Solution Manual for Horngren's Financial & Managerial Accounting, The Financial Chapters, 7th Edition by Tracie Miller-Nobles, Brenda Mattison Chapter 1-15

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Horngren's Managerial Chapters Accounting, 7th Edition by Tracie
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Chapter 1-11
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Chapter 1 bn




Introduction to Managerial Accounting bn bn bn




Review Questions bn




1. The primary purpose of managerial accounting is to provide information to help managers
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plan,direct, control, and make decisions.
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2. Financial accounting and managerial accounting differ on the following 6 dimensions: (1)
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primaryusers, (2) purpose of information, (3) focus and time dimension of the information, (4)
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rules and restrictions, (5) scope of information, and (6) behavioral.
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3. Line positions are directly involved in providing goods or services to customers. Staff
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positionssupport line positions.
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4. Planning means choosing goals and deciding how to achieve them. Directing involves running the
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day-to-day operations of a business. Controlling is the process of monitoring operations and
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keepingthe company on track.
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5. The four IMA standards of ethical practice and a description of each follow.
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I. Competence.
Maintain an appropriate level of professional leadership and expertise by
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enhancingknowledge and skills.
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Perform professional duties in accordance with relevant laws, regulations, and
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technicalstandards.
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Provide decision support information and recommendations that are accurate, clear,
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concise,and timely.
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Recognise and help mange risk. bn bn bn bn



II. Confidentiality.
Keep information confidential except when disclosure is authorized or legally required.
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Inform all relevant parties regarding appropriate use of confidential information. Monitor
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toensure compliance.
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Refrain from using confidential information for unethical or illegal advantage.
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III. Integrity.
Mitigate actual conflicts of interest. Regularly communicate with business associates to
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avoidapparent conflicts of interest. Advise all parties of any potential conflicts.
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Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
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Abstain from engaging in or supporting any activity that might discredit the profession.
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, Contribute to a positive ethical culture and place integrity of the profession above
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personalinterest.
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5, cont.
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IV. Credibility.
Communicate information fairly and objectively. bn bn bn bn


Provide all relevant information that could reasonably be expected to influence an
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intendeduser’s understanding of the reports, analyses, or recommendations.
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Report any delays or deficiencies in information, timeliness, processing, or internal
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controlsin conformance with organization policy and/or applicable law.
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Communicate any professional limitations or other constraints that would preclude bn bn bn bn bn bn bn bn bn


responsi-ble judgment or successful performance of an activity.
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6. Service companies sell time, skills, and knowledge. Examples of service companies include
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phoneservice companies, banks, cleaning service companies, accounting firms, law firms, medical
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physicians, and online auction services.
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7. Merchandising companies resell products they buy from suppliers. Merchandisers keep an
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inventoryof products, and managers are accountable for the purchasing, storage, and sale of the
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products. Examples of merchandising companies include toy stores, grocery stores, and clothing
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stores.
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8. Merchandising companies resell products they previously bought from suppliers, whereas
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manufacturing companies use labor, equipment, supplies, and facilities to convert raw materials
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intonew finished products. In contrast to merchandising companies, manufacturing companies
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have a broad range of production activities that require tracking costs on three kinds of
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inventory.
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9. The three inventory accounts used by manufacturing companies are Raw Materials Inventory,
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Work-in-Process Inventory, and Finished Goods Inventory.
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Raw Materials Inventory includes materials used to manufacture a product. Work-in-
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ProcessInventory includes goods that have been started in the manufacturing process but are
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not yet complete. Finished Goods Inventory includes completed goods that have not yet
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been sold.
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10. A direct cost is a cost that can be easily and cost-effectively traced to a cost object (which is
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anything for which managers want a separate measurement of cost). An indirect cost is a cost
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thatcannot be easily or cost-effectively traced to a cost object.
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11. The three manufacturing costs for a manufacturing company are direct materials, direct labor, and
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manufacturing overhead. Direct materials are materials that become a physical part of a finished
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,bn product and whose costs are easily traceable to the finished product. Direct labor is the labor
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bn cost ofthe employees who convert materials into finished products. Manufacturing overhead
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bn includes all bn




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, manufacturing costs except direct materials and direct labor, such as indirect materials,
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indirectlabor, factory depreciation, factory rent, and factory property taxes.
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12. Examples of manufacturing overhead include costs of indirect materials, indirect labor, repair
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bnandmaintenance in factory, factory utilities, factory rent, factory insurance, factory property
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bntaxes, manufacturing plant managers’ salaries, and depreciation on manufacturing buildings and
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bnequipment.

13. Prime costs are direct materials plus direct labor. Conversion costs are direct labor plus
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bnmanufacturing overhead. Note that direct labor is classified as both a prime cost and a
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bnconversioncost. n
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14. Product costs are the cost of purchasing or making a product. These costs are recorded as an
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bnasset and not expensed until the product is sold. Product costs include direct materials, direct
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bnlabor, andmanufacturing overhead.
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15. Period costs are non-manufacturing costs that are expensed in the same accounting period in
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bnwhichthey are incurred, whereas product costs are recorded as an asset and not expensed until
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bnthe accounting period in which the product is sold.
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16. Cost of Goods Manufactured is calculated as Beginning Work-in-Process Inventory +
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bnTotalManufacturing Costs Incurred during the Year – Ending Work-in-Process
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bnInventory. TotalManufacturing Costs Incurred during the Year = Direct Materials Used
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bn+ Direct Labor + Manufacturing Overhead.
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17. For a manufacturing company, the activity in the Finished Goods Inventory account provides
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bntheinformation for determining Cost of Goods Sold. A manufacturing company calculates
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bnCost of Goods Sold as Beginning Finished Goods Inventory + Cost of Goods Manufactured
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bn– Ending Finished Good Inventory. In addition, a manufacturing company must track costs
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bnfrom Raw Materials Inventory and Work-in-Process Inventory in order to compute Cost of
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bnGoods Manufactured used in the previous equation.
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For a merchandising company, the activity in the Merchandise Inventory account provides the
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information for determining Cost of Goods Sold. A merchandising company calculates Cost of
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Goods Sold as Beginning Merchandise Inventory + Purchases and Freight In – Ending
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MerchandiseInventory.
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18. A manufacturing company calculates unit product cost as Cost of Goods Manufactured /
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bnTotalnumber of units produced.
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19. A service company calculates unit cost per service as Total operating costs / Total
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bnnumber ofservices provided. bn n
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