Solution Manual for
Horngren's Managerial Chapters Accounting, 7th Edition by Tracie
Chapterw1-11
Chapter 1 w
Introduction to Managerial Accounting
w w w
Review Questions
w
1. Thewprimarywpurposewofwmanagerialwaccountingwiswtowprovidewinformationwtowhelpwmanagerswplan,wdir
ect,wcontrol,wandwmakewdecisions.
2. Financialwaccountingwandwmanagerialwaccountingwdifferwonwthewfollowingw6wdimensions:w(1)wprimarywusers
,w(2)wpurposewofwinformation,w(3)wfocuswandwtimewdimensionwofwthewinformation,w(4)wruleswandwrestriction
s,w(5)wscopewofwinformation,wandw(6)wbehavioral.
3. Linewpositionswarewdirectlywinvolvedwinwprovidingwgoodsworwserviceswtowcustomers.wStaffwpositionswsup
portwlinewpositions.
4. Planningwmeanswchoosingwgoalswandwdecidingwhowwtowachievewthem.wDirectingwinvolveswrunningwthewday-
to-
daywoperationswofwawbusiness.wControllingwiswthewprocesswofwmonitoringwoperationswandwkeepingwthewcompa
nywonwtrack.
5. ThewfourwIMAwstandardswofwethicalwpracticewandwawdescriptionwofweachwfollow.
I. Competence.
Maintainwanwappropriatewlevelwofwprofessionalwleadershipwandwexpertisewbywenhancingwkn
owledgewandwskills.
Performwprofessionalwdutieswinwaccordancewwithwrelevantwlaws,wregulations,wandwtechnicalwsta
ndards.
Providewdecisionwsupportwinformationwandwrecommendationswthatwarewaccurate,wclear,wconcise,wan
dwtimely.
Recognisewandwhelpwmangewrisk.
II. Confidentiality.
Keepwinformationwconfidentialwexceptwwhenwdisclosurewiswauthorizedworwlegallywrequired.
Informwallwrelevantwpartieswregardingwappropriatewusewofwconfidentialwinformation.w Monitorwtowens
urewcompliance.
Refrainwfromwusingwconfidentialwinformationwforwunethicalworwillegalwadvantage.
III. Integrity.
Mitigatewactualwconflictswofwinterest.wRegularlywcommunicatewwithwbusinesswassociateswtowavoidwappa
rentwconflictswofwinterest.wwAdvisewallwpartieswofwanywpotentialwconflicts.
Refrainwfromwengagingwinwanywconductwthatwwouldwprejudicewcarryingwoutwdutieswethically.
Abstainwfromwengagingwinworwsupportingwanywactivitywthatwmightwdiscreditwthewprofession.
©w2021wPearsonwEducation,wInc. 1-1
, Contributewtowawpositivewethicalwculturewandwplacewintegritywofwthewprofessionwabovewpersonalwint
erest.
5,wcont.
IV. Credibility.
Communicatewinformationwfairlywandwobjectively.
Providewallwrelevantwinformationwthatwcouldwreasonablywbewexpectedwtowinfluencewanwintendedwuse
r’swunderstandingwofwthewreports,wanalyses,worwrecommendations.
Reportwanywdelaysworwdeficiencieswinwinformation,wtimeliness,wprocessing,worwinternalwcontrolswinwc
onformancewwithworganizationwpolicywand/orwapplicablewlaw.
Communicatewanywprofessionalwlimitationsworwotherwconstraintswthatwwouldwprecludewresponsi-
blewjudgmentworwsuccessfulwperformancewofwanwactivity.
w
6. Servicewcompanieswsellwtime,wskills,wandwknowledge.w Exampleswofwservicewcompanieswincludewphonewservi
cewcompanies,wbanks,wcleaningwservicewcompanies,waccountingwfirms,wlawwfirms,wmedicalwphysicians,wandw
onlinewauctionwservices.
7. Merchandisingwcompanieswresellwproductswtheywbuywfromwsuppliers.wMerchandiserswkeepwanwinventorywofwp
roducts,wandwmanagerswarewaccountablewforwthewpurchasing,wstorage,wandwsalewofwthewproducts.wExampleswo
fwmerchandisingwcompanieswincludewtoywstores,wgrocerywstores,wandwclothingwstores.
8. Merchandisingwcompanieswresellwproductswtheywpreviouslywboughtwfromwsuppliers,wwhereaswmanufacturin
gwcompanieswusewlabor,wequipment,wsupplies,wandwfacilitieswtowconvertwrawwmaterialswintownewwfinishedwpro
ducts.wInwcontrastwtowmerchandisingwcompanies,wmanufacturingwcompanieswhavewawbroadwrangewofwproduc
tionwactivitieswthatwrequirewtrackingwcostswonwthreewkindswofwinventory.
9. ThewthreewinventorywaccountswusedwbywmanufacturingwcompanieswarewRawwMaterialswInventory,wWork-win-
ProcesswInventory,wandwFinishedwGoodswInventory.
RawwMaterialswInventorywincludeswmaterialswusedwtowmanufacturewawproduct.wWork-in-
ProcesswInventorywincludeswgoodswthatwhavewbeenwstartedwinwthewmanufacturingwprocesswbutwarewnotwy
etwcomplete.w FinishedwGoodswInventorywincludeswcompletedwgoodswthatwhavewnotwyetwbeenwsold.
10. Awdirectwcostwiswawcostwthatwcanwbeweasilywandwcost-
effectivelywtracedwtowawcostwobjectw(whichwiswanythingwforwwhichwmanagerswwantwawseparatewmeasuremen
twofwcost).wAnwindirectwcostwiswawcostwthatwcannotwbeweasilyworwcost-effectivelywtracedwtowawcostwobject.
11. Thewthreewmanufacturingwcostswforwawmanufacturingwcompanywarewdirectwmaterials,wdirectwlabor,wandwmanu
facturingwoverhead.wDirectwmaterialswarewmaterialswthatwbecomewawphysicalwpartwofwawfinishedwproductwandw
whosewcostswareweasilywtraceablewtowthewfinishedwproduct.w Directwlaborwiswthewlaborwcostwofwthewemployeesw
whowconvertwmaterialswintowfinishedwproducts.w Manufacturingwoverheadwincludeswall
©w2021wPearsonwEducation,wInc. 1-2
, manufacturingwcostswexceptwdirectwmaterialswandwdirectwlabor,wsuchwaswindirectwmaterials,windirectwlabo
r,wfactorywdepreciation,wfactorywrent,wandwfactorywpropertywtaxes.
12. Exampleswofwmanufacturingwoverheadwincludewcostswofwindirectwmaterials,windirectwlabor,wrepairwandwmai
ntenancewinwfactory,wfactorywutilities,wfactorywrent,wfactorywinsurance,wfactorywpropertywtaxes,wmanufactu
ringwplantwmanagers’wsalaries,wandwdepreciationwonwmanufacturingwbuildingswandwequipment.
13. Primewcostswarewdirectwmaterialswpluswdirectwlabor.wConversionwcostswarewdirectwlaborwpluswmanufacturin
gwoverhead.wNotewthatwdirectwlaborwiswclassifiedwaswbothwawprimewcostwandwawconversionwcost.
14. Productwcostswarewthewcostwofwpurchasingworwmakingwawproduct.w Thesewcostswarewrecordedwaswanwassetwan
dwnotwexpensedwuntilwthewproductwiswsold.wProductwcostswincludewdirectwmaterials,wdirectwlabor,wandwmanu
facturingwoverhead.
15. Periodwcostswarewnon-
manufacturingwcostswthatwarewexpensedwinwthewsamewaccountingwperiodwinwwhichwtheywarewincurred,wwhere
aswproductwcostswarewrecordedwaswanwassetwandwnotwexpensedwuntilwthewaccountingwperiodwinwwhichwthewpr
oductwiswsold.
16. CostwofwGoodswManufacturedwiswcalculatedwaswBeginningwWork-in-
ProcesswInventoryw+wTotalwManufacturingwCostswIncurredwduringwthewYearw–wEndingwWork-in-
ProcesswInventory.wTotalwManufacturingwCostswIncurredwduringwthewYearw=wDirectwMaterialswUse
dw+wDirectwLaborw+wManufacturingwOverhead.
17. Forwawmanufacturingwcompany,wthewactivitywinwthewFinishedwGoodswInventorywaccountwprovideswthewinf
ormationwforwdeterminingwCostwofwGoodswSold.wAwmanufacturingwcompanywcalculateswCostwofwGoodsw
SoldwaswBeginningwFinishedwGoodswInventoryw+wCostwofwGoodswManufacturedw–
wEndingwFinishedwGoodwInventory.wInwaddition,wawmanufacturingwcompanywmustwtrackwcostswfromwRa
wwMaterialswInventorywandwWork-in-
ProcesswInventorywinworderwtowcomputewCostwofwGoodswManufacturedwusedwinwthewpreviouswequation.
Forwawmerchandisingwcompany,wthewactivitywinwthewMerchandisewInventorywaccountwprovideswthewinformat
ionwforwdeterminingwCostwofwGoodswSold.wAwmerchandisingwcompanywcalculateswCostwofwGoodswSoldwaswB
eginningwMerchandisewInventoryw+wPurchaseswandwFreightwInw–wEndingwMerchandisewInventory.
18. AwmanufacturingwcompanywcalculateswunitwproductwcostwaswCostwofwGoodswManufacturedw/wTotalwn
umberwofwunitswproduced.
19. AwservicewcompanywcalculateswunitwcostwperwservicewaswTotalwoperatingwcostsw/wTotalwnumberwofwser
viceswprovided.
©w2021wPearsonwEducation,wInc. 1-3
, 20. AwmerchandisingwcompanywcalculateswunitwcostwperwitemwaswTotalwcostwofwgoodswsoldw/wTotalwnumberwofwite
mswsold.
Short Exercises
w
S-M:1-1
a. FA
b. MA
c. MA
d. FA
e. FA
S-M:1-2
a. Confidentiality
b. Integrity
c. Competencew(skippingwthewsession);w Integrityw(company-paidwconference)
d. Competence
e. Credibility;w Integrity
S-M:1-3
a. 2
b. 4
c. 1
d. 5
e. 4
f. 5
g. 3
S-M:1-4
Gluewforwframes $ 250
Plantwdepreciation 7,500
Plantwforeman’swsalary 3,500
Plantwjanitor’swwages 1,300
Oilwforwmanufacturingwequipment w 150ww
Totalwmanufacturingwoverhead w $w12,700ww
©w2021wPearsonwEducation,wInc. 1-4
Horngren's Managerial Chapters Accounting, 7th Edition by Tracie
Chapterw1-11
Chapter 1 w
Introduction to Managerial Accounting
w w w
Review Questions
w
1. Thewprimarywpurposewofwmanagerialwaccountingwiswtowprovidewinformationwtowhelpwmanagerswplan,wdir
ect,wcontrol,wandwmakewdecisions.
2. Financialwaccountingwandwmanagerialwaccountingwdifferwonwthewfollowingw6wdimensions:w(1)wprimarywusers
,w(2)wpurposewofwinformation,w(3)wfocuswandwtimewdimensionwofwthewinformation,w(4)wruleswandwrestriction
s,w(5)wscopewofwinformation,wandw(6)wbehavioral.
3. Linewpositionswarewdirectlywinvolvedwinwprovidingwgoodsworwserviceswtowcustomers.wStaffwpositionswsup
portwlinewpositions.
4. Planningwmeanswchoosingwgoalswandwdecidingwhowwtowachievewthem.wDirectingwinvolveswrunningwthewday-
to-
daywoperationswofwawbusiness.wControllingwiswthewprocesswofwmonitoringwoperationswandwkeepingwthewcompa
nywonwtrack.
5. ThewfourwIMAwstandardswofwethicalwpracticewandwawdescriptionwofweachwfollow.
I. Competence.
Maintainwanwappropriatewlevelwofwprofessionalwleadershipwandwexpertisewbywenhancingwkn
owledgewandwskills.
Performwprofessionalwdutieswinwaccordancewwithwrelevantwlaws,wregulations,wandwtechnicalwsta
ndards.
Providewdecisionwsupportwinformationwandwrecommendationswthatwarewaccurate,wclear,wconcise,wan
dwtimely.
Recognisewandwhelpwmangewrisk.
II. Confidentiality.
Keepwinformationwconfidentialwexceptwwhenwdisclosurewiswauthorizedworwlegallywrequired.
Informwallwrelevantwpartieswregardingwappropriatewusewofwconfidentialwinformation.w Monitorwtowens
urewcompliance.
Refrainwfromwusingwconfidentialwinformationwforwunethicalworwillegalwadvantage.
III. Integrity.
Mitigatewactualwconflictswofwinterest.wRegularlywcommunicatewwithwbusinesswassociateswtowavoidwappa
rentwconflictswofwinterest.wwAdvisewallwpartieswofwanywpotentialwconflicts.
Refrainwfromwengagingwinwanywconductwthatwwouldwprejudicewcarryingwoutwdutieswethically.
Abstainwfromwengagingwinworwsupportingwanywactivitywthatwmightwdiscreditwthewprofession.
©w2021wPearsonwEducation,wInc. 1-1
, Contributewtowawpositivewethicalwculturewandwplacewintegritywofwthewprofessionwabovewpersonalwint
erest.
5,wcont.
IV. Credibility.
Communicatewinformationwfairlywandwobjectively.
Providewallwrelevantwinformationwthatwcouldwreasonablywbewexpectedwtowinfluencewanwintendedwuse
r’swunderstandingwofwthewreports,wanalyses,worwrecommendations.
Reportwanywdelaysworwdeficiencieswinwinformation,wtimeliness,wprocessing,worwinternalwcontrolswinwc
onformancewwithworganizationwpolicywand/orwapplicablewlaw.
Communicatewanywprofessionalwlimitationsworwotherwconstraintswthatwwouldwprecludewresponsi-
blewjudgmentworwsuccessfulwperformancewofwanwactivity.
w
6. Servicewcompanieswsellwtime,wskills,wandwknowledge.w Exampleswofwservicewcompanieswincludewphonewservi
cewcompanies,wbanks,wcleaningwservicewcompanies,waccountingwfirms,wlawwfirms,wmedicalwphysicians,wandw
onlinewauctionwservices.
7. Merchandisingwcompanieswresellwproductswtheywbuywfromwsuppliers.wMerchandiserswkeepwanwinventorywofwp
roducts,wandwmanagerswarewaccountablewforwthewpurchasing,wstorage,wandwsalewofwthewproducts.wExampleswo
fwmerchandisingwcompanieswincludewtoywstores,wgrocerywstores,wandwclothingwstores.
8. Merchandisingwcompanieswresellwproductswtheywpreviouslywboughtwfromwsuppliers,wwhereaswmanufacturin
gwcompanieswusewlabor,wequipment,wsupplies,wandwfacilitieswtowconvertwrawwmaterialswintownewwfinishedwpro
ducts.wInwcontrastwtowmerchandisingwcompanies,wmanufacturingwcompanieswhavewawbroadwrangewofwproduc
tionwactivitieswthatwrequirewtrackingwcostswonwthreewkindswofwinventory.
9. ThewthreewinventorywaccountswusedwbywmanufacturingwcompanieswarewRawwMaterialswInventory,wWork-win-
ProcesswInventory,wandwFinishedwGoodswInventory.
RawwMaterialswInventorywincludeswmaterialswusedwtowmanufacturewawproduct.wWork-in-
ProcesswInventorywincludeswgoodswthatwhavewbeenwstartedwinwthewmanufacturingwprocesswbutwarewnotwy
etwcomplete.w FinishedwGoodswInventorywincludeswcompletedwgoodswthatwhavewnotwyetwbeenwsold.
10. Awdirectwcostwiswawcostwthatwcanwbeweasilywandwcost-
effectivelywtracedwtowawcostwobjectw(whichwiswanythingwforwwhichwmanagerswwantwawseparatewmeasuremen
twofwcost).wAnwindirectwcostwiswawcostwthatwcannotwbeweasilyworwcost-effectivelywtracedwtowawcostwobject.
11. Thewthreewmanufacturingwcostswforwawmanufacturingwcompanywarewdirectwmaterials,wdirectwlabor,wandwmanu
facturingwoverhead.wDirectwmaterialswarewmaterialswthatwbecomewawphysicalwpartwofwawfinishedwproductwandw
whosewcostswareweasilywtraceablewtowthewfinishedwproduct.w Directwlaborwiswthewlaborwcostwofwthewemployeesw
whowconvertwmaterialswintowfinishedwproducts.w Manufacturingwoverheadwincludeswall
©w2021wPearsonwEducation,wInc. 1-2
, manufacturingwcostswexceptwdirectwmaterialswandwdirectwlabor,wsuchwaswindirectwmaterials,windirectwlabo
r,wfactorywdepreciation,wfactorywrent,wandwfactorywpropertywtaxes.
12. Exampleswofwmanufacturingwoverheadwincludewcostswofwindirectwmaterials,windirectwlabor,wrepairwandwmai
ntenancewinwfactory,wfactorywutilities,wfactorywrent,wfactorywinsurance,wfactorywpropertywtaxes,wmanufactu
ringwplantwmanagers’wsalaries,wandwdepreciationwonwmanufacturingwbuildingswandwequipment.
13. Primewcostswarewdirectwmaterialswpluswdirectwlabor.wConversionwcostswarewdirectwlaborwpluswmanufacturin
gwoverhead.wNotewthatwdirectwlaborwiswclassifiedwaswbothwawprimewcostwandwawconversionwcost.
14. Productwcostswarewthewcostwofwpurchasingworwmakingwawproduct.w Thesewcostswarewrecordedwaswanwassetwan
dwnotwexpensedwuntilwthewproductwiswsold.wProductwcostswincludewdirectwmaterials,wdirectwlabor,wandwmanu
facturingwoverhead.
15. Periodwcostswarewnon-
manufacturingwcostswthatwarewexpensedwinwthewsamewaccountingwperiodwinwwhichwtheywarewincurred,wwhere
aswproductwcostswarewrecordedwaswanwassetwandwnotwexpensedwuntilwthewaccountingwperiodwinwwhichwthewpr
oductwiswsold.
16. CostwofwGoodswManufacturedwiswcalculatedwaswBeginningwWork-in-
ProcesswInventoryw+wTotalwManufacturingwCostswIncurredwduringwthewYearw–wEndingwWork-in-
ProcesswInventory.wTotalwManufacturingwCostswIncurredwduringwthewYearw=wDirectwMaterialswUse
dw+wDirectwLaborw+wManufacturingwOverhead.
17. Forwawmanufacturingwcompany,wthewactivitywinwthewFinishedwGoodswInventorywaccountwprovideswthewinf
ormationwforwdeterminingwCostwofwGoodswSold.wAwmanufacturingwcompanywcalculateswCostwofwGoodsw
SoldwaswBeginningwFinishedwGoodswInventoryw+wCostwofwGoodswManufacturedw–
wEndingwFinishedwGoodwInventory.wInwaddition,wawmanufacturingwcompanywmustwtrackwcostswfromwRa
wwMaterialswInventorywandwWork-in-
ProcesswInventorywinworderwtowcomputewCostwofwGoodswManufacturedwusedwinwthewpreviouswequation.
Forwawmerchandisingwcompany,wthewactivitywinwthewMerchandisewInventorywaccountwprovideswthewinformat
ionwforwdeterminingwCostwofwGoodswSold.wAwmerchandisingwcompanywcalculateswCostwofwGoodswSoldwaswB
eginningwMerchandisewInventoryw+wPurchaseswandwFreightwInw–wEndingwMerchandisewInventory.
18. AwmanufacturingwcompanywcalculateswunitwproductwcostwaswCostwofwGoodswManufacturedw/wTotalwn
umberwofwunitswproduced.
19. AwservicewcompanywcalculateswunitwcostwperwservicewaswTotalwoperatingwcostsw/wTotalwnumberwofwser
viceswprovided.
©w2021wPearsonwEducation,wInc. 1-3
, 20. AwmerchandisingwcompanywcalculateswunitwcostwperwitemwaswTotalwcostwofwgoodswsoldw/wTotalwnumberwofwite
mswsold.
Short Exercises
w
S-M:1-1
a. FA
b. MA
c. MA
d. FA
e. FA
S-M:1-2
a. Confidentiality
b. Integrity
c. Competencew(skippingwthewsession);w Integrityw(company-paidwconference)
d. Competence
e. Credibility;w Integrity
S-M:1-3
a. 2
b. 4
c. 1
d. 5
e. 4
f. 5
g. 3
S-M:1-4
Gluewforwframes $ 250
Plantwdepreciation 7,500
Plantwforeman’swsalary 3,500
Plantwjanitor’swwages 1,300
Oilwforwmanufacturingwequipment w 150ww
Totalwmanufacturingwoverhead w $w12,700ww
©w2021wPearsonwEducation,wInc. 1-4
