Copyright © 2023 McGraw Hill Ltd. All rights reserved
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Solutions Manual, Chapter 2
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. 1
,Solution Manual for mf mf
Introduction to Managerial Accounting 7CE Peter C. Brewer, Ray H. Garrison,
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Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan
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Chapter 1 mf
An Introduction to Managerial Accounting
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Solutions to Questions mf mf
1-1 Managerial accounting is concerned with providing information primarily to mana
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gers for their use internally in the organization for the purposes of strategy, planni
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ng, implementation and control. Financial accounting is concerned with providing
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information primarily to investors, creditors, and others outside of the organizatio
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n.
1-2 Essentially, the manager carries out three major activities in an organization: plan
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ning, implementation, and control. All three activities involve decision-
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making and use managerial accounting information. This is depicted in Exhibit 1-
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1.
mf
1-3 The Planning, Implementation and Control Cycle involves the following steps: (1)
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formulating plans which often includes preparing budgets, (2) overseeing day-to-
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day activities which includes organizing, directing and motivating people, resourc
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e allocation and decision making, and (3) controlling which includes providing fee
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dback via performance reports.mf mf mf
1-4 In contrast to financial accounting, managerial accounting: (1) focuses on the ne
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eds of the manager; (2) places more emphasis on the future; (3) emphasizes rele
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vance and timeliness, rather than verifiability and precision; (4) emphasizes the s
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egments of an organization; (5) is not governed by IFRS or ASPE; and (6) is not m
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andatory.
1-5 The lean business model focuses on continuous improvement by eliminating
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waste in the organization. Companies that adopt the lean business model u
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sually implement one or more of the following management practices.
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• Just-in-
time (JIT): A production and inventory control system in which material
mf mf mf mf mf mf mf mf mf mf
s are purchased and units are produced only as needed to meet actual cu
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stomer demand. mf
© The McGraw-Hill Companies, Inc., 2002. All rights reserved.
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2 Introduction to Manage mf mf
, • Total quality management (TQM): An approach to continuous impro
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vement that focuses on serving customers and uses teams of front-
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line workers to systematically identify and solve problems.
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• Process re- mf
engineering: An approach to improvement that involves completely r mf mf mf mf mf mf mf mf
edesigning business processes in order to eliminate unnecessary steps
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, reduce errors, and reduce costs.
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• Theory of constraints (TOC): A management approach that
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emphasizes the importance of managing constraints.
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1-6 Benefits
• Improves operational processes that makes the business efficient
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• It leads to reduction or elimination of waste
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• It improves profitability and reduces costs
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• It reduces the turnaround time to fulfill customer orders improving
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customer satisfaction mf
Limitations
• Production schedule can get hampered if any external shocks lead to mf mf mf mf mf mf mf mf mf mf mf
supply chain disturbance mf mf
• Lean processes must be complimented with agile processes to adapt
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swiftly to changing customer needs. mf mf mf mf
1-7 Pros
• Funds tied up in maintaining inventory can be used elsewhere
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• Areas previously used to store inventories are made available for other
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more productive uses mf mf
• The time required to fill an order is reduced, resulting in quicker response
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to customers and consequentially greater potential sales
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• Defect rates are reduced resulting in less waste and greater customer
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satisfaction
• More effective operations mf mf
Cons
• Increased number of purchase orders to buy raw materials and/or other
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components used in manufact uring products mf mf mf mf
• There is little room for errors and defects in products because this could t
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hrow the production facility off schedule
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• There is a high reliance and dependence on suppliers to meet delivery
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deadlines as well as supply products that have no defects and require
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minimal inspection mf
1-8 Agree. Ethical behaviour is the foundation of a successful market economy. If we
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cannot trust people to act ethically in their business dealings with us, we will be i
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nclined to invest less, scrutinize more and waste money and time (scarce resourc
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es) trying to protect ourselves. Ethical standards and Codes of Conduct
mf mf mf mf mf mf mf mf mf mf
Copyright © 2023 McGraw Hill Ltd. All rights reserved
mf mf mf mf mf mf mf mf
Solutions Manual, Chapter 2
mf mf mf
. 3
, aid the smooth running of the economy. In addition, t he lack of regulatory
mf mf mf mf mf mf mf mf mf mf mf mf mf
requirements (IFRS, ASPE) regarding managerial accounting makes ethical mf mf mf mf mf mf mf mf
behaviour even more critical. mf mf mf
Solutions to Exercises mf mf
Exercise 1-1 (LO1 CC2) mf mf mf
Item Financial Accountin
mf Managerial Accountin
mf
g g
a) Preparing budgeted statements
m f mf mf X
of income and financial position
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for the next year
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b) Analyzing t he profitability of a ne
m f mf mf mf mf mf X
w project mf
c) Preparing the income stateme
m f mf mf mf X
nt and balance sheet
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d) Preparing a weekly performan
m f mf mf mf X
ce report for t he product mana
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ger
e) Costing and pricing a new prod
m f mf mf mf mf mf X
uct
Exercise 1-2 (LO1 CC1) mf mf mf
Planning Implementation Control
a) Doing a cost–
m f mf mf X
benefit analysis of buying mf mf mf mf
new planes versus leasing t mf mf mf mf
hem
b) Estimating the cost of utilit
m f mf mf mf mf X
ies to be incurred during t h
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e next quarter
mf mf
© The McGraw-Hill Companies, Inc., 2002. All rights reserved.
mf mf mf mf mf mf mf mf
4 Introduction to Manage
mf mf
mf
mf mf mf mf mf mf mf mf
Solutions Manual, Chapter 2
mf mf mf
. 1
,Solution Manual for mf mf
Introduction to Managerial Accounting 7CE Peter C. Brewer, Ray H. Garrison,
mf mf mf mf mf mf mf mf mf mf
Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan
mf mf mf mf mf mf
Chapter 1 mf
An Introduction to Managerial Accounting
mf mf mf mf
Solutions to Questions mf mf
1-1 Managerial accounting is concerned with providing information primarily to mana
mf mf mf mf mf mf mf mf mf
gers for their use internally in the organization for the purposes of strategy, planni
mf mf mf mf mf mf mf mf mf mf mf mf mf
ng, implementation and control. Financial accounting is concerned with providing
mf mf mf mf mf mf mf mf mf mf
information primarily to investors, creditors, and others outside of the organizatio
mf mf mf mf mf mf mf mf mf mf
n.
1-2 Essentially, the manager carries out three major activities in an organization: plan
mf mf mf mf mf mf mf mf mf mf mf
ning, implementation, and control. All three activities involve decision-
mf mf mf m f mf mf mf mf
making and use managerial accounting information. This is depicted in Exhibit 1-
mf mf mf mf mf mf m f mf mf mf mf mf
1.
mf
1-3 The Planning, Implementation and Control Cycle involves the following steps: (1)
mf mf mf mf mf mf mf mf mf mf mf
formulating plans which often includes preparing budgets, (2) overseeing day-to-
mf mf mf mf mf mf mf mf mf
day activities which includes organizing, directing and motivating people, resourc
mf mf mf mf mf mf mf mf mf mf
e allocation and decision making, and (3) controlling which includes providing fee
mf mf mf mf mf mf mf mf mf mf mf
dback via performance reports.mf mf mf
1-4 In contrast to financial accounting, managerial accounting: (1) focuses on the ne
mf mf mf mf mf mf mf mf mf mf mf
eds of the manager; (2) places more emphasis on the future; (3) emphasizes rele
mf mf mf mf mf mf mf mf mf mf mf mf mf
vance and timeliness, rather than verifiability and precision; (4) emphasizes the s
mf mf mf mf mf mf mf mf mf mf mf
egments of an organization; (5) is not governed by IFRS or ASPE; and (6) is not m
mf mf mf mf mf mf mf mf mf mf mf mf mf mf mf mf
andatory.
1-5 The lean business model focuses on continuous improvement by eliminating
mf mf mf mf mf mf mf mf mf mf
waste in the organization. Companies that adopt the lean business model u
mf mf mf m f mf mf mf mf mf mf mf
sually implement one or more of the following management practices.
mf mf mf mf mf mf mf mf mf
• Just-in-
time (JIT): A production and inventory control system in which material
mf mf mf mf mf mf mf mf mf mf
s are purchased and units are produced only as needed to meet actual cu
mf mf mf mf mf mf mf mf mf mf mf mf mf
stomer demand. mf
© The McGraw-Hill Companies, Inc., 2002. All rights reserved.
mf mf mf mf mf mf mf mf
2 Introduction to Manage mf mf
, • Total quality management (TQM): An approach to continuous impro
mf mf mf mf mf mf mf mf
vement that focuses on serving customers and uses teams of front-
mf mf mf mf mf mf mf mf mf mf
line workers to systematically identify and solve problems.
mf mf mf mf mf mf mf mf
• Process re- mf
engineering: An approach to improvement that involves completely r mf mf mf mf mf mf mf mf
edesigning business processes in order to eliminate unnecessary steps
mf mf mf mf mf mf mf mf
, reduce errors, and reduce costs.
mf mf mf mf mf
• Theory of constraints (TOC): A management approach that
mf mf mf mf mf mf mf m
emphasizes the importance of managing constraints.
f mf mf mf mf mf
1-6 Benefits
• Improves operational processes that makes the business efficient
mf mf mf mf mf mf mf
• It leads to reduction or elimination of waste
mf mf mf mf mf mf mf
• It improves profitability and reduces costs
mf mf mf mf mf
• It reduces the turnaround time to fulfill customer orders improving
mf mf mf mf mf mf mf mf mf mf
customer satisfaction mf
Limitations
• Production schedule can get hampered if any external shocks lead to mf mf mf mf mf mf mf mf mf mf mf
supply chain disturbance mf mf
• Lean processes must be complimented with agile processes to adapt
mf mf mf mf mf mf mf mf mf mf
swiftly to changing customer needs. mf mf mf mf
1-7 Pros
• Funds tied up in maintaining inventory can be used elsewhere
mf mf mf mf mf mf mf mf mf
• Areas previously used to store inventories are made available for other
mf mf mf mf mf mf mf mf mf mf mf
more productive uses mf mf
• The time required to fill an order is reduced, resulting in quicker response
mf mf mf mf mf mf mf mf mf mf mf mf mf
to customers and consequentially greater potential sales
mf mf mf mf mf mf
• Defect rates are reduced resulting in less waste and greater customer
mf mf mf mf mf mf mf mf mf mf mf
satisfaction
• More effective operations mf mf
Cons
• Increased number of purchase orders to buy raw materials and/or other
mf mf mf mf mf mf mf mf mf mf mf
components used in manufact uring products mf mf mf mf
• There is little room for errors and defects in products because this could t
mf mf mf mf mf mf mf mf mf mf mf mf mf
hrow the production facility off schedule
mf mf mf mf mf
• There is a high reliance and dependence on suppliers to meet delivery
mf mf mf mf mf mf mf mf mf mf mf mf
deadlines as well as supply products that have no defects and require
mf mf mf mf mf mf mf mf mf mf mf mf
minimal inspection mf
1-8 Agree. Ethical behaviour is the foundation of a successful market economy. If we
mf mf mf mf mf mf mf mf mf mf mf mf mf
cannot trust people to act ethically in their business dealings with us, we will be i
mf mf mf mf mf mf mf mf mf mf mf mf mf mf mf
nclined to invest less, scrutinize more and waste money and time (scarce resourc
mf mf mf mf mf mf mf mf mf mf mf mf
es) trying to protect ourselves. Ethical standards and Codes of Conduct
mf mf mf mf mf mf mf mf mf mf
Copyright © 2023 McGraw Hill Ltd. All rights reserved
mf mf mf mf mf mf mf mf
Solutions Manual, Chapter 2
mf mf mf
. 3
, aid the smooth running of the economy. In addition, t he lack of regulatory
mf mf mf mf mf mf mf mf mf mf mf mf mf
requirements (IFRS, ASPE) regarding managerial accounting makes ethical mf mf mf mf mf mf mf mf
behaviour even more critical. mf mf mf
Solutions to Exercises mf mf
Exercise 1-1 (LO1 CC2) mf mf mf
Item Financial Accountin
mf Managerial Accountin
mf
g g
a) Preparing budgeted statements
m f mf mf X
of income and financial position
mf mf mf mf mf
for the next year
mf mf mf mf
b) Analyzing t he profitability of a ne
m f mf mf mf mf mf X
w project mf
c) Preparing the income stateme
m f mf mf mf X
nt and balance sheet
mf mf mf
d) Preparing a weekly performan
m f mf mf mf X
ce report for t he product mana
mf mf mf mf mf
ger
e) Costing and pricing a new prod
m f mf mf mf mf mf X
uct
Exercise 1-2 (LO1 CC1) mf mf mf
Planning Implementation Control
a) Doing a cost–
m f mf mf X
benefit analysis of buying mf mf mf mf
new planes versus leasing t mf mf mf mf
hem
b) Estimating the cost of utilit
m f mf mf mf mf X
ies to be incurred during t h
mf mf mf mf mf
e next quarter
mf mf
© The McGraw-Hill Companies, Inc., 2002. All rights reserved.
mf mf mf mf mf mf mf mf
4 Introduction to Manage
mf mf
