Solution manual for horngren s managerial chapters accounting 7th edition

Solution Manual for f f




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




Chapter 1 f




Introduction to Managerial Accounting f f f




Review Questions f




1. The primary purpose of managerial accounting is to provide information to help managers plan,direct,
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control, and make decisions.
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2. Financial accounting and managerial accounting differ on the following 6 dimensions: (1) primaryusers, (2)
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purpose of information, (3) focus and time dimension of the information, (4) rules and restrictions, (5)
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scope of information, and (6) behavioral.
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3. Line positions are directly involved in providing goods or services to customers. Staff positionssupport
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line positions.
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4. Planning means choosing goals and deciding how to achieve them. Directing involves running the day-to-day
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operations of a business. Controlling is the process of monitoring operations and keepingthe company on
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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 f f f f f f f f f




enhancingknowledge and skills.
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Perform professional duties in accordance with relevant laws, regulations, and f f f f f f f f f




technicalstandards. f f




Provide decision support information and recommendations that are accurate, clear, concise,and
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timely. f




Recognise and help mange risk. f f f f




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 toensure
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compliance. f




Refrain from using confidential information for unethical or illegal advantage. f f f f f f f f f




III. Integrity.
Mitigate actual conflicts of interest. Regularly communicate with business associates to avoidapparent
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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.f f f f f f f f f f f f




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, Contribute to a positive ethical culture and place integrity of the profession above personalinterest.
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5, cont.
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IV. Credibility.
Communicate information fairly and objectively. f f f f




Provide all relevant information that could reasonably be expected to influence an intendeduser’s f f f f f f f f f f f f f




understanding of the reports, analyses, or recommendations.
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Report any delays or deficiencies in information, timeliness, processing, or internal controlsin
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conformance with organization policy and/or applicable law.
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Communicate any professional limitations or other constraints that would preclude responsi-ble f f f f f f f f f f f




judgment or successful performance of an activity.
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6. Service companies sell time, skills, and knowledge. Examples of service companies include phoneservice
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companies, banks, cleaning service companies, accounting firms, law firms, medical physicians, and online
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auction services.
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7. Merchandising companies resell products they buy from suppliers. Merchandisers keep an inventoryof
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products, and managers are accountable for the purchasing, storage, and sale of the products. Examples of
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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 manufacturing
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companies use labor, equipment, supplies, and facilities to convert raw materials intonew finished products.
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In contrast to merchandising companies, manufacturing companies have a broad range of production
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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, Work-in-
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Process Inventory, and Finished Goods Inventory.
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Raw Materials Inventory includes materials used to manufacture a product. Work-in-ProcessInventory
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includes goods that have been started in the manufacturing process but are not yet complete. Finished
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Goods Inventory includes completed goods that have not yet 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 anything for
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which managers want a separate measurement of cost). An indirect cost is a cost thatcannot be easily or
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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 product and
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whose costs are easily traceable to the finished product. Direct labor is the labor cost ofthe employees who
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convert materials into finished products. Manufacturing overhead includes all
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, manufacturing costs except direct materials and direct labor, such as indirect materials, indirectlabor,f f f f f f f f f f f f f




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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andmaintenance in factory, factory utilities, factory rent, factory insurance, factory property taxes,
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manufacturing plant managers’ salaries, and depreciation on manufacturing buildings and equipment.
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13. Prime costs are direct materials plus direct labor. Conversion costs are direct labor plus manufacturing
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overhead. Note that direct labor is classified as both a prime cost and a conversioncost.
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14. Product costs are the cost of purchasing or making a product. These costs are recorded as an asset and not
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expensed until the product is sold. Product costs include direct materials, direct labor, and manufacturing
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overhead.
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15. Period costs are non-manufacturing costs that are expensed in the same accounting period in whichthey are
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incurred, whereas product costs are recorded as an asset and not expensed until the accounting period in
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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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TotalManufacturing Costs Incurred during the Year – Ending Work-in-Process Inventory.
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TotalManufacturing Costs Incurred during the Year = Direct Materials Used + Direct Labor +
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Manufacturing Overhead.
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17. For a manufacturing company, the activity in the Finished Goods Inventory account provides
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theinformation for determining Cost of Goods Sold. A manufacturing company calculates Cost of
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Goods Sold as Beginning Finished Goods Inventory + Cost of Goods Manufactured – Ending Finished
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Good Inventory. In addition, a manufacturing company must track costs from Raw Materials Inventory
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and Work-in-Process Inventory in order to compute Cost of Goods Manufactured used in the previous
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equation.
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For a merchandising company, the activity in the Merchandise Inventory account provides the information
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for determining Cost of Goods Sold. A merchandising company calculates Cost of Goods Sold as Beginning
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Merchandise Inventory + Purchases and Freight In – Ending MerchandiseInventory.
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18. A manufacturing company calculates unit product cost as Cost of Goods Manufactured /
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Totalnumber of units produced.
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19. A service company calculates unit cost per service as Total operating costs / Total number ofservices
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provided.
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, 20. A merchandising company calculates unit cost per item as Total cost of goods sold / Total number ofitems
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sold.f




Short Exercises f




S-M:1-1

a. FA
b. MA
c. MA
d. FA
e. FA


S-M:1-2

a. Confidentiality
b. Integrity
c. Competence (skipping the session); Integrity (company-paid conference)
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d. Competence
e. Credibility; Integrity f




S-M:1-3

a. 2
b. 4
c. 1
d. 5
e. 4
f. 5
g. 3


S-M:1-4

Glue for frames
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Plant depreciation
f 7,500
Plant foreman’s salary
f f 3,500
Plant janitor’s wages
f f 1,300
Oil for manufacturing equipment
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Total manufacturing overhead
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