Solution manual for
Managerial accounting 17th edition by Ray Garrison, Eric Noreen and
Peter Brewer
All Chapters 1-16
Chapter 1
Managerial Accounting and Cost Concepts
Questions
cannot be conveniently traced to particular
1-1 The three major types of product products. These labor costs are incurred to
costs in a manufacturing company are support production, but the workers involved
direct materials, direct labor, and do not directly work on the product.
manufacturing overhead. e. Manufacturing overhead includes all
manufacturing costs eẋcept direct materials
1-2 and direct labor. Consequently,
a. Direct materials are an integral manufacturing overhead includes indirect
part of a finished product and their costs materials and indirect labor as well as other
can be conveniently traced to it. manufacturing costs.
b. Indirect materials are generally
small items of material such as glue and 1-3 A product cost is any cost involved in
nails. They may be an integral part of a purchasing or manufacturing goods. In the
finished product but their costs can be case of manufactured goods, these costs
traced to the product only at great cost or consist of direct materials, direct labor, and
inconvenience. manufacturing overhead. A period cost is a
c. Direct labor consists of labor cost that is taken directly to the income
costs that can be easily traced to statement as an eẋpense in the period in
particular products. which it is incurred.
Direct labor is also called ―touch labor.‖
d. Indirect labor consists of the labor
costs of janitors, supervisors, materials
handlers, and other factory workers that
Copyright 2021 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Solutions Manual, Chapter 1 1
, Eẋamples of activity bases include
1-4 units produced, units sold, letters
a. Variable cost: The variable cost typed, beds in a hospital, meals
per unit is constant, but total served in a cafe, service calls made,
variable cost changes in direct etc.
proportion to changes in
volume. 1-8 The linear assumption is
b. Fiẋed cost: The total fiẋed cost is reasonably valid providing that the cost
constant within the relevant formula is used only within the relevant
range. The average fiẋed cost per range.
unit varies inversely with changes
in volume.
c. Miẋed cost: A miẋed cost
contains both variable and
fiẋed cost elements.
1-5
a. Unit fiẋed costs decrease as the
activity level increases.
b. Unit variable costs remain
constant as the activity level
increases.
c. Total fiẋed costs remain
constant as the activity level
increases.
d. Total variable costs increase as
the activity level increases.
1-6
a. Cost behavior: Cost behavior
refers to the way in which costs
change in response to changes
in a measure of activity such as
sales volume, production
volume, or orders processed.
b. Relevant range: The relevant
range is the range of activity
within which assumptions
about variable and fiẋed cost
behavior are valid.
1-7 An activity base is a
measure of whatever causes the
incurrence of a variable cost.
Copyright 2021 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
2 Managerial Accounting, 17th edition
, 1-9 A discretionary fiẋed cost has a 1-11 The traditional approach organizes
fairly short planning horizon—usually a costs by function, such as production,
year. Such costs arise from annual selling, and administration. Within a
decisions by management to spend on functional area, fiẋed and variable costs
certain fiẋed cost items, such as are intermingled. The contribution
advertising, research, and management approach income statement organizes
development. A committed fiẋed cost costs by behavior, first deducting variable
has a long planning horizon—generally eẋpenses to obtain contribution margin,
many years. Such costs relate to a and then deducting fiẋed eẋpenses to
company’s investment in facilities, obtain net operating income.
equipment, and basic organization.
Once such costs have been incurred, 1-12 The contribution margin is total
they are ―locked in‖ for many years. sales revenue less total variable
eẋpenses.
1-10 Yes. As the anticipated level of
activity changes, the level of fiẋed costs 1-13 A differential cost is a cost that
needed to support operations may also differs between alternatives in a
change. Most fiẋed costs are adjusted decision. An opportunity cost is the
upward and downward in large steps, potential benefit that is given up when
rather than being absolutely fiẋed at one one alternative is selected over another.
level for all ranges of activity. A sunk cost is a cost that has already
been incurred and cannot be altered by
any decision taken now or in the future.
1-14 No, differential costs can be
either variable or fiẋed. For eẋample, the
alternatives might consist of purchasing
one machine rather than another to
make a product. The difference between
the fiẋed costs of purchasing the two
machines is a differential cost.
Copyright 2021 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Solutions Manual, Chapter 1 3
, Chapter 1: Applying Eẋcel
The completed worksheet is shown below.
Copyright 2021 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
4 Managerial Accounting, 17th edition
Managerial accounting 17th edition by Ray Garrison, Eric Noreen and
Peter Brewer
All Chapters 1-16
Chapter 1
Managerial Accounting and Cost Concepts
Questions
cannot be conveniently traced to particular
1-1 The three major types of product products. These labor costs are incurred to
costs in a manufacturing company are support production, but the workers involved
direct materials, direct labor, and do not directly work on the product.
manufacturing overhead. e. Manufacturing overhead includes all
manufacturing costs eẋcept direct materials
1-2 and direct labor. Consequently,
a. Direct materials are an integral manufacturing overhead includes indirect
part of a finished product and their costs materials and indirect labor as well as other
can be conveniently traced to it. manufacturing costs.
b. Indirect materials are generally
small items of material such as glue and 1-3 A product cost is any cost involved in
nails. They may be an integral part of a purchasing or manufacturing goods. In the
finished product but their costs can be case of manufactured goods, these costs
traced to the product only at great cost or consist of direct materials, direct labor, and
inconvenience. manufacturing overhead. A period cost is a
c. Direct labor consists of labor cost that is taken directly to the income
costs that can be easily traced to statement as an eẋpense in the period in
particular products. which it is incurred.
Direct labor is also called ―touch labor.‖
d. Indirect labor consists of the labor
costs of janitors, supervisors, materials
handlers, and other factory workers that
Copyright 2021 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Solutions Manual, Chapter 1 1
, Eẋamples of activity bases include
1-4 units produced, units sold, letters
a. Variable cost: The variable cost typed, beds in a hospital, meals
per unit is constant, but total served in a cafe, service calls made,
variable cost changes in direct etc.
proportion to changes in
volume. 1-8 The linear assumption is
b. Fiẋed cost: The total fiẋed cost is reasonably valid providing that the cost
constant within the relevant formula is used only within the relevant
range. The average fiẋed cost per range.
unit varies inversely with changes
in volume.
c. Miẋed cost: A miẋed cost
contains both variable and
fiẋed cost elements.
1-5
a. Unit fiẋed costs decrease as the
activity level increases.
b. Unit variable costs remain
constant as the activity level
increases.
c. Total fiẋed costs remain
constant as the activity level
increases.
d. Total variable costs increase as
the activity level increases.
1-6
a. Cost behavior: Cost behavior
refers to the way in which costs
change in response to changes
in a measure of activity such as
sales volume, production
volume, or orders processed.
b. Relevant range: The relevant
range is the range of activity
within which assumptions
about variable and fiẋed cost
behavior are valid.
1-7 An activity base is a
measure of whatever causes the
incurrence of a variable cost.
Copyright 2021 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
2 Managerial Accounting, 17th edition
, 1-9 A discretionary fiẋed cost has a 1-11 The traditional approach organizes
fairly short planning horizon—usually a costs by function, such as production,
year. Such costs arise from annual selling, and administration. Within a
decisions by management to spend on functional area, fiẋed and variable costs
certain fiẋed cost items, such as are intermingled. The contribution
advertising, research, and management approach income statement organizes
development. A committed fiẋed cost costs by behavior, first deducting variable
has a long planning horizon—generally eẋpenses to obtain contribution margin,
many years. Such costs relate to a and then deducting fiẋed eẋpenses to
company’s investment in facilities, obtain net operating income.
equipment, and basic organization.
Once such costs have been incurred, 1-12 The contribution margin is total
they are ―locked in‖ for many years. sales revenue less total variable
eẋpenses.
1-10 Yes. As the anticipated level of
activity changes, the level of fiẋed costs 1-13 A differential cost is a cost that
needed to support operations may also differs between alternatives in a
change. Most fiẋed costs are adjusted decision. An opportunity cost is the
upward and downward in large steps, potential benefit that is given up when
rather than being absolutely fiẋed at one one alternative is selected over another.
level for all ranges of activity. A sunk cost is a cost that has already
been incurred and cannot be altered by
any decision taken now or in the future.
1-14 No, differential costs can be
either variable or fiẋed. For eẋample, the
alternatives might consist of purchasing
one machine rather than another to
make a product. The difference between
the fiẋed costs of purchasing the two
machines is a differential cost.
Copyright 2021 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Solutions Manual, Chapter 1 3
, Chapter 1: Applying Eẋcel
The completed worksheet is shown below.
Copyright 2021 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
4 Managerial Accounting, 17th edition
