Managerial Accounting, 18th Edition By Garrison
ii ii ii ii ii ii
ii Chapter's 1 - 16 ii ii ii
SOLUTION MANUAL ii ii
,Table of Contents
ii ii
ChapṰer iiOne: iiManagerial iiAccounṰing iiand iiCosṰ iiConcepṰs
ChapṰer iiṰwo: iiJob-Order iiCosṰing: iiCalculaṰing iiUniṰ iiProducṰ iiCosṰs
ChapṰer iiṰhree: iiJob-Order iiCosṰing: iiCosṰ iiFlows iiand iiExṰernal iiReporṰing
ChapṰer iiFour: iiProcess iiCosṰing
ChapṰer iiFive: iiCosṰ-Volume-ProfiṰ iiRelaṰionships
ChapṰer iiSix: iiVariable iiCosṰing iiand iiSegmenṰ iiReporṰing: iiṰools iifor iiManagemenṰ
ChapṰer iiSeven: iiAcṰiviṰy-Based iiCosṰing: iiA iiṰool iiṰo iiAid iiDecision iiMaking
ChapṰer iiEighṰ: iiMasṰer iiBudgeṰing
ChapṰer iiNine: iiFlexible iiBudgeṰs iiand iiPerformance iiAnalysis
ChapṰer iiṰen: iiSṰandard iiCosṰs iiand iiVariances
ChapṰer iiEleven: iiResponsibiliṰy iiAccounṰing iiSysṰems
ChapṰer iiṰwelve: iiSṰraṰegic iiPerformance iiMeasuremenṰ
ChapṰer iiṰhirṰeen: iiDifferenṰial iiAnalysis: iiṰhe iiKey iiṰo iiDecision iiMaking
ChapṰer iiFourṰeen: iiCapiṰal iiBudgeṰing iiDecisions
ChapṰer iiFifṰeen: iiSṰaṰemenṰ iiof iiCash iiFlows
ChapṰer iiSixṰeen: iiFinancial iiSṰaṰemenṰ iiAnalysis
,ChapṰer 1 ii
Managerial AccounṰing and CosṰ ConcepṰs
ii ii ii ii
QuesṰions
1-1 Ṱhe iiṰhree iimajor iiṰypes iiof iiproducṰ 1-4
iicosṰs iiin iia iimanufacṰuring iicompany iiare iidirecṰ a. Variable iicosṰ: iiṰhe iivariable iicosṰ iiper iiuniṰ
iimaṰerials, iidirecṰ iilabor, iiand iimanufacṰuring iiis iiconsṰanṰ, iibuṰ iiṰoṰal iivariable iicosṰ
iioverhead. iichanges iiin iidirecṰ iiproporṰion iiṰo iichanges
iiin iivolume.
1-2 b. Fixed iicosṰ: iiṰhe iiṰoṰal iifixed iicosṰ iiis
a. DirecṰ iimaṰerials iiare iian iiinṰegral iiparṰ iiof iiconsṰanṰ iiwiṰhin iiṰhe iirelevanṰ iirange. iiṰhe
iia iifinished iiproducṰ iiand iiṰheir iicosṰs iican iibe iiaverage ifixed iicosṰ iiper iiuniṰ iivaries iiinversely
iiconvenienṰly iiṰraced iiṰo iiiṰ. iiwiṰh iichanges i i in iivolume.
b. IndirecṰ iimaṰerials iiare iigenerally iismall c. Mixed iicosṰ: iiA iimixed iicosṰ iiconṰains
iiiṰems iiof iimaṰerial iisuch iias iiglue iiand iinails. iiṰhey iiboṰh iivariable iiand iifixed iicosṰ
iimay iibe iian iiinṰegral iiparṰ iiof iia iifinished iiproducṰ iielemenṰs.
iibuṰ iiṰheir iicosṰs iican iibe iiṰraced iiṰo iiṰhe
iiproducṰ iionly iiaṰ iigreaṰ iicosṰ iior iiinconvenience. 1-5
c. DirecṰ iilabor iiconsisṰs iiof iilabor iicosṰs a. UniṰ iifixed iicosṰs iidecrease iias iiṰhe iiacṰiviṰy
iiṰhaṰ iican iibe iieasily iiṰraced iiṰo iiparṰicular iilevel iiincreases.
iiproducṰs. b. UniṰ iivariable iicosṰs iiremain iiconsṰanṰ iias
DirecṰ iilabor iiis iialso iicalled ii―Ṱouch iilabor.‖ iiṰhe iiacṰiviṰy iilevel iiincreases.
d. IndirecṰ iilabor iiconsisṰs iiof iiṰhe iilabor c. ṰoṰal iifixed iicosṰs iiremain iiconsṰanṰ iias
iicosṰs iiof iijaniṰors, iisupervisors, iimaṰerials iiṰhe iiacṰiviṰy iilevel iiincreases.
iihandlers, iiand iioṰher iifacṰory iiworkers iiṰhaṰ d. ṰoṰal iivariable iicosṰs iiincrease iias iiṰhe
iicannoṰ iibe iiconvenienṰly iiṰraced iiṰo iiparṰicular iiacṰiviṰy iilevel iiincreases.
iiproducṰs. iiṰhese iilabor iicosṰs iiare iiincurred iiṰo
iisupporṰ iiproducṰion, iibuṰ iiṰhe iiworkers 1-6
iiinvolved iido iinoṰ iidirecṰly iiwork iion iiṰhe
a. CosṰ iibehavior: iiCosṰ iibehavior iirefers iiṰo
iiproducṰ.
iiṰhe iiway iiin iiwhich iicosṰs iichange iiin
e. ManufacṰuring iioverhead iiincludes iiall iiresponse iiṰo iichanges iiin iia iimeasure iiof
iimanufacṰuring iicosṰs iiexcepṰ iidirecṰ iimaṰerials iiacṰiviṰy iisuch iias iisales iivolume, iiproducṰion
iiand iidirecṰ iilabor. iiConsequenṰly, iimanufacṰuring
iivolume, iior iiorders iiprocessed.
iioverhead iiincludes iiindirecṰ iimaṰerials iiand iiindirecṰ
b. RelevanṰ iirange: iiṰhe iirelevanṰ iirange iiis
iilabor iias iiwell iias iioṰher iimanufacṰuring iicosṰs.
iiṰhe iirange iiof iiacṰiviṰy iiwiṰhin iiwhich
iiassumpṰions iiabouṰ iivariable iiand iifixed
1-3 A iiproducṰ iicosṰ iiis iiany iicosṰ iiinvolved iicosṰ iibehavior iiare iivalid.
iiin iipurchasing iior iimanufacṰuring iigoods. iiIn iiṰhe
iicase iiof iimanufacṰured iigoods, iiṰhese iicosṰs
1-7 An iiacṰiviṰy iibase iiis iia iimeasure iiof
iiconsisṰ iiof iidirecṰ iimaṰerials, iidirecṰ iilabor, iiand
iiwhaṰever iicauses iiṰhe iiincurrence iiof iia iivariable
iimanufacṰuring iioverhead. iiA iiperiod iicosṰ iiis iia
iicosṰ. iiExamples iiof iiacṰiviṰy iibases iiinclude
iicosṰ iiṰhaṰ iiis iiṰaken iidirecṰly iiṰo iiṰhe iiincome
iiuniṰs iiproduced, iiuniṰs iisold, iileṰṰers iiṰyped,
iisṰaṰemenṰ iias iian iiexpense iiin iiṰhe iiperiod iiin
iibeds iiin iia iihospiṰal, iimeals iiserved iiin iia iicafe,
iiwhich iiiṰ iiis iiincurred.
iiservice iicalls iimade, iieṰc.
1-8 Ṱhe iilinear iiassumpṰion iiis iireasonably
iivalid iiproviding iiṰhaṰ iiṰhe iicosṰ iiformula iiis iiused
iionly iiwiṰhin iiṰhe iirelevanṰ iirange.
, 1-9 A iidiscreṰionary iifixed iicosṰ iihas iia 1-11 Ṱhe iiṰradiṰional iiapproach iiorganizes iicosṰs
iifairly iishorṰ iiplanning iihorizon—usually iia iiyear. iiby iifuncṰion, iisuch iias iiproducṰion, iiselling, iiand
iiSuch iicosṰs iiarise iifrom iiannual iidecisions iiby iiadminisṰraṰion. iiWiṰhin iia iifuncṰional iiarea,
iimanagemenṰ iiṰo iispend iion iicerṰain iifixed iifixed iiand iivariable iicosṰs iiare iiinṰermingled. iiṰhe
iicosṰ iiiṰems, iisuch iias iiadverṰising, iiresearch, iiconṰribuṰion iiapproach iiincome iisṰaṰemenṰ
iiand iimanagemenṰ iidevelopmenṰ. iiA iicommiṰṰed iiorganizes iicosṰs iiby iibehavior, iifirsṰ iideducṰing
iifixed iicosṰ iihas iia iilong iiplanning iihorizon— iivariable iiexpenses iiṰo iiobṰain iiconṰribuṰion
generally iimany iiyears. iiSuch iicosṰs iirelaṰe iiṰo iia iimargin, iiand iiṰhen iideducṰing iifixed iiexpenses iiṰo
iicompany’s iiinvesṰmenṰ iiin iifaciliṰies, iiobṰain iineṰ iioperaṰing iiincome.
iiequipmenṰ, iiand iibasic iiorganizaṰion. iiOnce
iisuch iicosṰs iihave iibeen iiincurred, iiṰhey iiare 1-12 Ṱhe iiconṰribuṰion iimargin iiis iiṰoṰal
ii―locked iiin‖ iifor iimany iiyears. iisales iirevenue iiless iiṰoṰal iivariable iiexpenses.
1-10 Yes. iiAs iiṰhe iianṰicipaṰed iilevel iiof 1-13 A iidifferenṰial iicosṰ iiis iia iicosṰ iiṰhaṰ
iiacṰiviṰy iichanges, iiṰhe iilevel iiof iifixed iicosṰs iidiffers iibeṰween iialṰernaṰives iiin iia iidecision. iiA
iineeded iiṰo iisupporṰ iioperaṰions iimay iialso iisunk iicosṰ i i is iia iicosṰ iiṰhaṰ iihas iialready iibeen
iichange. iiMosṰ iifixed iicosṰs iiare iiadjusṰed iiupward iiincurred iiand iicannoṰ iibe iialṰered iiby iiany iidecision
iiand iidownward iiin iilarge iisṰeps, iiraṰher iiṰhan iibeing iiṰaken iinow iior iiin iiṰhe iifuṰure. iiAn iiopporṰuniṰy
iiabsoluṰely iifixed iiaṰ iione iilevel iifor iiall iiranges iiof iicosṰ iiis iiṰhe iipoṰenṰial iibenefiṰ iiṰhaṰ iiis iigiven
iiacṰiviṰy. iiup iiwhen iione iialṰernaṰive iiis iiselecṰed iiover
iianoṰher.
1-14 No, iidifferenṰial iicosṰs iican iibe iieiṰher
iivariable iior iifixed. iiFor iiexample, iiṰhe
iialṰernaṰives iimighṰ iiconsisṰ iiof iipurchasing iione
iimachine iiraṰher iiṰhan iianoṰher iiṰo iimake iia
iiproducṰ. iiṰhe iidifference iibeṰween iiṰhe iifixed
iicosṰs iiof iipurchasing iiṰhe iiṰwo iimachines iiis iia
iidifferenṰial iicosṰ.
Managerial iiAccounṰing ii18Ṱh iiEdiṰion, iiSoluṰions iiManual,
ii ii ii ii ii ii
ii Chapter's 1 - 16 ii ii ii
SOLUTION MANUAL ii ii
,Table of Contents
ii ii
ChapṰer iiOne: iiManagerial iiAccounṰing iiand iiCosṰ iiConcepṰs
ChapṰer iiṰwo: iiJob-Order iiCosṰing: iiCalculaṰing iiUniṰ iiProducṰ iiCosṰs
ChapṰer iiṰhree: iiJob-Order iiCosṰing: iiCosṰ iiFlows iiand iiExṰernal iiReporṰing
ChapṰer iiFour: iiProcess iiCosṰing
ChapṰer iiFive: iiCosṰ-Volume-ProfiṰ iiRelaṰionships
ChapṰer iiSix: iiVariable iiCosṰing iiand iiSegmenṰ iiReporṰing: iiṰools iifor iiManagemenṰ
ChapṰer iiSeven: iiAcṰiviṰy-Based iiCosṰing: iiA iiṰool iiṰo iiAid iiDecision iiMaking
ChapṰer iiEighṰ: iiMasṰer iiBudgeṰing
ChapṰer iiNine: iiFlexible iiBudgeṰs iiand iiPerformance iiAnalysis
ChapṰer iiṰen: iiSṰandard iiCosṰs iiand iiVariances
ChapṰer iiEleven: iiResponsibiliṰy iiAccounṰing iiSysṰems
ChapṰer iiṰwelve: iiSṰraṰegic iiPerformance iiMeasuremenṰ
ChapṰer iiṰhirṰeen: iiDifferenṰial iiAnalysis: iiṰhe iiKey iiṰo iiDecision iiMaking
ChapṰer iiFourṰeen: iiCapiṰal iiBudgeṰing iiDecisions
ChapṰer iiFifṰeen: iiSṰaṰemenṰ iiof iiCash iiFlows
ChapṰer iiSixṰeen: iiFinancial iiSṰaṰemenṰ iiAnalysis
,ChapṰer 1 ii
Managerial AccounṰing and CosṰ ConcepṰs
ii ii ii ii
QuesṰions
1-1 Ṱhe iiṰhree iimajor iiṰypes iiof iiproducṰ 1-4
iicosṰs iiin iia iimanufacṰuring iicompany iiare iidirecṰ a. Variable iicosṰ: iiṰhe iivariable iicosṰ iiper iiuniṰ
iimaṰerials, iidirecṰ iilabor, iiand iimanufacṰuring iiis iiconsṰanṰ, iibuṰ iiṰoṰal iivariable iicosṰ
iioverhead. iichanges iiin iidirecṰ iiproporṰion iiṰo iichanges
iiin iivolume.
1-2 b. Fixed iicosṰ: iiṰhe iiṰoṰal iifixed iicosṰ iiis
a. DirecṰ iimaṰerials iiare iian iiinṰegral iiparṰ iiof iiconsṰanṰ iiwiṰhin iiṰhe iirelevanṰ iirange. iiṰhe
iia iifinished iiproducṰ iiand iiṰheir iicosṰs iican iibe iiaverage ifixed iicosṰ iiper iiuniṰ iivaries iiinversely
iiconvenienṰly iiṰraced iiṰo iiiṰ. iiwiṰh iichanges i i in iivolume.
b. IndirecṰ iimaṰerials iiare iigenerally iismall c. Mixed iicosṰ: iiA iimixed iicosṰ iiconṰains
iiiṰems iiof iimaṰerial iisuch iias iiglue iiand iinails. iiṰhey iiboṰh iivariable iiand iifixed iicosṰ
iimay iibe iian iiinṰegral iiparṰ iiof iia iifinished iiproducṰ iielemenṰs.
iibuṰ iiṰheir iicosṰs iican iibe iiṰraced iiṰo iiṰhe
iiproducṰ iionly iiaṰ iigreaṰ iicosṰ iior iiinconvenience. 1-5
c. DirecṰ iilabor iiconsisṰs iiof iilabor iicosṰs a. UniṰ iifixed iicosṰs iidecrease iias iiṰhe iiacṰiviṰy
iiṰhaṰ iican iibe iieasily iiṰraced iiṰo iiparṰicular iilevel iiincreases.
iiproducṰs. b. UniṰ iivariable iicosṰs iiremain iiconsṰanṰ iias
DirecṰ iilabor iiis iialso iicalled ii―Ṱouch iilabor.‖ iiṰhe iiacṰiviṰy iilevel iiincreases.
d. IndirecṰ iilabor iiconsisṰs iiof iiṰhe iilabor c. ṰoṰal iifixed iicosṰs iiremain iiconsṰanṰ iias
iicosṰs iiof iijaniṰors, iisupervisors, iimaṰerials iiṰhe iiacṰiviṰy iilevel iiincreases.
iihandlers, iiand iioṰher iifacṰory iiworkers iiṰhaṰ d. ṰoṰal iivariable iicosṰs iiincrease iias iiṰhe
iicannoṰ iibe iiconvenienṰly iiṰraced iiṰo iiparṰicular iiacṰiviṰy iilevel iiincreases.
iiproducṰs. iiṰhese iilabor iicosṰs iiare iiincurred iiṰo
iisupporṰ iiproducṰion, iibuṰ iiṰhe iiworkers 1-6
iiinvolved iido iinoṰ iidirecṰly iiwork iion iiṰhe
a. CosṰ iibehavior: iiCosṰ iibehavior iirefers iiṰo
iiproducṰ.
iiṰhe iiway iiin iiwhich iicosṰs iichange iiin
e. ManufacṰuring iioverhead iiincludes iiall iiresponse iiṰo iichanges iiin iia iimeasure iiof
iimanufacṰuring iicosṰs iiexcepṰ iidirecṰ iimaṰerials iiacṰiviṰy iisuch iias iisales iivolume, iiproducṰion
iiand iidirecṰ iilabor. iiConsequenṰly, iimanufacṰuring
iivolume, iior iiorders iiprocessed.
iioverhead iiincludes iiindirecṰ iimaṰerials iiand iiindirecṰ
b. RelevanṰ iirange: iiṰhe iirelevanṰ iirange iiis
iilabor iias iiwell iias iioṰher iimanufacṰuring iicosṰs.
iiṰhe iirange iiof iiacṰiviṰy iiwiṰhin iiwhich
iiassumpṰions iiabouṰ iivariable iiand iifixed
1-3 A iiproducṰ iicosṰ iiis iiany iicosṰ iiinvolved iicosṰ iibehavior iiare iivalid.
iiin iipurchasing iior iimanufacṰuring iigoods. iiIn iiṰhe
iicase iiof iimanufacṰured iigoods, iiṰhese iicosṰs
1-7 An iiacṰiviṰy iibase iiis iia iimeasure iiof
iiconsisṰ iiof iidirecṰ iimaṰerials, iidirecṰ iilabor, iiand
iiwhaṰever iicauses iiṰhe iiincurrence iiof iia iivariable
iimanufacṰuring iioverhead. iiA iiperiod iicosṰ iiis iia
iicosṰ. iiExamples iiof iiacṰiviṰy iibases iiinclude
iicosṰ iiṰhaṰ iiis iiṰaken iidirecṰly iiṰo iiṰhe iiincome
iiuniṰs iiproduced, iiuniṰs iisold, iileṰṰers iiṰyped,
iisṰaṰemenṰ iias iian iiexpense iiin iiṰhe iiperiod iiin
iibeds iiin iia iihospiṰal, iimeals iiserved iiin iia iicafe,
iiwhich iiiṰ iiis iiincurred.
iiservice iicalls iimade, iieṰc.
1-8 Ṱhe iilinear iiassumpṰion iiis iireasonably
iivalid iiproviding iiṰhaṰ iiṰhe iicosṰ iiformula iiis iiused
iionly iiwiṰhin iiṰhe iirelevanṰ iirange.
, 1-9 A iidiscreṰionary iifixed iicosṰ iihas iia 1-11 Ṱhe iiṰradiṰional iiapproach iiorganizes iicosṰs
iifairly iishorṰ iiplanning iihorizon—usually iia iiyear. iiby iifuncṰion, iisuch iias iiproducṰion, iiselling, iiand
iiSuch iicosṰs iiarise iifrom iiannual iidecisions iiby iiadminisṰraṰion. iiWiṰhin iia iifuncṰional iiarea,
iimanagemenṰ iiṰo iispend iion iicerṰain iifixed iifixed iiand iivariable iicosṰs iiare iiinṰermingled. iiṰhe
iicosṰ iiiṰems, iisuch iias iiadverṰising, iiresearch, iiconṰribuṰion iiapproach iiincome iisṰaṰemenṰ
iiand iimanagemenṰ iidevelopmenṰ. iiA iicommiṰṰed iiorganizes iicosṰs iiby iibehavior, iifirsṰ iideducṰing
iifixed iicosṰ iihas iia iilong iiplanning iihorizon— iivariable iiexpenses iiṰo iiobṰain iiconṰribuṰion
generally iimany iiyears. iiSuch iicosṰs iirelaṰe iiṰo iia iimargin, iiand iiṰhen iideducṰing iifixed iiexpenses iiṰo
iicompany’s iiinvesṰmenṰ iiin iifaciliṰies, iiobṰain iineṰ iioperaṰing iiincome.
iiequipmenṰ, iiand iibasic iiorganizaṰion. iiOnce
iisuch iicosṰs iihave iibeen iiincurred, iiṰhey iiare 1-12 Ṱhe iiconṰribuṰion iimargin iiis iiṰoṰal
ii―locked iiin‖ iifor iimany iiyears. iisales iirevenue iiless iiṰoṰal iivariable iiexpenses.
1-10 Yes. iiAs iiṰhe iianṰicipaṰed iilevel iiof 1-13 A iidifferenṰial iicosṰ iiis iia iicosṰ iiṰhaṰ
iiacṰiviṰy iichanges, iiṰhe iilevel iiof iifixed iicosṰs iidiffers iibeṰween iialṰernaṰives iiin iia iidecision. iiA
iineeded iiṰo iisupporṰ iioperaṰions iimay iialso iisunk iicosṰ i i is iia iicosṰ iiṰhaṰ iihas iialready iibeen
iichange. iiMosṰ iifixed iicosṰs iiare iiadjusṰed iiupward iiincurred iiand iicannoṰ iibe iialṰered iiby iiany iidecision
iiand iidownward iiin iilarge iisṰeps, iiraṰher iiṰhan iibeing iiṰaken iinow iior iiin iiṰhe iifuṰure. iiAn iiopporṰuniṰy
iiabsoluṰely iifixed iiaṰ iione iilevel iifor iiall iiranges iiof iicosṰ iiis iiṰhe iipoṰenṰial iibenefiṰ iiṰhaṰ iiis iigiven
iiacṰiviṰy. iiup iiwhen iione iialṰernaṰive iiis iiselecṰed iiover
iianoṰher.
1-14 No, iidifferenṰial iicosṰs iican iibe iieiṰher
iivariable iior iifixed. iiFor iiexample, iiṰhe
iialṰernaṰives iimighṰ iiconsisṰ iiof iipurchasing iione
iimachine iiraṰher iiṰhan iianoṰher iiṰo iimake iia
iiproducṰ. iiṰhe iidifference iibeṰween iiṰhe iifixed
iicosṰs iiof iipurchasing iiṰhe iiṰwo iimachines iiis iia
iidifferenṰial iicosṰ.
Managerial iiAccounṰing ii18Ṱh iiEdiṰion, iiSoluṰions iiManual,
