SOLUTIONS MANUAL
** All Chapters included
** Solutions to Questions
** Exercise & Problems
** Excel Analytics Solutions
** Lecture Notes & Cases
,Table of Contents are given below
1. Managerial Accounting and Cost Concepts
2. Cost-Volume-Profit Relationships
3. Job-Order Costing: Calculating Unit Product Costs
4. Variable Costing and Segment Reporting: Tools for Management
5. Activity-Based Costing: A Tool to Aid Decision Making
6. Differential Analysis: The Key to Decision Making
7. Capital Budgeting Decisions
8. Master Budgeting
9. Flexible Budgets and Performance Analysis
10. Standard Costs and Variances
11. Responsibility Accounting Systems
12. Strategic Performance Measurement
,Chapter 1
Managerial Accounting and Cost Concepts
Questions
1-1 The three major types of product costs in a a. Variable cost: The variable cost per unit is
manufacturing company are direct constant, but total variable cost changes in
materials, direct labor, and manufacturing direct proportion to changes in volume.
overhead. b. Fixed cost: The total fixed cost is constant
within the relevant range. The average
1-2 fixed cost per unit varies inversely with
changes in volume.
a. Direct materials are an integral part of a c. Mixed cost: A mixed cost contains both
finished product and their costs can be variable and fixed cost elements.
conveniently traced to it.
b. Indirect materials are generally small items 1-5
of material such as glue and nails. They
may be an integral part of a finished a. Unit fixed costs decrease as the activity level
product but their costs can be traced to the increases.
product only at great cost or b. Unit variable costs remain constant as the
inconvenience. activity level increases.
c. Direct labor consists of labor costs that can c. Total fixed costs remain constant as the
be easily traced to particular products. activity level increases.
Direct labor is also called “touch labor.” d. Total variable costs increase as the activity
d. Indirect labor consists of the labor costs of level increases.
janitors, supervisors, materials handlers,
and other factory workers that cannot be 1-6
conveniently traced to particular products.
These labor costs are incurred to support a. Cost behavior: Cost behavior refers to the
production, but the workers involved do way in which costs change in response to
not directly work on the product. changes in a measure of activity such as
e. Manufacturing overhead includes all sales volume, production volume, or orders
manufacturing costs except direct materials processed.
and direct labor. Consequently, b. Relevant range: The relevant range is the
manufacturing overhead includes indirect range of activity within which assumptions
materials and indirect labor as well as other about variable and fixed cost behavior are
manufacturing costs. valid.
1-3 A product cost is any cost involved in 1-7 An activity base is a measure of whatever
purchasing or manufacturing goods. In the causes the incurrence of a variable cost.
case of manufactured goods, these costs Examples of activity bases include units
consist of direct materials, direct labor, and produced, units sold, letters typed, beds in
manufacturing overhead. A period cost is a a hospital, meals served in a cafe, service
cost that is taken directly to the income calls made, etc.
statement as an expense in the period in
which it is incurred. 1-8 The linear assumption is reasonably valid
providing that the cost formula is used only
1-4 within the relevant range.
1-9 A discretionary fixed cost has a fairly short
planning horizon—usually a year. Such
Solutions Manual, Chapter 1 1
, costs arise from annual decisions by
management to spend on certain fixed cost
items, such as advertising, research, and
management development. A committed
fixed cost has a long planning horizon—
generally many years. Such costs relate to
a company’s investment in facilities,
equipment, and basic organization. Once
such costs have been incurred, they are
“locked in” for many years.
1-10 Yes. As the anticipated level of activity
changes, the level of fixed costs needed to
support operations may also change. Most
fixed costs are adjusted upward and
downward in large steps, rather than being
absolutely fixed at one level for all ranges
of activity.
1-11 The traditional approach organizes costs by
function, such as production, selling, and
administration. Within a functional area,
fixed and variable costs are intermingled.
The contribution approach income
statement organizes costs by behavior, first
deducting variable expenses to obtain
contribution margin, and then deducting
fixed expenses to obtain net operating
income.
1-12 The contribution margin is total sales
revenue less total variable expenses.
1-13 A differential cost is a cost that differs
between alternatives in a decision. A sunk
cost is a cost that has already been
incurred and cannot be altered by any
decision taken now or in the future. An
opportunity cost is the potential benefit
that is given 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.
Solutions Manual, Chapter 1 1
** All Chapters included
** Solutions to Questions
** Exercise & Problems
** Excel Analytics Solutions
** Lecture Notes & Cases
,Table of Contents are given below
1. Managerial Accounting and Cost Concepts
2. Cost-Volume-Profit Relationships
3. Job-Order Costing: Calculating Unit Product Costs
4. Variable Costing and Segment Reporting: Tools for Management
5. Activity-Based Costing: A Tool to Aid Decision Making
6. Differential Analysis: The Key to Decision Making
7. Capital Budgeting Decisions
8. Master Budgeting
9. Flexible Budgets and Performance Analysis
10. Standard Costs and Variances
11. Responsibility Accounting Systems
12. Strategic Performance Measurement
,Chapter 1
Managerial Accounting and Cost Concepts
Questions
1-1 The three major types of product costs in a a. Variable cost: The variable cost per unit is
manufacturing company are direct constant, but total variable cost changes in
materials, direct labor, and manufacturing direct proportion to changes in volume.
overhead. b. Fixed cost: The total fixed cost is constant
within the relevant range. The average
1-2 fixed cost per unit varies inversely with
changes in volume.
a. Direct materials are an integral part of a c. Mixed cost: A mixed cost contains both
finished product and their costs can be variable and fixed cost elements.
conveniently traced to it.
b. Indirect materials are generally small items 1-5
of material such as glue and nails. They
may be an integral part of a finished a. Unit fixed costs decrease as the activity level
product but their costs can be traced to the increases.
product only at great cost or b. Unit variable costs remain constant as the
inconvenience. activity level increases.
c. Direct labor consists of labor costs that can c. Total fixed costs remain constant as the
be easily traced to particular products. activity level increases.
Direct labor is also called “touch labor.” d. Total variable costs increase as the activity
d. Indirect labor consists of the labor costs of level increases.
janitors, supervisors, materials handlers,
and other factory workers that cannot be 1-6
conveniently traced to particular products.
These labor costs are incurred to support a. Cost behavior: Cost behavior refers to the
production, but the workers involved do way in which costs change in response to
not directly work on the product. changes in a measure of activity such as
e. Manufacturing overhead includes all sales volume, production volume, or orders
manufacturing costs except direct materials processed.
and direct labor. Consequently, b. Relevant range: The relevant range is the
manufacturing overhead includes indirect range of activity within which assumptions
materials and indirect labor as well as other about variable and fixed cost behavior are
manufacturing costs. valid.
1-3 A product cost is any cost involved in 1-7 An activity base is a measure of whatever
purchasing or manufacturing goods. In the causes the incurrence of a variable cost.
case of manufactured goods, these costs Examples of activity bases include units
consist of direct materials, direct labor, and produced, units sold, letters typed, beds in
manufacturing overhead. A period cost is a a hospital, meals served in a cafe, service
cost that is taken directly to the income calls made, etc.
statement as an expense in the period in
which it is incurred. 1-8 The linear assumption is reasonably valid
providing that the cost formula is used only
1-4 within the relevant range.
1-9 A discretionary fixed cost has a fairly short
planning horizon—usually a year. Such
Solutions Manual, Chapter 1 1
, costs arise from annual decisions by
management to spend on certain fixed cost
items, such as advertising, research, and
management development. A committed
fixed cost has a long planning horizon—
generally many years. Such costs relate to
a company’s investment in facilities,
equipment, and basic organization. Once
such costs have been incurred, they are
“locked in” for many years.
1-10 Yes. As the anticipated level of activity
changes, the level of fixed costs needed to
support operations may also change. Most
fixed costs are adjusted upward and
downward in large steps, rather than being
absolutely fixed at one level for all ranges
of activity.
1-11 The traditional approach organizes costs by
function, such as production, selling, and
administration. Within a functional area,
fixed and variable costs are intermingled.
The contribution approach income
statement organizes costs by behavior, first
deducting variable expenses to obtain
contribution margin, and then deducting
fixed expenses to obtain net operating
income.
1-12 The contribution margin is total sales
revenue less total variable expenses.
1-13 A differential cost is a cost that differs
between alternatives in a decision. A sunk
cost is a cost that has already been
incurred and cannot be altered by any
decision taken now or in the future. An
opportunity cost is the potential benefit
that is given 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.
Solutions Manual, Chapter 1 1
