Solution Manual for Managerial Accounting, 6th Edition
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Managerial Accounting
Sixth Edition
Karen Wilken Braun
Wendy M. Tietz
Instructor’s Solutions Manual
Jennifer Allen
Sixth Edition
Karen Wilken Braun
Wendy M. Tietz
Instructor’s Solutions Manual
Jennifer Allen
Contents
Chapter 1 Introduction to Managerial Accounting ............................................ 1-1
Chapter 2 Building Blocks of Managerial Accounting ..................................... 2-1
Chapter 3 Job Costing........................................................................................ 3-1
Chapter 4 Activity-Based Costing, Lean Operations, and the
Costs of Quality .............................................................................. 4-1
Chapter 5 Process Costing .................................................................................. 5-1
Chapter 6 Cost Behavior..................................................................................... 6-1
Chapter 7 Cost-Volume-Profit Analysis............................................................ 7-1
Chapter 8 Relevant Costs for Short-Term Decisions ........................................ 8-1
Chapter 9 The Master Budget ........................................................................... 9-1
Chapter 10 Performance Evaluation ................................................................. 10-1
Chapter 11 Standard Costs and Variances ......................................................... 11-1
Chapter 12 Capital Investment Decisions and the Time Value of Money ........ 12-1
Chapter 13 Statement of Cash Flows ................................................................ 13-1
Chapter 14 Financial Statement Analysis ........................................................... 14-1
Chapter 15 Sustainability.................................................................................... 15-1
Chapter 1 Introduction to Managerial Accounting ............................................ 1-1
Chapter 2 Building Blocks of Managerial Accounting ..................................... 2-1
Chapter 3 Job Costing........................................................................................ 3-1
Chapter 4 Activity-Based Costing, Lean Operations, and the
Costs of Quality .............................................................................. 4-1
Chapter 5 Process Costing .................................................................................. 5-1
Chapter 6 Cost Behavior..................................................................................... 6-1
Chapter 7 Cost-Volume-Profit Analysis............................................................ 7-1
Chapter 8 Relevant Costs for Short-Term Decisions ........................................ 8-1
Chapter 9 The Master Budget ........................................................................... 9-1
Chapter 10 Performance Evaluation ................................................................. 10-1
Chapter 11 Standard Costs and Variances ......................................................... 11-1
Chapter 12 Capital Investment Decisions and the Time Value of Money ........ 12-1
Chapter 13 Statement of Cash Flows ................................................................ 13-1
Chapter 14 Financial Statement Analysis ........................................................... 14-1
Chapter 15 Sustainability.................................................................................... 15-1
Contents
Chapter 1 Introduction to Managerial Accounting ............................................ 1-1
Chapter 2 Building Blocks of Managerial Accounting ..................................... 2-1
Chapter 3 Job Costing........................................................................................ 3-1
Chapter 4 Activity-Based Costing, Lean Operations, and the
Costs of Quality .............................................................................. 4-1
Chapter 5 Process Costing .................................................................................. 5-1
Chapter 6 Cost Behavior..................................................................................... 6-1
Chapter 7 Cost-Volume-Profit Analysis............................................................ 7-1
Chapter 8 Relevant Costs for Short-Term Decisions ........................................ 8-1
Chapter 9 The Master Budget ........................................................................... 9-1
Chapter 10 Performance Evaluation ................................................................. 10-1
Chapter 11 Standard Costs and Variances ......................................................... 11-1
Chapter 12 Capital Investment Decisions and the Time Value of Money ........ 12-1
Chapter 13 Statement of Cash Flows ................................................................ 13-1
Chapter 14 Financial Statement Analysis ........................................................... 14-1
Chapter 15 Sustainability.................................................................................... 15-1
Chapter 1 Introduction to Managerial Accounting ............................................ 1-1
Chapter 2 Building Blocks of Managerial Accounting ..................................... 2-1
Chapter 3 Job Costing........................................................................................ 3-1
Chapter 4 Activity-Based Costing, Lean Operations, and the
Costs of Quality .............................................................................. 4-1
Chapter 5 Process Costing .................................................................................. 5-1
Chapter 6 Cost Behavior..................................................................................... 6-1
Chapter 7 Cost-Volume-Profit Analysis............................................................ 7-1
Chapter 8 Relevant Costs for Short-Term Decisions ........................................ 8-1
Chapter 9 The Master Budget ........................................................................... 9-1
Chapter 10 Performance Evaluation ................................................................. 10-1
Chapter 11 Standard Costs and Variances ......................................................... 11-1
Chapter 12 Capital Investment Decisions and the Time Value of Money ........ 12-1
Chapter 13 Statement of Cash Flows ................................................................ 13-1
Chapter 14 Financial Statement Analysis ........................................................... 14-1
Chapter 15 Sustainability.................................................................................... 15-1
1-1
Chapter 1
Introduction to Managerial Accounting
Quick Check
Answers
QC1-1. c
QC1-2. d
QC1-3. b
QC1-4. d
QC1-5. d
QC1-6. c
QC1-7. a
QC1-8. c
QC1-9. b
QC1-10. a
QC1-11. c
QC1-12. b
Short Exercises
(5–10 min.) S1-1
a. Planning
b. Controlling
c. Directing
d. Directing
e. Directing, Controlling
(5–10 min.) S1-2
a. Financial accounting
b. Financial accounting
c. Financial accounting
d. Managerial accounting
e. Managerial accounting
f. Managerial accounting
g. Financial accounting
h. Financial accounting
i. Managerial accounting
j. Managerial accounting
k. Financial accounting
l. Managerial accounting
m. Financial accounting
Chapter 1
Introduction to Managerial Accounting
Quick Check
Answers
QC1-1. c
QC1-2. d
QC1-3. b
QC1-4. d
QC1-5. d
QC1-6. c
QC1-7. a
QC1-8. c
QC1-9. b
QC1-10. a
QC1-11. c
QC1-12. b
Short Exercises
(5–10 min.) S1-1
a. Planning
b. Controlling
c. Directing
d. Directing
e. Directing, Controlling
(5–10 min.) S1-2
a. Financial accounting
b. Financial accounting
c. Financial accounting
d. Managerial accounting
e. Managerial accounting
f. Managerial accounting
g. Financial accounting
h. Financial accounting
i. Managerial accounting
j. Managerial accounting
k. Financial accounting
l. Managerial accounting
m. Financial accounting
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Managerial Accounting 6e Solutions Manual
1-2
(5–10 min.) S1-3
a. Internal Auditing Department
b. Controller
c. Internal Auditing Department
d. Internal Auditing Department
e. Treasurer
f. Controller
g. Controller
h. Controller
i. Controller
j. Controller
k. Controller
l. Treasurer
m. Treasurer
(5–10 min.) S1-4
Characteristic Check (√) if related to internal
auditing
a. Reports directly to the audit committee √
b. Reports to treasurer or controller
c. Is part of the Accounting Department
d. Helps to ensure that company’s internal controls are functioning
properly
√
e. Performs the same function as independent certified public
accountants
f. Usually reports to a senior executive (CFO or CEO) for administrative
matters
√
g. External audits can be performed by the internal auditing department
h. Required by the New York Stock Exchange if company stock is publicly
traded on the NYSE
√
i. Ensures that the company achieves its profit goals
1-2
(5–10 min.) S1-3
a. Internal Auditing Department
b. Controller
c. Internal Auditing Department
d. Internal Auditing Department
e. Treasurer
f. Controller
g. Controller
h. Controller
i. Controller
j. Controller
k. Controller
l. Treasurer
m. Treasurer
(5–10 min.) S1-4
Characteristic Check (√) if related to internal
auditing
a. Reports directly to the audit committee √
b. Reports to treasurer or controller
c. Is part of the Accounting Department
d. Helps to ensure that company’s internal controls are functioning
properly
√
e. Performs the same function as independent certified public
accountants
f. Usually reports to a senior executive (CFO or CEO) for administrative
matters
√
g. External audits can be performed by the internal auditing department
h. Required by the New York Stock Exchange if company stock is publicly
traded on the NYSE
√
i. Ensures that the company achieves its profit goals
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Chapter 1 Introduction to Managerial Accounting
1-3
(10 min.) S1-5
a. The CEO is hired by the board of directors.
b. A subcommittee of the board of directors is called the audit committee.
c. Raising capital and investing funds are the direct responsibilities of the treasurer.
d. The CFO and the COO report to the CEO.
e. Financial accounting, managerial accounting, and tax reporting are the direct responsibilities of the controller.
f. Management accountants often work on cross-functional teams.
g. The internal audit function reports to the CFO or the CEO and the audit committee.
h. The company’s operations are the direct responsibility of the COO.
(5 min.) S1-6
1. The Institute of Management Accountants (IMA) issues the Certified Management Accountant (CMA)
certification.
2. The certification offered by IMA, focuses on accounting and finance topics.
3. The monthly professional magazine published by the Institute of Management Accountants is called Strategic
Finance.
4. The certification launched in 2012 jointly by the American Institute of Certified Public Accountants (AICPA) and
the Chartered Institute of Management Accountants (CIMA) is called the Chartered Global Management
Accountant (CGMA).
5. To earn CMA certification, a candidate must have a(n) baccalaureate degree. The CMA exam can be taken,
however, before finishing this degree.
(5 min.) S1-7
a. Failing to provide job description information to management because you fear it may be used to cut a position
in your department violates the credibility standard.
b. Providing earnings information to your sister before it is publicly announced violates the confidentiality
standard.
c. Failing to read the specifications of the software package before purchasing it violates the competence standard.
d. Stealing from your employer is a violation of the integrity standard.
e. Skipping continuing education sessions could violate the requirement to maintain professional competence. If
your company paid for you to attend the conference, skipping the sessions also violates the integrity standard.
1-3
(10 min.) S1-5
a. The CEO is hired by the board of directors.
b. A subcommittee of the board of directors is called the audit committee.
c. Raising capital and investing funds are the direct responsibilities of the treasurer.
d. The CFO and the COO report to the CEO.
e. Financial accounting, managerial accounting, and tax reporting are the direct responsibilities of the controller.
f. Management accountants often work on cross-functional teams.
g. The internal audit function reports to the CFO or the CEO and the audit committee.
h. The company’s operations are the direct responsibility of the COO.
(5 min.) S1-6
1. The Institute of Management Accountants (IMA) issues the Certified Management Accountant (CMA)
certification.
2. The certification offered by IMA, focuses on accounting and finance topics.
3. The monthly professional magazine published by the Institute of Management Accountants is called Strategic
Finance.
4. The certification launched in 2012 jointly by the American Institute of Certified Public Accountants (AICPA) and
the Chartered Institute of Management Accountants (CIMA) is called the Chartered Global Management
Accountant (CGMA).
5. To earn CMA certification, a candidate must have a(n) baccalaureate degree. The CMA exam can be taken,
however, before finishing this degree.
(5 min.) S1-7
a. Failing to provide job description information to management because you fear it may be used to cut a position
in your department violates the credibility standard.
b. Providing earnings information to your sister before it is publicly announced violates the confidentiality
standard.
c. Failing to read the specifications of the software package before purchasing it violates the competence standard.
d. Stealing from your employer is a violation of the integrity standard.
e. Skipping continuing education sessions could violate the requirement to maintain professional competence. If
your company paid for you to attend the conference, skipping the sessions also violates the integrity standard.
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Managerial Accounting 6e Solutions Manual
1-4
(5 min.) S1-8
a. Sustainability
b. Sarbanes-Oxley Act (SOX)
c. Enterprise resource planning (ERP) system
d. Data analytics
(5 min.) S1-9
Letter Scenario Standard violated
a. Jack, an accountant for a smartphone manufacturer, told his friends
about a new model of smartphone being released by the company in the
following quarter. For competitive reasons, the company keeps its
models shrouded in secrecy until release date. Confidentiality
b. The CFO directed that certain expenses be reclassified as assets, so that
target profit could be achieved. The CFO rationalized that jobs would be
saved by reaching the targeted income figures. Integrity
c. Even though Meagan's company is adopting a new ERP system that
impacts the accounting system, Meagan (a management accountant) has
not completed the required ERP training from the vendor. Competence
d. Oliver provides an analysis of the profitability of a company-owned store
that is managed by Oliver’s best friend, Bob. Oliver neglects to include
allocated fixed costs in Bob’s report. If Oliver includes those allocated
fixed costs, the store will show a loss and Bob’s job could be in danger. Credibility
e. Yimeng, a purchasing agent for her company, received two tickets from a
supplier to the upcoming Ohio State versus University of Michigan
football game. These tickets sell for over $500 each. Integrity
(10 min.) S1-10
a. Financial accounting system
b. Critical thinking
c. IMA
d. Treasurer
e. Economic, environmental, and social
f. Controller
g. Internal audit
h. Sarbanes-Oxley Act of 2002
i. Triple Bottom Line
j. Controlling
k. Directing
l. ERP
m. Sustainability
n. CEO
o. Planning
p. CFO
1-4
(5 min.) S1-8
a. Sustainability
b. Sarbanes-Oxley Act (SOX)
c. Enterprise resource planning (ERP) system
d. Data analytics
(5 min.) S1-9
Letter Scenario Standard violated
a. Jack, an accountant for a smartphone manufacturer, told his friends
about a new model of smartphone being released by the company in the
following quarter. For competitive reasons, the company keeps its
models shrouded in secrecy until release date. Confidentiality
b. The CFO directed that certain expenses be reclassified as assets, so that
target profit could be achieved. The CFO rationalized that jobs would be
saved by reaching the targeted income figures. Integrity
c. Even though Meagan's company is adopting a new ERP system that
impacts the accounting system, Meagan (a management accountant) has
not completed the required ERP training from the vendor. Competence
d. Oliver provides an analysis of the profitability of a company-owned store
that is managed by Oliver’s best friend, Bob. Oliver neglects to include
allocated fixed costs in Bob’s report. If Oliver includes those allocated
fixed costs, the store will show a loss and Bob’s job could be in danger. Credibility
e. Yimeng, a purchasing agent for her company, received two tickets from a
supplier to the upcoming Ohio State versus University of Michigan
football game. These tickets sell for over $500 each. Integrity
(10 min.) S1-10
a. Financial accounting system
b. Critical thinking
c. IMA
d. Treasurer
e. Economic, environmental, and social
f. Controller
g. Internal audit
h. Sarbanes-Oxley Act of 2002
i. Triple Bottom Line
j. Controlling
k. Directing
l. ERP
m. Sustainability
n. CEO
o. Planning
p. CFO
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Chapter 1 Introduction to Managerial Accounting
1-5
(5 min.) S1-11
a. Descriptive
b. Descriptive
c. Prescriptive
d. Diagnostic
e. Predictive
f. Diagnostic
g. Adaptive and Autonomous
(10 min.) S1-12
Item Term Definition
1. Adaptive and autonomous
analytics
k. Analytics that collect, analyze, learn, and adjust without human
intervention.
2. Big data d. Data characterized by five Vs: volume, velocity, variety, veracity,
and value.
3. Categorical (nominal data) h. Data that represents things that have no numerical value (such as
customer name, state, and distribution channel).
4. Data i. A collection of observations.
5. Data analytics b. The process of turning raw data into actionable insights that lead to
good business decisions.
6. Data visualization j. The art and science of communicating quantitative information
through visual presentations.
7. Descriptive analytics m. Analytics that describe what has or is happening.
8. Diagnostic analytics f. Analytics that help uncover the root cause of the current state.
9. Ordinal data c. Data that has a clearly defined order and may or may not have
numbers associated with it (such as customer satisfaction rankings
and employee rank).
10. Predictive analytics g. Analytics that seek to predict what will happen in the future.
11. Prescriptive analytics a. Analytics that seek to determine what should be done.
12. Quantitative data n. Data that can be measured, counted, and aggregated (such as sales
revenue, number of customers, and cost of product).
13. Structured data l. Data that is highly organized into predefined discreet categories,
often contains labels, and is fairly easy to search and manipulate.
14. Unstructured data e. Data that is not organized into predefined categories.
1-5
(5 min.) S1-11
a. Descriptive
b. Descriptive
c. Prescriptive
d. Diagnostic
e. Predictive
f. Diagnostic
g. Adaptive and Autonomous
(10 min.) S1-12
Item Term Definition
1. Adaptive and autonomous
analytics
k. Analytics that collect, analyze, learn, and adjust without human
intervention.
2. Big data d. Data characterized by five Vs: volume, velocity, variety, veracity,
and value.
3. Categorical (nominal data) h. Data that represents things that have no numerical value (such as
customer name, state, and distribution channel).
4. Data i. A collection of observations.
5. Data analytics b. The process of turning raw data into actionable insights that lead to
good business decisions.
6. Data visualization j. The art and science of communicating quantitative information
through visual presentations.
7. Descriptive analytics m. Analytics that describe what has or is happening.
8. Diagnostic analytics f. Analytics that help uncover the root cause of the current state.
9. Ordinal data c. Data that has a clearly defined order and may or may not have
numbers associated with it (such as customer satisfaction rankings
and employee rank).
10. Predictive analytics g. Analytics that seek to predict what will happen in the future.
11. Prescriptive analytics a. Analytics that seek to determine what should be done.
12. Quantitative data n. Data that can be measured, counted, and aggregated (such as sales
revenue, number of customers, and cost of product).
13. Structured data l. Data that is highly organized into predefined discreet categories,
often contains labels, and is fairly easy to search and manipulate.
14. Unstructured data e. Data that is not organized into predefined categories.
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Managerial Accounting 6e Solutions Manual
1-6
(10 min.) S1-13
Item Task Screen shot letter
1. Format as accounting number K
2. Insert new workbook I
3. Insert function D
4. Worksheet name H
5. Decrease decimal J
6. Active cell E
7. Ribbon A
8. Name of workbook (file name) G
9. Cell reference C
10. Formula bar F
11. Name box B
(10 min.) S1-14
Task Description of how to do the task in Excel (Windows)
1. Change the order of the worksheets in the
workbook
c. Drag and drop worksheet to desired location.
2. Copy and paste the contents of one cell to another
cell
j. In the first cell, hold down Ctrl + C, then navigate to
the desired cell and hold down Ctrl + V.
3. Copy the contents of a cell to a range of cell a. Drag the fill handle down the column or across the
row.
4. Go to the end of the data set in a worksheet g. Hold down the Ctrl and End keys simultaneously.
5. Move between worksheets i. Click on a worksheet tab.
6. Refer to a cell as an absolute reference d. Put dollar signs in front of both the column and row
reference in the formula.
7. Rename a worksheet h. Right click worksheet tab and select option to give the
worksheet a new name.
8. Select a range of cells b. Click on the first cell in a range and drag your cursor to
the final cell you are selecting.
9. Select all data in a worksheet e. Hold down the Ctrl and A keys simultaneously.
10. Select one cell f. Click on a cell.
1-6
(10 min.) S1-13
Item Task Screen shot letter
1. Format as accounting number K
2. Insert new workbook I
3. Insert function D
4. Worksheet name H
5. Decrease decimal J
6. Active cell E
7. Ribbon A
8. Name of workbook (file name) G
9. Cell reference C
10. Formula bar F
11. Name box B
(10 min.) S1-14
Task Description of how to do the task in Excel (Windows)
1. Change the order of the worksheets in the
workbook
c. Drag and drop worksheet to desired location.
2. Copy and paste the contents of one cell to another
cell
j. In the first cell, hold down Ctrl + C, then navigate to
the desired cell and hold down Ctrl + V.
3. Copy the contents of a cell to a range of cell a. Drag the fill handle down the column or across the
row.
4. Go to the end of the data set in a worksheet g. Hold down the Ctrl and End keys simultaneously.
5. Move between worksheets i. Click on a worksheet tab.
6. Refer to a cell as an absolute reference d. Put dollar signs in front of both the column and row
reference in the formula.
7. Rename a worksheet h. Right click worksheet tab and select option to give the
worksheet a new name.
8. Select a range of cells b. Click on the first cell in a range and drag your cursor to
the final cell you are selecting.
9. Select all data in a worksheet e. Hold down the Ctrl and A keys simultaneously.
10. Select one cell f. Click on a cell.
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Chapter 1 Introduction to Managerial Accounting
1-7
(10 min.) S1-15
a. =B2*C2
b. Drag the cell handle in the lower right corner of Cell D2 down to Cell D5.
c. =SUM(B2:B5)
d. =SUM(D2:D5)
e. =B2+B4
f. =D2+D4
g. =B10/B9
h. =B3-B5
i. =D3-D5
(10 min.) S1-16
a. To quickly navigate to the end of the data in a worksheet when using Excel in a Windows
environment, use the Ctrl + End keystrokes.
b. The top bar in an Excel workbook that contains File, Home, Insert, and other tabs is called the
ribbon.
c. File, Home, Insert, Page Layout, Formulas, and Data are examples of tabs.
d. The formula bar displays how the content of the active cell was generated.
e. To select all data in a worksheet when using Excel in a Windows environment, use the Ctrl + A
keystrokes.
f. The worksheet tab is right clicked to rename it.
g. The active cell will have a colored border around it and the cell reference will appear in the name
box.
h. A unique address for each cell in an Excel worksheet is called a cell reference.
i. The cell reference for the active cell will appear in the name box.
j. To quickly navigate to the first column of a row in Excel when using Excel in a Windows
environment, use the Ctrl + arrow left keystrokes.
k. There are separate tabs for each worksheet in a workbook.
1-7
(10 min.) S1-15
a. =B2*C2
b. Drag the cell handle in the lower right corner of Cell D2 down to Cell D5.
c. =SUM(B2:B5)
d. =SUM(D2:D5)
e. =B2+B4
f. =D2+D4
g. =B10/B9
h. =B3-B5
i. =D3-D5
(10 min.) S1-16
a. To quickly navigate to the end of the data in a worksheet when using Excel in a Windows
environment, use the Ctrl + End keystrokes.
b. The top bar in an Excel workbook that contains File, Home, Insert, and other tabs is called the
ribbon.
c. File, Home, Insert, Page Layout, Formulas, and Data are examples of tabs.
d. The formula bar displays how the content of the active cell was generated.
e. To select all data in a worksheet when using Excel in a Windows environment, use the Ctrl + A
keystrokes.
f. The worksheet tab is right clicked to rename it.
g. The active cell will have a colored border around it and the cell reference will appear in the name
box.
h. A unique address for each cell in an Excel worksheet is called a cell reference.
i. The cell reference for the active cell will appear in the name box.
j. To quickly navigate to the first column of a row in Excel when using Excel in a Windows
environment, use the Ctrl + arrow left keystrokes.
k. There are separate tabs for each worksheet in a workbook.
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Managerial Accounting 6e Solutions Manual
1-8
Exercises (Group A)
(10 min.) E1-17A
a. Information on a company’s past performance is provided to external parties by financial accounting.
b. Managerial accounting systems are chosen by comparing the costs versus the benefits of the system and are
not restricted by GAAP (or International Financial Reporting Standards, IFRS, in the case of companies
headquartered in many countries outside of the United States).
c. Managerial accounting systems report on various segments or business units of the company.
d. Financial accounting develops reports for external parties such as creditors and shareholders.
e. When managers evaluate the company’s performance compared to the plan, they are performing the
controlling role of management.
f. CPAs audit the financial accounting statements of public companies.
g. Companies must follow GAAP (or International Financial Reporting Standards, IFRS, in the case of companies
headquartered in many countries outside of the Unites States) in their financial accounting systems.
h. Choosing goals and the means to achieve them is the planning function of management.
i. Decision makers inside a company are the managers.
(10 min.) E1-18A
a. Technical
b. Nontechnical
c. Technical
d. Nontechnical
e. Nontechnical
f. Nontechnical
g. Technical
h. Technical
i. Technical
j. Technical
k. Nontechnical
l. Nontechnical
m. Technical
n. Nontechnical
o. Technical
p. Technical
q. Nontechnical
r. Nontechnical
s. Technical
t. Nontechnical
1-8
Exercises (Group A)
(10 min.) E1-17A
a. Information on a company’s past performance is provided to external parties by financial accounting.
b. Managerial accounting systems are chosen by comparing the costs versus the benefits of the system and are
not restricted by GAAP (or International Financial Reporting Standards, IFRS, in the case of companies
headquartered in many countries outside of the United States).
c. Managerial accounting systems report on various segments or business units of the company.
d. Financial accounting develops reports for external parties such as creditors and shareholders.
e. When managers evaluate the company’s performance compared to the plan, they are performing the
controlling role of management.
f. CPAs audit the financial accounting statements of public companies.
g. Companies must follow GAAP (or International Financial Reporting Standards, IFRS, in the case of companies
headquartered in many countries outside of the Unites States) in their financial accounting systems.
h. Choosing goals and the means to achieve them is the planning function of management.
i. Decision makers inside a company are the managers.
(10 min.) E1-18A
a. Technical
b. Nontechnical
c. Technical
d. Nontechnical
e. Nontechnical
f. Nontechnical
g. Technical
h. Technical
i. Technical
j. Technical
k. Nontechnical
l. Nontechnical
m. Technical
n. Nontechnical
o. Technical
p. Technical
q. Nontechnical
r. Nontechnical
s. Technical
t. Nontechnical
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Chapter 1 Introduction to Managerial Accounting
1-9
(10 min.) E1-19A
1. Financial accounting information
2. Managerial accounting information
3. Financial accounting information
4. Financial accounting information
5. Managerial accounting information
6. Financial accounting information
7. Both
8. Financial accounting information
9. Financial accounting information
10. Financial accounting information
11. Both
12. Both
13. Financial accounting information
14. Financial accounting information
(10 min.) E1-20A
1. Confidentiality
2. Credibility
3. Credibility
4. Credibility
5. Confidentiality
6. Confidentiality
7. Integrity
8. Competence
9. Competence
10. Competence
11. Integrity
12. Integrity
13. Competence
(10 min.) E1-21A
Expected benefit (cost savings)
Wages (20 workers x 40 hrs. x $15/hr.) $12,000
Payroll taxes ($12,000 x 7.65%) 918
Total expected cost savings $12,918
Expected costs
Lettuce Bot cost (machine cost) $8,000
Lettuce Bot delivery cost 500
Cost of operating the lettuce bot 1,500
Total expected costs $10,000
Net expected benefit in first year $2,918
1-9
(10 min.) E1-19A
1. Financial accounting information
2. Managerial accounting information
3. Financial accounting information
4. Financial accounting information
5. Managerial accounting information
6. Financial accounting information
7. Both
8. Financial accounting information
9. Financial accounting information
10. Financial accounting information
11. Both
12. Both
13. Financial accounting information
14. Financial accounting information
(10 min.) E1-20A
1. Confidentiality
2. Credibility
3. Credibility
4. Credibility
5. Confidentiality
6. Confidentiality
7. Integrity
8. Competence
9. Competence
10. Competence
11. Integrity
12. Integrity
13. Competence
(10 min.) E1-21A
Expected benefit (cost savings)
Wages (20 workers x 40 hrs. x $15/hr.) $12,000
Payroll taxes ($12,000 x 7.65%) 918
Total expected cost savings $12,918
Expected costs
Lettuce Bot cost (machine cost) $8,000
Lettuce Bot delivery cost 500
Cost of operating the lettuce bot 1,500
Total expected costs $10,000
Net expected benefit in first year $2,918
Loading page 12...
Managerial Accounting 6e Solutions Manual
1-10
(10 min.) E1-22A
a. Economic
b. Social
c. Environmental
d. Social
e. Environmental
f. Social
g. Economic
h. Environmental
i. Environmental
j. Social
k. Social
l. Social
m. Social
n. Environmental
(10 min.) E1-23A
a. Categorical
b. Ordinal
c. Categorical
d. Quantitative
e. Quantitative
f. Ordinal
g. Quantitative
h. Ordinal
i. Categorical
j. Quantitative
k. Categorical
l. Ordinal
1-10
(10 min.) E1-22A
a. Economic
b. Social
c. Environmental
d. Social
e. Environmental
f. Social
g. Economic
h. Environmental
i. Environmental
j. Social
k. Social
l. Social
m. Social
n. Environmental
(10 min.) E1-23A
a. Categorical
b. Ordinal
c. Categorical
d. Quantitative
e. Quantitative
f. Ordinal
g. Quantitative
h. Ordinal
i. Categorical
j. Quantitative
k. Categorical
l. Ordinal
Loading page 13...
Chapter 1 Introduction to Managerial Accounting
1-11
(20 min.) E1-24A
Excel file should show:
Formulas in each cell should be:
1-11
(20 min.) E1-24A
Excel file should show:
Formulas in each cell should be:
Loading page 14...
Managerial Accounting 6e Solutions Manual
1-12
(10 min.) E1-25A
1. 985
2. MD-Disability
3. 389
4. 3
5. 49926
6. See below
a. $636.10
b. 12
c. $7,633.20
7. 80840
8. Click in the cell in the upper left corner of the worksheet (the intersection of the row and column headers)
1-12
(10 min.) E1-25A
1. 985
2. MD-Disability
3. 389
4. 3
5. 49926
6. See below
a. $636.10
b. 12
c. $7,633.20
7. 80840
8. Click in the cell in the upper left corner of the worksheet (the intersection of the row and column headers)
Loading page 15...
Chapter 1 Introduction to Managerial Accounting
1-13
(10 min.) E1-26A
Excel file should show:
1-13
(10 min.) E1-26A
Excel file should show:
Loading page 16...
Managerial Accounting 6e Solutions Manual
1-14
(continued) E1-26A
Formulas in each cell should be:
1-14
(continued) E1-26A
Formulas in each cell should be:
Loading page 17...
Chapter 1 Introduction to Managerial Accounting
1-15
Exercises (Group B)
(5 min.) E1-27B
a. U.S. companies must follow GAAP (or International Financial Reporting Standards, IFRS, in the case of companies
headquartered in many countries outside of the United States) in their financial accounting systems.
b. Financial accounting develops reports for external parties, such as creditors and shareholders.
c. When managers evaluate the company’s performance compared to the plan, they are performing the
controlling role of management.
d. Managers are decision makers inside a company.
e. Financial accounting provides information on a company’s past performance to external parties.
f. Managerial accounting systems are not restricted by GAAP (or International Financial Reporting Standards, IFRS,
in the case of companies headquartered in many countries outside of the United States) but are chosen by
comparing the costs versus the benefits of the system.
g. Choosing goals and the means to achieve them is the planning function of management.
h. Managerial accounting systems report on various segments or business units of the company.
i. Financial accounting statements of public companies are audited annually by CPAs.
(5–10 min.) E1-28B
a. Nontechnical
b. Nontechnical
c. Nontechnical
d. Technical
e. Nontechnical
f. Technical
g. Technical
h. Technical
i. Nontechnical
j. Technical
k. Nontechnical
l. Technical
m. Nontechnical
n. Technical
o. Technical
p. Technical
q. Technical
r. Nontechnical
s. Nontechnical
t. Nontechnical
1-15
Exercises (Group B)
(5 min.) E1-27B
a. U.S. companies must follow GAAP (or International Financial Reporting Standards, IFRS, in the case of companies
headquartered in many countries outside of the United States) in their financial accounting systems.
b. Financial accounting develops reports for external parties, such as creditors and shareholders.
c. When managers evaluate the company’s performance compared to the plan, they are performing the
controlling role of management.
d. Managers are decision makers inside a company.
e. Financial accounting provides information on a company’s past performance to external parties.
f. Managerial accounting systems are not restricted by GAAP (or International Financial Reporting Standards, IFRS,
in the case of companies headquartered in many countries outside of the United States) but are chosen by
comparing the costs versus the benefits of the system.
g. Choosing goals and the means to achieve them is the planning function of management.
h. Managerial accounting systems report on various segments or business units of the company.
i. Financial accounting statements of public companies are audited annually by CPAs.
(5–10 min.) E1-28B
a. Nontechnical
b. Nontechnical
c. Nontechnical
d. Technical
e. Nontechnical
f. Technical
g. Technical
h. Technical
i. Nontechnical
j. Technical
k. Nontechnical
l. Technical
m. Nontechnical
n. Technical
o. Technical
p. Technical
q. Technical
r. Nontechnical
s. Nontechnical
t. Nontechnical
Loading page 18...
Managerial Accounting 6e Solutions Manual
1-16
(5–10 min.) E1-29B
1. Both
2. Financial accounting information
3. Financial accounting information
4. Managerial accounting information
5. Financial accounting information
6. Managerial accounting information
7. Financial accounting information
8. Financial accounting information
9. Financial accounting information
10. Financial accounting information
11. Both
12. Both
13. Financial accounting information
14. Financial accounting information
(10 min.) E1-30B
1. Credibility
2. Competence
3. Integrity
4. Competence
5. Integrity
6. Credibility
7. Confidentiality
8. Competence
9. Integrity
10. Confidentiality
11. Credibility
12. Confidentiality
13. Competence
(10 min.) E1-31B
Expected benefit (cost savings)
Wages (25 workers x 50 hrs. x $15/hr.) $18,750
Payroll taxes ($18,750 x 7.65%) 1,434
Total expected cost savings $20,184
Expected costs
Lettuce bot cost (machine cost) $ 9,500
Lettuce bot delivery cost 1,000
Cost of operating the lettuce bot 2,500
Total expected costs $13,000
Net expected benefit in first year $7,184
1-16
(5–10 min.) E1-29B
1. Both
2. Financial accounting information
3. Financial accounting information
4. Managerial accounting information
5. Financial accounting information
6. Managerial accounting information
7. Financial accounting information
8. Financial accounting information
9. Financial accounting information
10. Financial accounting information
11. Both
12. Both
13. Financial accounting information
14. Financial accounting information
(10 min.) E1-30B
1. Credibility
2. Competence
3. Integrity
4. Competence
5. Integrity
6. Credibility
7. Confidentiality
8. Competence
9. Integrity
10. Confidentiality
11. Credibility
12. Confidentiality
13. Competence
(10 min.) E1-31B
Expected benefit (cost savings)
Wages (25 workers x 50 hrs. x $15/hr.) $18,750
Payroll taxes ($18,750 x 7.65%) 1,434
Total expected cost savings $20,184
Expected costs
Lettuce bot cost (machine cost) $ 9,500
Lettuce bot delivery cost 1,000
Cost of operating the lettuce bot 2,500
Total expected costs $13,000
Net expected benefit in first year $7,184
Loading page 19...
Chapter 1 Introduction to Managerial Accounting
1-17
(10 min.) E1-32B
a. Social
b. Environmental
c. Environmental
d. Economic
e. Environmental
f. Social
g. Environmental
h. Social
i. Environmental
j. Social
k. Economic
l. Social
m. Environmental
n. Social
(10 min.) E1-33B
a. Categorical
b. Quantitative
c. Categorical
d. Categorical
e. Ordinal
f. Ordinal
g. Quantitative
h. Ordinal
i. Quantitative
j. Categorical
k. Quantitative
l. Ordinal
1-17
(10 min.) E1-32B
a. Social
b. Environmental
c. Environmental
d. Economic
e. Environmental
f. Social
g. Environmental
h. Social
i. Environmental
j. Social
k. Economic
l. Social
m. Environmental
n. Social
(10 min.) E1-33B
a. Categorical
b. Quantitative
c. Categorical
d. Categorical
e. Ordinal
f. Ordinal
g. Quantitative
h. Ordinal
i. Quantitative
j. Categorical
k. Quantitative
l. Ordinal
Loading page 20...
Managerial Accounting 6e Solutions Manual
1-18
(20 min.) E1-34B
Excel file should show:
Formulas in each cell should be:
1-18
(20 min.) E1-34B
Excel file should show:
Formulas in each cell should be:
Loading page 21...
Chapter 1 Introduction to Managerial Accounting
1-19
(10 min.) E1-35B
1. 386
2. NJ-Disability
3. 693
4. 9
5. 57516
6. See below
a. $679.55
b. 12
c. $8,154.59
7. 56243
8. Click in the cell in the upper left corner of the worksheet (the intersection of the row and column headers)
1-19
(10 min.) E1-35B
1. 386
2. NJ-Disability
3. 693
4. 9
5. 57516
6. See below
a. $679.55
b. 12
c. $8,154.59
7. 56243
8. Click in the cell in the upper left corner of the worksheet (the intersection of the row and column headers)
Loading page 22...
Managerial Accounting 6e Solutions Manual
1-20
(10 min.) E1-36B
Excel file should show:
1-20
(10 min.) E1-36B
Excel file should show:
Loading page 23...
Chapter 1 Introduction to Managerial Accounting
1-21
(continued) E1-36B
Formulas in each cell should be:
1-21
(continued) E1-36B
Formulas in each cell should be:
Loading page 24...
Managerial Accounting 6e Solutions Manual
1-22
Problems (Group A)
(45–60 min.) P1-37A
Req. 1
Planning Directing Controlling
Sales Increase sales Setting competitive prices.
Examine sales reports.
Monitor sales numbers and
prices from different products
and locations over time.
Investigate variances.
Repairs Increase
volume of
repairs
Streamline process to save time. Set
competitive prices; generate reports
showing time used for each type of
repair.
Track total number of repairs
and see if more repairs are
being made and if time is
utilized efficiently.
Lessons Increase
number of
lessons given
Find out what customers want and need.
Observe competitors for prices and
lessons offered. Improve teacher
qualifications.
Examine number of lessons
given per instrument.
Web
development
Increase Web
traffic
Improve design of website. Offer more
products online. Make shopping easier
and more intuitive. Increase marketing
efforts.
Monitor Web traffic by having
an online counting device. Look
at sales numbers to see if
people are just surfing or
actually buying merchandise.
Accounting Implement ERP
system to
monitor
department
activities and
record finances
Train employees on new system. Find
potential flaws in the system and fix
before implementation.
Track employee work schedules
to stay on time. Double-check
entries to ensure system is
working properly.
Human
resources
Decrease
employee
turnover
Hire employees who are “a good fit” for
the company.
Raise employee morale; set clear job
descriptions. Give feedback to
employees.
Monitor both involuntary and
voluntary turnover. Interview
employees to determine
potential problems with the
workplace.
1-22
Problems (Group A)
(45–60 min.) P1-37A
Req. 1
Planning Directing Controlling
Sales Increase sales Setting competitive prices.
Examine sales reports.
Monitor sales numbers and
prices from different products
and locations over time.
Investigate variances.
Repairs Increase
volume of
repairs
Streamline process to save time. Set
competitive prices; generate reports
showing time used for each type of
repair.
Track total number of repairs
and see if more repairs are
being made and if time is
utilized efficiently.
Lessons Increase
number of
lessons given
Find out what customers want and need.
Observe competitors for prices and
lessons offered. Improve teacher
qualifications.
Examine number of lessons
given per instrument.
Web
development
Increase Web
traffic
Improve design of website. Offer more
products online. Make shopping easier
and more intuitive. Increase marketing
efforts.
Monitor Web traffic by having
an online counting device. Look
at sales numbers to see if
people are just surfing or
actually buying merchandise.
Accounting Implement ERP
system to
monitor
department
activities and
record finances
Train employees on new system. Find
potential flaws in the system and fix
before implementation.
Track employee work schedules
to stay on time. Double-check
entries to ensure system is
working properly.
Human
resources
Decrease
employee
turnover
Hire employees who are “a good fit” for
the company.
Raise employee morale; set clear job
descriptions. Give feedback to
employees.
Monitor both involuntary and
voluntary turnover. Interview
employees to determine
potential problems with the
workplace.
Loading page 25...
Chapter 1 Introduction to Managerial Accounting
1-23
(continued) P1-37A
Req. 2
Planning Directing Controlling
Sales A sales budget for the
entire company and each
individual product at each
location is needed.
Analyze sales reports to
monitor type and amount of
sales made. Prices would be
analyzed using these reports
and market analysis of
competitors.
Compare budgets with actual
sales numbers. Investigate
variances to take corrective
actions if needed. Change
prices if deemed appropriate.
Repairs Labor budgets would be
needed to determine the
time taken to repair
instruments and if hiring
more repair staff would be
feasible.
Employee training programs
would be used. Monitor time
taken per repair for each
member of repair staff.
Compare budgets with actual
results. Investigate variances
and take corrective action if
needed.
Lessons Budgets for types of
lessons offered, time
needed per lesson taught,
and market analysis to
determine which lessons
potential customers want.
Ensure customer satisfaction
by hiring qualified staff.
Analyze market analysis to
determine market needs and
proper pricing schemes.
Compare budgets with actual
results. Use customer
feedback to improve lessons.
Make changes if needed.
Web
development
An expense budget is
needed to ensure money is
spent efficiently. A budget
would also be needed to
set Web traffic goals.
Monitor department expenses
and website visits using online
counting program.
Compare budgeted expenses
with actual and compare
expected Web traffic with
actual. Investigate variances
and make changes as needed.
Accounting Time budgets as well as
expense budgets are
needed.
Train employees on new
system to keep within time
budget. Monitor expenses
closely.
Compare budget with actual
numbers. Investigate
variances and make changes if
needed.
Human
resources
Employee satisfaction
surveys and feedback
reports.
Active relationship between
management and employees.
Management would record
needs and suggestions made
by employees in feedback
system.
Consider employee
suggestions and enact
changes if needed.
Note: All the information needed in the table above would be generated almost entirely by the managerial accounting
system. Managerial accounting systems provide much of the information needed for internal decision making, while
financial accounting systems are geared towards external financial reporting.
1-23
(continued) P1-37A
Req. 2
Planning Directing Controlling
Sales A sales budget for the
entire company and each
individual product at each
location is needed.
Analyze sales reports to
monitor type and amount of
sales made. Prices would be
analyzed using these reports
and market analysis of
competitors.
Compare budgets with actual
sales numbers. Investigate
variances to take corrective
actions if needed. Change
prices if deemed appropriate.
Repairs Labor budgets would be
needed to determine the
time taken to repair
instruments and if hiring
more repair staff would be
feasible.
Employee training programs
would be used. Monitor time
taken per repair for each
member of repair staff.
Compare budgets with actual
results. Investigate variances
and take corrective action if
needed.
Lessons Budgets for types of
lessons offered, time
needed per lesson taught,
and market analysis to
determine which lessons
potential customers want.
Ensure customer satisfaction
by hiring qualified staff.
Analyze market analysis to
determine market needs and
proper pricing schemes.
Compare budgets with actual
results. Use customer
feedback to improve lessons.
Make changes if needed.
Web
development
An expense budget is
needed to ensure money is
spent efficiently. A budget
would also be needed to
set Web traffic goals.
Monitor department expenses
and website visits using online
counting program.
Compare budgeted expenses
with actual and compare
expected Web traffic with
actual. Investigate variances
and make changes as needed.
Accounting Time budgets as well as
expense budgets are
needed.
Train employees on new
system to keep within time
budget. Monitor expenses
closely.
Compare budget with actual
numbers. Investigate
variances and make changes if
needed.
Human
resources
Employee satisfaction
surveys and feedback
reports.
Active relationship between
management and employees.
Management would record
needs and suggestions made
by employees in feedback
system.
Consider employee
suggestions and enact
changes if needed.
Note: All the information needed in the table above would be generated almost entirely by the managerial accounting
system. Managerial accounting systems provide much of the information needed for internal decision making, while
financial accounting systems are geared towards external financial reporting.
Loading page 26...
Managerial Accounting 6e Solutions Manual
1-24
(15–20 min.) P1-38A
a. If the goods have been received, postponing recording of the purchases understates liabilities. This is unethical
and inconsistent with the IMA standards even if the supplier agrees to delay billing.
b. The software has not been sold. Therefore, it would be inconsistent with the IMA standards to record it as sales.
c. Delaying year-end closing incorrectly records next year’s sales as this year’s sales. This is clearly wrong and
unethical, and it is inconsistent with the IMA standards.
d. The appropriate allowance for bad debts is a difficult judgment. The decision should not be driven by the desire
to meet a profit goal. It should be based on the likelihood that the company will collect. We cannot determine
this without more information. However, because the company emphasizes earnings growth, which can lead to
sales to customers with weaker credit records, reducing the allowance seems questionable. This strategy is likely
inconsistent with the IMA standards.
e. If the maintenance is postponed, there is no transaction to record. This strategy is beyond the responsibility of
the controller, so it does not violate IMA standards.
Strategies a, b, and c are clearly unethical and inconsistent with the IMA standards of integrity, credibility, and perhaps
competence. Strategy d is likely unethical, but we cannot be certain without more information. The controller should
resist attempts to implement a, b, and c, and she should gather more information about d. If the president ignores the
controller’s concerns and still insists that these strategies be implemented, then the controller should probably resign
rather than continuing to work for a company that engages in unethical behavior.
1-24
(15–20 min.) P1-38A
a. If the goods have been received, postponing recording of the purchases understates liabilities. This is unethical
and inconsistent with the IMA standards even if the supplier agrees to delay billing.
b. The software has not been sold. Therefore, it would be inconsistent with the IMA standards to record it as sales.
c. Delaying year-end closing incorrectly records next year’s sales as this year’s sales. This is clearly wrong and
unethical, and it is inconsistent with the IMA standards.
d. The appropriate allowance for bad debts is a difficult judgment. The decision should not be driven by the desire
to meet a profit goal. It should be based on the likelihood that the company will collect. We cannot determine
this without more information. However, because the company emphasizes earnings growth, which can lead to
sales to customers with weaker credit records, reducing the allowance seems questionable. This strategy is likely
inconsistent with the IMA standards.
e. If the maintenance is postponed, there is no transaction to record. This strategy is beyond the responsibility of
the controller, so it does not violate IMA standards.
Strategies a, b, and c are clearly unethical and inconsistent with the IMA standards of integrity, credibility, and perhaps
competence. Strategy d is likely unethical, but we cannot be certain without more information. The controller should
resist attempts to implement a, b, and c, and she should gather more information about d. If the president ignores the
controller’s concerns and still insists that these strategies be implemented, then the controller should probably resign
rather than continuing to work for a company that engages in unethical behavior.
Loading page 27...
Chapter 1 Introduction to Managerial Accounting
1-25
(15–20 min.) P1-39A
Req. 1
Benefits if the project is successful:
Savings from more efficient order processing………………………… $105,000
Savings from streamlining the manufacturing process……………… 125,000
Savings from inventory reduction……………………………………….. 225,000
Profits from increased sales...........…………………………………….... 155,000
Total benefits if the project is successful……………………………… $610,000
Req. 2
Costs of implementing the project:
Software costs…………………………………………………………………. $435,000
Customizing ERP and loading data……………………...………………… 95,000
Employee training…………………………………………………………….. 105,000
Total costs…………………………………..………………………………….. $635,000
Now compare the value of benefits to the costs:
Expected benefits………….................................................. $610,000
Expected costs...…………………………….......................... (635,000)
Net benefits (costs)…………..…...…………………………... $ (25,000)
Because the expected value of the benefits is less than the total costs, the company should not undertake the project.
Req. 3
The CEO formed a team to evaluate the feasibility of installing an ERP system for two reasons. First, the project was
probably too big for one person. Second, representatives of the different functional business areas have different
knowledge and information to contribute.
a. Estimating software costs systems specialist
b. Estimating cost of loading data into the new ERP system management accountant
systems specialist
c. Customize the ERP software management accountant
systems specialist
d. Estimate customization costs all team members
e. Estimate training costs human resource director
f. Savings from more efficient order processing systems specialist
management accountant
g. Savings from streamlining the manufacturing process plant engineer
plant foreman
h. Evaluate the effects of integrating purchasing, production,
marketing, and distribution into a single system
plant foreman
i. Estimate increase in sales from higher customer
satisfaction
marketing director
j. Estimate benefits and costs all team members
Student answers may vary. The main point is that different team members contribute different knowledge.
1-25
(15–20 min.) P1-39A
Req. 1
Benefits if the project is successful:
Savings from more efficient order processing………………………… $105,000
Savings from streamlining the manufacturing process……………… 125,000
Savings from inventory reduction……………………………………….. 225,000
Profits from increased sales...........…………………………………….... 155,000
Total benefits if the project is successful……………………………… $610,000
Req. 2
Costs of implementing the project:
Software costs…………………………………………………………………. $435,000
Customizing ERP and loading data……………………...………………… 95,000
Employee training…………………………………………………………….. 105,000
Total costs…………………………………..………………………………….. $635,000
Now compare the value of benefits to the costs:
Expected benefits………….................................................. $610,000
Expected costs...…………………………….......................... (635,000)
Net benefits (costs)…………..…...…………………………... $ (25,000)
Because the expected value of the benefits is less than the total costs, the company should not undertake the project.
Req. 3
The CEO formed a team to evaluate the feasibility of installing an ERP system for two reasons. First, the project was
probably too big for one person. Second, representatives of the different functional business areas have different
knowledge and information to contribute.
a. Estimating software costs systems specialist
b. Estimating cost of loading data into the new ERP system management accountant
systems specialist
c. Customize the ERP software management accountant
systems specialist
d. Estimate customization costs all team members
e. Estimate training costs human resource director
f. Savings from more efficient order processing systems specialist
management accountant
g. Savings from streamlining the manufacturing process plant engineer
plant foreman
h. Evaluate the effects of integrating purchasing, production,
marketing, and distribution into a single system
plant foreman
i. Estimate increase in sales from higher customer
satisfaction
marketing director
j. Estimate benefits and costs all team members
Student answers may vary. The main point is that different team members contribute different knowledge.
Loading page 28...
Managerial Accounting 6e Solutions Manual
1-26
(10–15 min.) P1-40A
Costs:
Financial assistance to dealers...............………….. $ 760,000
Computer hardware upgrade………………….......... 160,000
Software and consulting fees……………………….. 220,000
Total costs...........................………………………............ $1,140,000
Value of benefits (lower labor costs)………….……….. $1,340,000
Total costs...............................………………………….… (1,140,000)
Excess of benefits over costs…………………………… $ 200,000
Because the benefits exceed the costs, a cost-benefit analysis suggests that the company should proceed with the
online ordering system.
(20–25 min.) P1-41A
Req. 1
The expected value of the benefits is the labor cost savings of $935,000. This is a downward revision from what was
originally estimated in P1-28A.
Req. 2
Expected value of benefits……….……………............ $935,000
Total costs (from P1-28A)………………...……………. (1,140,000)
Net cost..........................………………………………… $ (205,000)
The revised estimates mean the expected costs are greater than the expected benefits. The quantitative analysis
suggests that the company should not undertake the project. Before deciding, the company should carefully consider
other factors like those listed in Req. 3.
Req. 3
Other factors management should consider before making a final decision include the following:
• The difficulty and costs of laying off employees may reduce the expected benefits.
• Employee layoffs may hurt morale and efficiency in other areas of the company, thus increasing costs.
• Electronic order processing should reduce human errors, thereby reducing costs.
• Providing dealers with current availability, price information, and timely order processing will help the company
manage and reduce its inventories.
Student answers to Req. 3 may vary.
1-26
(10–15 min.) P1-40A
Costs:
Financial assistance to dealers...............………….. $ 760,000
Computer hardware upgrade………………….......... 160,000
Software and consulting fees……………………….. 220,000
Total costs...........................………………………............ $1,140,000
Value of benefits (lower labor costs)………….……….. $1,340,000
Total costs...............................………………………….… (1,140,000)
Excess of benefits over costs…………………………… $ 200,000
Because the benefits exceed the costs, a cost-benefit analysis suggests that the company should proceed with the
online ordering system.
(20–25 min.) P1-41A
Req. 1
The expected value of the benefits is the labor cost savings of $935,000. This is a downward revision from what was
originally estimated in P1-28A.
Req. 2
Expected value of benefits……….……………............ $935,000
Total costs (from P1-28A)………………...……………. (1,140,000)
Net cost..........................………………………………… $ (205,000)
The revised estimates mean the expected costs are greater than the expected benefits. The quantitative analysis
suggests that the company should not undertake the project. Before deciding, the company should carefully consider
other factors like those listed in Req. 3.
Req. 3
Other factors management should consider before making a final decision include the following:
• The difficulty and costs of laying off employees may reduce the expected benefits.
• Employee layoffs may hurt morale and efficiency in other areas of the company, thus increasing costs.
• Electronic order processing should reduce human errors, thereby reducing costs.
• Providing dealers with current availability, price information, and timely order processing will help the company
manage and reduce its inventories.
Student answers to Req. 3 may vary.
Loading page 29...
Chapter 1 Introduction to Managerial Accounting
1-27
Problems (Group B)
(45–60 min.) P1-42B
Req. 1
Planning Directing Controlling
Sales Increase sales Setting competitive prices.
Examine sales reports.
Monitor sales numbers and
prices from different products
and locations over time.
Investigate variances.
Repairs Increase volume
of repairs
Streamline process to save time.
Set competitive prices; generate
reports showing time used for
each type of repair.
Track total number of repairs
and see if more repairs are
being made and if time is
utilized efficiently.
Customization Increase number
of custom systems
built
Find out what customers want
and need. Observe competitors
for prices and options offered.
Improve employee certification
and offer higher-quality parts.
Examine number of computer
systems built per type
(multimedia, gaming, etc.).
Web
development
Increase Web
traffic
Improve design of website.
Offer more products online.
Make shopping easier and more
intuitive. Increase marketing
efforts.
Monitor Web traffic by having
an online counting device. Look
at sales numbers to see if
people are just surfing or
actually buying merchandise.
Accounting Implement ERP
system to monitor
department
activities and
record finances
Train employees on new system.
Find potential flaws in the
system and fix before
implementation.
Track employee work schedules
to stay on time. Double check
entries to ensure system is
working properly.
Human
resources
Decrease
employee
turnover
Hire employees who are “a good
fit” for the company.
Raise employee morale; set
clear job descriptions. Give
feedback to employees.
Monitor both involuntary and
voluntary turnover. Interview
employees to determine
potential problems with the
workplace.
1-27
Problems (Group B)
(45–60 min.) P1-42B
Req. 1
Planning Directing Controlling
Sales Increase sales Setting competitive prices.
Examine sales reports.
Monitor sales numbers and
prices from different products
and locations over time.
Investigate variances.
Repairs Increase volume
of repairs
Streamline process to save time.
Set competitive prices; generate
reports showing time used for
each type of repair.
Track total number of repairs
and see if more repairs are
being made and if time is
utilized efficiently.
Customization Increase number
of custom systems
built
Find out what customers want
and need. Observe competitors
for prices and options offered.
Improve employee certification
and offer higher-quality parts.
Examine number of computer
systems built per type
(multimedia, gaming, etc.).
Web
development
Increase Web
traffic
Improve design of website.
Offer more products online.
Make shopping easier and more
intuitive. Increase marketing
efforts.
Monitor Web traffic by having
an online counting device. Look
at sales numbers to see if
people are just surfing or
actually buying merchandise.
Accounting Implement ERP
system to monitor
department
activities and
record finances
Train employees on new system.
Find potential flaws in the
system and fix before
implementation.
Track employee work schedules
to stay on time. Double check
entries to ensure system is
working properly.
Human
resources
Decrease
employee
turnover
Hire employees who are “a good
fit” for the company.
Raise employee morale; set
clear job descriptions. Give
feedback to employees.
Monitor both involuntary and
voluntary turnover. Interview
employees to determine
potential problems with the
workplace.
Loading page 30...
Managerial Accounting 6e Solutions Manual
1-28
(continued) P1-42B
Req. 2
Planning Directing Controlling
Sales Haas would need a sales
budget for the entire company
and each individual product at
each location.
Analyze sales reports to monitor
type and amount of sales made.
Prices would be analyzed using
these reports and market analysis
of competitors.
Compare budgets with
actual sales numbers.
Investigate variances to
take corrective actions if
needed. Change prices if
deemed appropriate.
Customization Budgets for types of computers
offered, time needed per job,
and market analysis to
determine which computers
potential customers want.
Ensure customer satisfaction by
hiring qualified staff. Research
quality of available parts. Analyze
market analysis to determine
market needs and proper pricing
schemes.
Compare budgets with
actual results. Use customer
feedback to improve
custom builds. Make
changes if needed.
Repairs Labor budgets would be
needed to determine the time
taken to repair instruments
and if hiring more repair staff
would be feasible.
Employee training programs
would be used. Monitor time
taken per repair for each
member of repair staff.
Compare budgets with
actual results. Investigate
variances and take
corrective action if needed.
Web
development
Haas would need an expense
budget to ensure money is
spent efficiently. A budget
would also be needed to set
Web traffic goals.
Monitor department expenses
and website visits using online
counting program.
Compare budgeted
expenses with actual and
compare expected Web
traffic with actual.
Investigate variances and
make changes as needed.
Accounting Haas would need time budgets
as well as expense budgets.
Train employees on new system
to keep within time budget.
Monitor expenses closely.
Compare budget with
actual numbers. Investigate
variances and make
changes if needed.
Human
resources
Employee satisfaction surveys
and feedback reports.
Active relationship between
management and employees.
Management would record
needs and suggestions made by
employees in feedback system.
Consider employee
suggestions and enact
changes if needed.
Note: All the information needed in the table above would be generated almost entirely by the managerial
accounting system. Managerial accounting systems provide much of the information needed for internal decision
making, while financial accounting systems are geared toward external financial reporting.
1-28
(continued) P1-42B
Req. 2
Planning Directing Controlling
Sales Haas would need a sales
budget for the entire company
and each individual product at
each location.
Analyze sales reports to monitor
type and amount of sales made.
Prices would be analyzed using
these reports and market analysis
of competitors.
Compare budgets with
actual sales numbers.
Investigate variances to
take corrective actions if
needed. Change prices if
deemed appropriate.
Customization Budgets for types of computers
offered, time needed per job,
and market analysis to
determine which computers
potential customers want.
Ensure customer satisfaction by
hiring qualified staff. Research
quality of available parts. Analyze
market analysis to determine
market needs and proper pricing
schemes.
Compare budgets with
actual results. Use customer
feedback to improve
custom builds. Make
changes if needed.
Repairs Labor budgets would be
needed to determine the time
taken to repair instruments
and if hiring more repair staff
would be feasible.
Employee training programs
would be used. Monitor time
taken per repair for each
member of repair staff.
Compare budgets with
actual results. Investigate
variances and take
corrective action if needed.
Web
development
Haas would need an expense
budget to ensure money is
spent efficiently. A budget
would also be needed to set
Web traffic goals.
Monitor department expenses
and website visits using online
counting program.
Compare budgeted
expenses with actual and
compare expected Web
traffic with actual.
Investigate variances and
make changes as needed.
Accounting Haas would need time budgets
as well as expense budgets.
Train employees on new system
to keep within time budget.
Monitor expenses closely.
Compare budget with
actual numbers. Investigate
variances and make
changes if needed.
Human
resources
Employee satisfaction surveys
and feedback reports.
Active relationship between
management and employees.
Management would record
needs and suggestions made by
employees in feedback system.
Consider employee
suggestions and enact
changes if needed.
Note: All the information needed in the table above would be generated almost entirely by the managerial
accounting system. Managerial accounting systems provide much of the information needed for internal decision
making, while financial accounting systems are geared toward external financial reporting.
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