Chapter 1 r
An Introduction to Managerial
r r r r
Accounting
SolutionsrtorQuestions
1-1 Managerialraccountingrisrconcernedrwithrprovidingrinformationrprimarilyrtorm
anagersrforrtheirruserinternallyrinrtherorganizationrforrtherpurposesrofrstrategy
,rplanning,rimplementationrandrcontrol.rFinancialraccountingrisrconcernedrwit
hrprovidingrinformationrprimarilyrtorinvestors,rcreditors,randrothersroutsiderofr
therorganization.
1-2 Essentially,rthermanagerrcarriesroutrthreermajorractivitiesrinranrorganization:r
planning,rimplementation,randrcontrol.rAllrthreeractivitiesrinvolverdecision-
makingrandrusermanagerialraccountingrinformation.rThisrisrdepictedrinrExhibi
tr1-1.
1-3 TherPlanning,rImplementationrandrControlrCyclerinvolvesrtherfollowingrstep
s:r(1)rformulatingrplansrwhichroftenrincludesrpreparingrbudgets,r(2)roverse
eingrday-to-
dayractivitiesrwhichrincludesrorganizing,rdirectingrandrmotivatingrpeople,rre
sourcerallocationrandrdecisionrmaking,randr(3)rcontrollingrwhichrincludesrpr
ovidingrfeedbackrviarperformancerreports.
1-4 Inrcontrastrtorfinancialraccounting,rmanagerialraccounting:r(1)rfocusesronrthe
rneedsrofrthermanager;r(2)rplacesrmoreremphasisronrtherfuture;r(3)remphasiz
esrrelevancerandrtimeliness,rratherrthanrverifiabilityrandrprecision;r(4)rempha
sizesrthersegmentsrofranrorganization;r(5)risrnotrgovernedrbyrIFRSrorrASPE;ra
ndr(6)risrnotrmandatory.
1-5 Therleanrbusinessrmodelrfocusesronrcontinuousrimprovementrbyrelimina
tingrwasterinrtherorganization.rCompaniesrthatradoptrtherleanrbusinessrm
odelrusuallyrimplementronerorrmorerofrtherfollowingrmanagementrpractic
es.
Just-in-
timer(JIT):rArproductionrandrinventoryrcontrolrsystemrinrwhichrmate
rialsrarerpurchasedrandrunitsrarerproducedronlyrasrneededrtormeetract
ualrcustomerrdemand.
Totalrqualityrmanagementr(TQM):rAnrapproachrtorcontinuousrim
provementrthatrfocusesronrservingrcustomersrandrusesrteamsrofrfront-
linerworkersrtorsystematicallyridentifyrandrsolverproblems.
Processrre-
engineering:rAnrapproachrtorimprovementrthatrinvolvesrcompl
etelyrredesigningrbusiness
Copyrightr©rprocesses rinrorder
r2017rMcGraw-Hill rtoreliminate
rEducation. runnece
rAllrrightsrreserved.
SolutionsrManual,r Chapterr 1 1
, ssaryrsteps,rreducererrors,randrreducercosts.
Copyrightr©r2017rMcGraw-HillrEducation.rAllrrightsrreserved.
2 Introductionr tor Managerialr Accounting,r Fifthr Canadianr Edition
, Theoryrofrconstraintsr(TOC):rArmanagementrapproachrthatre
mphasizesrtherimportancerofrmanagingrconstraints.
1-6 Pros
Fundsrtiedruprinrmaintainingrinventoryrcanrberusedrelsewhere
Areasrpreviouslyrusedrtorstorerinventoriesrarermaderavailablerforroth
errmorerproductiveruses
Thertimerrequiredrtorfillranrorderrisrreduced,rresultingrinrquickerrrespo
nsertorcustomersrandrconsequentiallyrgreaterrpotentialrsales
Defectrratesrarerreducedrresultingrinrlessrwasterandrgreaterrcus
tomerrsatisfaction
Morereffectiveroperations
Cons
Increasedrnumberrofrpurchaserordersrtorbuyrrawrmaterialsrand/orroth
errcomponentsrusedrinrmanufacturingrproducts
Thererisrlittlerroomrforrerrorsrandrdefectsrinrproductsrbecauserthisrcoul
drthrowrtherproductionrfacilityroffrschedule
Thererisrarhighrreliancerandrdependenceronrsuppliersrtormeetrdeliver
yrdeadlinesrasrwellrasrsupplyrproductsrthatrhavernordefectsrandrrequir
erminimalrinspection
1-7 Agree.rEthicalrbehaviourrisrtherfoundationrofrarsuccessfulrmarketreconomy
.rIfrwercannotrtrustrpeoplertoractrethicallyrinrtheirrbusinessrdealingsrwithrus,
rwerwillrberinclinedrtorinvestrless,rscrutinizermorerandrwastermoneyrandrtim
er(scarcerresources)rtryingrtorprotectrourselves.rEthicalrstandardsrandrCod
esrofrConductraidrthersmoothrrunningrofrthereconomy.rInraddition,rtherlackr
ofrregulatoryrrequirementsr(IFRS,rASPE)rregardingrmanagerialraccountingr
makesrethicalrbehaviourrevenrmorercritical.
Copyrightr©r2017rMcGraw-HillrEducation.rAllrrightsrreserved.
SolutionsrManual,r Chapterr 1 3
, Solutions to Exercises
r r r
Exercise 1-1 (LO1 CC2)
r r r
Item FinancialrA Managerialr
ccounting Accounting
a)r Preparingrarcashrbudgetrforrthern X
extrquarter
b)r Analyzingrtherprofitabilityrofrarre X
questrfromrarpotentialrcustome
r
c)rAccumulatingrthertransactionsrf X
orrtherpreviousrsixrmonthsrtorpr
epareranrincomerstatement
d)rPreparingrarweeklyrperforma X
ncerreportrforrtherbranchrma
nager
e)r Preparingranrannouncementrtorb X
erreleasedrtortherfinancialranalys
ts
Exercise 1-2 (LO1 CC1)
r r r
Planning Implementation Control
a)rDoingrar“cost- X
benefit”ranalysisrofraddingrar
newrbranchrversusrinstallingr
newrATMs
b)rEstimatingrthercostrofrrawrm X
aterialsrtorberpurchasedrdu
ringrthernextrquarter
c)rAnalyzingrmarketrdemand X
Copyrightr©r2017rMcGraw-HillrEducation.rAllrrightsrreserved.
4 Introductionr tor Managerialr Accounting,r Fifthr Canadianr Edition
An Introduction to Managerial
r r r r
Accounting
SolutionsrtorQuestions
1-1 Managerialraccountingrisrconcernedrwithrprovidingrinformationrprimarilyrtorm
anagersrforrtheirruserinternallyrinrtherorganizationrforrtherpurposesrofrstrategy
,rplanning,rimplementationrandrcontrol.rFinancialraccountingrisrconcernedrwit
hrprovidingrinformationrprimarilyrtorinvestors,rcreditors,randrothersroutsiderofr
therorganization.
1-2 Essentially,rthermanagerrcarriesroutrthreermajorractivitiesrinranrorganization:r
planning,rimplementation,randrcontrol.rAllrthreeractivitiesrinvolverdecision-
makingrandrusermanagerialraccountingrinformation.rThisrisrdepictedrinrExhibi
tr1-1.
1-3 TherPlanning,rImplementationrandrControlrCyclerinvolvesrtherfollowingrstep
s:r(1)rformulatingrplansrwhichroftenrincludesrpreparingrbudgets,r(2)roverse
eingrday-to-
dayractivitiesrwhichrincludesrorganizing,rdirectingrandrmotivatingrpeople,rre
sourcerallocationrandrdecisionrmaking,randr(3)rcontrollingrwhichrincludesrpr
ovidingrfeedbackrviarperformancerreports.
1-4 Inrcontrastrtorfinancialraccounting,rmanagerialraccounting:r(1)rfocusesronrthe
rneedsrofrthermanager;r(2)rplacesrmoreremphasisronrtherfuture;r(3)remphasiz
esrrelevancerandrtimeliness,rratherrthanrverifiabilityrandrprecision;r(4)rempha
sizesrthersegmentsrofranrorganization;r(5)risrnotrgovernedrbyrIFRSrorrASPE;ra
ndr(6)risrnotrmandatory.
1-5 Therleanrbusinessrmodelrfocusesronrcontinuousrimprovementrbyrelimina
tingrwasterinrtherorganization.rCompaniesrthatradoptrtherleanrbusinessrm
odelrusuallyrimplementronerorrmorerofrtherfollowingrmanagementrpractic
es.
Just-in-
timer(JIT):rArproductionrandrinventoryrcontrolrsystemrinrwhichrmate
rialsrarerpurchasedrandrunitsrarerproducedronlyrasrneededrtormeetract
ualrcustomerrdemand.
Totalrqualityrmanagementr(TQM):rAnrapproachrtorcontinuousrim
provementrthatrfocusesronrservingrcustomersrandrusesrteamsrofrfront-
linerworkersrtorsystematicallyridentifyrandrsolverproblems.
Processrre-
engineering:rAnrapproachrtorimprovementrthatrinvolvesrcompl
etelyrredesigningrbusiness
Copyrightr©rprocesses rinrorder
r2017rMcGraw-Hill rtoreliminate
rEducation. runnece
rAllrrightsrreserved.
SolutionsrManual,r Chapterr 1 1
, ssaryrsteps,rreducererrors,randrreducercosts.
Copyrightr©r2017rMcGraw-HillrEducation.rAllrrightsrreserved.
2 Introductionr tor Managerialr Accounting,r Fifthr Canadianr Edition
, Theoryrofrconstraintsr(TOC):rArmanagementrapproachrthatre
mphasizesrtherimportancerofrmanagingrconstraints.
1-6 Pros
Fundsrtiedruprinrmaintainingrinventoryrcanrberusedrelsewhere
Areasrpreviouslyrusedrtorstorerinventoriesrarermaderavailablerforroth
errmorerproductiveruses
Thertimerrequiredrtorfillranrorderrisrreduced,rresultingrinrquickerrrespo
nsertorcustomersrandrconsequentiallyrgreaterrpotentialrsales
Defectrratesrarerreducedrresultingrinrlessrwasterandrgreaterrcus
tomerrsatisfaction
Morereffectiveroperations
Cons
Increasedrnumberrofrpurchaserordersrtorbuyrrawrmaterialsrand/orroth
errcomponentsrusedrinrmanufacturingrproducts
Thererisrlittlerroomrforrerrorsrandrdefectsrinrproductsrbecauserthisrcoul
drthrowrtherproductionrfacilityroffrschedule
Thererisrarhighrreliancerandrdependenceronrsuppliersrtormeetrdeliver
yrdeadlinesrasrwellrasrsupplyrproductsrthatrhavernordefectsrandrrequir
erminimalrinspection
1-7 Agree.rEthicalrbehaviourrisrtherfoundationrofrarsuccessfulrmarketreconomy
.rIfrwercannotrtrustrpeoplertoractrethicallyrinrtheirrbusinessrdealingsrwithrus,
rwerwillrberinclinedrtorinvestrless,rscrutinizermorerandrwastermoneyrandrtim
er(scarcerresources)rtryingrtorprotectrourselves.rEthicalrstandardsrandrCod
esrofrConductraidrthersmoothrrunningrofrthereconomy.rInraddition,rtherlackr
ofrregulatoryrrequirementsr(IFRS,rASPE)rregardingrmanagerialraccountingr
makesrethicalrbehaviourrevenrmorercritical.
Copyrightr©r2017rMcGraw-HillrEducation.rAllrrightsrreserved.
SolutionsrManual,r Chapterr 1 3
, Solutions to Exercises
r r r
Exercise 1-1 (LO1 CC2)
r r r
Item FinancialrA Managerialr
ccounting Accounting
a)r Preparingrarcashrbudgetrforrthern X
extrquarter
b)r Analyzingrtherprofitabilityrofrarre X
questrfromrarpotentialrcustome
r
c)rAccumulatingrthertransactionsrf X
orrtherpreviousrsixrmonthsrtorpr
epareranrincomerstatement
d)rPreparingrarweeklyrperforma X
ncerreportrforrtherbranchrma
nager
e)r Preparingranrannouncementrtorb X
erreleasedrtortherfinancialranalys
ts
Exercise 1-2 (LO1 CC1)
r r r
Planning Implementation Control
a)rDoingrar“cost- X
benefit”ranalysisrofraddingrar
newrbranchrversusrinstallingr
newrATMs
b)rEstimatingrthercostrofrrawrm X
aterialsrtorberpurchasedrdu
ringrthernextrquarter
c)rAnalyzingrmarketrdemand X
Copyrightr©r2017rMcGraw-HillrEducation.rAllrrightsrreserved.
4 Introductionr tor Managerialr Accounting,r Fifthr Canadianr Edition
