Solution Manual for k k
Horngren's kManagerial kChapters kAccounting, k7th kEdition kby kTracie
Chapter k1-11
Chapter 1 k
Introduction to Managerial Accounting
k k k
Review Questions
k
1. The kprimary kpurpose kof kmanagerial kaccounting kis kto kprovide kinformation kto khelp kmanagers
kplan,kdirect, kcontrol, kand kmake kdecisions.
2. Financial kaccounting kand kmanagerial kaccounting kdiffer kon kthe kfollowing k6 kdimensions: k(1) kprimary
kusers, k(2) kpurpose kof kinformation, k(3) kfocus kand ktime kdimension kof kthe kinformation, k(4) krules kand
krestrictions, k(5) kscope kof kinformation, kand k(6) kbehavioral.
3. Line kpositions kare kdirectly kinvolved kin kproviding kgoods kor kservices kto kcustomers. kStaff
kpositionsksupport kline kpositions.
4. Planning kmeans kchoosing kgoals kand kdeciding khow kto kachieve kthem. kDirecting kinvolves krunning kthe
kday-to-day koperations kof ka kbusiness. kControlling kis kthe kprocess kof kmonitoring koperations kand
kkeepingkthe kcompany kon ktrack.
5. The kfour kIMA kstandards kof kethical kpractice kand ka kdescription kof keach kfollow.
I. Competence.
Maintain kan kappropriate klevel kof kprofessional kleadership kand kexpertise kby kenhancing
kknowledge kand kskills.
Perform kprofessional kduties kin kaccordance kwith krelevant klaws, kregulations, kand ktechnical
kstandards.
Provide kdecision ksupport kinformation kand krecommendations kthat kare kaccurate, kclear, kconcise,
kand ktimely.
Recognise kand khelp kmange krisk.
II. Confidentiality.
Keep kinformation kconfidential kexcept kwhen kdisclosure kis kauthorized kor klegally krequired.
Inform kall krelevant kparties kregarding kappropriate kuse kof kconfidential kinformation. k Monitor
ktokensure kcompliance.
Refrain kfrom kusing kconfidential kinformation kfor kunethical kor killegal kadvantage.
III. Integrity.
Mitigate kactual kconflicts kof kinterest. kRegularly kcommunicate kwith kbusiness kassociates kto kavoid
kapparent kconflicts kof kinterest. k kAdvise kall kparties kof kany kpotential kconflicts.
Refrain kfrom kengaging kin kany kconduct kthat kwould kprejudice kcarrying kout kduties kethically.
Abstain kfrom kengaging kin kor ksupporting kany kactivity kthat kmight kdiscredit kthe kprofession.
© k2021 kPearson kEducation, 1-1
kInc.
, Contribute kto ka kpositive kethical kculture kand kplace kintegrity kof kthe kprofession kabove
kpersonalkinterest.
5, kcont.
IV. Credibility.
Communicate kinformation kfairly kand kobjectively.
Provide kall krelevant kinformation kthat kcould kreasonably kbe kexpected kto kinfluence kan
kintendedkuser’s kunderstanding kof kthe kreports, kanalyses, kor krecommendations.
Report kany kdelays kor kdeficiencies kin kinformation, ktimeliness, kprocessing, kor kinternal kcontrols
kin kconformance kwith korganization kpolicy kand/or kapplicable klaw.
Communicate kany kprofessional klimitations kor kother kconstraints kthat kwould kpreclude kresponsi-
kble kjudgment kor ksuccessful kperformance kof kan kactivity.
6. Service kcompanies ksell ktime, kskills, kand kknowledge. k Examples kof kservice kcompanies kinclude kphone
kservice kcompanies, kbanks, kcleaning kservice kcompanies, kaccounting kfirms, klaw kfirms, kmedical
kphysicians, kand konline kauction kservices.
7. Merchandising kcompanies kresell kproducts kthey kbuy kfrom ksuppliers. kMerchandisers kkeep kan kinventory
kof kproducts, kand kmanagers kare kaccountable kfor kthe kpurchasing, kstorage, kand ksale kof kthe kproducts.
kExamples kof kmerchandising kcompanies kinclude ktoy kstores, kgrocery kstores, kand kclothing kstores.
8. Merchandising kcompanies kresell kproducts kthey kpreviously kbought kfrom ksuppliers, kwhereas
kmanufacturing kcompanies kuse klabor, kequipment, ksupplies, kand kfacilities kto kconvert kraw kmaterials kinto
knew kfinished kproducts. kIn kcontrast kto kmerchandising kcompanies, kmanufacturing kcompanies khave ka
kbroad krange kof kproduction kactivities kthat krequire ktracking kcosts kon kthree kkinds kof kinventory.
9. The kthree kinventory kaccounts kused kby kmanufacturing kcompanies kare kRaw kMaterials kInventory, kWork-
kin-Process kInventory, kand kFinished kGoods kInventory.
Raw kMaterials kInventory kincludes kmaterials kused kto kmanufacture ka kproduct. kWork-in-Process
kInventory kincludes kgoods kthat khave kbeen kstarted kin kthe kmanufacturing kprocess kbut kare knot kyet
kcomplete. k Finished kGoods kInventory kincludes kcompleted kgoods kthat khave knot kyet kbeen ksold.
10. A kdirect kcost kis ka kcost kthat kcan kbe keasily kand kcost-effectively ktraced kto ka kcost kobject k(which kis
kanything kfor kwhich kmanagers kwant ka kseparate kmeasurement kof kcost). kAn kindirect kcost kis ka kcost
kthatkcannot kbe keasily kor kcost-effectively ktraced kto ka kcost kobject.
11. The kthree kmanufacturing kcosts kfor ka kmanufacturing kcompany kare kdirect kmaterials, kdirect klabor, kand
kmanufacturing koverhead. kDirect kmaterials kare kmaterials kthat kbecome ka kphysical kpart kof ka kfinished
kproduct kand kwhose kcosts kare keasily ktraceable kto kthe kfinished kproduct. k Direct klabor kis kthe klabor kcost
kofkthe kemployees kwho kconvert kmaterials kinto kfinished kproducts. k Manufacturing koverhead kincludes
kall
© k2021 kPearson kEducation, 1-2
kInc.
, manufacturing kcosts kexcept kdirect kmaterials kand kdirect klabor, ksuch kas kindirect kmaterials, kindirect
klabor, kfactory kdepreciation, kfactory krent, kand kfactory kproperty ktaxes.
12. Examples kof kmanufacturing koverhead kinclude kcosts kof kindirect kmaterials, kindirect klabor, krepair kand
kmaintenance kin kfactory, kfactory kutilities, kfactory krent, kfactory kinsurance, kfactory kproperty ktaxes,
kmanufacturing kplant kmanagers’ ksalaries, kand kdepreciation kon kmanufacturing kbuildings kand
kequipment.
13. Prime kcosts kare kdirect kmaterials kplus kdirect klabor. kConversion kcosts kare kdirect klabor kplus
kmanufacturing koverhead. kNote kthat kdirect klabor kis kclassified kas kboth ka kprime kcost kand ka
kconversionkcost.
14. Product kcosts kare kthe kcost kof kpurchasing kor kmaking ka kproduct. k These kcosts kare krecorded kas kan
kasset kand knot kexpensed kuntil kthe kproduct kis ksold. kProduct kcosts kinclude kdirect kmaterials, kdirect
klabor, kandkmanufacturing koverhead.
15. Period kcosts kare knon-manufacturing kcosts kthat kare kexpensed kin kthe ksame kaccounting kperiod kin
kwhichkthey kare kincurred, kwhereas kproduct kcosts kare krecorded kas kan kasset kand knot kexpensed kuntil
kthe kaccounting kperiod kin kwhich kthe kproduct kis ksold.
16. Cost kof kGoods kManufactured kis kcalculated kas kBeginning kWork-in-Process kInventory k+
kTotalkManufacturing kCosts kIncurred kduring kthe kYear k– kEnding kWork-in-Process kInventory.
kTotalkManufacturing kCosts kIncurred kduring kthe kYear k= kDirect kMaterials kUsed k+ kDirect
kLabor k+ kManufacturing kOverhead.
17. For ka kmanufacturing kcompany, kthe kactivity kin kthe kFinished kGoods kInventory kaccount kprovides
kthekinformation kfor kdetermining kCost kof kGoods kSold. kA kmanufacturing kcompany kcalculates kCost
kof kGoods kSold kas kBeginning kFinished kGoods kInventory k+ kCost kof kGoods kManufactured k–
kEnding kFinished kGood kInventory. kIn kaddition, ka kmanufacturing kcompany kmust ktrack kcosts kfrom
kRaw kMaterials kInventory kand kWork-in-Process kInventory kin korder kto kcompute kCost kof kGoods
kManufactured kused kin kthe kprevious kequation.
For ka kmerchandising kcompany, kthe kactivity kin kthe kMerchandise kInventory kaccount kprovides kthe
kinformation kfor kdetermining kCost kof kGoods kSold. kA kmerchandising kcompany kcalculates kCost kof
kGoods kSold kas kBeginning kMerchandise kInventory k+ kPurchases kand kFreight kIn k– kEnding
kMerchandisekInventory.
18. A kmanufacturing kcompany kcalculates kunit kproduct kcost kas kCost kof kGoods kManufactured k/
kTotalknumber kof kunits kproduced.
19. A kservice kcompany kcalculates kunit kcost kper kservice kas kTotal koperating kcosts k/ kTotal knumber
kofkservices kprovided.
© k2021 kPearson kEducation, 1-3
kInc.
, 20. A kmerchandising kcompany kcalculates kunit kcost kper kitem kas kTotal kcost kof kgoods ksold k/ kTotal knumber
kofkitems ksold.
Short Exercises
k
S-M:1-1
a. FA
b. MA
c. MA
d. FA
e. FA
S-M:1-2
a. Confidentiality
b. Integrity
c. Competence k(skipping kthe ksession); k Integrity k(company-paid kconference)
d. Competence
e. Credibility; k Integrity
S-M:1-3
a. 2
b. 4
c. 1
d. 5
e. 4
f. 5
g. 3
S-M:1-4
Glue kfor kframes $ 250
Plant kdepreciation 7,500
Plant kforeman’s ksalary 3,500
Plant kjanitor’s kwages 1,300
Oil kfor kmanufacturing kequipment k 150 k k
Total kmanufacturing koverhead k $ k12,700 k k
© k2021 kPearson kEducation, 1-4
kInc.
Horngren's kManagerial kChapters kAccounting, k7th kEdition kby kTracie
Chapter k1-11
Chapter 1 k
Introduction to Managerial Accounting
k k k
Review Questions
k
1. The kprimary kpurpose kof kmanagerial kaccounting kis kto kprovide kinformation kto khelp kmanagers
kplan,kdirect, kcontrol, kand kmake kdecisions.
2. Financial kaccounting kand kmanagerial kaccounting kdiffer kon kthe kfollowing k6 kdimensions: k(1) kprimary
kusers, k(2) kpurpose kof kinformation, k(3) kfocus kand ktime kdimension kof kthe kinformation, k(4) krules kand
krestrictions, k(5) kscope kof kinformation, kand k(6) kbehavioral.
3. Line kpositions kare kdirectly kinvolved kin kproviding kgoods kor kservices kto kcustomers. kStaff
kpositionsksupport kline kpositions.
4. Planning kmeans kchoosing kgoals kand kdeciding khow kto kachieve kthem. kDirecting kinvolves krunning kthe
kday-to-day koperations kof ka kbusiness. kControlling kis kthe kprocess kof kmonitoring koperations kand
kkeepingkthe kcompany kon ktrack.
5. The kfour kIMA kstandards kof kethical kpractice kand ka kdescription kof keach kfollow.
I. Competence.
Maintain kan kappropriate klevel kof kprofessional kleadership kand kexpertise kby kenhancing
kknowledge kand kskills.
Perform kprofessional kduties kin kaccordance kwith krelevant klaws, kregulations, kand ktechnical
kstandards.
Provide kdecision ksupport kinformation kand krecommendations kthat kare kaccurate, kclear, kconcise,
kand ktimely.
Recognise kand khelp kmange krisk.
II. Confidentiality.
Keep kinformation kconfidential kexcept kwhen kdisclosure kis kauthorized kor klegally krequired.
Inform kall krelevant kparties kregarding kappropriate kuse kof kconfidential kinformation. k Monitor
ktokensure kcompliance.
Refrain kfrom kusing kconfidential kinformation kfor kunethical kor killegal kadvantage.
III. Integrity.
Mitigate kactual kconflicts kof kinterest. kRegularly kcommunicate kwith kbusiness kassociates kto kavoid
kapparent kconflicts kof kinterest. k kAdvise kall kparties kof kany kpotential kconflicts.
Refrain kfrom kengaging kin kany kconduct kthat kwould kprejudice kcarrying kout kduties kethically.
Abstain kfrom kengaging kin kor ksupporting kany kactivity kthat kmight kdiscredit kthe kprofession.
© k2021 kPearson kEducation, 1-1
kInc.
, Contribute kto ka kpositive kethical kculture kand kplace kintegrity kof kthe kprofession kabove
kpersonalkinterest.
5, kcont.
IV. Credibility.
Communicate kinformation kfairly kand kobjectively.
Provide kall krelevant kinformation kthat kcould kreasonably kbe kexpected kto kinfluence kan
kintendedkuser’s kunderstanding kof kthe kreports, kanalyses, kor krecommendations.
Report kany kdelays kor kdeficiencies kin kinformation, ktimeliness, kprocessing, kor kinternal kcontrols
kin kconformance kwith korganization kpolicy kand/or kapplicable klaw.
Communicate kany kprofessional klimitations kor kother kconstraints kthat kwould kpreclude kresponsi-
kble kjudgment kor ksuccessful kperformance kof kan kactivity.
6. Service kcompanies ksell ktime, kskills, kand kknowledge. k Examples kof kservice kcompanies kinclude kphone
kservice kcompanies, kbanks, kcleaning kservice kcompanies, kaccounting kfirms, klaw kfirms, kmedical
kphysicians, kand konline kauction kservices.
7. Merchandising kcompanies kresell kproducts kthey kbuy kfrom ksuppliers. kMerchandisers kkeep kan kinventory
kof kproducts, kand kmanagers kare kaccountable kfor kthe kpurchasing, kstorage, kand ksale kof kthe kproducts.
kExamples kof kmerchandising kcompanies kinclude ktoy kstores, kgrocery kstores, kand kclothing kstores.
8. Merchandising kcompanies kresell kproducts kthey kpreviously kbought kfrom ksuppliers, kwhereas
kmanufacturing kcompanies kuse klabor, kequipment, ksupplies, kand kfacilities kto kconvert kraw kmaterials kinto
knew kfinished kproducts. kIn kcontrast kto kmerchandising kcompanies, kmanufacturing kcompanies khave ka
kbroad krange kof kproduction kactivities kthat krequire ktracking kcosts kon kthree kkinds kof kinventory.
9. The kthree kinventory kaccounts kused kby kmanufacturing kcompanies kare kRaw kMaterials kInventory, kWork-
kin-Process kInventory, kand kFinished kGoods kInventory.
Raw kMaterials kInventory kincludes kmaterials kused kto kmanufacture ka kproduct. kWork-in-Process
kInventory kincludes kgoods kthat khave kbeen kstarted kin kthe kmanufacturing kprocess kbut kare knot kyet
kcomplete. k Finished kGoods kInventory kincludes kcompleted kgoods kthat khave knot kyet kbeen ksold.
10. A kdirect kcost kis ka kcost kthat kcan kbe keasily kand kcost-effectively ktraced kto ka kcost kobject k(which kis
kanything kfor kwhich kmanagers kwant ka kseparate kmeasurement kof kcost). kAn kindirect kcost kis ka kcost
kthatkcannot kbe keasily kor kcost-effectively ktraced kto ka kcost kobject.
11. The kthree kmanufacturing kcosts kfor ka kmanufacturing kcompany kare kdirect kmaterials, kdirect klabor, kand
kmanufacturing koverhead. kDirect kmaterials kare kmaterials kthat kbecome ka kphysical kpart kof ka kfinished
kproduct kand kwhose kcosts kare keasily ktraceable kto kthe kfinished kproduct. k Direct klabor kis kthe klabor kcost
kofkthe kemployees kwho kconvert kmaterials kinto kfinished kproducts. k Manufacturing koverhead kincludes
kall
© k2021 kPearson kEducation, 1-2
kInc.
, manufacturing kcosts kexcept kdirect kmaterials kand kdirect klabor, ksuch kas kindirect kmaterials, kindirect
klabor, kfactory kdepreciation, kfactory krent, kand kfactory kproperty ktaxes.
12. Examples kof kmanufacturing koverhead kinclude kcosts kof kindirect kmaterials, kindirect klabor, krepair kand
kmaintenance kin kfactory, kfactory kutilities, kfactory krent, kfactory kinsurance, kfactory kproperty ktaxes,
kmanufacturing kplant kmanagers’ ksalaries, kand kdepreciation kon kmanufacturing kbuildings kand
kequipment.
13. Prime kcosts kare kdirect kmaterials kplus kdirect klabor. kConversion kcosts kare kdirect klabor kplus
kmanufacturing koverhead. kNote kthat kdirect klabor kis kclassified kas kboth ka kprime kcost kand ka
kconversionkcost.
14. Product kcosts kare kthe kcost kof kpurchasing kor kmaking ka kproduct. k These kcosts kare krecorded kas kan
kasset kand knot kexpensed kuntil kthe kproduct kis ksold. kProduct kcosts kinclude kdirect kmaterials, kdirect
klabor, kandkmanufacturing koverhead.
15. Period kcosts kare knon-manufacturing kcosts kthat kare kexpensed kin kthe ksame kaccounting kperiod kin
kwhichkthey kare kincurred, kwhereas kproduct kcosts kare krecorded kas kan kasset kand knot kexpensed kuntil
kthe kaccounting kperiod kin kwhich kthe kproduct kis ksold.
16. Cost kof kGoods kManufactured kis kcalculated kas kBeginning kWork-in-Process kInventory k+
kTotalkManufacturing kCosts kIncurred kduring kthe kYear k– kEnding kWork-in-Process kInventory.
kTotalkManufacturing kCosts kIncurred kduring kthe kYear k= kDirect kMaterials kUsed k+ kDirect
kLabor k+ kManufacturing kOverhead.
17. For ka kmanufacturing kcompany, kthe kactivity kin kthe kFinished kGoods kInventory kaccount kprovides
kthekinformation kfor kdetermining kCost kof kGoods kSold. kA kmanufacturing kcompany kcalculates kCost
kof kGoods kSold kas kBeginning kFinished kGoods kInventory k+ kCost kof kGoods kManufactured k–
kEnding kFinished kGood kInventory. kIn kaddition, ka kmanufacturing kcompany kmust ktrack kcosts kfrom
kRaw kMaterials kInventory kand kWork-in-Process kInventory kin korder kto kcompute kCost kof kGoods
kManufactured kused kin kthe kprevious kequation.
For ka kmerchandising kcompany, kthe kactivity kin kthe kMerchandise kInventory kaccount kprovides kthe
kinformation kfor kdetermining kCost kof kGoods kSold. kA kmerchandising kcompany kcalculates kCost kof
kGoods kSold kas kBeginning kMerchandise kInventory k+ kPurchases kand kFreight kIn k– kEnding
kMerchandisekInventory.
18. A kmanufacturing kcompany kcalculates kunit kproduct kcost kas kCost kof kGoods kManufactured k/
kTotalknumber kof kunits kproduced.
19. A kservice kcompany kcalculates kunit kcost kper kservice kas kTotal koperating kcosts k/ kTotal knumber
kofkservices kprovided.
© k2021 kPearson kEducation, 1-3
kInc.
, 20. A kmerchandising kcompany kcalculates kunit kcost kper kitem kas kTotal kcost kof kgoods ksold k/ kTotal knumber
kofkitems ksold.
Short Exercises
k
S-M:1-1
a. FA
b. MA
c. MA
d. FA
e. FA
S-M:1-2
a. Confidentiality
b. Integrity
c. Competence k(skipping kthe ksession); k Integrity k(company-paid kconference)
d. Competence
e. Credibility; k Integrity
S-M:1-3
a. 2
b. 4
c. 1
d. 5
e. 4
f. 5
g. 3
S-M:1-4
Glue kfor kframes $ 250
Plant kdepreciation 7,500
Plant kforeman’s ksalary 3,500
Plant kjanitor’s kwages 1,300
Oil kfor kmanufacturing kequipment k 150 k k
Total kmanufacturing koverhead k $ k12,700 k k
© k2021 kPearson kEducation, 1-4
kInc.
