAGERIAL ACCOUNTING 18th EDITION BY RAY GARRISON,
ERIC NOREEN AND PETER BREWERR ALL CHAPTERS INCLUDED 2023/2024.
1-9 A discretionary fixed cost has a fairly 1-11 The traditional approach organizes costs by
short planning horizon—usually a year. Such function, such as production, selling, and
costs arise from annual decisions by management administration. Within a functional area, fixed and
to spend on certain fixed cost items, such as variable costs are intermingled. The contribution
advertising, research, and management approach income statement organizes costs by
development. A committed fixed cost has a long behavior, first deducting variable expenses to obtain
planning horizon—generally many years. Such contribution margin, and then deducting fixed
costs relate to a company’s investment in expenses to obtain net operating income.
facilities, equipment, and basic organization. Once
such costs have been incurred, they are ―locked 1-12 The contribution margin is total sales
in‖ for many years. revenue less total variable expenses.
1-10 Yes. As the anticipated level of activity 1-13 A differential cost is a cost that differs
changes, the level of fixed costs needed to support between alternatives in a decision. A sunk cost is a
operations may also change. Most fixed costs are cost that has already been incurred and cannot be
adjusted upward and downward in large steps, rather altered by any decision taken now or in the future. An
than being absolutely fixed at one level for all ranges opportunity cost is the potential benefit that is given
of activity. up when one alternative is selected over another.
1-14 No, differential costs can be either variable
or fixed. For example, the alternatives might consist
of purchasing one machine rather than another to
make a product. The difference between the fixed
costs of purchasing the two machines is a
differential cost.
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
Managerial Accounting 18th Edition, Solutions Manual, Chapter 1
Managerial Accounting
RAY H. GARRISON, ERIC NOREEN, PETER C. BREWER
18th Edition
,SOLUTION MANUAL FOR MANAGERIAL ACCOUNTING 18th EDITION BY RAY GARRISON,
ERIC NOREEN AND PETER BREWERR ALL CHAPTERS INCLUDED 2023/2024.
Chapter 1
Managerial Accounting and Cost Concepts
Questions
1-1 The three major types of product costs in a 1-4
manufacturing company are direct materials, direct a. Variable cost: The variable cost per unit is
labor, and manufacturing overhead. constant, but total variable cost changes in
direct proportion to changes in volume.
1-2 b. Fixed cost: The total fixed cost is constant
a. Direct materials are an integral part of a within the relevant range. The average fixed cost
finished product and their costs can be per unit varies inversely with changes in
conveniently traced to it. volume.
b. Indirect materials are generally small items of c. Mixed cost: A mixed cost contains both
material such as glue and nails. They may be an variable and fixed cost elements.
integral part of a finished product but their costs can
be traced to the product only at great cost or 1-5
inconvenience. a. Unit fixed costs decrease as the activity level
c. Direct labor consists of labor costs that can increases.
be easily traced to particular products. b. Unit variable costs remain constant as the
Direct labor is also called ―touch labor.‖ activity level increases.
d. Indirect labor consists of the labor costs of c. Total fixed costs remain constant as the
janitors, supervisors, materials handlers, and other activity level increases.
factory workers that cannot be conveniently traced d. Total variable costs increase as the activity
to particular products. These labor costs are level increases.
incurred to support production, but the workers
involved do not directly work on the product. 1-6
e. Manufacturing overhead includes all a. Cost behavior: Cost behavior refers to the way
manufacturing costs except direct materials and in which costs change in response to changes
direct labor. Consequently, manufacturing overhead in a measure of activity such as sales volume,
includes indirect materials and indirect labor as well production volume, or orders processed.
as other manufacturing costs. b. Relevant range: The relevant range is the
range of activity within which assumptions
1-3 A product cost is any cost involved in about variable and fixed cost behavior are
purchasing or manufacturing goods. In the case of valid.
manufactured goods, these costs consist of direct
materials, direct labor, and manufacturing overhead. 1-7 An activity base is a measure of
A period cost is a cost that is taken directly to the whatever causes the incurrence of a variable cost.
income statement as an expense in the period in Examples of activity bases include units
which it is incurred. produced, units sold, letters typed, beds in a
hospital, meals served in a cafe, service calls
made, etc.
1-8 The linear assumption is reasonably valid
providing that the cost formula is used only within
the relevant range.
Managerial Accounting 18th Edition, Solutions Manual, Chapter 1 1
,SOLUTION MANUAL FOR MANAGERIAL ACCOUNTING 18th EDITION BY RAY GARRISON,
ERIC NOREEN AND PETER BREWERR ALL CHAPTERS INCLUDED 2023/2024.
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
Managerial Accounting 18th Edition, Solutions Manual, Chapter 1 1
, SOLUTION MANUAL FOR MANAGERIAL ACCOUNTING 18th EDITION BY RAY GARRISON,
ERIC NOREEN AND PETER BREWERR ALL CHAPTERS INCLUDED 2023/2024.
1-9 A discretionary fixed cost has a fairly 1-11 The traditional approach organizes costs by
short planning horizon—usually a year. Such function, such as production, selling, and
costs arise from annual decisions by management administration. Within a functional area, fixed and
to spend on certain fixed cost items, such as variable costs are intermingled. The contribution
advertising, research, and management approach income statement organizes costs by
development. A committed fixed cost has a long behavior, first deducting variable expenses to obtain
planning horizon—generally many years. Such contribution margin, and then deducting fixed
costs relate to a company’s investment in expenses to obtain net operating income.
facilities, equipment, and basic organization. Once
such costs have been incurred, they are ―locked 1-12 The contribution margin is total sales
in‖ for many years. revenue less total variable expenses.
1-10 Yes. As the anticipated level of activity 1-13 A differential cost is a cost that differs
changes, the level of fixed costs needed to support between alternatives in a decision. A sunk cost is a
operations may also change. Most fixed costs are cost that has already been incurred and cannot be
adjusted upward and downward in large steps, rather altered by any decision taken now or in the future. An
than being absolutely fixed at one level for all ranges opportunity cost is the potential benefit that is given
of activity. up when one alternative is selected over another.
1-14 No, differential costs can be either variable
or fixed. For example, the alternatives might consist
of purchasing one machine rather than another to
make a product. The difference between the fixed
costs of purchasing the two machines is a
differential cost.
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw Hill LLC.
Managerial Accounting 18th Edition, Solutions Manual, Chapter 1
