Solution Manual for
Horngren's Managerial Chapters Accounting,
7th Edition by Tracie
Chapter 1-11
Chapter 1
Introduction to Managerial Accounting
Review Questions
1. The primary purpose of managerial accounting is to provide information to help managers plan,
direct, control, and make decisions.
2. Financial accounting and managerial accounting differ on the following 6 dimensions: (1) primary
users, (2) purpose of information, (3) focus and time dimension of the information, (4) rules and
restrictions, (5) scope of information, and (6) behavioral.
3. Line positions are directly involved in providing goods or services to customers. Staff positions
support line positions.
4. Planning means choosing goals and deciding how to achieve them. Directing involves running the day-
to-day operations of a business. Controlling is the process of monitoring operations and keeping the
company on track.
5. The four IMA standards of ethical practice and a description of each follow.
I. Competence.
Maintain an appropriate level of professional leadership and expertise by enhancing
knowledge and skills.
Perform professional duties in accordance with relevant laws, regulations, and technical
standards.
Provide decision support information and recommendations that are accurate, clear, concise,
and timely.
Recognise and help mange risk.
II. Confidentiality.
Keep information confidential except when disclosure is authorized or legally required.
Inform all relevant parties regarding appropriate use of confidential information. Monitor to
ensure compliance.
Refrain from using confidential information for unethical or illegal advantage.
III. Integrity.
Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid
apparent conflicts of interest. Advise all parties of any potential conflicts.
© 2021 Pearson Education, Inc. 1-1
,Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
Abstain from engaging in or supporting any activity that might discredit the profession.
© 2021 Pearson Education, Inc. 1-2
, Contribute hjto hja hjpositive hjethical hjculture hjand hjplace hjintegrity hjof hjthe hjprofession hjabove
hjpersonalh
ij nterest.
5, hjcont.
IV. Credibility.
Communicate hjinformation hjfairly hjand hjobjectively.
Provide hjall hjrelevant hjinformation hjthat hjcould hjreasonably hjbe hjexpected hjto hjinfluence hjan
hjintendedh uj ser’s hjunderstanding hjof hjthe hjreports, hjanalyses, hjor hjrecommendations.
Report hjany hjdelays hjor hjdeficiencies hjin hjinformation, hjtimeliness, hjprocessing, hjor hjinternal
hjcontrolsh
ij n hjconformance hjwith hjorganization hjpolicy hjand/or hjapplicable hjlaw.
Communicate hjany hjprofessional hjlimitations hjor hjother hjconstraints hjthat hjwould hjpreclude
hjresponsi-h b
j le hjjudgment hjor hjsuccessful hjperformance hjof hjan hjactivity.
6. Service hjcompanies hjsell hjtime, hjskills, hjand hjknowledge. h j Examples hjof hjservice hjcompanies hjinclude
hjphonehsj ervice hjcompanies, hjbanks, hjcleaning hjservice hjcompanies, hjaccounting hjfirms, hjlaw hjfirms, hjmedical
hjphysicians, hjand hjonline hjauction hj services.
7. Merchandising hjcompanies hjresell hjproducts hjthey hjbuy hjfrom hjsuppliers. hjMerchandisers hjkeep hjan
hjinventoryh
o
j f hjproducts, hjand hjmanagers hjare hjaccountable hjfor hjthe hjpurchasing, hjstorage, hjand hjsale hjof hjthe
hjproducts. hjExamples hjof hjmerchandising hjcompanies hjinclude hjtoy hjstores, hj grocery hjstores, hjand hjclothing
hjstores.
8. Merchandising hjcompanies hjresell hjproducts hjthey hjpreviously hjbought hjfrom hjsuppliers, hjwhereas
hjmanufacturing hjcompanies hjuse hjlabor, hjequipment, hjsupplies, hjand hjfacilities hjto hjconvert hjraw hjmaterials
hjintoh
n
j ew hjfinished hjproducts. hjIn hjcontrast hjto hjmerchandising hjcompanies, hjmanufacturing hjcompanies
hjhave hja hjbroad hjrange hjof hjproduction hjactivities hjthat hjrequire hjtracking hjcosts hjon hjthree hjkinds hjof
hjinventory.
9. The hjthree hjinventory hjaccounts hjused hjby hjmanufacturing hjcompanies hjare hjRaw hjMaterials hjInventory,
hjWork-hij n-Process hjInventory, hjand hjFinished hjGoods hjInventory.
Raw hjMaterials hjInventory hjincludes hjmaterials hjused hjto hjmanufacture hja hjproduct. hjWork-in-Process
Ij nventory hjincludes hjgoods hjthat hjhave hjbeen hjstarted hjin hjthe hjmanufacturing hjprocess hjbut hjare hjnot
h
hjyet hjcomplete. h j Finished hjGoods hjInventory hjincludes hjcompleted hjgoods hjthat hjhave hjnot hjyet hjbeen
hjsold.
10. A hjdirect hjcost hjis hja hjcost hjthat hjcan hjbe hjeasily hjand hjcost-effectively hjtraced hjto hja hjcost hjobject hj(which hjis
hjanything hjfor hjwhich hjmanagers hjwant hja hjseparate hjmeasurement hjof hjcost). hjAn hjindirect hjcost hjis hja hjcost
hjthath
cj annot hjbe hjeasily hjor hjcost-effectively hjtraced hjto hja hjcost hjobject.
11. The hjthree hjmanufacturing hjcosts hjfor hja hjmanufacturing hjcompany hjare hjdirect hjmaterials, hjdirect hjlabor, hjand
hjmanufacturing hjoverhead. hjDirect hjmaterials hjare hjmaterials hjthat hjbecome hja hjphysical hjpart hjof hja hjfinished
© 2021 Pearson Education, Inc. 1-3
, hjproduct hjand hjwhose hjcosts hjare hjeasily hjtraceable hjto hjthe hjfinished hjproduct. h j Direct hjlabor hjis hjthe hjlabor
hjcost hjofthj he hjemployees hjwho hjconvert hjmaterials hjinto hjfinished hjproducts. h j Manufacturing hjoverhead
hjincludes hjall
© 2021 Pearson Education, Inc. 1-4
Horngren's Managerial Chapters Accounting,
7th Edition by Tracie
Chapter 1-11
Chapter 1
Introduction to Managerial Accounting
Review Questions
1. The primary purpose of managerial accounting is to provide information to help managers plan,
direct, control, and make decisions.
2. Financial accounting and managerial accounting differ on the following 6 dimensions: (1) primary
users, (2) purpose of information, (3) focus and time dimension of the information, (4) rules and
restrictions, (5) scope of information, and (6) behavioral.
3. Line positions are directly involved in providing goods or services to customers. Staff positions
support line positions.
4. Planning means choosing goals and deciding how to achieve them. Directing involves running the day-
to-day operations of a business. Controlling is the process of monitoring operations and keeping the
company on track.
5. The four IMA standards of ethical practice and a description of each follow.
I. Competence.
Maintain an appropriate level of professional leadership and expertise by enhancing
knowledge and skills.
Perform professional duties in accordance with relevant laws, regulations, and technical
standards.
Provide decision support information and recommendations that are accurate, clear, concise,
and timely.
Recognise and help mange risk.
II. Confidentiality.
Keep information confidential except when disclosure is authorized or legally required.
Inform all relevant parties regarding appropriate use of confidential information. Monitor to
ensure compliance.
Refrain from using confidential information for unethical or illegal advantage.
III. Integrity.
Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid
apparent conflicts of interest. Advise all parties of any potential conflicts.
© 2021 Pearson Education, Inc. 1-1
,Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
Abstain from engaging in or supporting any activity that might discredit the profession.
© 2021 Pearson Education, Inc. 1-2
, Contribute hjto hja hjpositive hjethical hjculture hjand hjplace hjintegrity hjof hjthe hjprofession hjabove
hjpersonalh
ij nterest.
5, hjcont.
IV. Credibility.
Communicate hjinformation hjfairly hjand hjobjectively.
Provide hjall hjrelevant hjinformation hjthat hjcould hjreasonably hjbe hjexpected hjto hjinfluence hjan
hjintendedh uj ser’s hjunderstanding hjof hjthe hjreports, hjanalyses, hjor hjrecommendations.
Report hjany hjdelays hjor hjdeficiencies hjin hjinformation, hjtimeliness, hjprocessing, hjor hjinternal
hjcontrolsh
ij n hjconformance hjwith hjorganization hjpolicy hjand/or hjapplicable hjlaw.
Communicate hjany hjprofessional hjlimitations hjor hjother hjconstraints hjthat hjwould hjpreclude
hjresponsi-h b
j le hjjudgment hjor hjsuccessful hjperformance hjof hjan hjactivity.
6. Service hjcompanies hjsell hjtime, hjskills, hjand hjknowledge. h j Examples hjof hjservice hjcompanies hjinclude
hjphonehsj ervice hjcompanies, hjbanks, hjcleaning hjservice hjcompanies, hjaccounting hjfirms, hjlaw hjfirms, hjmedical
hjphysicians, hjand hjonline hjauction hj services.
7. Merchandising hjcompanies hjresell hjproducts hjthey hjbuy hjfrom hjsuppliers. hjMerchandisers hjkeep hjan
hjinventoryh
o
j f hjproducts, hjand hjmanagers hjare hjaccountable hjfor hjthe hjpurchasing, hjstorage, hjand hjsale hjof hjthe
hjproducts. hjExamples hjof hjmerchandising hjcompanies hjinclude hjtoy hjstores, hj grocery hjstores, hjand hjclothing
hjstores.
8. Merchandising hjcompanies hjresell hjproducts hjthey hjpreviously hjbought hjfrom hjsuppliers, hjwhereas
hjmanufacturing hjcompanies hjuse hjlabor, hjequipment, hjsupplies, hjand hjfacilities hjto hjconvert hjraw hjmaterials
hjintoh
n
j ew hjfinished hjproducts. hjIn hjcontrast hjto hjmerchandising hjcompanies, hjmanufacturing hjcompanies
hjhave hja hjbroad hjrange hjof hjproduction hjactivities hjthat hjrequire hjtracking hjcosts hjon hjthree hjkinds hjof
hjinventory.
9. The hjthree hjinventory hjaccounts hjused hjby hjmanufacturing hjcompanies hjare hjRaw hjMaterials hjInventory,
hjWork-hij n-Process hjInventory, hjand hjFinished hjGoods hjInventory.
Raw hjMaterials hjInventory hjincludes hjmaterials hjused hjto hjmanufacture hja hjproduct. hjWork-in-Process
Ij nventory hjincludes hjgoods hjthat hjhave hjbeen hjstarted hjin hjthe hjmanufacturing hjprocess hjbut hjare hjnot
h
hjyet hjcomplete. h j Finished hjGoods hjInventory hjincludes hjcompleted hjgoods hjthat hjhave hjnot hjyet hjbeen
hjsold.
10. A hjdirect hjcost hjis hja hjcost hjthat hjcan hjbe hjeasily hjand hjcost-effectively hjtraced hjto hja hjcost hjobject hj(which hjis
hjanything hjfor hjwhich hjmanagers hjwant hja hjseparate hjmeasurement hjof hjcost). hjAn hjindirect hjcost hjis hja hjcost
hjthath
cj annot hjbe hjeasily hjor hjcost-effectively hjtraced hjto hja hjcost hjobject.
11. The hjthree hjmanufacturing hjcosts hjfor hja hjmanufacturing hjcompany hjare hjdirect hjmaterials, hjdirect hjlabor, hjand
hjmanufacturing hjoverhead. hjDirect hjmaterials hjare hjmaterials hjthat hjbecome hja hjphysical hjpart hjof hja hjfinished
© 2021 Pearson Education, Inc. 1-3
, hjproduct hjand hjwhose hjcosts hjare hjeasily hjtraceable hjto hjthe hjfinished hjproduct. h j Direct hjlabor hjis hjthe hjlabor
hjcost hjofthj he hjemployees hjwho hjconvert hjmaterials hjinto hjfinished hjproducts. h j Manufacturing hjoverhead
hjincludes hjall
© 2021 Pearson Education, Inc. 1-4
