Skip to content
Textbook Guides

Managerial Accounting, Third Canadian Edition Solution Manual

  • Accounting
  • 1539 pages
  • Shared February 2025
  • 84 downloads

Make studying easier with Managerial Accounting, Third Canadian Edition Solution Manual, designed for clear and structured learning.

Preview 31 of 1539 pages

See the first 31 pages exactly as they appear in the document.

  1. Page 1
    Read page 1 as text

    Chapter 1 Introduction to Managerial Accounting Quick Check Answers: 1. b 3. d 5. c 7. c 9. b 2. b 4. d 6. c 8. a

  2. Page 2
  3. Page 3
    Read page 3 as text

    Short Exercises (5 – 10 min.) S1 - 1 The four primary responsibilities of managers include planning, directing, controlling, and decision making. Managers plan by setting goals and objectives for the company and devising strategies for achieving those goals. Then they direct the day - to - day operations of the company in light of the goals and objectives. They control the company by comparing actual results to plans and then use that feedback to adjust plans and operations. Throughout all aspects of these duties, management is making critical business decisions. Student responses may vary.

  4. Page 4
    Read page 4 as text

    (5 – 10 min.) S1 - 2 a. Managerial accounting b. Managerial accounting c. Financial accounting d. Financial accounting e. Managerial accounting f. Managerial accounting g. Financial accounting h. Managerial accounting i. Financial accounting j. Financial accounting k. Financial accounting l. Financial accounting m. Managerial accounting

  5. Page 5
    Read page 5 as text

    (5 – 10 min.) S1 - 3 a. Internal auditing department b. Controller c. Treasurer d. Internal auditing department e. Controller f. Controller g. Treasurer h. Internal auditing department i. Controller j. Controller k. Treasurer l. Internal auditing department m. Controller

  6. Page 6
    Read page 6 as text

    (5 – 10 min.) S1 - 4 Characteristic Check (  ) if r e lated to internal auditing a. Helps to ensure that company’s internal controls are functioning properly  b. Reports to treasurer or controller c. Required by the Toronto Stock Exchange if company stock is pu b licly traded on the T S X  d. Reports directly to the audit committee  e. Ensures that the company achieves its profit goals f. Is part of the accounting department g. Usually reports to a senior executive (CFO or CEO) for administr a tive matters  h. Performs the same function as independent certified public accountants i. External audits can be performed by the internal auditing department

  7. Page 7
    Read page 7 as text

    (10 min.) S1 - 5 Each of the five ethical standards contributes to maintaining the CPA Canada’s expectation that management accountants will uphold the highest standards of ethical behaviour. Without the necessary competence, management accountants will be unable to perform their responsibilities. Even if they do recognize an ethical dilemma, they could lack the competence required to determine all the alternative courses of action and the implications of each alternative. Having independence is important for minimizing or eliminating the impact of others’ influences. Management accountants need to provide opinions based on their own interpretation of data rather than the interpretations of other stakeholders. Management accountants have access to confidential information. If they do not maintain that confidentiality, their companies could suffer. Their companies would be reluctant to provide access to information, which would prevent management accountants from performing their responsibilities. Additionally, Employers must have confidence that management accountants have the integrity to apply their skills appropriately and avoid being prejudiced by any conflicts of interest. Management Accountants should have the ability as well, to effectively analyze situations so that they might communicate them faithfully to employers, regulators or clients to ensure proper action is taken.

  8. Page 8
    Read page 8 as text

    (continued) S1 - 5 Finally, An important part of management accountants’ responsibilities is communicating information and providing reports to senior management. To be able to rely on these reports, management must have confidence that the management accountant is not hiding inconvenient facts or presenting a biased view. Student responses may vary.

  9. Page 9
    Read page 9 as text

    (5 min.) S1 - 6 a. Providing earnings information to your brother before it is publicly announced violates the concept of client confidentiality , and fails to uphold trust. b. Stealing from your employer is a violation of the concept of integrity , and is illegal c. Skipping continuing education sessions could violate the requirement to maintain professional competence in enabling competencies . If your company paid for you to attend the conference, skipping the sessions also violates the notion of integrity d. Failing to read the specifications of the software package before purchasing it violates professional competence in enabling competencies e. Failing to provide job description information to management because you fear it may be used to cut a position in your department violates the notion of integrity and the required skills of a competent accountant

  10. Page 10
    Read page 10 as text

    (5 min.) S1 - 7 a. ISO 9001:2008 b. Enterprise resource planning (ERP) system c. T he Sarbanes - Oxley Act (SOX) d. XBRL e. E commerce (5 min.) S1 - 8 a. Prevention costs b. Lean production c. Appraisal costs d. Internal failure costs e. External failure costs

  11. Page 11
    Read page 11 as text

    (5 – 10 min.) S1 - 9 a. Lean b. Traditional c. Traditional d. Lean e. Traditional f. Lean g. Lean h. Traditional i. Lean j. Lean k. Lean l. Lean m. Traditional

  12. Page 12
    Read page 12 as text

    (5 min.) S 1 - 10 1. Reworking defective units — internal failure 2. Litigation costs from product liability claims — external failure 3. Inspecting incoming raw materials — appraisal 4. Training employees — prevention 5. Warranty repairs — external failure 6. Redesigning the production process — prevention 7. Lost productivity due to machine breakdown — internal failure 8. Inspecting products that are halfway through the production process — appraisal 9. Incremental cost of using a higher grade raw material — prevention 10. Cost incurred producing and disposing of defective units — internal failure

  13. Page 13
    Read page 13 as text

    (10 – 15 min.) S1 - 11 Req. 1 Prevention costs: Negotiating with and training suppliers to obtain higher quality materials and on - time delivery Redesigning the speakers to make them easier to manufacture Appraisal costs: Additional 20 minutes of testing for each speaker Avoid inspection of raw materials. Internal failure costs: Rework avoided because of fewer defective units Avoid lost profits from lost production time due to rework. External failure costs: Reduced warranty repair costs Avoid lost profits from lost sales due to disappointed customers.

  14. Page 14
    Read page 14 as text

    (continued) S 1 - 1 1 Req. 2 Cost /<Benefit> Analysis Costs < Savings > Prevention costs: Negotiating with and training suppliers to obtain higher quality materials and on - time delivery…………. $ 300,000 Redesigning the speakers to make them easier to manufacture……………………………………… 1,400,000 Appraisal costs: Additional 20 minutes of testing for each speaker………. 500 ,000 Savings on Inspection of raw materials………………………. $<400,000> Internal failure costs: Savings on Rework………………………………………………... <650,000> Savings on Lost profits from lost production time due to rework……………………………………………………………. <300,000> External failure costs: Savings on Warranty repair costs……………………………… <200,000> Savings on Lost profits from lost sales due to disappointed customers…………………………………........ <850,000 > Net <Benefit> from implementing quality program…………. $ 0 Wharfedale should implement the new quality program. The company w ould save $0 by implementing the new program but the change would likely improve longer term relations with current as well as potential new customers .

  15. Page 15
    Read page 15 as text

    (5 – 10 min.) S1 - 12 1. External failure cost 2. External failure cost 3. External failure cost 4. Appraisal cost 5. Prevention cost 6. Internal failure cost

  16. Page 16
    Read page 16 as text

    Exercises (Group A) (5 – 10 min.) E1 - 13A a. Controlling b. Decision making (also directing) c. Planning (also decision making) d. Decision making (also directing) e. Decision making (also controlling) Student responses may vary since several of management’s responsibilities overlap when performing these activities.

  17. Page 17
    Read page 17 as text

    (5 min.) E1 - 14A a. Companies must follow IFRS or ASPE 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 responsibility 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 IFRS or ASPE 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 public accountants.

  18. Page 18
    Read page 18 as text

    (5 – 10 min.) E1 - 15A 1. Financial accounting information 2. Financial accounting information 3. Managerial accounting information 4. Financial accounting information 5. Managerial accounting information 6. Financial accounting information 7. Financial accounting information 8. Financial accounting information 9. Financial accounting information 10. Both 11. Both 12. Financial accounting information 13. Financial accounting information 14. Both

  19. Page 19
    Read page 19 as text

    (5 – 10 min.) E1 - 16A a. The CFO and the COO report to the CEO. b. The internal audit function reports to the CFO or CEO and the audit committee . c. The controller is directly responsible for financial accounting, managerial accounting, and tax reporting. d. The CEO is hired by the board of directors. e. The treasurer is directly responsible for raising capital and investing funds. f. The COO is directly responsible for the company’s operations. g. Management accountants often work with cross - functional teams . h. A subcommittee of the board of directors is called the audit committee.

  20. Page 20
    Read page 20 as text

    (5 min.) E1 - 17A Major issues in management accounting include: 1. The role played in providing information; 2. The behavioural implications of managerial accounting information (e.g., how does this impact performance reward systems in organizations?); 3. The management of organizational capacity; 4. The development, deployment and use of accounting and management information systems. 5. The stewardship of sustainable activities in the organization (Student answers may vary.)

  21. Page 21
    Read page 21 as text

    (15 min.) E1 - 18A Req. 1 While the amount is not large now, the repeated nature of the thefts means that they add up over time. Also, the repeated nature of the thefts increases the severity of Anik Cousineau’s unethical behaviour. A new employee who has engaged in repeated thefts is unlikely to become a valued and trusted employee. As controller, Mary Gonzales hired Anik, and she is also responsible for the lack of controls that permitted a new employee to commit this theft. However, this is no excuse for Anik’s unethical behaviour. The controller should think carefully whether it is in the company’s interest to keep Anik or fire her immediately. This incident also reflects poorly on Mary’s competence. She needs to learn from the experience and supervise the next bookkeeper more carefully. Req. 2 The new information makes Mary’s decision more complex. Being new, she may want to discuss the situation with the company president. Even if the bookkeeper believed she was just “borrowing” the money, her behaviour is still unethical. It will probably be difficult to confirm whether Anik did in fact repay money she had taken in the past. Unless Mary can obtain additional clarifying information, one alternative to firing her would be to indicate to Anik that this behaviour will not be tolerated in the future and to establish better controls and closer supervision. Student responses may vary.

  22. Page 22
    Read page 22 as text

    (10 min.) E1 - 19A 1. Maintains a client’s confidentiality 2. Demonstrates competence 3. Demonstrates credible skills and reasonable independence 4. Demonstrates competence 5. Maintains professional and personal integrity 6. Demonstrates competence and credible skills 7. Maintains professional and personal integrity 8. Demonstrates credible skills 9. Maintains a client’s confidentiality 10. Demonstrates competence and credible skills 11. Maintains professional and personal integrity 12. Maintains a client’s confidentiality 13. Demonstrates credible skills

  23. Page 23
    Read page 23 as text

    (10 min.) E1 - 20A a. XBRL b. Supply - chain management c. Sarbanes - Oxley Act of 2002 d. L ean production e. P resent, future f . ERP g . E commerce h . ISO 9001:2008 i . Lean production j . XBRL k . IFRS l . just in time m . Total quality management

  24. Page 24
    Read page 24 as text

    (10 – 15 min.) E1 - 21A MEMO DATE: Current TO: Accounting Colleagues FROM: Your Name RE: SOX ______________________________________________________ The Sarbanes - Oxley Act of 2002, better known as SOX, was the direct result of corporate accounting scandals such as those at Enron and WorldCom. The goal of SOX is to restore public confidence in publicly traded companies in the United States, their management, their financial statements, and their auditors. Some of the major provisions of SOX include:  The CEO and CFO assume responsibility for the financial statements and must certify that the financial statements fairly present the operations and financial condition of the company.  The CEO and CFO assume responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting.  The effectiveness of the internal controls and financial reporting procedures must be assessed annually.  The audit committee members must be independent of the company, which means they cannot receive consulting or advisory fees. At least one member should be a financial expert.

  25. Page 25
    Read page 25 as text

    (continued) E1 - 21A  The penalties for corporate fraud and other white - collar crimes are more severe than before, often including substantial monetary fines and imprisonment.  CPA firms are no longer allowed to provide certain non - audit services (such as bookkeeping, consulting, and systems design) to clients at the same time they are providing the audit.  CPA firms must undergo periodic quality reviews (every one to three years) .  Audit partners must rotate off the audit engagement every five years. Even though these are rules in the United States, they are important for the Canadian company because the company is an international firm also traded on the American stock exchanges. Therefore, the Canadian company would be subject to the same rules and regulations as the American companies. Student responses may vary.

  26. Page 26
    Read page 26 as text

    (10 min.) E1 - 22A Req. 1 Total costs of adopting lean production model: Employee training......................................... $1 5 , 0 00 Streamline plant’s production process...... 37,000 Supplier identification.................................. 8,000 Total costs..................................................... $ 60 , 0 00 Req. 2 Benefits of adopting lean production: Savings in warehouse expenses............…. $ 97,000 Lower spoilage costs.............................…... 46,000 Total benefits....................................……….. $143,000 Req. 3 Expected total benefits.........................…… $143,000 Expected total costs..............................…… ( 60 , 0 00 ) Excess of benefits over costs..................... $ 8 3 , 0 00 Wild Rides should adopt the lean production model because the expected benefits exceed the costs.

  27. Page 27
    Read page 27 as text

    (15 – 20 min) E1 - 23A Traditional and lean systems vary greatly along several dimensions of production. Some of the differences are as follows: 1. Inventory levels — Lean production systems strive to maintain low inventory levels. Lean producers try to purchase raw materials “just in time” to meet the production schedule and have the finished inventory ready “just in time” to meet customer demand. Traditional production systems maintain greater quantities of raw materials, work in process, and finished goods inventory. 2. Batch sizes — Lean production systems produce units in much smaller batches than traditional production systems. These batches are “demand - pulled” through production, rather than “pushed through” production (like a traditional system), allowing the company to only produce what customers have ordered. 3. Set - up times — Lean production systems stress short set - up times so that they can produce and deliver the product to the end customer in a very short amount of time. By keeping set - up times short, lean producers don’t have to worry about keeping extra inventory on hand just to be able to quickly meet demand. 4. Physical layout of plant — Lean producers tend to physically organize their manufacturing plants by self - contained production cells. Each cell contains all of the machinery necessary to produce the product. By organizing the plant this way, lean producers are able to minimize interruptions and time spent moving materials and work in process inventory. This, in turn, reduces the time it takes to produce the product. In contrast, traditional producers tend to group like machinery together in different areas of the plant.

  28. Page 28
    Read page 28 as text

    (continued) E1 - 23A 5. Roles of plant employees — At lean producers, plant employees tend to have broader roles. They are cross - trained to perform about every role that is needed in each production cell. They set up, operate, and repair the machines in the cell. They also perform the quality inspections. As a result, employees tend to have higher morale. Additionally, this decreases bottlenecks caused by having to wait for the “right person” to come do the job. 6. Manufacturing cycle times — Lean producers put great emphasis on shortening their manufacturing cycle times. Lean producers need to have short cycle times since they have very little, if any, safety stock ready to sell to customers. By having short cycle times, they are able to fill customer orders quickly, keeping customers satisfied. 7. Quality — Lean producers stress high quality in every aspect of production. Since lean producers do not carry much, if any stock, they need to be able to produce the product right, the first time. Lean producers tend to “build - in” quality, rather than “inspect - in” quality as traditional firms do.

  29. Page 29
    Read page 29 as text

    (15 – 20 min) E1 - 24A Req. 1 Cost of Quality Report for Salty Snackfoods Total Costs of Qua l ity Percentage of total costs of qua l ity (rounded) Prevention Costs: Personnel training $ 26,000 Preventative maintenance 7,000 Total prevention costs $ 33,000 4% Appraisal Costs: Inspecting products at halfway point $ 55,000 Inspection of raw materials 5,000 Total appraisal costs $ 60,000 8 % Internal Failure Costs: Production loss due to machine breakdowns $ 15,000 Cost of defective products 94,000 Cost of disposing of rejected products 12,000 Total internal failure costs $121,000 15% External Failure Costs: Recall of Batch #59374 $175,000 Warranty claims 4 0 0,000 Total external failure costs $5 7 5,000 73 % Total Costs of Quality $ 789 ,000 100 %

  30. Page 30
    Read page 30 as text

    (continued) E1 - 24A Req. 2 Because the company has warranty returns and has had a product recall, the company may suffer from a reputation for poor - quality products. If so, they are probably losing profits from losing sales. Unsatisfied customers will be reluctant to buy from the company again. They may also tell their friends and family not to buy from the company. This report does not include an estimate of the lost profits arising from a reputation for poor - quality products. Req. 3 The Cost of Quality report shows that very little is being spent on prevention and appraisal, which is probably why the internal and external failure costs are so high. It appears that the company is only inspecting the product halfway through the production process, and not again at the end of the process. Perhaps that is the reason their external failure costs are so high. The CEO should use this information to develop quality initiatives in the areas of prevention and a p praisal. Such initiatives should reduce future internal and external failure costs.

  31. Page 31
    Read page 31 as text

    (15 – 20 min.) E1 - 25A Req. 1 Prevention costs: Training employees in TQM Training suppliers in TQM Identifying preferred suppliers who commit to on - time delivery of perfect quality materials Appraisal costs: Strength - testing one item from each batch of panels Avoid inspection of raw materials . Internal failure costs: Avoid rework and spoilage . External failure costs: Avoid lost profits from lost sales due to disappointed customers . Avoid warranty costs .

1508 more pages in the full document

Unlock it once and it stays in your library, ready to chat with or turn into flashcards.

Unlock the full document

More Accounting study materials

See all

Study this document with CramX

Once it is in your library, every tool can work from it.