Solution Manual for r r
Horngren's rManagerial rChapters rAccounting, r7th rEdition rby rTracie
Chapter r1-11
Chapter 1 r
Introduction to Managerial Accounting
r r r
Review Questions
r
1. The rprimary rpurpose rof rmanagerial raccounting ris rto rprovide rinformation rto rhelp rmanagers
rplan,rdirect, rcontrol, rand rmake rdecisions.
2. Financial raccounting rand rmanagerial raccounting rdiffer ron rthe rfollowing r6 rdimensions: r(1)
rprimaryrusers, r(2) rpurpose rof rinformation, r(3) rfocus rand rtime rdimension rof rthe rinformation, r(4) rrules
rand rrestrictions, r(5) rscope rof rinformation, rand r(6) rbehavioral.
3. Line rpositions rare rdirectly rinvolved rin rproviding rgoods ror rservices rto rcustomers. rStaff
rpositionsrsupport rline rpositions.
4. Planning rmeans rchoosing rgoals rand rdeciding rhow rto rachieve rthem. rDirecting rinvolves rrunning rthe
rday-to-day roperations rof ra rbusiness. rControlling ris rthe rprocess rof rmonitoring roperations rand
rkeepingrthe rcompany ron rtrack.
5. The rfour rIMA rstandards rof rethical rpractice rand ra rdescription rof reach rfollow.
I. Competence.
Maintain ran rappropriate rlevel rof rprofessional rleadership rand rexpertise rby
renhancingrknowledge rand rskills.
Perform rprofessional rduties rin raccordance rwith rrelevant rlaws, rregulations, rand
rtechnicalrstandards.
Provide rdecision rsupport rinformation rand rrecommendations rthat rare raccurate, rclear,
rconcise,rand rtimely.
Recognise rand rhelp rmange rrisk.
II. Confidentiality.
Keep rinformation rconfidential rexcept rwhen rdisclosure ris rauthorized ror rlegally rrequired.
Inform rall rrelevant rparties rregarding rappropriate ruse rof rconfidential rinformation. r Monitor
rtorensure rcompliance.
Refrain rfrom rusing rconfidential rinformation rfor runethical ror rillegal radvantage.
III. Integrity.
Mitigate ractual rconflicts rof rinterest. rRegularly rcommunicate rwith rbusiness rassociates rto
ravoidrapparent rconflicts rof rinterest. r rAdvise rall rparties rof rany rpotential rconflicts.
Refrain rfrom rengaging rin rany rconduct rthat rwould rprejudice rcarrying rout rduties rethically.
Abstain rfrom rengaging rin ror rsupporting rany ractivity rthat rmight rdiscredit rthe rprofession.
© r2021 rPearson rEducation, 1-1
rInc.
, Contribute rto ra rpositive rethical rculture rand rplace rintegrity rof rthe rprofession rabove
rpersonalrinterest.
5, rcont.
IV. Credibility.
Communicate rinformation rfairly rand robjectively.
Provide rall rrelevant rinformation rthat rcould rreasonably rbe rexpected rto rinfluence ran
rintendedruser’s runderstanding rof rthe rreports, ranalyses, ror rrecommendations.
Report rany rdelays ror rdeficiencies rin rinformation, rtimeliness, rprocessing, ror rinternal rcontrolsrin
rconformance rwith rorganization rpolicy rand/or rapplicable rlaw.
Communicate rany rprofessional rlimitations ror rother rconstraints rthat rwould rpreclude rresponsi-
rble rjudgment ror rsuccessful rperformance rof ran ractivity.
6. Service rcompanies rsell rtime, rskills, rand rknowledge. r Examples rof rservice rcompanies rinclude
rphonerservice rcompanies, rbanks, rcleaning rservice rcompanies, raccounting rfirms, rlaw rfirms, rmedical
rphysicians, rand ronline rauction rservices.
7. Merchandising rcompanies rresell rproducts rthey rbuy rfrom rsuppliers. rMerchandisers rkeep ran rinventoryrof
rproducts, rand rmanagers rare raccountable rfor rthe rpurchasing, rstorage, rand rsale rof rthe rproducts.
rExamples rof rmerchandising rcompanies rinclude rtoy rstores, rgrocery rstores, rand rclothing rstores.
8. Merchandising rcompanies rresell rproducts rthey rpreviously rbought rfrom rsuppliers, rwhereas
rmanufacturing rcompanies ruse rlabor, requipment, rsupplies, rand rfacilities rto rconvert rraw rmaterials
rintornew rfinished rproducts. rIn rcontrast rto rmerchandising rcompanies, rmanufacturing rcompanies rhave ra
rbroad rrange rof rproduction ractivities rthat rrequire rtracking rcosts ron rthree rkinds rof rinventory.
9. The rthree rinventory raccounts rused rby rmanufacturing rcompanies rare rRaw rMaterials rInventory, rWork-
rin-Process rInventory, rand rFinished rGoods rInventory.
Raw rMaterials rInventory rincludes rmaterials rused rto rmanufacture ra rproduct. rWork-in-
ProcessrInventory rincludes rgoods rthat rhave rbeen rstarted rin rthe rmanufacturing rprocess rbut rare rnot
ryet rcomplete. r Finished rGoods rInventory rincludes rcompleted rgoods rthat rhave rnot ryet rbeen rsold.
10. A rdirect rcost ris ra rcost rthat rcan rbe reasily rand rcost-effectively rtraced rto ra rcost robject r(which ris
ranything rfor rwhich rmanagers rwant ra rseparate rmeasurement rof rcost). rAn rindirect rcost ris ra rcost
rthatrcannot rbe reasily ror rcost-effectively rtraced rto ra rcost robject.
11. The rthree rmanufacturing rcosts rfor ra rmanufacturing rcompany rare rdirect rmaterials, rdirect rlabor, rand
rmanufacturing roverhead. rDirect rmaterials rare rmaterials rthat rbecome ra rphysical rpart rof ra rfinished
rproduct rand rwhose rcosts rare reasily rtraceable rto rthe rfinished rproduct. r Direct rlabor ris rthe rlabor rcost
rofrthe remployees rwho rconvert rmaterials rinto rfinished rproducts. r Manufacturing roverhead rincludes rall
© r2021 rPearson rEducation, 1-2
rInc.
, manufacturing rcosts rexcept rdirect rmaterials rand rdirect rlabor, rsuch ras rindirect rmaterials,
rindirectrlabor, rfactory rdepreciation, rfactory rrent, rand rfactory rproperty rtaxes.
12. Examples rof rmanufacturing roverhead rinclude rcosts rof rindirect rmaterials, rindirect rlabor, rrepair
randrmaintenance rin rfactory, rfactory rutilities, rfactory rrent, rfactory rinsurance, rfactory rproperty rtaxes,
rmanufacturing rplant rmanagers’ rsalaries, rand rdepreciation ron rmanufacturing rbuildings rand
requipment.
13. Prime rcosts rare rdirect rmaterials rplus rdirect rlabor. rConversion rcosts rare rdirect rlabor rplus
rmanufacturing roverhead. rNote rthat rdirect rlabor ris rclassified ras rboth ra rprime rcost rand ra
rconversionrcost.
14. Product rcosts rare rthe rcost rof rpurchasing ror rmaking ra rproduct. r These rcosts rare rrecorded ras ran
rasset rand rnot rexpensed runtil rthe rproduct ris rsold. rProduct rcosts rinclude rdirect rmaterials, rdirect rlabor,
randrmanufacturing roverhead.
15. Period rcosts rare rnon-manufacturing rcosts rthat rare rexpensed rin rthe rsame raccounting rperiod rin
rwhichrthey rare rincurred, rwhereas rproduct rcosts rare rrecorded ras ran rasset rand rnot rexpensed runtil rthe
raccounting rperiod rin rwhich rthe rproduct ris rsold.
16. Cost rof rGoods rManufactured ris rcalculated ras rBeginning rWork-in-Process rInventory r+
rTotalrManufacturing rCosts rIncurred rduring rthe rYear r– rEnding rWork-in-Process rInventory.
rTotalrManufacturing rCosts rIncurred rduring rthe rYear r= rDirect rMaterials rUsed r+ rDirect rLabor
r+ rManufacturing rOverhead.
17. For ra rmanufacturing rcompany, rthe ractivity rin rthe rFinished rGoods rInventory raccount rprovides
rtherinformation rfor rdetermining rCost rof rGoods rSold. rA rmanufacturing rcompany rcalculates rCost rof
rGoods rSold ras rBeginning rFinished rGoods rInventory r+ rCost rof rGoods rManufactured r– rEnding
rFinished rGood rInventory. rIn raddition, ra rmanufacturing rcompany rmust rtrack rcosts rfrom rRaw
rMaterials rInventory rand rWork-in-Process rInventory rin rorder rto rcompute rCost rof rGoods
rManufactured rused rin rthe rprevious requation.
For ra rmerchandising rcompany, rthe ractivity rin rthe rMerchandise rInventory raccount rprovides rthe
rinformation rfor rdetermining rCost rof rGoods rSold. rA rmerchandising rcompany rcalculates rCost rof
rGoods rSold ras rBeginning rMerchandise rInventory r+ rPurchases rand rFreight rIn r– rEnding
rMerchandiserInventory.
18. A rmanufacturing rcompany rcalculates runit rproduct rcost ras rCost rof rGoods rManufactured r/
rTotalrnumber rof runits rproduced.
19. A rservice rcompany rcalculates runit rcost rper rservice ras rTotal roperating rcosts r/ rTotal rnumber
rofrservices rprovided.
© r2021 rPearson rEducation, 1-3
rInc.
, 20. A rmerchandising rcompany rcalculates runit rcost rper ritem ras rTotal rcost rof rgoods rsold r/ rTotal rnumber
rofritems rsold.
Short Exercises
r
S-M:1-1
a. FA
b. MA
c. MA
d. FA
e. FA
S-M:1-2
a. Confidentiality
b. Integrity
c. Competence r(skipping rthe rsession); r Integrity r(company-paid rconference)
d. Competence
e. Credibility; r Integrity
S-M:1-3
a. 2
b. 4
c. 1
d. 5
e. 4
f. 5
g. 3
S-M:1-4
Glue rfor rframes $ 250
Plant rdepreciation 7,500
Plant rforeman’s rsalary 3,500
Plant rjanitor’s rwages 1,300
Oil rfor rmanufacturing requipment r 150 r r
Total rmanufacturing roverhead r $ r12,700 r r
© r2021 rPearson rEducation, 1-4
rInc.
Horngren's rManagerial rChapters rAccounting, r7th rEdition rby rTracie
Chapter r1-11
Chapter 1 r
Introduction to Managerial Accounting
r r r
Review Questions
r
1. The rprimary rpurpose rof rmanagerial raccounting ris rto rprovide rinformation rto rhelp rmanagers
rplan,rdirect, rcontrol, rand rmake rdecisions.
2. Financial raccounting rand rmanagerial raccounting rdiffer ron rthe rfollowing r6 rdimensions: r(1)
rprimaryrusers, r(2) rpurpose rof rinformation, r(3) rfocus rand rtime rdimension rof rthe rinformation, r(4) rrules
rand rrestrictions, r(5) rscope rof rinformation, rand r(6) rbehavioral.
3. Line rpositions rare rdirectly rinvolved rin rproviding rgoods ror rservices rto rcustomers. rStaff
rpositionsrsupport rline rpositions.
4. Planning rmeans rchoosing rgoals rand rdeciding rhow rto rachieve rthem. rDirecting rinvolves rrunning rthe
rday-to-day roperations rof ra rbusiness. rControlling ris rthe rprocess rof rmonitoring roperations rand
rkeepingrthe rcompany ron rtrack.
5. The rfour rIMA rstandards rof rethical rpractice rand ra rdescription rof reach rfollow.
I. Competence.
Maintain ran rappropriate rlevel rof rprofessional rleadership rand rexpertise rby
renhancingrknowledge rand rskills.
Perform rprofessional rduties rin raccordance rwith rrelevant rlaws, rregulations, rand
rtechnicalrstandards.
Provide rdecision rsupport rinformation rand rrecommendations rthat rare raccurate, rclear,
rconcise,rand rtimely.
Recognise rand rhelp rmange rrisk.
II. Confidentiality.
Keep rinformation rconfidential rexcept rwhen rdisclosure ris rauthorized ror rlegally rrequired.
Inform rall rrelevant rparties rregarding rappropriate ruse rof rconfidential rinformation. r Monitor
rtorensure rcompliance.
Refrain rfrom rusing rconfidential rinformation rfor runethical ror rillegal radvantage.
III. Integrity.
Mitigate ractual rconflicts rof rinterest. rRegularly rcommunicate rwith rbusiness rassociates rto
ravoidrapparent rconflicts rof rinterest. r rAdvise rall rparties rof rany rpotential rconflicts.
Refrain rfrom rengaging rin rany rconduct rthat rwould rprejudice rcarrying rout rduties rethically.
Abstain rfrom rengaging rin ror rsupporting rany ractivity rthat rmight rdiscredit rthe rprofession.
© r2021 rPearson rEducation, 1-1
rInc.
, Contribute rto ra rpositive rethical rculture rand rplace rintegrity rof rthe rprofession rabove
rpersonalrinterest.
5, rcont.
IV. Credibility.
Communicate rinformation rfairly rand robjectively.
Provide rall rrelevant rinformation rthat rcould rreasonably rbe rexpected rto rinfluence ran
rintendedruser’s runderstanding rof rthe rreports, ranalyses, ror rrecommendations.
Report rany rdelays ror rdeficiencies rin rinformation, rtimeliness, rprocessing, ror rinternal rcontrolsrin
rconformance rwith rorganization rpolicy rand/or rapplicable rlaw.
Communicate rany rprofessional rlimitations ror rother rconstraints rthat rwould rpreclude rresponsi-
rble rjudgment ror rsuccessful rperformance rof ran ractivity.
6. Service rcompanies rsell rtime, rskills, rand rknowledge. r Examples rof rservice rcompanies rinclude
rphonerservice rcompanies, rbanks, rcleaning rservice rcompanies, raccounting rfirms, rlaw rfirms, rmedical
rphysicians, rand ronline rauction rservices.
7. Merchandising rcompanies rresell rproducts rthey rbuy rfrom rsuppliers. rMerchandisers rkeep ran rinventoryrof
rproducts, rand rmanagers rare raccountable rfor rthe rpurchasing, rstorage, rand rsale rof rthe rproducts.
rExamples rof rmerchandising rcompanies rinclude rtoy rstores, rgrocery rstores, rand rclothing rstores.
8. Merchandising rcompanies rresell rproducts rthey rpreviously rbought rfrom rsuppliers, rwhereas
rmanufacturing rcompanies ruse rlabor, requipment, rsupplies, rand rfacilities rto rconvert rraw rmaterials
rintornew rfinished rproducts. rIn rcontrast rto rmerchandising rcompanies, rmanufacturing rcompanies rhave ra
rbroad rrange rof rproduction ractivities rthat rrequire rtracking rcosts ron rthree rkinds rof rinventory.
9. The rthree rinventory raccounts rused rby rmanufacturing rcompanies rare rRaw rMaterials rInventory, rWork-
rin-Process rInventory, rand rFinished rGoods rInventory.
Raw rMaterials rInventory rincludes rmaterials rused rto rmanufacture ra rproduct. rWork-in-
ProcessrInventory rincludes rgoods rthat rhave rbeen rstarted rin rthe rmanufacturing rprocess rbut rare rnot
ryet rcomplete. r Finished rGoods rInventory rincludes rcompleted rgoods rthat rhave rnot ryet rbeen rsold.
10. A rdirect rcost ris ra rcost rthat rcan rbe reasily rand rcost-effectively rtraced rto ra rcost robject r(which ris
ranything rfor rwhich rmanagers rwant ra rseparate rmeasurement rof rcost). rAn rindirect rcost ris ra rcost
rthatrcannot rbe reasily ror rcost-effectively rtraced rto ra rcost robject.
11. The rthree rmanufacturing rcosts rfor ra rmanufacturing rcompany rare rdirect rmaterials, rdirect rlabor, rand
rmanufacturing roverhead. rDirect rmaterials rare rmaterials rthat rbecome ra rphysical rpart rof ra rfinished
rproduct rand rwhose rcosts rare reasily rtraceable rto rthe rfinished rproduct. r Direct rlabor ris rthe rlabor rcost
rofrthe remployees rwho rconvert rmaterials rinto rfinished rproducts. r Manufacturing roverhead rincludes rall
© r2021 rPearson rEducation, 1-2
rInc.
, manufacturing rcosts rexcept rdirect rmaterials rand rdirect rlabor, rsuch ras rindirect rmaterials,
rindirectrlabor, rfactory rdepreciation, rfactory rrent, rand rfactory rproperty rtaxes.
12. Examples rof rmanufacturing roverhead rinclude rcosts rof rindirect rmaterials, rindirect rlabor, rrepair
randrmaintenance rin rfactory, rfactory rutilities, rfactory rrent, rfactory rinsurance, rfactory rproperty rtaxes,
rmanufacturing rplant rmanagers’ rsalaries, rand rdepreciation ron rmanufacturing rbuildings rand
requipment.
13. Prime rcosts rare rdirect rmaterials rplus rdirect rlabor. rConversion rcosts rare rdirect rlabor rplus
rmanufacturing roverhead. rNote rthat rdirect rlabor ris rclassified ras rboth ra rprime rcost rand ra
rconversionrcost.
14. Product rcosts rare rthe rcost rof rpurchasing ror rmaking ra rproduct. r These rcosts rare rrecorded ras ran
rasset rand rnot rexpensed runtil rthe rproduct ris rsold. rProduct rcosts rinclude rdirect rmaterials, rdirect rlabor,
randrmanufacturing roverhead.
15. Period rcosts rare rnon-manufacturing rcosts rthat rare rexpensed rin rthe rsame raccounting rperiod rin
rwhichrthey rare rincurred, rwhereas rproduct rcosts rare rrecorded ras ran rasset rand rnot rexpensed runtil rthe
raccounting rperiod rin rwhich rthe rproduct ris rsold.
16. Cost rof rGoods rManufactured ris rcalculated ras rBeginning rWork-in-Process rInventory r+
rTotalrManufacturing rCosts rIncurred rduring rthe rYear r– rEnding rWork-in-Process rInventory.
rTotalrManufacturing rCosts rIncurred rduring rthe rYear r= rDirect rMaterials rUsed r+ rDirect rLabor
r+ rManufacturing rOverhead.
17. For ra rmanufacturing rcompany, rthe ractivity rin rthe rFinished rGoods rInventory raccount rprovides
rtherinformation rfor rdetermining rCost rof rGoods rSold. rA rmanufacturing rcompany rcalculates rCost rof
rGoods rSold ras rBeginning rFinished rGoods rInventory r+ rCost rof rGoods rManufactured r– rEnding
rFinished rGood rInventory. rIn raddition, ra rmanufacturing rcompany rmust rtrack rcosts rfrom rRaw
rMaterials rInventory rand rWork-in-Process rInventory rin rorder rto rcompute rCost rof rGoods
rManufactured rused rin rthe rprevious requation.
For ra rmerchandising rcompany, rthe ractivity rin rthe rMerchandise rInventory raccount rprovides rthe
rinformation rfor rdetermining rCost rof rGoods rSold. rA rmerchandising rcompany rcalculates rCost rof
rGoods rSold ras rBeginning rMerchandise rInventory r+ rPurchases rand rFreight rIn r– rEnding
rMerchandiserInventory.
18. A rmanufacturing rcompany rcalculates runit rproduct rcost ras rCost rof rGoods rManufactured r/
rTotalrnumber rof runits rproduced.
19. A rservice rcompany rcalculates runit rcost rper rservice ras rTotal roperating rcosts r/ rTotal rnumber
rofrservices rprovided.
© r2021 rPearson rEducation, 1-3
rInc.
, 20. A rmerchandising rcompany rcalculates runit rcost rper ritem ras rTotal rcost rof rgoods rsold r/ rTotal rnumber
rofritems rsold.
Short Exercises
r
S-M:1-1
a. FA
b. MA
c. MA
d. FA
e. FA
S-M:1-2
a. Confidentiality
b. Integrity
c. Competence r(skipping rthe rsession); r Integrity r(company-paid rconference)
d. Competence
e. Credibility; r Integrity
S-M:1-3
a. 2
b. 4
c. 1
d. 5
e. 4
f. 5
g. 3
S-M:1-4
Glue rfor rframes $ 250
Plant rdepreciation 7,500
Plant rforeman’s rsalary 3,500
Plant rjanitor’s rwages 1,300
Oil rfor rmanufacturing requipment r 150 r r
Total rmanufacturing roverhead r $ r12,700 r r
© r2021 rPearson rEducation, 1-4
rInc.
