SOLUTION MANUAL
HORNGREN`S ACCOUNTING 13TH EDITION
STUDY NOTES
MANAGERIAL CHAPTERS
1. Introduction to Managerial Accounting
2. Job Order Costing
3. Process Costing
4. Cost-Volume-Profit Analysis
5. Master Budgets
6. Flexible Budgets and Standard Cost Systems
7. Cost Allocation and Responsibility Accounting
8. Short-Term Business Decisions
9. Capital Investment Decisions
,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
keepingthe 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.
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 controlsin
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 inventoryof
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-ProcessInventory
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
thatcannot 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 manufacturing costs except direct materials and direct labor, such as indirect materials, indirect
labor, factory depreciation, factory rent, and factory property taxes.
HORNGREN`S ACCOUNTING 13TH EDITION
STUDY NOTES
MANAGERIAL CHAPTERS
1. Introduction to Managerial Accounting
2. Job Order Costing
3. Process Costing
4. Cost-Volume-Profit Analysis
5. Master Budgets
6. Flexible Budgets and Standard Cost Systems
7. Cost Allocation and Responsibility Accounting
8. Short-Term Business Decisions
9. Capital Investment Decisions
,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
keepingthe 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.
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 controlsin
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 inventoryof
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-ProcessInventory
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
thatcannot 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 manufacturing costs except direct materials and direct labor, such as indirect materials, indirect
labor, factory depreciation, factory rent, and factory property taxes.
