Solution Manual for Managerial Accounting,
18th Edition
By Ray Garrison, Eric Noreen and Peter Brewer
Verified Chapter's 1 - 16 | Complete
,Table of Contents GT GT
Chapter One: Managerial Accounting and Cost Concepts
GT GT GT GT GT GT
Chapter Two: Job-Order Costing: Calculating Unit Product Costs
GT GT GT GT GT GT GT
Chapter Three: Job-Order Costing: Cost Flows and External Reporting
GT GT GT GT GT GT GT GT
Chapter Four: Process Costing
GT GT GT
Chapter Five: Cost-Volume-Profit Relationships
GT GT GT
Chapter Six: Variable Costing and Segment Reporting: Tools for Management
GT GT GT GT GT GT GT GT GT
Chapter Seven: Activity-Based Costing: A Tool to Aid Decision Making
GT GT GT GT GT GT GT GT GT
Chapter Eight: Master Budgeting
GT GT GT
Chapter Nine: Flexible Budgets and Performance Analysis
GT GT GT GT GT GT
Chapter Ten: Standard Costs and Variances
GT GT GT GT GT
Chapter Eleven: Responsibility Accounting Systems
GT GT GT GT
Chapter Twelve: Strategic Performance Measurement
GT GT GT GT
Chapter Thirteen: Differential Analysis: The Key to Decision Making
GT GT GT GT GT GT GT GT
Chapter Fourteen: Capital Budgeting Decisions
GT GT GT GT
Chapter Fifteen: Statement of Cash Flows
GT GT GT GT GT
Chapter Sixteen: Financial Statement Analysis
GT GT GT GT
,Chapter 1 GT
Managerial Accounting and Cost Concepts GT GT GT GT
Questions
1-1 The three major types of product costs in GT GT GT GT GT GT GT GT 1-4
a manufacturing company are direct materials, dir
GT GT GT GT GT GT a. Variable cost: The variable cost per unit is co GT GT GT GT GT GT GT GT
ect labor, and manufacturing overhead.
GT GT GT GT nstant, but total variable cost changes in direc GT GT GT GT GT GT GT
t proportion to changes in volume.
GT GT GT GT GT
1-2 b. Fixed cost: The total fixed cost is constant wit
GT GT GT GT GT GT GT GT
a. Direct materials are an integral part of a fin GT GT GT GT GT GT GT GT hin the relevant range. The average fixed cost p
GT GT GT GT GT GT GT GT
ished product and their costs can be conveniently
GT GT GT GT GT GT GT GT er unit varies inversely with changes in volum
GT GT GT GT GT G T GT
traced to it. GT GT
e.
b. Indirect materials are generally small items GT GT GT GT GT GT c. Mixed cost: A mixed cost contains both va GT GT GT GT GT GT GT
of material such as glue and nails. They may be an i
GT GT GT GT GT GT GT GT GT GT GT
riable and fixed cost elements. GT GT GT GT
ntegral part of a finished product but their costs can
GT GT GT GT GT GT GT GT GT G
Tbe traced to the product only at great cost or incon
GT GT GT GT GT GT GT GT GT GT
1-5
venience. a. Unit fixed costs decrease as the activity level inc
GT GT GT GT GT GT GT GT
c. Direct labor consists of labor costs that ca GT GT GT GT GT GT GT
reases.
n be easily traced to particular products.
GT GT GT GT GT GT
b. Unit variable costs remain constant as the act
GT GT GT GT GT GT GT
Direct labor is also called ―touch labor.‖
GT GT GT GT GT GT
ivity level increases. GT GT
d. Indirect labor consists of the labor costs of GT GT GT GT GT GT GT GT
c. Total fixed costs remain constant as the ac
GT GT GT GT GT GT GT
janitors, supervisors, materials handlers, and other
GT GT GT GT GT GT
tivity level increases. GT GT
factory workers that cannot be conveniently trace
GT GT GT GT GT GT
d. Total variable costs increase as the activity le
GT GT GT GT GT GT GT
d to particular products. These labor costs are inc
GT GT GT GT GT GT GT GT
vel increases. GT
urred to support production, but the workers invo
GT GT GT GT GT GT GT
lved do not directly work on the product.
GT GT GT GT GT GT GT
1-6
e. Manufacturing overhead includes all manufa GT GT GT GT
a. Cost behavior: Cost behavior refers to the wa
cturing costs except direct materials and direct labo
GT GT GT GT GT GT GT
GT GT GT GT GT GT GT
y in which costs change in response to chang
r. Consequently, manufacturing overhead includes i
GT GT GT GT GT GT GT GT
es in a measure of activity such as sales volum
GT GT GT GT GT
ndirect materials and indirect labor as well as other
GT GT GT GT GT GT GT GT GT
e, production volume, or orders processed.
GT GT GT GT GT GT GT GT GT
manufacturing costs.
GT GT GT GT GT
b. Relevant range: The relevant range is the ra
GT
GT GT GT GT GT GT GT
nge of activity within which assumptions abou
1-3
GT GT GT GT GT GT
t variable and fixed cost behavior are valid.
A product cost is any cost involved in pur
GT GT GT GT GT GT GT
GT GT GT GT GT GT GT GT
chasing or manufacturing goods. In the case of man
1-7
GT GT GT GT GT GT GT GT
ufactured goods, these costs consist of direct materi
GT GT GT GT GT GT GT
An activity base is a measure of whate GT GT GT GT GT GT GT
als, direct labor, and manufacturing overhead. A per
GT GT GT GT GT GT GT
ver causes the incurrence of a variable cost. Exa
GT GT GT GT GT GT GT GT
iod cost is a cost that is taken directly to the incom
GT GT GT GT GT GT GT GT GT GT GT
mples of activity bases include units produced, u
GT GT GT GT GT GT GT
e statement as an expense in the period in which it
GT GT GT GT GT GT GT GT GT GT GT
nits sold, letters typed, beds in a hospital, meals
GT GT GT GT GT GT GT GT GT
is incurred.
GT
served in a cafe, service calls made, etc.
GT GT GT GT GT GT GT
1-8 The linear assumption is reasonably valid GT GT GT GT GT GT
providing that the cost formula is used only within t
GT GT GT GT GT GT GT GT GT
he relevant range.
GT GT
, 1-9 A discretionary fixed cost has a fairly sh
GT GT GT GT GT GT GT 1-11 The traditional approach organizes costs by GT GT GT GT GT G
ort planning horizon—
GT GT function, such as production, selling, and administr
T GT GT GT GT GT GT
usually a year. Such costs arise from annual decis
GT GT GT GT GT GT GT GT ation. Within a functional area, fixed and variable c
GT GT GT GT GT GT GT GT
ions by management to spend on certain fixed co
GT GT GT GT GT GT GT GT osts are intermingled. The contribution approach i
GT GT GT GT GT GT
st items, such as advertising, research, and mana
GT GT GT GT GT GT GT ncome statement organizes costs by behavior, first
GT GT GT GT GT GT GT
gement development. A committed fixed cost has
GT GT GT GT GT GT GT deducting variable expenses to obtain contribution GT GT GT GT GT GT
a long planning horizon—
GT GT GT margin, and then deducting fixed expenses to obtain
GT GT GT GT GT GT GT
generally many years. Such costs relate to a com
GT GT GT GT GT GT GT GT net operating income.
GT GT GT
pany’s investment in facilities, equipment, and ba
GT GT GT GT GT GT
sic organization. Once such costs have been incu
GT GT GT GT GT GT GT
1-12 The contribution margin is total sales re GT GT GT GT GT GT
rred, they are ―locked in‖ for many years.
GT GT GT GT GT GT GT venue less total variable expenses.GT GT GT GT
1-10 Yes. As the anticipated level of activity cha GT GT GT GT GT GT GT
1-13 A differential cost is a cost that differs bet GT GT GT GT GT GT GT GT
nges, the level of fixed costs needed to support ope
GT GT GT GT GT GT GT GT GT
ween alternatives in a decision. A sunk cost is a co
GT GT GT GT GT GT GT G T GT GT
rations may also change. Most fixed costs are adjus
GT GT GT GT GT GT GT GT
st that has already been incurred and cannot be alte
GT GT GT GT GT GT GT GT GT
ted upward and downward in large steps, rather tha
GT GT GT GT GT GT GT GT
red by any decision taken now or in the future. An o
GT GT GT GT GT GT GT GT GT GT GT
n being absolutely fixed at one level for all ranges o
GT GT GT GT GT GT GT GT GT GT
pportunity cost is the potential benefit that is given GT GT GT GT GT GT GT GT GT
f activity.
GT
up when one alternative is selected over another.
GT GT GT GT GT GT GT
1-14 No, differential costs can be either variabl GT GT GT GT GT GT
e or fixed. For example, the alternatives might con
GT GT GT GT GT GT GT GT
sist of purchasing one machine rather than another
GT GT GT GT GT GT GT GT
to make a product. The difference between the fixe
GT GT GT GT GT GT GT GT
d costs of purchasing the two machines is a differe
GT GT GT GT GT GT GT GT GT
ntial cost. GT
Managerial Accounting 18th Edition, Solutions Manual,
GT GT GT GT GT
18th Edition
By Ray Garrison, Eric Noreen and Peter Brewer
Verified Chapter's 1 - 16 | Complete
,Table of Contents GT GT
Chapter One: Managerial Accounting and Cost Concepts
GT GT GT GT GT GT
Chapter Two: Job-Order Costing: Calculating Unit Product Costs
GT GT GT GT GT GT GT
Chapter Three: Job-Order Costing: Cost Flows and External Reporting
GT GT GT GT GT GT GT GT
Chapter Four: Process Costing
GT GT GT
Chapter Five: Cost-Volume-Profit Relationships
GT GT GT
Chapter Six: Variable Costing and Segment Reporting: Tools for Management
GT GT GT GT GT GT GT GT GT
Chapter Seven: Activity-Based Costing: A Tool to Aid Decision Making
GT GT GT GT GT GT GT GT GT
Chapter Eight: Master Budgeting
GT GT GT
Chapter Nine: Flexible Budgets and Performance Analysis
GT GT GT GT GT GT
Chapter Ten: Standard Costs and Variances
GT GT GT GT GT
Chapter Eleven: Responsibility Accounting Systems
GT GT GT GT
Chapter Twelve: Strategic Performance Measurement
GT GT GT GT
Chapter Thirteen: Differential Analysis: The Key to Decision Making
GT GT GT GT GT GT GT GT
Chapter Fourteen: Capital Budgeting Decisions
GT GT GT GT
Chapter Fifteen: Statement of Cash Flows
GT GT GT GT GT
Chapter Sixteen: Financial Statement Analysis
GT GT GT GT
,Chapter 1 GT
Managerial Accounting and Cost Concepts GT GT GT GT
Questions
1-1 The three major types of product costs in GT GT GT GT GT GT GT GT 1-4
a manufacturing company are direct materials, dir
GT GT GT GT GT GT a. Variable cost: The variable cost per unit is co GT GT GT GT GT GT GT GT
ect labor, and manufacturing overhead.
GT GT GT GT nstant, but total variable cost changes in direc GT GT GT GT GT GT GT
t proportion to changes in volume.
GT GT GT GT GT
1-2 b. Fixed cost: The total fixed cost is constant wit
GT GT GT GT GT GT GT GT
a. Direct materials are an integral part of a fin GT GT GT GT GT GT GT GT hin the relevant range. The average fixed cost p
GT GT GT GT GT GT GT GT
ished product and their costs can be conveniently
GT GT GT GT GT GT GT GT er unit varies inversely with changes in volum
GT GT GT GT GT G T GT
traced to it. GT GT
e.
b. Indirect materials are generally small items GT GT GT GT GT GT c. Mixed cost: A mixed cost contains both va GT GT GT GT GT GT GT
of material such as glue and nails. They may be an i
GT GT GT GT GT GT GT GT GT GT GT
riable and fixed cost elements. GT GT GT GT
ntegral part of a finished product but their costs can
GT GT GT GT GT GT GT GT GT G
Tbe traced to the product only at great cost or incon
GT GT GT GT GT GT GT GT GT GT
1-5
venience. a. Unit fixed costs decrease as the activity level inc
GT GT GT GT GT GT GT GT
c. Direct labor consists of labor costs that ca GT GT GT GT GT GT GT
reases.
n be easily traced to particular products.
GT GT GT GT GT GT
b. Unit variable costs remain constant as the act
GT GT GT GT GT GT GT
Direct labor is also called ―touch labor.‖
GT GT GT GT GT GT
ivity level increases. GT GT
d. Indirect labor consists of the labor costs of GT GT GT GT GT GT GT GT
c. Total fixed costs remain constant as the ac
GT GT GT GT GT GT GT
janitors, supervisors, materials handlers, and other
GT GT GT GT GT GT
tivity level increases. GT GT
factory workers that cannot be conveniently trace
GT GT GT GT GT GT
d. Total variable costs increase as the activity le
GT GT GT GT GT GT GT
d to particular products. These labor costs are inc
GT GT GT GT GT GT GT GT
vel increases. GT
urred to support production, but the workers invo
GT GT GT GT GT GT GT
lved do not directly work on the product.
GT GT GT GT GT GT GT
1-6
e. Manufacturing overhead includes all manufa GT GT GT GT
a. Cost behavior: Cost behavior refers to the wa
cturing costs except direct materials and direct labo
GT GT GT GT GT GT GT
GT GT GT GT GT GT GT
y in which costs change in response to chang
r. Consequently, manufacturing overhead includes i
GT GT GT GT GT GT GT GT
es in a measure of activity such as sales volum
GT GT GT GT GT
ndirect materials and indirect labor as well as other
GT GT GT GT GT GT GT GT GT
e, production volume, or orders processed.
GT GT GT GT GT GT GT GT GT
manufacturing costs.
GT GT GT GT GT
b. Relevant range: The relevant range is the ra
GT
GT GT GT GT GT GT GT
nge of activity within which assumptions abou
1-3
GT GT GT GT GT GT
t variable and fixed cost behavior are valid.
A product cost is any cost involved in pur
GT GT GT GT GT GT GT
GT GT GT GT GT GT GT GT
chasing or manufacturing goods. In the case of man
1-7
GT GT GT GT GT GT GT GT
ufactured goods, these costs consist of direct materi
GT GT GT GT GT GT GT
An activity base is a measure of whate GT GT GT GT GT GT GT
als, direct labor, and manufacturing overhead. A per
GT GT GT GT GT GT GT
ver causes the incurrence of a variable cost. Exa
GT GT GT GT GT GT GT GT
iod cost is a cost that is taken directly to the incom
GT GT GT GT GT GT GT GT GT GT GT
mples of activity bases include units produced, u
GT GT GT GT GT GT GT
e statement as an expense in the period in which it
GT GT GT GT GT GT GT GT GT GT GT
nits sold, letters typed, beds in a hospital, meals
GT GT GT GT GT GT GT GT GT
is incurred.
GT
served in a cafe, service calls made, etc.
GT GT GT GT GT GT GT
1-8 The linear assumption is reasonably valid GT GT GT GT GT GT
providing that the cost formula is used only within t
GT GT GT GT GT GT GT GT GT
he relevant range.
GT GT
, 1-9 A discretionary fixed cost has a fairly sh
GT GT GT GT GT GT GT 1-11 The traditional approach organizes costs by GT GT GT GT GT G
ort planning horizon—
GT GT function, such as production, selling, and administr
T GT GT GT GT GT GT
usually a year. Such costs arise from annual decis
GT GT GT GT GT GT GT GT ation. Within a functional area, fixed and variable c
GT GT GT GT GT GT GT GT
ions by management to spend on certain fixed co
GT GT GT GT GT GT GT GT osts are intermingled. The contribution approach i
GT GT GT GT GT GT
st items, such as advertising, research, and mana
GT GT GT GT GT GT GT ncome statement organizes costs by behavior, first
GT GT GT GT GT GT GT
gement development. A committed fixed cost has
GT GT GT GT GT GT GT deducting variable expenses to obtain contribution GT GT GT GT GT GT
a long planning horizon—
GT GT GT margin, and then deducting fixed expenses to obtain
GT GT GT GT GT GT GT
generally many years. Such costs relate to a com
GT GT GT GT GT GT GT GT net operating income.
GT GT GT
pany’s investment in facilities, equipment, and ba
GT GT GT GT GT GT
sic organization. Once such costs have been incu
GT GT GT GT GT GT GT
1-12 The contribution margin is total sales re GT GT GT GT GT GT
rred, they are ―locked in‖ for many years.
GT GT GT GT GT GT GT venue less total variable expenses.GT GT GT GT
1-10 Yes. As the anticipated level of activity cha GT GT GT GT GT GT GT
1-13 A differential cost is a cost that differs bet GT GT GT GT GT GT GT GT
nges, the level of fixed costs needed to support ope
GT GT GT GT GT GT GT GT GT
ween alternatives in a decision. A sunk cost is a co
GT GT GT GT GT GT GT G T GT GT
rations may also change. Most fixed costs are adjus
GT GT GT GT GT GT GT GT
st that has already been incurred and cannot be alte
GT GT GT GT GT GT GT GT GT
ted upward and downward in large steps, rather tha
GT GT GT GT GT GT GT GT
red by any decision taken now or in the future. An o
GT GT GT GT GT GT GT GT GT GT GT
n being absolutely fixed at one level for all ranges o
GT GT GT GT GT GT GT GT GT GT
pportunity cost is the potential benefit that is given GT GT GT GT GT GT GT GT GT
f activity.
GT
up when one alternative is selected over another.
GT GT GT GT GT GT GT
1-14 No, differential costs can be either variabl GT GT GT GT GT GT
e or fixed. For example, the alternatives might con
GT GT GT GT GT GT GT GT
sist of purchasing one machine rather than another
GT GT GT GT GT GT GT GT
to make a product. The difference between the fixe
GT GT GT GT GT GT GT GT
d costs of purchasing the two machines is a differe
GT GT GT GT GT GT GT GT GT
ntial cost. GT
Managerial Accounting 18th Edition, Solutions Manual,
GT GT GT GT GT
