SOLUTION MANUAL FOR MANAGERIAL
ACCOUNTING 18TH EDITION BY RAY
GARRISON, ERIC NOREEN AND PETER
BREWER LATEST UPDATE 2025/2026 A+
1
,TABLE OF CONTENTS
prologue:managerial accounting: an overview
1. managerial accounting and cost concepts
2. job-order costing: calculating unit product costs
3. job-order costing: cost flows and external reporting
4. process costing
5. cost-volume-profit relationships
6. variable costing and segment reporting: tools for
management
7. activity-based costing: a tool to aid decision making
8. master budgeting
9. flexible budgets and performance analysis
10. standard costs and variances
11. responsibility accounting systems
12. strategic performance measurement
13. differential analysis: the key to decision making
14. capital budgeting decisions
15. statement of cash flows
16. financial statement analysis
integration exercises: an overview
2
,chapter 1
managerial accounting and cost concepts
questions
1-1 the three major types of product costs in a 1-4
manufacturing company are direct materials, direct a . variable cost: the variable cost per unit is
labor, and manufacturing overhead. constant, but total variable cost changes in
direct proportion to changes in volume.
1-2 b. fixed cost: the total fixed cost is constant within
a. direct materials are an integral part of a the relevant range. the average fixed cost per unit
finished product and their costs can be varies inversely with changes in volume.
conveniently traced to it. c. mixed cost: a mixed cost contains both
b. indirect materials are generally small items of variable and fixed cost elements.
material such as glue and nails. they may be an
integral part of a finished product but their costs can 1-5
be traced to the product only at great cost or a . unit fixed costs decrease as the activity level
inconvenience. increases.
c. direct labor consists of labor costs that can b. unit variable costs remain constant as the
be easily traced to particular products. activity level increases.
direct labor is also called ―touch labor.‖ c. total fixed costs remain constant as the
d. indirect labor consists of the labor costs of activity level increases.
janitors, supervisors, materials handlers, and other d. total variable costs increase as the activity level
factory workers that cannot be conveniently traced increases.
to particular products. these labor costs are incurred
to support production, but the workers involved do 1-6
not directly work on the product. a. cost behavior: cost behavior refers to the way
e. manufacturing overhead includes all in which costs change in response to changes
manufacturing costs except direct materials and in a measure of activity such as sales volume,
direct labor. consequently, manufacturing overhead production volume, or orders processed.
includes indirect materials and indirect labor as well b. relevant range: the relevant range is the range
as other manufacturing costs. of activity within which assumptions about
variable and fixed cost behavior are valid.
1-3 a product cost is any cost involved in
purchasing or manufacturing goods. in the case of 1-7 an activity base is a measure of
manufactured goods, these costs consist of direct whatever causes the incurrence of a variable cost.
materials, direct labor, and manufacturing overhead. a examples of activity bases include units produced,
period cost is a cost that is taken directly to the units sold, letters typed, beds in a hospital, meals
income statement as an expense in the period in served in a cafe, service calls made, etc.
which it is incurred.
1-8 the linear assumption is reasonably valid
providing that the cost formula is used only within the
relevant range.
© mcgraw hill llc. all rights reserved. no reproduction or distribution without the prior written consent of mcgraw
hill llc.
3
, 1-9 a discretionary fixed cost has a fairly 1-1 1 the traditional approach organizes costs by
short planning horizon—usually a year. such costs function, such as production, selling, and
arise from annual decisions by management to administration. within a functional area, fixed and
spend on certain fixed cost items, such as variable costs are intermingled. the contribution
advertising, research, and management approach income statement organizes costs by
development. a committed fixed cost has a long behavior, first deducting variable expenses to obtain
planning horizon—generally many years. such contribution margin, and then deducting fixed
costs relate to a company’s investment in facilities, expenses to obtain net operating income.
equipment, and basic organization. once such
costs have been incurre d , they are ―locke d in‖ for 1-1 2 the contribution margin is total sales
many years. revenue less total variable expenses.
1-1 0 yes. as the anticipated level of activity 1-1 3 a differential cost is a cost that differs
changes, the level of fixed costs needed to support between alternatives in a decision. a sunk cost is a
operations may also change. most fixed costs are cost that has already been incurred and cannot be
adjusted upward and downward in large steps, rather altered by any decision taken now or in the future. an
than being absolutely fixed atone level for all ranges opportunity cost is the potentialbenefit that is given
of activity. up when one alternative is selected over another.
1-1 4 no, differential costs can be either variable
or fixed. for example, the alternatives might consist
of purchasing one machine ratherthan another to
make a product. the difference between the fixed
costs of purchasing the two machines is a
differential cost.
© mcgraw hill llc. all rights reserved. no reproduction or distribution without the prior written consent of mcgraw
hill llc.
4
ACCOUNTING 18TH EDITION BY RAY
GARRISON, ERIC NOREEN AND PETER
BREWER LATEST UPDATE 2025/2026 A+
1
,TABLE OF CONTENTS
prologue:managerial accounting: an overview
1. managerial accounting and cost concepts
2. job-order costing: calculating unit product costs
3. job-order costing: cost flows and external reporting
4. process costing
5. cost-volume-profit relationships
6. variable costing and segment reporting: tools for
management
7. activity-based costing: a tool to aid decision making
8. master budgeting
9. flexible budgets and performance analysis
10. standard costs and variances
11. responsibility accounting systems
12. strategic performance measurement
13. differential analysis: the key to decision making
14. capital budgeting decisions
15. statement of cash flows
16. financial statement analysis
integration exercises: an overview
2
,chapter 1
managerial accounting and cost concepts
questions
1-1 the three major types of product costs in a 1-4
manufacturing company are direct materials, direct a . variable cost: the variable cost per unit is
labor, and manufacturing overhead. constant, but total variable cost changes in
direct proportion to changes in volume.
1-2 b. fixed cost: the total fixed cost is constant within
a. direct materials are an integral part of a the relevant range. the average fixed cost per unit
finished product and their costs can be varies inversely with changes in volume.
conveniently traced to it. c. mixed cost: a mixed cost contains both
b. indirect materials are generally small items of variable and fixed cost elements.
material such as glue and nails. they may be an
integral part of a finished product but their costs can 1-5
be traced to the product only at great cost or a . unit fixed costs decrease as the activity level
inconvenience. increases.
c. direct labor consists of labor costs that can b. unit variable costs remain constant as the
be easily traced to particular products. activity level increases.
direct labor is also called ―touch labor.‖ c. total fixed costs remain constant as the
d. indirect labor consists of the labor costs of activity level increases.
janitors, supervisors, materials handlers, and other d. total variable costs increase as the activity level
factory workers that cannot be conveniently traced increases.
to particular products. these labor costs are incurred
to support production, but the workers involved do 1-6
not directly work on the product. a. cost behavior: cost behavior refers to the way
e. manufacturing overhead includes all in which costs change in response to changes
manufacturing costs except direct materials and in a measure of activity such as sales volume,
direct labor. consequently, manufacturing overhead production volume, or orders processed.
includes indirect materials and indirect labor as well b. relevant range: the relevant range is the range
as other manufacturing costs. of activity within which assumptions about
variable and fixed cost behavior are valid.
1-3 a product cost is any cost involved in
purchasing or manufacturing goods. in the case of 1-7 an activity base is a measure of
manufactured goods, these costs consist of direct whatever causes the incurrence of a variable cost.
materials, direct labor, and manufacturing overhead. a examples of activity bases include units produced,
period cost is a cost that is taken directly to the units sold, letters typed, beds in a hospital, meals
income statement as an expense in the period in served in a cafe, service calls made, etc.
which it is incurred.
1-8 the linear assumption is reasonably valid
providing that the cost formula is used only within the
relevant range.
© mcgraw hill llc. all rights reserved. no reproduction or distribution without the prior written consent of mcgraw
hill llc.
3
, 1-9 a discretionary fixed cost has a fairly 1-1 1 the traditional approach organizes costs by
short planning horizon—usually a year. such costs function, such as production, selling, and
arise from annual decisions by management to administration. within a functional area, fixed and
spend on certain fixed cost items, such as variable costs are intermingled. the contribution
advertising, research, and management approach income statement organizes costs by
development. a committed fixed cost has a long behavior, first deducting variable expenses to obtain
planning horizon—generally many years. such contribution margin, and then deducting fixed
costs relate to a company’s investment in facilities, expenses to obtain net operating income.
equipment, and basic organization. once such
costs have been incurre d , they are ―locke d in‖ for 1-1 2 the contribution margin is total sales
many years. revenue less total variable expenses.
1-1 0 yes. as the anticipated level of activity 1-1 3 a differential cost is a cost that differs
changes, the level of fixed costs needed to support between alternatives in a decision. a sunk cost is a
operations may also change. most fixed costs are cost that has already been incurred and cannot be
adjusted upward and downward in large steps, rather altered by any decision taken now or in the future. an
than being absolutely fixed atone level for all ranges opportunity cost is the potentialbenefit that is given
of activity. up when one alternative is selected over another.
1-1 4 no, differential costs can be either variable
or fixed. for example, the alternatives might consist
of purchasing one machine ratherthan another to
make a product. the difference between the fixed
costs of purchasing the two machines is a
differential cost.
© mcgraw hill llc. all rights reserved. no reproduction or distribution without the prior written consent of mcgraw
hill llc.
4
