Solutions Manual for Managerial Accounting, 18th Edition by Ray Garrison, Eric Noreen, and Peter Brewer Latest Verified Edition

SolutionManualforManagerialAccounting,
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18thEdition t




ByRayGarrison, Eric Noreen and Peter Brewer
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VerifiedChapter's1 - 16 | Complete
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,TableofContents t t




Chapter One: Managerial Accounting and Cost Concepts
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Chapter Two: Job-Order Costing: Calculating Unit Product Costs
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Chapter Three: Job-Order Costing: Cost Flows and External Reporting
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Chapter Four: Process Costing
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Chapter Five: Cost-Volume-Profit Relationships
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Chapter Six: Variable Costing and Segment Reporting: Tools for Management
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Chapter Seven: Activity-Based Costing: A Tool to Aid Decision Making
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Chapter Eight: Master Budgeting
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Chapter Nine: Flexible Budgets and Performance Analysis
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Chapter Ten: Standard Costs and Variances
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Chapter Eleven: Responsibility Accounting Systems
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Chapter Twelve: Strategic Performance Measurement
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Chapter Thirteen: Differential Analysis: The Key to Decision Making
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Chapter Fourteen: Capital Budgeting Decisions
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Chapter Fifteen: Statement of Cash Flows
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Chapter Sixteen: Financial Statement Analysis
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,Chapter1 t




ManagerialAccountingandCostConcepts t t t t




Questions


1-1 Thethreemajortypesofproductcosts in a t t t t t t t t
1-4
manufacturing company are direct materials,
t t t t t a. Variable cost: The variable cost per unit is t t t t t t t




direct labor, and manufacturing overhead.
t t t t t constant,buttotalvariable costchangesin
t t t t t t t




direct proportion to changes in volume.
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1-2 b. Fixed cost: The total fixed cost is constant within t t t t t t t t




a. Directmaterialsare anintegralpart ofa t t t t t t t therelevantrange.Theaveragefixed cost per
t t t t t t t t




finished product and their costs can be
t t t t t t t unit varies inversely with changes in volume.
t t t t t t t




conveniently traced to it.
t t t t c. Mixedcost:Amixedcostcontainsboth t t t t t t




b. Indirect materials are generally small items t t t t t variable and fixed cost elements.
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of material such as glue and nails. They maybean
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integralpart ofafinishedproduct but their costs can
t t t t t t t t t t 1-5
be traced to the product only at great cost or
t t t t t t t t t t a. Unitfixedcostsdecreaseas theactivitylevel
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inconvenience.
t
increases.
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c. Directlaborconsistsoflaborcoststhat can t t t t t t t b. Unitvariablecostsremainconstantasthe
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be easily traced to particular products.
t t t t t t activity level increases.
t t t




Directlaborisalsocalled―touchlabor.‖
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c. Totalfixedcostsremainconstantasthe t t t t t t




d. Indirect labor consists of the labor costs of t t t t t t t activity level increases.
t t t




janitors,supervisors,materialshandlers,and other
t t t t t t d. Totalvariablecostsincreaseastheactivity t t t t t t




factory workers that cannot be conveniently
t t t t t t level increases.
t t




traced to particular products. These labor costs are
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incurred to support production, but the workers
t t t t t t t
1-6
involved do not directly work on the product.
t t t t t t t t a. Cost behavior: Cost behavior refers to the way
t t t t t t t




e. Manufacturing overhead includes all t t t in which costs change in response to changes
t t t t t t t t




manufacturing costs except direct materials and
t t t t t t in a measure of activity such as salesvolume,
t t t t t t t t t




direct labor. Consequently, manufacturing
t t t t productionvolume,ororders processed.
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overheadincludesindirectmaterialsandindirect
t t t t t t b. Relevant range: The relevant range is the t t t t t t




labor as well as other manufacturing costs.
t t t t t t t rangeofactivitywithinwhichassumptions
t t t t t t




aboutvariable and fixed cost behaviorare
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1-3 A product cost is any cost involved in t t t t t t t valid.
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purchasingormanufacturing goods.Inthe case of
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manufactured goods, these costs consist of direct
t t t t t t t 1-7 An activity base is a measure of t t t t t t




materials,directlabor,andmanufacturing
t t t t t whatevercausestheincurrence ofavariable
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overhead. A period cost is a cost that is taken directly
t t t t t t t t t t t cost.Examplesofactivitybasesincludeunits
t t t t t t t




to the income statement as an expense in the period
t t t t t t t t t t produced, units sold, letters typed,bedsina
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in which it is incurred.
t t t t t hospital,mealsservedina cafe,service calls
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made, etc.
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1-8 The linear assumption is reasonably valid t t t t t




providingthatthecostformulaisusedonly within the
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relevant range.
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, 1-9 A discretionary fixed cost has a fairly t t t t t t 1-11 Thetraditionalapproachorganizescosts by t t t t t




short planning horizon—usually a year. Such
t t t t t t function, such as production, selling, and
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costs arise from annual decisions by
t t t t t t administration. Within a functional area, fixed and
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management to spend on certain fixed cost
t t t t t t t variable costs are intermingled. The contribution
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items, such as advertising, research, and
t t t t t t approach income statement organizes costs by
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managementdevelopment.Acommittedfixed
t t t t t behavior, first deducting variableexpensesto
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cost has a long planning horizon—generally
t t t t t t obtaincontributionmargin, andthendeducting
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many years. Such costs relate to a company’s
t t t t t t t t fixedexpensestoobtainnet operating income.
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investment in facilities, equipment, and basic
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organization. Once such costs have been
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1-12 Thecontributionmarginistotalsales t t t t t




incurred,theyare―lockedin‖formanyyears.
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revenue less total variable expenses.
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1-10 Yes. As the anticipated level of activity t t t t t t 1-13 A differential cost is a cost that differs t t t t t t t




changes, the level of fixed costs needed to support
t t t t t t t t t between alternatives in a decision. A sunk cost is a
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operations may also change. Most fixed costs are
t t t t t t t t cost that has already been incurred and cannot be
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adjusted upward and downward in largesteps,
t t t t t t t altered by any decision taken now or inthefuture.An
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ratherthanbeingabsolutelyfixedat one level for all
t t t t t t t t t t opportunitycostisthepotential benefit that is given
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ranges of activity.
t t t up when one alternative is selected over another.
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1-14 No, differential costs can be either variable t t t t t t




or fixed. For example, the alternatives might
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consistofpurchasingonemachinerather than
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anothertomakeaproduct.Thedifference between
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the fixed costs of purchasing the two machines is a
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differential cost.
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Managerial Accounting 18th Edition, Solutions Manual,
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