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,,dire
ct,,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,sup
port,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,compa
ny,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,kno
wledge,and,skills.
Perform,professional,duties,in,accordance,with,relevant,laws,,regulations,,and,technical,stan
dards.
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,ens
ure,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,appa
rent,conflicts,of,interest.,,Advise,all,parties,of,any,potential,conflicts.
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. 1-1
, Contribute,to,a,positive,ethical,culture,and,place,integrity,of,the,profession,above,personal,inte
rest.
5,,cont.
IV. Credibility.
Communicate,information,fairly,and,objectively.
Provide,all,relevant,information,that,could,reasonably,be,expected,to,influence,an,intended,use
r’s,understanding,of,the,reports,,analyses,,or,recommendations.
Report,any,delays,or,deficiencies,in,information,,timeliness,,processing,,or,internal,controls,in,co
nformance,with,organization,policy,and/or,applicable,law.
Communicate,any,professional,limitations,or,other,constraints,that,would,preclude,responsi-
,ble,judgment,or,successful,performance,of,an,activity.
6. Service,companies,sell,time,,skills,,and,knowledge., Examples,of,service,companies,include,phone,servi
ce,companies,,banks,,cleaning,service,companies,,accounting,firms,,law,firms,,medical,physicians,,and,
online,auction,services.
7. Merchandising,companies,resell,products,they,buy,from,suppliers.,Merchandisers,keep,an,inventory,of,pr
oducts,,and,managers,are,accountable,for,the,purchasing,,storage,,and,sale,of,the,products.,Examples,of,
merchandising,companies,include,toy,stores,,grocery,stores,,and,clothing,stores.
8. Merchandising,companies,resell,products,they,previously,bought,from,suppliers,,whereas,manufacturin
g,companies,use,labor,,equipment,,supplies,,and,facilities,to,convert,raw,materials,into,new,finished,prod
ucts.,In,contrast,to,merchandising,companies,,manufacturing,companies,have,a,broad,range,of,producti
on,activities,that,require,tracking,costs,on,three,kinds,of,inventory.
9. The,three,inventory,accounts,used,by,manufacturing,companies,are,Raw,Materials,Inventory,,Work-,in-
Process,Inventory,,and,Finished,Goods,Inventory.
Raw,Materials,Inventory,includes,materials,used,to,manufacture,a,product.,Work-in-
Process,Inventory,includes,goods,that,have,been,started,in,the,manufacturing,process,but,are,not,y
et,complete., Finished,Goods,Inventory,includes,completed,goods,that,have,not,yet,been,sold.
10. A,direct,cost,is,a,cost,that,can,be,easily,and,cost-
effectively,traced,to,a,cost,object,(which,is,anything,for,which,managers,want,a,separate,measurement,
of,cost).,An,indirect,cost,is,a,cost,that,cannot,be,easily,or,cost-effectively,traced,to,a,cost,object.
11. The,three,manufacturing,costs,for,a,manufacturing,company,are,direct,materials,,direct,labor,,and,manu
facturing,overhead.,Direct,materials,are,materials,that,become,a,physical,part,of,a,finished,product,and,
whose,costs,are,easily,traceable,to,the,finished,product., Direct,labor,is,the,labor,cost,of,the,employees,w
ho,convert,materials,into,finished,products., Manufacturing,overhead,includes,all
©,2021,Pearson,Education,,Inc. 1-2
, manufacturing,costs,except,direct,materials,and,direct,labor,,such,as,indirect,materials,,indirect,labo
r,,factory,depreciation,,factory,rent,,and,factory,property,taxes.
12. Examples,of,manufacturing,overhead,include,costs,of,indirect,materials,,indirect,labor,,repair,and,mai
ntenance,in,factory,,factory,utilities,,factory,rent,,factory,insurance,,factory,property,taxes,,manufactur
ing,plant,managers’,salaries,,and,depreciation,on,manufacturing,buildings,and,equipment.
13. Prime,costs,are,direct,materials,plus,direct,labor.,Conversion,costs,are,direct,labor,plus,manufacturin
g,overhead.,Note,that,direct,labor,is,classified,as,both,a,prime,cost,and,a,conversion,cost.
14. Product,costs,are,the,cost,of,purchasing,or,making,a,product., These,costs,are,recorded,as,an,asset,and
,not,expensed,until,the,product,is,sold.,Product,costs,include,direct,materials,,direct,labor,,and,manufa
cturing,overhead.
15. Period,costs,are,non-
manufacturing,costs,that,are,expensed,in,the,same,accounting,period,in,which,they,are,incurred,,wherea
s,product,costs,are,recorded,as,an,asset,and,not,expensed,until,the,accounting,period,in,which,the,prod
uct,is,sold.
16. Cost,of,Goods,Manufactured,is,calculated,as,Beginning,Work-in-
Process,Inventory,+,Total,Manufacturing,Costs,Incurred,during,the,Year,–,Ending,Work-in-
Process,Inventory.,Total,Manufacturing,Costs,Incurred,during,the,Year,=,Direct,Materials,Use
d,+,Direct,Labor,+,Manufacturing,Overhead.
17. For,a,manufacturing,company,,the,activity,in,the,Finished,Goods,Inventory,account,provides,the,inf
ormation,for,determining,Cost,of,Goods,Sold.,A,manufacturing,company,calculates,Cost,of,Goods,
Sold,as,Beginning,Finished,Goods,Inventory,+,Cost,of,Goods,Manufactured,–
,Ending,Finished,Good,Inventory.,In,addition,,a,manufacturing,company,must,track,costs,from,Ra
w,Materials,Inventory,and,Work-in-
Process,Inventory,in,order,to,compute,Cost,of,Goods,Manufactured,used,in,the,previous,equation.
For,a,merchandising,company,,the,activity,in,the,Merchandise,Inventory,account,provides,the,informati
on,for,determining,Cost,of,Goods,Sold.,A,merchandising,company,calculates,Cost,of,Goods,Sold,as,Be
ginning,Merchandise,Inventory,+,Purchases,and,Freight,In,–,Ending,Merchandise,Inventory.
18. A,manufacturing,company,calculates,unit,product,cost,as,Cost,of,Goods,Manufactured,/,Total,nu
mber,of,units,produced.
19. A,service,company,calculates,unit,cost,per,service,as,Total,operating,costs,/,Total,number,of,ser
vices,provided.
©,2021,Pearson,Education,,Inc. 1-3
, 20. A,merchandising,company,calculates,unit,cost,per,item,as,Total,cost,of,goods,sold,/,Total,number,of,ite
ms,sold.
Short,Exercises
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)
d. Competence
e. Credibility;, Integrity
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 $ 250
Plant,depreciation 7,500
Plant,foreman’s,salary 3,500
Plant,janitor’s,wages 1,300
Oil,for,manufacturing,equipment , 150,,
Total,manufacturing,overhead , $,12,700,,
©,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,,dire
ct,,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,sup
port,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,compa
ny,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,kno
wledge,and,skills.
Perform,professional,duties,in,accordance,with,relevant,laws,,regulations,,and,technical,stan
dards.
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,ens
ure,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,appa
rent,conflicts,of,interest.,,Advise,all,parties,of,any,potential,conflicts.
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. 1-1
, Contribute,to,a,positive,ethical,culture,and,place,integrity,of,the,profession,above,personal,inte
rest.
5,,cont.
IV. Credibility.
Communicate,information,fairly,and,objectively.
Provide,all,relevant,information,that,could,reasonably,be,expected,to,influence,an,intended,use
r’s,understanding,of,the,reports,,analyses,,or,recommendations.
Report,any,delays,or,deficiencies,in,information,,timeliness,,processing,,or,internal,controls,in,co
nformance,with,organization,policy,and/or,applicable,law.
Communicate,any,professional,limitations,or,other,constraints,that,would,preclude,responsi-
,ble,judgment,or,successful,performance,of,an,activity.
6. Service,companies,sell,time,,skills,,and,knowledge., Examples,of,service,companies,include,phone,servi
ce,companies,,banks,,cleaning,service,companies,,accounting,firms,,law,firms,,medical,physicians,,and,
online,auction,services.
7. Merchandising,companies,resell,products,they,buy,from,suppliers.,Merchandisers,keep,an,inventory,of,pr
oducts,,and,managers,are,accountable,for,the,purchasing,,storage,,and,sale,of,the,products.,Examples,of,
merchandising,companies,include,toy,stores,,grocery,stores,,and,clothing,stores.
8. Merchandising,companies,resell,products,they,previously,bought,from,suppliers,,whereas,manufacturin
g,companies,use,labor,,equipment,,supplies,,and,facilities,to,convert,raw,materials,into,new,finished,prod
ucts.,In,contrast,to,merchandising,companies,,manufacturing,companies,have,a,broad,range,of,producti
on,activities,that,require,tracking,costs,on,three,kinds,of,inventory.
9. The,three,inventory,accounts,used,by,manufacturing,companies,are,Raw,Materials,Inventory,,Work-,in-
Process,Inventory,,and,Finished,Goods,Inventory.
Raw,Materials,Inventory,includes,materials,used,to,manufacture,a,product.,Work-in-
Process,Inventory,includes,goods,that,have,been,started,in,the,manufacturing,process,but,are,not,y
et,complete., Finished,Goods,Inventory,includes,completed,goods,that,have,not,yet,been,sold.
10. A,direct,cost,is,a,cost,that,can,be,easily,and,cost-
effectively,traced,to,a,cost,object,(which,is,anything,for,which,managers,want,a,separate,measurement,
of,cost).,An,indirect,cost,is,a,cost,that,cannot,be,easily,or,cost-effectively,traced,to,a,cost,object.
11. The,three,manufacturing,costs,for,a,manufacturing,company,are,direct,materials,,direct,labor,,and,manu
facturing,overhead.,Direct,materials,are,materials,that,become,a,physical,part,of,a,finished,product,and,
whose,costs,are,easily,traceable,to,the,finished,product., Direct,labor,is,the,labor,cost,of,the,employees,w
ho,convert,materials,into,finished,products., Manufacturing,overhead,includes,all
©,2021,Pearson,Education,,Inc. 1-2
, manufacturing,costs,except,direct,materials,and,direct,labor,,such,as,indirect,materials,,indirect,labo
r,,factory,depreciation,,factory,rent,,and,factory,property,taxes.
12. Examples,of,manufacturing,overhead,include,costs,of,indirect,materials,,indirect,labor,,repair,and,mai
ntenance,in,factory,,factory,utilities,,factory,rent,,factory,insurance,,factory,property,taxes,,manufactur
ing,plant,managers’,salaries,,and,depreciation,on,manufacturing,buildings,and,equipment.
13. Prime,costs,are,direct,materials,plus,direct,labor.,Conversion,costs,are,direct,labor,plus,manufacturin
g,overhead.,Note,that,direct,labor,is,classified,as,both,a,prime,cost,and,a,conversion,cost.
14. Product,costs,are,the,cost,of,purchasing,or,making,a,product., These,costs,are,recorded,as,an,asset,and
,not,expensed,until,the,product,is,sold.,Product,costs,include,direct,materials,,direct,labor,,and,manufa
cturing,overhead.
15. Period,costs,are,non-
manufacturing,costs,that,are,expensed,in,the,same,accounting,period,in,which,they,are,incurred,,wherea
s,product,costs,are,recorded,as,an,asset,and,not,expensed,until,the,accounting,period,in,which,the,prod
uct,is,sold.
16. Cost,of,Goods,Manufactured,is,calculated,as,Beginning,Work-in-
Process,Inventory,+,Total,Manufacturing,Costs,Incurred,during,the,Year,–,Ending,Work-in-
Process,Inventory.,Total,Manufacturing,Costs,Incurred,during,the,Year,=,Direct,Materials,Use
d,+,Direct,Labor,+,Manufacturing,Overhead.
17. For,a,manufacturing,company,,the,activity,in,the,Finished,Goods,Inventory,account,provides,the,inf
ormation,for,determining,Cost,of,Goods,Sold.,A,manufacturing,company,calculates,Cost,of,Goods,
Sold,as,Beginning,Finished,Goods,Inventory,+,Cost,of,Goods,Manufactured,–
,Ending,Finished,Good,Inventory.,In,addition,,a,manufacturing,company,must,track,costs,from,Ra
w,Materials,Inventory,and,Work-in-
Process,Inventory,in,order,to,compute,Cost,of,Goods,Manufactured,used,in,the,previous,equation.
For,a,merchandising,company,,the,activity,in,the,Merchandise,Inventory,account,provides,the,informati
on,for,determining,Cost,of,Goods,Sold.,A,merchandising,company,calculates,Cost,of,Goods,Sold,as,Be
ginning,Merchandise,Inventory,+,Purchases,and,Freight,In,–,Ending,Merchandise,Inventory.
18. A,manufacturing,company,calculates,unit,product,cost,as,Cost,of,Goods,Manufactured,/,Total,nu
mber,of,units,produced.
19. A,service,company,calculates,unit,cost,per,service,as,Total,operating,costs,/,Total,number,of,ser
vices,provided.
©,2021,Pearson,Education,,Inc. 1-3
, 20. A,merchandising,company,calculates,unit,cost,per,item,as,Total,cost,of,goods,sold,/,Total,number,of,ite
ms,sold.
Short,Exercises
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)
d. Competence
e. Credibility;, Integrity
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 $ 250
Plant,depreciation 7,500
Plant,foreman’s,salary 3,500
Plant,janitor’s,wages 1,300
Oil,for,manufacturing,equipment , 150,,
Total,manufacturing,overhead , $,12,700,,
©,2021,Pearson,Education,,Inc. 1-4
