Solution Manual for
Horngren's Managerial Chapters Accounting, 7th Edition by Tracie
Chapterj1-11
Chapter 1 j
Introduction to Managerial Accounting
j j j
Review Questions
j
1. Thejprimaryjpurposejofjmanagerialjaccountingjisjtojprovidejinformationjtojhelpjmanagersjplan,jdirect,jc
ontrol,jandjmakejdecisions.
2. Financialjaccountingjandjmanagerialjaccountingjdifferjonjthejfollowingj6jdimensions:j(1)jprimaryjusers,j(2)j
purposejofjinformation,j(3)jfocusjandjtimejdimensionjofjthejinformation,j(4)jrulesjandjrestrictions,j(5)jscop
ejofjinformation,jandj(6)jbehavioral.
3. Linejpositionsjarejdirectlyjinvolvedjinjprovidingjgoodsjorjservicesjtojcustomers.jStaffjpositionsjsupportj
linejpositions.
4. Planningjmeansjchoosingjgoalsjandjdecidingjhowjtojachievejthem.jDirectingjinvolvesjrunningjthejday-to-
dayjoperationsjofjajbusiness.jControllingjisjthejprocessjofjmonitoringjoperationsjandjkeepingjthejcompanyjo
njtrack.
5. ThejfourjIMAjstandardsjofjethicaljpracticejandjajdescriptionjofjeachjfollow.
I. Competence.
Maintainjanjappropriatejleveljofjprofessionaljleadershipjandjexpertisejbyjenhancingjknowl
edgejandjskills.
Performjprofessionaljdutiesjinjaccordancejwithjrelevantjlaws,jregulations,jandjtechnicaljstanda
rds.
Providejdecisionjsupportjinformationjandjrecommendationsjthatjarejaccurate,jclear,jconcise,jandjti
mely.
Recognisejandjhelpjmangejrisk.
II. Confidentiality.
Keepjinformationjconfidentialjexceptjwhenjdisclosurejisjauthorizedjorjlegallyjrequired.
Informjalljrelevantjpartiesjregardingjappropriatejusejofjconfidentialjinformation.j Monitorjtojensurej
compliance.
Refrainjfromjusingjconfidentialjinformationjforjunethicaljorjillegaljadvantage.
III. Integrity.
Mitigatejactualjconflictsjofjinterest.jRegularlyjcommunicatejwithjbusinessjassociatesjtojavoidjapparen
tjconflictsjofjinterest.jjAdvisejalljpartiesjofjanyjpotentialjconflicts.
Refrainjfromjengagingjinjanyjconductjthatjwouldjprejudicejcarryingjoutjdutiesjethically.
Abstainjfromjengagingjinjorjsupportingjanyjactivityjthatjmightjdiscreditjthejprofession.
©j2021jPearsonjEducation,jInc. 1-1
, Contributejtojajpositivejethicaljculturejandjplacejintegrityjofjthejprofessionjabovejpersonaljinterest
.
5,jcont.
IV. Credibility.
Communicatejinformationjfairlyjandjobjectively.
Providejalljrelevantjinformationjthatjcouldjreasonablyjbejexpectedjtojinfluencejanjintendedjuser’sju
nderstandingjofjthejreports,janalyses,jorjrecommendations.
Reportjanyjdelaysjorjdeficienciesjinjinformation,jtimeliness,jprocessing,jorjinternaljcontrolsjinjconf
ormancejwithjorganizationjpolicyjand/orjapplicablejlaw.
Communicatejanyjprofessionaljlimitationsjorjotherjconstraintsjthatjwouldjprecludejresponsi-
jblejjudgmentjorjsuccessfuljperformancejofjanjactivity.
6. Servicejcompaniesjselljtime,jskills,jandjknowledge.j Examplesjofjservicejcompaniesjincludejphonejservicejc
ompanies,jbanks,jcleaningjservicejcompanies,jaccountingjfirms,jlawjfirms,jmedicaljphysicians,jandjonlineja
uctionjservices.
7. Merchandisingjcompaniesjreselljproductsjtheyjbuyjfromjsuppliers.jMerchandisersjkeepjanjinventoryjofjprod
ucts,jandjmanagersjarejaccountablejforjthejpurchasing,jstorage,jandjsalejofjthejproducts.jExamplesjofjmercha
ndisingjcompaniesjincludejtoyjstores,jgroceryjstores,jandjclothingjstores.
8. Merchandisingjcompaniesjreselljproductsjtheyjpreviouslyjboughtjfromjsuppliers,jwhereasjmanufacturingjc
ompaniesjusejlabor,jequipment,jsupplies,jandjfacilitiesjtojconvertjrawjmaterialsjintojnewjfinishedjproducts.jI
njcontrastjtojmerchandisingjcompanies,jmanufacturingjcompaniesjhavejajbroadjrangejofjproductionjactiviti
esjthatjrequirejtrackingjcostsjonjthreejkindsjofjinventory.
9. ThejthreejinventoryjaccountsjusedjbyjmanufacturingjcompaniesjarejRawjMaterialsjInventory,jWork-jin-
ProcessjInventory,jandjFinishedjGoodsjInventory.
RawjMaterialsjInventoryjincludesjmaterialsjusedjtojmanufacturejajproduct.jWork-in-
ProcessjInventoryjincludesjgoodsjthatjhavejbeenjstartedjinjthejmanufacturingjprocessjbutjarejnotjyetjco
mplete.j FinishedjGoodsjInventoryjincludesjcompletedjgoodsjthatjhavejnotjyetjbeenjsold.
10. Ajdirectjcostjisjajcostjthatjcanjbejeasilyjandjcost-
effectivelyjtracedjtojajcostjobjectj(whichjisjanythingjforjwhichjmanagersjwantjajseparatejmeasurementjofjc
ost).jAnjindirectjcostjisjajcostjthatjcannotjbejeasilyjorjcost-effectivelyjtracedjtojajcostjobject.
11. Thejthreejmanufacturingjcostsjforjajmanufacturingjcompanyjarejdirectjmaterials,jdirectjlabor,jandjmanufact
uringjoverhead.jDirectjmaterialsjarejmaterialsjthatjbecomejajphysicaljpartjofjajfinishedjproductjandjwhosejco
stsjarejeasilyjtraceablejtojthejfinishedjproduct.j Directjlaborjisjthejlaborjcostjofjthejemployeesjwhojconvertjma
terialsjintojfinishedjproducts.j Manufacturingjoverheadjincludesjall
©j2021jPearsonjEducation,jInc. 1-2
, manufacturingjcostsjexceptjdirectjmaterialsjandjdirectjlabor,jsuchjasjindirectjmaterials,jindirectjlabor,jfa
ctoryjdepreciation,jfactoryjrent,jandjfactoryjpropertyjtaxes.
12. Examplesjofjmanufacturingjoverheadjincludejcostsjofjindirectjmaterials,jindirectjlabor,jrepairjandjmainte
nancejinjfactory,jfactoryjutilities,jfactoryjrent,jfactoryjinsurance,jfactoryjpropertyjtaxes,jmanufacturingjpla
ntjmanagers’jsalaries,jandjdepreciationjonjmanufacturingjbuildingsjandjequipment.
13. Primejcostsjarejdirectjmaterialsjplusjdirectjlabor.jConversionjcostsjarejdirectjlaborjplusjmanufacturingjov
erhead.jNotejthatjdirectjlaborjisjclassifiedjasjbothjajprimejcostjandjajconversionjcost.
14. Productjcostsjarejthejcostjofjpurchasingjorjmakingjajproduct.j Thesejcostsjarejrecordedjasjanjassetjandjnotj
expensedjuntiljthejproductjisjsold.jProductjcostsjincludejdirectjmaterials,jdirectjlabor,jandjmanufacturingjo
verhead.
15. Periodjcostsjarejnon-
manufacturingjcostsjthatjarejexpensedjinjthejsamejaccountingjperiodjinjwhichjtheyjarejincurred,jwhereasjpr
oductjcostsjarejrecordedjasjanjassetjandjnotjexpensedjuntiljthejaccountingjperiodjinjwhichjthejproductjisjsol
d.
16. CostjofjGoodsjManufacturedjisjcalculatedjasjBeginningjWork-in-
ProcessjInventoryj+jTotaljManufacturingjCostsjIncurredjduringjthejYearj–jEndingjWork-in-
ProcessjInventory.jTotaljManufacturingjCostsjIncurredjduringjthejYearj=jDirectjMaterialsjUsedj+j
DirectjLaborj+jManufacturingjOverhead.
17. Forjajmanufacturingjcompany,jthejactivityjinjthejFinishedjGoodsjInventoryjaccountjprovidesjthejinform
ationjforjdeterminingjCostjofjGoodsjSold.jAjmanufacturingjcompanyjcalculatesjCostjofjGoodsjSoldjasjB
eginningjFinishedjGoodsjInventoryj+jCostjofjGoodsjManufacturedj–
jEndingjFinishedjGoodjInventory.jInjaddition,jajmanufacturingjcompanyjmustjtrackjcostsjfromjRawjMa
terialsjInventoryjandjWork-in-
ProcessjInventoryjinjorderjtojcomputejCostjofjGoodsjManufacturedjusedjinjthejpreviousjequation.
Forjajmerchandisingjcompany,jthejactivityjinjthejMerchandisejInventoryjaccountjprovidesjthejinformationjf
orjdeterminingjCostjofjGoodsjSold.jAjmerchandisingjcompanyjcalculatesjCostjofjGoodsjSoldjasjBeginningj
MerchandisejInventoryj+jPurchasesjandjFreightjInj–jEndingjMerchandisejInventory.
18. AjmanufacturingjcompanyjcalculatesjunitjproductjcostjasjCostjofjGoodsjManufacturedj/jTotaljnumb
erjofjunitsjproduced.
19. AjservicejcompanyjcalculatesjunitjcostjperjservicejasjTotaljoperatingjcostsj/jTotaljnumberjofjservices
jprovided.
©j2021jPearsonjEducation,jInc. 1-3
, 20. AjmerchandisingjcompanyjcalculatesjunitjcostjperjitemjasjTotaljcostjofjgoodsjsoldj/jTotaljnumberjofjitemsjsol
d.
Short Exercises
j
S-M:1-1
a. FA
b. MA
c. MA
d. FA
e. FA
S-M:1-2
a. Confidentiality
b. Integrity
c. Competencej(skippingjthejsession);j Integrityj(company-paidjconference)
d. Competence
e. Credibility;j Integrity
S-M:1-3
a. 2
b. 4
c. 1
d. 5
e. 4
f. 5
g. 3
S-M:1-4
Gluejforjframes $ 250
Plantjdepreciation 7,500
Plantjforeman’sjsalary 3,500
Plantjjanitor’sjwages 1,300
Oiljforjmanufacturingjequipment j 150jj
Totaljmanufacturingjoverhead j $j12,700jj
©j2021jPearsonjEducation,jInc. 1-4
