Solution n Manual n for n Managerial
Accounting,
n
18th Edition
n
By n Ray n Garrison, n Eric n Noreen n and
n PeternBrewer n Verified nChapter's n1 n- n16
n | nComplete
,Table of Contents
n n
Chapter n One: n Managerial n Accounting n and
n CostnConcepts nChapter nTwo: nJob-Order
nCosting: nCalculating nUnit nProduct nCosts
Chapter nThree: nJob-Order nCosting: nCost nFlows nand
nExternalnReporting n Chapter nFour: nProcess nCosting
Chapter nFive: nCost-Volume-Profit nRelationships
Chapter n Six: n Variable n Costing n and n Segment n Reporting:
n Tools n fornManagement n Chapter n Seven: n Activity-Based
n Costing: n A n Tool n to nAid nDecision n Making n Chapter nEight:
n Master nBudgeting
Chapter n Nine: n Flexible n Budgets n and
n PerformancenAnalysis nChapter nTen: nStandard
nCosts nand nVariances
Chapter nEleven: nResponsibility nAccounting
nSystems n Chapter n Twelve: n Strategic
n PerformancenMeasurement
Chapter nThirteen: nDifferential nAnalysis: nThe nKey nto
nDecisionnMaking n Chapter n Fourteen: n Capital nBudgeting
n Decisions nChapter nFifteen: nStatement nof nCash
Flows n Chapter nSixteen: nFinancial
nStatement nAnalysis
, Chapter 1 n
Managerial Accounting and Costn n n
Concepts
n
Questions
nperiod ncost nis na ncost nthat nis ntaken
1-1 The nthree nmajor ntypes nof ndirectlynto n the n income n statement n as
nproductncosts n in n a n manufacturing n an n expense nin nthe nperiod nin nwhich nit
n company n are ndirect n materials, nis nincurred.
ndirect nlabor, nand nmanufacturing
n overhead.
1-2
a. Direct nmaterials nare nan
nintegral npart nof na nfinished
nproduct nand ntheir ncosts ncan nbe
n conveniently ntraced nto nit.
b. Indirect nmaterials nare ngenerally
nsmall n items n of n material n such n as n glue
n and nnails. nThey nmay nbe nan nintegral
npart nof na nfinished nproduct nbut ntheir
ncosts ncan nbe ntraced nto nthe nproduct
nonly nat n great ncost norninconvenience.
c. Direct nlabor n consists nof
nlaborncosts nthat ncan nbe neasily
ntraced nto nparticular nproducts.
Direct nlabor nis nalso ncalled n―touch
nlabor.‖
d. Indirect nlabor nconsists nof nthe
nlabor ncosts nof njanitors, nsupervisors,
nmaterials nhandlers, nand nother
nfactory nworkers nthatncannot nbe
nconveniently ntraced nto nparticular
nproducts. n nThese nlabor ncosts nare
nincurred nto nsupport nproduction, nbut
nthe nworkers ninvolved ndo nnot n
ndirectly nwork non nthe nproduct.
e. Manufacturing n noverhead n
nincludes nall nmanufacturing ncosts
nexcept ndirect nmaterials nand ndirect
nlabor. nConsequently,nmanufacturing
noverhead nincludes nindirectnmaterials
nand nindirect nlabor nas nwell nas nother
nmanufacturing ncosts.
1-3 A n product n cost n is n any n cost
n involvednin n purchasing n or
n manufacturing n goods. n In nthe ncase
n of n manufactured n goods, n these ncosts
nconsist nof ndirect nmaterials, ndirect
nlabor, nand nmanufacturing noverhead. nA
, 1-4
a. Variable ncost: nThe nvariable ncost
nper nunit nis nconstant, nbut ntotal
nvariable ncost nchanges nin ndirect
nproportion nto nchanges nin
nvolume.
b. Fixed ncost: nThe ntotal nfixed ncost
nis nconstant n nwithin nthe nrelevant
nrange. nThe n average n fixed n cost
n per n unit n variesninversely nwith
n changes n in nvolume.
c. Mixed n cost: n A n mixed n cost
n containsnboth nvariable nand
nfixed ncost nelements.
1-5
a. Unit n fixed n costs n decrease
n as n thenactivity nlevel
n increases.
b. Unit n variable n costs nremain
n constantnas nthe n activity nlevel
nincreases.
c. Total nfixed ncosts nremain
nconstantnas nthe n activity
nlevel nincreases.
d. Total n variable n costs n increase
n as n thenactivity n level
nincreases.
1-6
a. Cost nbehavior: nCost nbehavior
nrefers nto nthe nway nin nwhich
ncosts nchange ninnresponse nto
n changes nin na nmeasure nof
nactivity nsuch nas nsales nvolume,
nproduction nvolume, nor norders
nprocessed.
b. Relevant nrange: nThe nrelevant
nrange nis nthe n range nof nactivity
nwithin nwhich nassumptions
nabout nvariable nand nfixed ncost
nbehavior nare n valid.
1-7 An n activity n base n is n a
n measure nof n whatever n causes
n the n incurrence nof nanvariable
ncost. nExamples nof nactivity nbases
ninclude nunits nproduced, nunits
nsold, nletters ntyped, nbeds nin na
nhospital, nmeals nserved nin n a
ncafe, nservice ncalls nmade, netc.
1-8 The nlinear nassumption nis
nreasonably
Accounting,
n
18th Edition
n
By n Ray n Garrison, n Eric n Noreen n and
n PeternBrewer n Verified nChapter's n1 n- n16
n | nComplete
,Table of Contents
n n
Chapter n One: n Managerial n Accounting n and
n CostnConcepts nChapter nTwo: nJob-Order
nCosting: nCalculating nUnit nProduct nCosts
Chapter nThree: nJob-Order nCosting: nCost nFlows nand
nExternalnReporting n Chapter nFour: nProcess nCosting
Chapter nFive: nCost-Volume-Profit nRelationships
Chapter n Six: n Variable n Costing n and n Segment n Reporting:
n Tools n fornManagement n Chapter n Seven: n Activity-Based
n Costing: n A n Tool n to nAid nDecision n Making n Chapter nEight:
n Master nBudgeting
Chapter n Nine: n Flexible n Budgets n and
n PerformancenAnalysis nChapter nTen: nStandard
nCosts nand nVariances
Chapter nEleven: nResponsibility nAccounting
nSystems n Chapter n Twelve: n Strategic
n PerformancenMeasurement
Chapter nThirteen: nDifferential nAnalysis: nThe nKey nto
nDecisionnMaking n Chapter n Fourteen: n Capital nBudgeting
n Decisions nChapter nFifteen: nStatement nof nCash
Flows n Chapter nSixteen: nFinancial
nStatement nAnalysis
, Chapter 1 n
Managerial Accounting and Costn n n
Concepts
n
Questions
nperiod ncost nis na ncost nthat nis ntaken
1-1 The nthree nmajor ntypes nof ndirectlynto n the n income n statement n as
nproductncosts n in n a n manufacturing n an n expense nin nthe nperiod nin nwhich nit
n company n are ndirect n materials, nis nincurred.
ndirect nlabor, nand nmanufacturing
n overhead.
1-2
a. Direct nmaterials nare nan
nintegral npart nof na nfinished
nproduct nand ntheir ncosts ncan nbe
n conveniently ntraced nto nit.
b. Indirect nmaterials nare ngenerally
nsmall n items n of n material n such n as n glue
n and nnails. nThey nmay nbe nan nintegral
npart nof na nfinished nproduct nbut ntheir
ncosts ncan nbe ntraced nto nthe nproduct
nonly nat n great ncost norninconvenience.
c. Direct nlabor n consists nof
nlaborncosts nthat ncan nbe neasily
ntraced nto nparticular nproducts.
Direct nlabor nis nalso ncalled n―touch
nlabor.‖
d. Indirect nlabor nconsists nof nthe
nlabor ncosts nof njanitors, nsupervisors,
nmaterials nhandlers, nand nother
nfactory nworkers nthatncannot nbe
nconveniently ntraced nto nparticular
nproducts. n nThese nlabor ncosts nare
nincurred nto nsupport nproduction, nbut
nthe nworkers ninvolved ndo nnot n
ndirectly nwork non nthe nproduct.
e. Manufacturing n noverhead n
nincludes nall nmanufacturing ncosts
nexcept ndirect nmaterials nand ndirect
nlabor. nConsequently,nmanufacturing
noverhead nincludes nindirectnmaterials
nand nindirect nlabor nas nwell nas nother
nmanufacturing ncosts.
1-3 A n product n cost n is n any n cost
n involvednin n purchasing n or
n manufacturing n goods. n In nthe ncase
n of n manufactured n goods, n these ncosts
nconsist nof ndirect nmaterials, ndirect
nlabor, nand nmanufacturing noverhead. nA
, 1-4
a. Variable ncost: nThe nvariable ncost
nper nunit nis nconstant, nbut ntotal
nvariable ncost nchanges nin ndirect
nproportion nto nchanges nin
nvolume.
b. Fixed ncost: nThe ntotal nfixed ncost
nis nconstant n nwithin nthe nrelevant
nrange. nThe n average n fixed n cost
n per n unit n variesninversely nwith
n changes n in nvolume.
c. Mixed n cost: n A n mixed n cost
n containsnboth nvariable nand
nfixed ncost nelements.
1-5
a. Unit n fixed n costs n decrease
n as n thenactivity nlevel
n increases.
b. Unit n variable n costs nremain
n constantnas nthe n activity nlevel
nincreases.
c. Total nfixed ncosts nremain
nconstantnas nthe n activity
nlevel nincreases.
d. Total n variable n costs n increase
n as n thenactivity n level
nincreases.
1-6
a. Cost nbehavior: nCost nbehavior
nrefers nto nthe nway nin nwhich
ncosts nchange ninnresponse nto
n changes nin na nmeasure nof
nactivity nsuch nas nsales nvolume,
nproduction nvolume, nor norders
nprocessed.
b. Relevant nrange: nThe nrelevant
nrange nis nthe n range nof nactivity
nwithin nwhich nassumptions
nabout nvariable nand nfixed ncost
nbehavior nare n valid.
1-7 An n activity n base n is n a
n measure nof n whatever n causes
n the n incurrence nof nanvariable
ncost. nExamples nof nactivity nbases
ninclude nunits nproduced, nunits
nsold, nletters ntyped, nbeds nin na
nhospital, nmeals nserved nin n a
ncafe, nservice ncalls nmade, netc.
1-8 The nlinear nassumption nis
nreasonably
