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Chapter 1
An Introduction to Managerial Accounting and Cost Concepts
Solutions to Questions
1-1 Managerial accounting is concerned with providing information to managers for use inside the organization. Financial accounting is concerned with providing information to stockholders, creditors, and others outside of the organization.
1-2 Managers carry out three major activities: planning, directing and motivating, and controlling. All three activities involve decision-making.
1-3 The planning and control cycle involves the following steps: formulating plans, implementing plans, measuring performance, and evaluating differences between planned and actual performance.
1-4 A line position is directly related to the achievement of the basic objectives of the organization. A staff position is not directly related to the achievement of those objectives; rather, it is supportive, providing services and assistance to other parts of the organization.
1-5 In contrast to financial accounting, managerial accounting: (1) focuses on the needs of the manager; (2) places more emphasis on the future; (3) emphasizes relevance rather than precision; (4) emphasizes the segments of an organization; (5) is not governed by GAAP; and (6) is not mandatory.
1-6 The three major elements of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead.
1-7 a. Direct materials are an integral part of a finished product and can be conveniently traced to it. b. Indirect materials are usually small items of material such as glue and nails. They may become an integral part of a finished product but are traceable to the product only at great cost or inconvenience. Indirect materials are ordinarily classified as part of manufacturing overhead. c. Direct labor includes those labor costs that can be easily traced to particular products. Direct labor is also called “touch labor.” d. Indirect labor includes the labor costs of
An Introduction to Managerial Accounting and Cost Concepts
Solutions to Questions
1-1 Managerial accounting is concerned with providing information to managers for use inside the organization. Financial accounting is concerned with providing information to stockholders, creditors, and others outside of the organization.
1-2 Managers carry out three major activities: planning, directing and motivating, and controlling. All three activities involve decision-making.
1-3 The planning and control cycle involves the following steps: formulating plans, implementing plans, measuring performance, and evaluating differences between planned and actual performance.
1-4 A line position is directly related to the achievement of the basic objectives of the organization. A staff position is not directly related to the achievement of those objectives; rather, it is supportive, providing services and assistance to other parts of the organization.
1-5 In contrast to financial accounting, managerial accounting: (1) focuses on the needs of the manager; (2) places more emphasis on the future; (3) emphasizes relevance rather than precision; (4) emphasizes the segments of an organization; (5) is not governed by GAAP; and (6) is not mandatory.
1-6 The three major elements of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead.
1-7 a. Direct materials are an integral part of a finished product and can be conveniently traced to it. b. Indirect materials are usually small items of material such as glue and nails. They may become an integral part of a finished product but are traceable to the product only at great cost or inconvenience. Indirect materials are ordinarily classified as part of manufacturing overhead. c. Direct labor includes those labor costs that can be easily traced to particular products. Direct labor is also called “touch labor.” d. Indirect labor includes the labor costs of