Solution Manual
Horngren’s Cost Accounting
17th Edition
1-1
,Table Of Contents
Chapter 1. The Manager And Management Accounting
Chapter 2. An Introduction To Cost Terms And Purposes
Chapter 3. Cost–Volume–Profit Analysis
Chapter 4. Job Costing
Chapter 5. Activity-Based Costing And Activity-Based Management
Chapter 6. Master Budget And Responsibility Accounting
Chapter 7. Flexible Budgets, Direct-Cost Variances, And Management Control
Chapter 8. Flexible Budgets, Overhead Cost Variances, And Management Control
Chapter 9. Inventory Costing And Capacity Analysis
Chapter 10. Determining How Costs Behave
Chapter 11. Data Analytic Thinking And Prediction
Chapter 12. Decision Making And Relevant Information
Chapter 13. Strategy, Balanced Scorecard, And Strategic Profitability Analysis
Chapter 14. Pricing Decisions And Cost Management
Chapter 15. Cost Allocation, Customer-Profitability Analysis, And Sales-Variance Analysis
Chapter 16. Allocation Of Support-Department Costs, Common Costs, And Revenues
Chapter 17. Cost Allocation: Joint Products And Byproducts
Chapter 18. Process Costing
Chapter 19. Spoilage, Rework, And Scrap
Chapter 20. Balanced Scorecard: Quality And Time
Chapter 21. Inventory Management, Just-In-Time, And Simplified Costing Methods
Chapter 22. Capital Budgeting And Cost Analysis
Chapter 23. Management Control Systems, Transfer Pricing, And Multinational
Considerations
Chapter 24. Performance Measurement, Compensation, And Multi-National Considerations
1-2
, CHAPTER 1
THE MANAGER AND MANAGEMENT ACCOUNTING
See The Front Matter Of This Solutions Manual For Suggestions Regarding Your Choices Of
Assignment Material For Each Chapter.
1-1 Management Accounting Measures, Analyzes And Reports Financial And Nonfinancial
Information That Helps Managers Make Decisions To Fulfill The Goals Of An Organization. It
Focuses On Internal Reporting And Is Not Restricted By Generally Accepted Accounting
Principles (GAAP).
Financial Accounting Focuses On Reporting To External Parties Such As Investors,
Government Agencies, And Banks. It Measures And Records Business Transactions And
Provides Financial Statements That Are Based On Generally Accepted Accounting Principles
(GAAP).
Other Differences Include (1) Management Accounting Emphasizes The Future (Not The
Past), And (2) Management Accounting Influences The Behavior Of Managers And Other
Employees (Rather Than Primarily Reporting Economic Events).
1-2 Financial Accounting Is Constrained By Generally Accepted Accounting Principles.
Management Accounting Is Not Restricted To These Principles. The Result Is That
Management Accounting Allows Managers To Charge Interest On Owners’ Capital To
Help Judge A Division’s Performance, Even Though Such A Charge Is Not Allowed
UnderGAAP,
Management Accounting Can Include Assets Or Liabilities (Such As “Brand Names”
Developed Internally) Not Recognized Under GAAP, And
Management Accounting Can Use Asset Or Liability Measurement Rules (Such As
PresentValues Or Resale Prices) Not Permitted Under GAAP.
1-3 Management Accountants Can Help To Formulate Strategy By Providing Information
About The Sources Of Competitive Advantage—For Example, The Cost, Productivity, Or
Efficiency Advantage Of Their Company Relative To Competitors Or The Premium Prices A
Company Can Charge Relative To The Costs Of Adding Features That Make Its Products Or
Services Distinctive.
1-4 The Business Functions In The Value Chain Are
Research And Development—Generating And Experimenting With Ideas Related To
NewProducts, Services, Or Processes.
Design Of Products And Processes—The Detailed Planning, Engineering, And
Testing OfProducts And Processes.
Production—Procuring, Transporting, Storing And Assembling Resources To
Produce AProduct Or Deliver A Service.
Marketing—Promoting And Selling Products Or Services To Customers Or
ProspectiveCustomers.
Distribution—Processing Orders And Shipping Products Or Services To Customers.
Customer Service—Providing After-Sales Service To Customers.
1-3
, 1-5 Supply Chain Describes The Flow Of Goods, Services, And Information From The Initial
Sources Of Materials And Services To The Delivery Of Products To Consumers, Regardless Of
Whether Those Activities Occur In The Same Organization Or In Other Organizations.
Cost Management Is Most Effective When It Integrates And Coordinates Activities
Across All Companies In The Supply Chain As Well As Across Each Business Function In An
Individual Company’s Value Chain. Attempts Are Made To Restructure All Cost Areas To Be
More Cost-Effective.
1-6 “Management Accounting Deals Only With Costs.” This Statement Is Misleading At
Best, And Wrong At Worst. Management Accounting Measures, Analyzes, And Reports
Financial And Non- Financial Information That Helps Managers Define The Organization’s
Goals, And Make Decisions To Fulfill Them. Management Accounting Also Analyzes Revenues
From Products And Customers In Order To Assess Product And Customer Profitability.
Therefore, While Management Accounting Does Use Cost Information, It Is Only A Part Of
The Organization’s Information Recorded And Analyzed By Management Accountants.
1-7 Management Accountants Can Help Improve Quality And Achieve Timely Product
Deliveries By Recording And Reporting An Organization’s Current Quality And Timeliness
Levels And By Analyzing And Evaluating The Costs And Benefits—Both Financial And Non-
Financial—Of New Quality Initiatives Such As TQM, Relieving Bottleneck Constraints Or
Providing Faster Customer Service.
1-8 The Five-Step Decision-Making Process Is (1) Identify The Problem And Uncertainties
(2) Obtain Information (3) Make Predictions About The Future (4) Make Decisions By
Choosing AmongAlternatives And (5) Implement The Decision, Evaluate Performance And
Learn.
1-9 Planning Decisions Focus On Selecting Organization Goals And Strategies, Predicting
Results Under Various Alternative Ways Of Achieving Those Goals, Deciding How To Attain
The Desired Goals, And Communicating The Goals And How To Attain Them To The Entire
Organization.
Control Decisions Focus On Taking Actions That Implement The Planning Decisions,
Deciding How To Evaluate Performance, And Providing Feedback And Learning To Help Future
DecisionMaking.
1-10 The Three Guidelines For Management Accountants Are
1. Employ A Cost-Benefit Approach.
2. Recognize Behavioral And Technical Considerations.
3. Apply The Notion Of “Different Costs For Different Purposes”.
1-11 Agree. A Successful Management Accountant Requires General Business Skills (Such
As Understanding The Strategy Of An Organization) And People Skills (Such As Motivating
Other Team Members) As Well As Technical Skills (Such As Computer Knowledge, Calculating
Costs Of Products, And Supporting Planning And Control Decisions).
1-4
Horngren’s Cost Accounting
17th Edition
1-1
,Table Of Contents
Chapter 1. The Manager And Management Accounting
Chapter 2. An Introduction To Cost Terms And Purposes
Chapter 3. Cost–Volume–Profit Analysis
Chapter 4. Job Costing
Chapter 5. Activity-Based Costing And Activity-Based Management
Chapter 6. Master Budget And Responsibility Accounting
Chapter 7. Flexible Budgets, Direct-Cost Variances, And Management Control
Chapter 8. Flexible Budgets, Overhead Cost Variances, And Management Control
Chapter 9. Inventory Costing And Capacity Analysis
Chapter 10. Determining How Costs Behave
Chapter 11. Data Analytic Thinking And Prediction
Chapter 12. Decision Making And Relevant Information
Chapter 13. Strategy, Balanced Scorecard, And Strategic Profitability Analysis
Chapter 14. Pricing Decisions And Cost Management
Chapter 15. Cost Allocation, Customer-Profitability Analysis, And Sales-Variance Analysis
Chapter 16. Allocation Of Support-Department Costs, Common Costs, And Revenues
Chapter 17. Cost Allocation: Joint Products And Byproducts
Chapter 18. Process Costing
Chapter 19. Spoilage, Rework, And Scrap
Chapter 20. Balanced Scorecard: Quality And Time
Chapter 21. Inventory Management, Just-In-Time, And Simplified Costing Methods
Chapter 22. Capital Budgeting And Cost Analysis
Chapter 23. Management Control Systems, Transfer Pricing, And Multinational
Considerations
Chapter 24. Performance Measurement, Compensation, And Multi-National Considerations
1-2
, CHAPTER 1
THE MANAGER AND MANAGEMENT ACCOUNTING
See The Front Matter Of This Solutions Manual For Suggestions Regarding Your Choices Of
Assignment Material For Each Chapter.
1-1 Management Accounting Measures, Analyzes And Reports Financial And Nonfinancial
Information That Helps Managers Make Decisions To Fulfill The Goals Of An Organization. It
Focuses On Internal Reporting And Is Not Restricted By Generally Accepted Accounting
Principles (GAAP).
Financial Accounting Focuses On Reporting To External Parties Such As Investors,
Government Agencies, And Banks. It Measures And Records Business Transactions And
Provides Financial Statements That Are Based On Generally Accepted Accounting Principles
(GAAP).
Other Differences Include (1) Management Accounting Emphasizes The Future (Not The
Past), And (2) Management Accounting Influences The Behavior Of Managers And Other
Employees (Rather Than Primarily Reporting Economic Events).
1-2 Financial Accounting Is Constrained By Generally Accepted Accounting Principles.
Management Accounting Is Not Restricted To These Principles. The Result Is That
Management Accounting Allows Managers To Charge Interest On Owners’ Capital To
Help Judge A Division’s Performance, Even Though Such A Charge Is Not Allowed
UnderGAAP,
Management Accounting Can Include Assets Or Liabilities (Such As “Brand Names”
Developed Internally) Not Recognized Under GAAP, And
Management Accounting Can Use Asset Or Liability Measurement Rules (Such As
PresentValues Or Resale Prices) Not Permitted Under GAAP.
1-3 Management Accountants Can Help To Formulate Strategy By Providing Information
About The Sources Of Competitive Advantage—For Example, The Cost, Productivity, Or
Efficiency Advantage Of Their Company Relative To Competitors Or The Premium Prices A
Company Can Charge Relative To The Costs Of Adding Features That Make Its Products Or
Services Distinctive.
1-4 The Business Functions In The Value Chain Are
Research And Development—Generating And Experimenting With Ideas Related To
NewProducts, Services, Or Processes.
Design Of Products And Processes—The Detailed Planning, Engineering, And
Testing OfProducts And Processes.
Production—Procuring, Transporting, Storing And Assembling Resources To
Produce AProduct Or Deliver A Service.
Marketing—Promoting And Selling Products Or Services To Customers Or
ProspectiveCustomers.
Distribution—Processing Orders And Shipping Products Or Services To Customers.
Customer Service—Providing After-Sales Service To Customers.
1-3
, 1-5 Supply Chain Describes The Flow Of Goods, Services, And Information From The Initial
Sources Of Materials And Services To The Delivery Of Products To Consumers, Regardless Of
Whether Those Activities Occur In The Same Organization Or In Other Organizations.
Cost Management Is Most Effective When It Integrates And Coordinates Activities
Across All Companies In The Supply Chain As Well As Across Each Business Function In An
Individual Company’s Value Chain. Attempts Are Made To Restructure All Cost Areas To Be
More Cost-Effective.
1-6 “Management Accounting Deals Only With Costs.” This Statement Is Misleading At
Best, And Wrong At Worst. Management Accounting Measures, Analyzes, And Reports
Financial And Non- Financial Information That Helps Managers Define The Organization’s
Goals, And Make Decisions To Fulfill Them. Management Accounting Also Analyzes Revenues
From Products And Customers In Order To Assess Product And Customer Profitability.
Therefore, While Management Accounting Does Use Cost Information, It Is Only A Part Of
The Organization’s Information Recorded And Analyzed By Management Accountants.
1-7 Management Accountants Can Help Improve Quality And Achieve Timely Product
Deliveries By Recording And Reporting An Organization’s Current Quality And Timeliness
Levels And By Analyzing And Evaluating The Costs And Benefits—Both Financial And Non-
Financial—Of New Quality Initiatives Such As TQM, Relieving Bottleneck Constraints Or
Providing Faster Customer Service.
1-8 The Five-Step Decision-Making Process Is (1) Identify The Problem And Uncertainties
(2) Obtain Information (3) Make Predictions About The Future (4) Make Decisions By
Choosing AmongAlternatives And (5) Implement The Decision, Evaluate Performance And
Learn.
1-9 Planning Decisions Focus On Selecting Organization Goals And Strategies, Predicting
Results Under Various Alternative Ways Of Achieving Those Goals, Deciding How To Attain
The Desired Goals, And Communicating The Goals And How To Attain Them To The Entire
Organization.
Control Decisions Focus On Taking Actions That Implement The Planning Decisions,
Deciding How To Evaluate Performance, And Providing Feedback And Learning To Help Future
DecisionMaking.
1-10 The Three Guidelines For Management Accountants Are
1. Employ A Cost-Benefit Approach.
2. Recognize Behavioral And Technical Considerations.
3. Apply The Notion Of “Different Costs For Different Purposes”.
1-11 Agree. A Successful Management Accountant Requires General Business Skills (Such
As Understanding The Strategy Of An Organization) And People Skills (Such As Motivating
Other Team Members) As Well As Technical Skills (Such As Computer Knowledge, Calculating
Costs Of Products, And Supporting Planning And Control Decisions).
1-4
