Solution Manual For
Managerial Accounting 15th Edition by Garrison, Noreen, Brewer
Chapter 1-15
enhance their ability to structure responses effectively.________________________________________3. Mathematics Exams3.1. Overview of Mathematics EducationMathematics
education
Chapter 1
Managerial Accounting: An Overview
Solutions to Questions
to the budget, and (5) comparing the actual cost of
1-1 Financial accounting is concerned with providing global, on-location news coverage to the
reporting financial information to external budget.
parties, such as stockholders, creditors, and
regulators. Managerial accounting is concerned
with providing information to managers for use
within the organization. Financial accounting
emphasizes the financial consequences of past
transactions, objectivity and verifiability,
precision, and companywide performance,
whereas managerial accounting emphasizes
decisions affecting the future, relevance,
timeliness, and segment performance. Financial
accounting is mandatory for external reports and
it needs to comply with rules, such as generally
accepted accounting principles (GAAP) and
international financial reporting standards
(IFRS), whereas managerial accounting is not
mandatory and it does not need to comply with
externally imposed rules.
1-2 Five examples of planning activities
include (1) estimating the advertising revenues
for a future period, (2) estimating the total
expenses for a future period, including the
salaries of all actors, news reporters, and
sportscasters, (3) planning how many new
television shows to introduce to the market, (4)
planning each television show’s designated
broadcast time slot, and (5) planning the
network’s advertising activities and
expenditures.
Five examples of controlling activities
include (1) comparing the actual number of
viewers for each show to its viewership
projections, (2) comparing the actual costs of
producing a made-for-television movie to its
budget, (3) comparing the revenues earned
from broadcasting a sporting event to the costs
incurred to broadcast that event, (4) comparing
the actual costs of running a production studio
1
, 1-3 The quantitative analysis would focus
on determining the potential cost savings
from buying the part rather than making it.
The qualitative analysis would focus on
broader issues such as strategy, risks, and
corporate social responsibility. For example, if
the part is critical to the organization’s
strategy, it may continue making the part
regardless of any potential cost savings from
outsourcing. If the overseas supplier might
create quality control problems that could
threaten the end consumers’ welfare, then
the risks of outsourcing may swamp any cost
savings.
Finally, from a social responsibility standpoint,
a company may decide against outsourcing if
it would result in layoffs at its domestic
manufacturing facility.
enhance their ability to structure responses effectively.________________________________________3. Mathematics Exams3.1. Overview of Mathematics EducationMathematics education
1-4 Companies prepare budgets to
translate plans into formal quantitative
terms. Budgets are used for various
purposes, such as forcing managers to plan
ahead, allocating resources across
departments, coordinating activities across
departments, establishing goals that
motivate people, and evaluating and
rewarding employees. These various
purposes often conflict with one another,
which makes budgeting one of
management’s most challenging activities.
1-5 Managerial accounting is relevant to
all business students because all managers
engage in planning, controlling, and decision
making activities. If managers wish to
influence co- workers across the
organization, they must be able to speak in
financial terms to justify their proposed
courses of action.
1-6 The Institute of Management
Accountants estimates that 80% of
accountants work in non-public accounting
environments.
Accountants that work in corporate, non-
profit, and governmental organizations are
expected to
, use their planning, controlling, and decision- making skills to help improve performance.
1-7 Deere & Company is an example of a company that competes in terms of product leadership. The
company’s slogan ―nothing runs like a Deere‖ emphasizes its product leadership customer value
proposition.
Amazon.com competes in terms of operational excellence. The company focuses on delivering
products faster, more conveniently, and at a lower price than competitors.
Charles Schwab competes in terms of customer intimacy. It focuses on building personal
relationships with clients so that it can tailor investment strategies to individual needs.
enhance their ability to structure responses effectively.________________________________________3. Mathematics Exams3.1. Overview of Mathematics EducationMathematics education
1-8 Planning, controlling, and decision making must be performed within the context of a company’s
strategy. For example, if a company that competes as a product leader plans to grow too quickly, it may
diminish quality and threaten the company’s customer value proposition. A company that competes in terms
of operational excellence would select control measures that focus on time-based performance,
convenience, and cost. A company that competes in terms of customer intimacy may decide against
outsourcing employee training to cut costs because it might diminish the quality of customer service.
1-9 This answer is based on Nike, which has suppliers in over 40 countries. One risk that Nike faces is
that its suppliers will fail to manage their employees in a socially responsible manner. Nike conducts
Management Audit Verifications at its overseas plants to minimize this risk.
Nike faces the risk that unsatisfactory environmental performance will diminish its brand image. The
company is investing substantial resources to develop products that minimize adverse impacts on the
environment.
Nike faces the risk that customers will not like its new products. The company uses focus group
research to proactively assess the customers’ reaction to its new products.
1-10 Airlines face the risk that large spikes in fuel prices will lower their profitability.
Therefore, they may reduce this risk by spending money on hedging contracts that enable them to lock-in
future fuel prices that will not change even if the market price increases.
Steel manufacturers face major risks related to employee safety, so they create and monitor
control measures related to occupational safety compliance and performance.
Restaurants face the risk that an economic downturn will reduce customer traffic and lower
sales. They reduce this risk by choosing to create menus during economic downturns that offer more
low-priced entrees.
1-11 Barnes & Noble could segment its companywide performance by individual store, by sales
channel (i.e., bricks-and-mortar versus on-line), and by product line (e.g. non-fiction books, fiction
books, music CDs, toys, etc.).
Procter & Gamble could segment its performance by product category (e.g., beauty and
grooming, household care, and health and well-being), product line (e.g., Crest, Tide, and Bounty), and
stock keeping units (e.g., Crest Cavity Protection toothpaste, Crest Extra Whitening toothpaste, and
Crest Sensitivity toothpaste).
1-12 Timberland publishes quarterly corporate social responsibility (CSR) metrics (see
www.earthkeeper.com/CSR/csrdownloads. Three of those metrics include metric tons of carbon emissions,
the percentage of total cotton sourced that is organic, and renewable energy use as a percent of total
energy usage.
Timberland’s corporate slogan of ―doing well by doing good‖ suggests that the company
publishes CSR reports because it believes that its financial success (i.e., doing well) is positively
influenced by its social and environmental performance (i.e., doing good).
3
, 1-13 Companies that use lean production only make units in response to customer orders. They
produce units just in time to satisfy customer demand, which results in minimal inventories.
1-14 Organizations are managed by people that have their own personal interests, insecurities, beliefs,
and data-supported conclusions that ensure unanimous support for a given course of action is the
exception rather than the rule. Therefore, managers must possess strong leadership skills if they wish to
channel their co-workers’ efforts towards achieving organizational goals.
enhance their ability to structure responses effectively.________________________________________3. Mathematics Exams3.1. Overview of Mathematics EducationMathematics education
1-15 Ethical behavior is the lubricant that
keeps the economy running. Without that
lubricant, the economy would operate much less
efficiently—less would be available to
consumers, quality would be lower, and prices
would be higher.
Exercise 1-1 (30 minutes)
1. Having the boss unilaterally impose a sales budget on the sales
manager is a bad idea for three reasons. First, the boss may not have
access to information possessed by the sales manager that would result
in a more accurate forecast. Second, the sales manager is unlikely to be
committed to achieving a budget that she did not help create. Third, if
the sales manager fails to achieve actual results that meet or exceed the
budget, it would be easy for the sales manager to justify this outcome
on the grounds that she had no input in creating the budget.
2. The company would probably not be comfortable with having the sales
manager create the budget with no input from her boss. First, the boss
is likely to possess a broad understanding of strategic issues that should
be incorporated into the budgeting process. Second, the sales manager
may be inclined to purposely underestimate future sales to increase her
chances of producing actual results that exceed the budget. If she can
produce actual results that exceed the budget it is likely to increase her
pay raise and bonus as well as her chances for promotion.
3. If the company used the sales budget for the sole purpose of planning
to deploy resources in a manner that best serves customers, then it is
possible that the boss and the sales manager would both be focused on
producing the most accurate forecast possible. They would strive for
accuracy because if they overestimate sales it is likely to result in
bloated inventories and if they underestimate sales it is likely to result in
lost sales.
4. If the company used the sales budget for the sole purpose of motivating
employees to strive for excellent results, then the boss may be inclined
Managerial Accounting 15th Edition by Garrison, Noreen, Brewer
Chapter 1-15
enhance their ability to structure responses effectively.________________________________________3. Mathematics Exams3.1. Overview of Mathematics EducationMathematics
education
Chapter 1
Managerial Accounting: An Overview
Solutions to Questions
to the budget, and (5) comparing the actual cost of
1-1 Financial accounting is concerned with providing global, on-location news coverage to the
reporting financial information to external budget.
parties, such as stockholders, creditors, and
regulators. Managerial accounting is concerned
with providing information to managers for use
within the organization. Financial accounting
emphasizes the financial consequences of past
transactions, objectivity and verifiability,
precision, and companywide performance,
whereas managerial accounting emphasizes
decisions affecting the future, relevance,
timeliness, and segment performance. Financial
accounting is mandatory for external reports and
it needs to comply with rules, such as generally
accepted accounting principles (GAAP) and
international financial reporting standards
(IFRS), whereas managerial accounting is not
mandatory and it does not need to comply with
externally imposed rules.
1-2 Five examples of planning activities
include (1) estimating the advertising revenues
for a future period, (2) estimating the total
expenses for a future period, including the
salaries of all actors, news reporters, and
sportscasters, (3) planning how many new
television shows to introduce to the market, (4)
planning each television show’s designated
broadcast time slot, and (5) planning the
network’s advertising activities and
expenditures.
Five examples of controlling activities
include (1) comparing the actual number of
viewers for each show to its viewership
projections, (2) comparing the actual costs of
producing a made-for-television movie to its
budget, (3) comparing the revenues earned
from broadcasting a sporting event to the costs
incurred to broadcast that event, (4) comparing
the actual costs of running a production studio
1
, 1-3 The quantitative analysis would focus
on determining the potential cost savings
from buying the part rather than making it.
The qualitative analysis would focus on
broader issues such as strategy, risks, and
corporate social responsibility. For example, if
the part is critical to the organization’s
strategy, it may continue making the part
regardless of any potential cost savings from
outsourcing. If the overseas supplier might
create quality control problems that could
threaten the end consumers’ welfare, then
the risks of outsourcing may swamp any cost
savings.
Finally, from a social responsibility standpoint,
a company may decide against outsourcing if
it would result in layoffs at its domestic
manufacturing facility.
enhance their ability to structure responses effectively.________________________________________3. Mathematics Exams3.1. Overview of Mathematics EducationMathematics education
1-4 Companies prepare budgets to
translate plans into formal quantitative
terms. Budgets are used for various
purposes, such as forcing managers to plan
ahead, allocating resources across
departments, coordinating activities across
departments, establishing goals that
motivate people, and evaluating and
rewarding employees. These various
purposes often conflict with one another,
which makes budgeting one of
management’s most challenging activities.
1-5 Managerial accounting is relevant to
all business students because all managers
engage in planning, controlling, and decision
making activities. If managers wish to
influence co- workers across the
organization, they must be able to speak in
financial terms to justify their proposed
courses of action.
1-6 The Institute of Management
Accountants estimates that 80% of
accountants work in non-public accounting
environments.
Accountants that work in corporate, non-
profit, and governmental organizations are
expected to
, use their planning, controlling, and decision- making skills to help improve performance.
1-7 Deere & Company is an example of a company that competes in terms of product leadership. The
company’s slogan ―nothing runs like a Deere‖ emphasizes its product leadership customer value
proposition.
Amazon.com competes in terms of operational excellence. The company focuses on delivering
products faster, more conveniently, and at a lower price than competitors.
Charles Schwab competes in terms of customer intimacy. It focuses on building personal
relationships with clients so that it can tailor investment strategies to individual needs.
enhance their ability to structure responses effectively.________________________________________3. Mathematics Exams3.1. Overview of Mathematics EducationMathematics education
1-8 Planning, controlling, and decision making must be performed within the context of a company’s
strategy. For example, if a company that competes as a product leader plans to grow too quickly, it may
diminish quality and threaten the company’s customer value proposition. A company that competes in terms
of operational excellence would select control measures that focus on time-based performance,
convenience, and cost. A company that competes in terms of customer intimacy may decide against
outsourcing employee training to cut costs because it might diminish the quality of customer service.
1-9 This answer is based on Nike, which has suppliers in over 40 countries. One risk that Nike faces is
that its suppliers will fail to manage their employees in a socially responsible manner. Nike conducts
Management Audit Verifications at its overseas plants to minimize this risk.
Nike faces the risk that unsatisfactory environmental performance will diminish its brand image. The
company is investing substantial resources to develop products that minimize adverse impacts on the
environment.
Nike faces the risk that customers will not like its new products. The company uses focus group
research to proactively assess the customers’ reaction to its new products.
1-10 Airlines face the risk that large spikes in fuel prices will lower their profitability.
Therefore, they may reduce this risk by spending money on hedging contracts that enable them to lock-in
future fuel prices that will not change even if the market price increases.
Steel manufacturers face major risks related to employee safety, so they create and monitor
control measures related to occupational safety compliance and performance.
Restaurants face the risk that an economic downturn will reduce customer traffic and lower
sales. They reduce this risk by choosing to create menus during economic downturns that offer more
low-priced entrees.
1-11 Barnes & Noble could segment its companywide performance by individual store, by sales
channel (i.e., bricks-and-mortar versus on-line), and by product line (e.g. non-fiction books, fiction
books, music CDs, toys, etc.).
Procter & Gamble could segment its performance by product category (e.g., beauty and
grooming, household care, and health and well-being), product line (e.g., Crest, Tide, and Bounty), and
stock keeping units (e.g., Crest Cavity Protection toothpaste, Crest Extra Whitening toothpaste, and
Crest Sensitivity toothpaste).
1-12 Timberland publishes quarterly corporate social responsibility (CSR) metrics (see
www.earthkeeper.com/CSR/csrdownloads. Three of those metrics include metric tons of carbon emissions,
the percentage of total cotton sourced that is organic, and renewable energy use as a percent of total
energy usage.
Timberland’s corporate slogan of ―doing well by doing good‖ suggests that the company
publishes CSR reports because it believes that its financial success (i.e., doing well) is positively
influenced by its social and environmental performance (i.e., doing good).
3
, 1-13 Companies that use lean production only make units in response to customer orders. They
produce units just in time to satisfy customer demand, which results in minimal inventories.
1-14 Organizations are managed by people that have their own personal interests, insecurities, beliefs,
and data-supported conclusions that ensure unanimous support for a given course of action is the
exception rather than the rule. Therefore, managers must possess strong leadership skills if they wish to
channel their co-workers’ efforts towards achieving organizational goals.
enhance their ability to structure responses effectively.________________________________________3. Mathematics Exams3.1. Overview of Mathematics EducationMathematics education
1-15 Ethical behavior is the lubricant that
keeps the economy running. Without that
lubricant, the economy would operate much less
efficiently—less would be available to
consumers, quality would be lower, and prices
would be higher.
Exercise 1-1 (30 minutes)
1. Having the boss unilaterally impose a sales budget on the sales
manager is a bad idea for three reasons. First, the boss may not have
access to information possessed by the sales manager that would result
in a more accurate forecast. Second, the sales manager is unlikely to be
committed to achieving a budget that she did not help create. Third, if
the sales manager fails to achieve actual results that meet or exceed the
budget, it would be easy for the sales manager to justify this outcome
on the grounds that she had no input in creating the budget.
2. The company would probably not be comfortable with having the sales
manager create the budget with no input from her boss. First, the boss
is likely to possess a broad understanding of strategic issues that should
be incorporated into the budgeting process. Second, the sales manager
may be inclined to purposely underestimate future sales to increase her
chances of producing actual results that exceed the budget. If she can
produce actual results that exceed the budget it is likely to increase her
pay raise and bonus as well as her chances for promotion.
3. If the company used the sales budget for the sole purpose of planning
to deploy resources in a manner that best serves customers, then it is
possible that the boss and the sales manager would both be focused on
producing the most accurate forecast possible. They would strive for
accuracy because if they overestimate sales it is likely to result in
bloated inventories and if they underestimate sales it is likely to result in
lost sales.
4. If the company used the sales budget for the sole purpose of motivating
employees to strive for excellent results, then the boss may be inclined
