TEST BANK For Financial and Managerial Accounting: Managerial Chapters, 7th Edition (Miller-Nobles)Verified Chapters 1 - 11, Complete Newest Version

Solution Manual for
Horngren's Managerial Chapters Accounting, 7th Edition by Tracie
Chapter 1-11 E6




Chapter 1 E6




Introduction to Managerial Accounting E6 E6 E6




Review Questions E6




1. The primary purpose of managerial accounting is to provide information to help managers p
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lan,direct, control, and make decisions.
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2. Financial accounting and managerial accounting differ on the following 6 dimensions: (1) prima
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ryusers, (2) purpose of information, (3) focus and time dimension of the information, (4) rules an
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d 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 positi
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onssupport line positions.
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4. Planning means choosing goals and deciding how to achieve them. Directing involves running th
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e day-to-
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day operations of a business. Controlling is the process of monitoring operations and keepingthe
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company on track. E6 E6




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 enhanci
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ngknowledge and skills. 6E E6 E6



Perform professional duties in accordance with relevant laws, regulations, and techni
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calstandards. 6E



Provide decision support information and recommendations that are accurate, clear, conci
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se,and timely. 6E E6



Recognise and help mange risk. E6 E6 E6 E6




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. Monito
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r 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 av
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oidapparent 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 perso
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nalinterest. 6E




5, cont.
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IV. Credibility.
Communicate information fairly and objectively. E6 E6 E6 E6



Provide all relevant information that could reasonably be expected to influence an inten
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deduser’s understanding of the reports, analyses, or recommendations.
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Report any delays or deficiencies in information, timeliness, processing, or internal contr
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olsin conformance with organization policy and/or applicable law.
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Communicate any professional limitations or other constraints that would preclude respo E6 E6 E6 E6 E6 E6 E6 E6 E6 E6



nsi-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 pho
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neservice companies, banks, cleaning service companies, accounting firms, law firms, medical ph
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ysicians, and online auction services. E6 E6 E6 E6




7. Merchandising companies resell products they buy from suppliers. Merchandisers keep an invento
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ryof products, and managers are accountable for the purchasing, storage, and sale of the products.
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Examples of merchandising companies include toy stores, grocery stores, and clothing stores.
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8. Merchandising companies resell products they previously bought from suppliers, whereas manuf
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acturing companies use labor, equipment, supplies, and facilities to convert raw materials intonew
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finished products. In contrast to merchandising companies, manufacturing companies have a bro
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ad range of production activities that require tracking costs on three kinds of inventory.
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9. The three inventory accounts used by manufacturing companies are Raw Materials Inventory, W
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ork-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 ar
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e not yet complete. Finished Goods Inventory includes completed goods that have not yet
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been sold. E6




10. A direct cost is a cost that can be easily and cost-
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effectively traced to a cost object (which is anything for which managers want a separate meas
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urement of cost). An indirect cost is a cost thatcannot be easily or cost-
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effectively traced to a cost object. E6 E6 E6 E6 E6




11. The three manufacturing costs for a manufacturing company are direct materials, direct labor, an
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d manufacturing overhead. Direct materials are materials that become a physical part of a finishe
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d product and whose costs are easily traceable to the finished product. Direct labor is the labor c
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ost ofthe employees who convert materials into finished products. Manufacturing overhead inclu
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,des all
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, manufacturing costs except direct materials and direct labor, such as indirect materials, indir
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ectlabor, 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 a
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ndmaintenance in factory, factory utilities, factory rent, factory insurance, factory property tax
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es, manufacturing plant managers’ salaries, and depreciation on manufacturing buildings and e
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quipment.

13. Prime costs are direct materials plus direct labor. Conversion costs are direct labor plus manu
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facturing overhead. Note that direct labor is classified as both a prime cost and a conversionco
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st.

14. Product costs are the cost of purchasing or making a product. These costs are recorded as an
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assetand not expensed until the product is sold. Product costs include direct materials, direct la
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bor, andmanufacturing overhead.
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15. Period costs are non- E6 E6 E6



manufacturing costs that are expensed in the same accounting period in whichthey are incurred,
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6whereas product costs are recorded as an asset and not expensed until the accounting period in
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which the product is sold. E6 E6 E6 E6




16. Cost of Goods Manufactured is calculated as Beginning Work-in-
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Process Inventory + TotalManufacturing Costs Incurred during the Year –
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E6Ending Work-in- E6



Process Inventory. TotalManufacturing Costs Incurred during the Year = Direct Materi
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als Used + 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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6theinformation for determining Cost of Goods Sold. A manufacturing company calculates Cos
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t of Goods Sold as Beginning Finished Goods Inventory + Cost of Goods Manufactured –
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E6Ending Finished Good Inventory. In addition, a manufacturing company must track costs fr
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om Raw Materials Inventory and Work-in-
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Process Inventory in order to compute Cost of Goods Manufactured used in the previous equ
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ation.

For a merchandising company, the activity in the Merchandise Inventory account provides the in
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formation for determining Cost of Goods Sold. A merchandising company calculates Cost of Goo
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ds Sold as Beginning Merchandise Inventory + Purchases and Freight In –
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Ending MerchandiseInventory.
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18. A manufacturing company calculates unit product cost as Cost of Goods Manufactured / T
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otalnumber of units produced.
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19. A service company calculates unit cost per service as Total operating costs / Total numbe
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