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,
|direct, |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
|support |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 |company |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
|knowledge |and |skills.
Perform |professional |duties |in |accordance |with |relevant |laws, |regulations, |and |technical
|standards.
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
|ensure |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
|apparent |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
|interest.
5, |cont.
IV. Credibility.
Communicate |information |fairly |and |objectively.
Provide |all |relevant |information |that |could |reasonably |be |expected |to |influence |an |intended
|user’s |understanding |of |the |reports, |analyses, |or |recommendations.
Report |any |delays |or |deficiencies |in |information, |timeliness, |processing, |or |internal |controls|in
|conformance |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
|service |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
|products, |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
|manufacturing |companies |use |labor, |equipment, |supplies, |and |facilities |to |convert |raw |materials |into
|new |finished |products. |In |contrast |to |merchandising |companies, |manufacturing |companies |have |a
|broad |range |of |production |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 |yet
|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
|manufacturing |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 |who |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
|labor, |factory |depreciation, |factory |rent, |and |factory |property |taxes.
12. Examples |of |manufacturing |overhead |include |costs |of |indirect |materials, |indirect |labor, |repair |and
|maintenance |in |factory, |factory |utilities, |factory |rent, |factory |insurance, |factory |property |taxes,
|manufacturing |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
|manufacturing |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|manufacturing |overhead.
15. Period |costs |are |non-manufacturing |costs |that |are |expensed |in |the |same |accounting |period |in |which
|they |are |incurred, |whereas |product |costs |are |recorded |as |an |asset |and |not |expensed |until |the
|accounting |period |in |which |the |product |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 |Used |+ |Direct |Labor |+
|Manufacturing |Overhead.
17. For |a |manufacturing |company, |the |activity |in |the |Finished |Goods |Inventory |account |provides |the
|information |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 |Raw
|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
|information |for |determining |Cost |of |Goods |Sold. |A |merchandising |company |calculates |Cost |of
|Goods |Sold |as |Beginning |Merchandise |Inventory |+ |Purchases |and |Freight |In |– |Ending |Merchandise
|Inventory.
18. A |manufacturing |company |calculates |unit |product |cost |as |Cost |of |Goods |Manufactured |/ |Total
|number |of |units |produced.
19. A |service |company |calculates |unit |cost |per |service |as |Total |operating |costs |/ |Total |number |of
|services |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|items |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,
|direct, |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
|support |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 |company |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
|knowledge |and |skills.
Perform |professional |duties |in |accordance |with |relevant |laws, |regulations, |and |technical
|standards.
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
|ensure |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
|apparent |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
|interest.
5, |cont.
IV. Credibility.
Communicate |information |fairly |and |objectively.
Provide |all |relevant |information |that |could |reasonably |be |expected |to |influence |an |intended
|user’s |understanding |of |the |reports, |analyses, |or |recommendations.
Report |any |delays |or |deficiencies |in |information, |timeliness, |processing, |or |internal |controls|in
|conformance |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
|service |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
|products, |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
|manufacturing |companies |use |labor, |equipment, |supplies, |and |facilities |to |convert |raw |materials |into
|new |finished |products. |In |contrast |to |merchandising |companies, |manufacturing |companies |have |a
|broad |range |of |production |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 |yet
|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
|manufacturing |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 |who |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
|labor, |factory |depreciation, |factory |rent, |and |factory |property |taxes.
12. Examples |of |manufacturing |overhead |include |costs |of |indirect |materials, |indirect |labor, |repair |and
|maintenance |in |factory, |factory |utilities, |factory |rent, |factory |insurance, |factory |property |taxes,
|manufacturing |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
|manufacturing |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|manufacturing |overhead.
15. Period |costs |are |non-manufacturing |costs |that |are |expensed |in |the |same |accounting |period |in |which
|they |are |incurred, |whereas |product |costs |are |recorded |as |an |asset |and |not |expensed |until |the
|accounting |period |in |which |the |product |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 |Used |+ |Direct |Labor |+
|Manufacturing |Overhead.
17. For |a |manufacturing |company, |the |activity |in |the |Finished |Goods |Inventory |account |provides |the
|information |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 |Raw
|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
|information |for |determining |Cost |of |Goods |Sold. |A |merchandising |company |calculates |Cost |of
|Goods |Sold |as |Beginning |Merchandise |Inventory |+ |Purchases |and |Freight |In |– |Ending |Merchandise
|Inventory.
18. A |manufacturing |company |calculates |unit |product |cost |as |Cost |of |Goods |Manufactured |/ |Total
|number |of |units |produced.
19. A |service |company |calculates |unit |cost |per |service |as |Total |operating |costs |/ |Total |number |of
|services |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|items |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
