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Managerial Accounting: Tools For Business Decision-Making, Third Canadian Edition Solution Manual

Managerial Accounting: Tools For Business Decision-Making, Third Canadian Edition Solution Manual simplifies complex textbook exercises with easy-to-understand solutions and step-by-step guides.

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    1-1 CHAPTER 1 Managerial Accounting ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Do It! Review Exercises A Problems B Problems * 1. Explain the distinguishing features of managerial accounting. 1, 2, 3 15 17, 21, 22 *2. Identify the three functions of management and the role of management accountants in an organizational structure. 4, 7, 8 15 19, 20 *3. Explain the importance of business ethics. 5, 6, 9 15 18 *4. Identify changes and trends in managerial accounting. 10, 11, 12, 13, 14 16 23

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    BLOOM’S TAXONOMY TABLE © 2012 For Use Only 1-2 Correlation Chart between Bloom’s Taxonomy, Study Objectives and End - of - Chapter Exercises and Problems Study Objective Knowledge Comprehension Application Analysis Synthesis Evaluation * 1. Explain the distinguishing features of managerial accounting. Q2, Q3, D15, E17, E21, E22 Q1 * 2. Identify the three functions of management and the role of management accountants in an organizational structure. Q4, D15, E19, E20 Q7, Q8 * 3. Explain the importance of business ethics. Q5, Q9, D15, E18 Q5, Q6 * 4. Identify changes trends in managerial accounting. Q10, Q11, Q12, Q13, D16, E23 Q14

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    1-3 ANSWERS TO QUESTIONS 1. (a) Disagree. Managerial accounting is a field of accounting that provides economic and financial information for managers and other internal users. (b) Carolina is incorrect. Managerial accounting applies to all types of businesses—service, merchandising, and manufacturing. 2. (a) Financial accounting is concerned primarily with external users such as shareholders, creditors, and regulators. In contrast, managerial accounting is concerned primarily with internal users such as officers and managers. (b) Classified financial statements are the end product of financial accounting. The statements are prepared monthly, quarterly and annually. In managerial accounting, internal reports may be prepared daily, weekly, monthly, quarterly, annually, or as needed. (c) The purpose of financial accounting is to provide general-purpose information for all users. The purpose of managerial accounting is to provide special-purpose information for a particular user for a specific decision. 3. Differences in the content of the reports are as follows: Financial Managerial • Pertains to business as a whole and is highly aggregated. • Limited to double-entry accounting and cost data. • Generally accepted accounting principles. • Pertains to subunits of the business and may be very detailed. • May extend beyond double-entry accounting system to any relevant data. • Standard is relevance to decisions. In financial accounting, financial statements are verified annually through an external audit by an independent professional accountant such as a Chartered Accountant. There are no independent audits of internal reports issued by managerial accountants. 4. Jean-Marc should know that the management of an organization performs three broad functions: (1) Planning requires management to look ahead and to establish objectives. (2) Directing involves coordinating the diverse activities and human resources of a company to produce a smooth-running operation. (3) Controlling is the process of keeping the company’s activities on track. 5. (a) The four categories of ethical standards for management accountants are: Objectivity, confidentiality, competence, and integrity. (b) No. Management accountants should not condone unethical acts by others within their organization.

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    1-4 Questions Chapter 1 (Continued) 6. Systems and controls sometimes unwittingly create incentives for managers to take unethical actions. For example, companies prepare budgets to provide direction. Because the budget is also used as an evaluation tool, some managers try to “game’’ the budgeting process by underestimating their division’s predicted performance so that it will be easier to meet their performance targets. Or, if the budget is set at unattainable levels, managers sometimes take unethical actions to meet the targets in order to receive higher compensation or, in some cases, keep their jobs. 7. Disagree. Decision making is not a separate management function. Rather, decision making involves the exercise of good judgment in performing the three management functions explained in the answer to question four above. 8. Employees with line positions are directly involved in the company’s primary revenue-generating operating activities. Examples include plant managers and supervisors, and the vice president of operations. In contrast, employees with staff positions are not directly involved in revenue- generating operating activities, but rather serve in a support capacity to line employees. Examples include employees in finance, legal, and human resources. 9. CEOs and CFOs must now certify that financial statements give a fair presentation of the company’s operating results and its financial condition and that the company maintains an adequate system of internal controls. In addition, the composition of the board of directors and audit committees receives more scrutiny, and penalties for misconduct have increased. 10. The value chain refers to all activities associated with providing a product or service. For a manufacturer, this includes research and development, product design, acquisition of raw materials, production, sales and marketing, delivery, customer relations and subsequent service. 11 . An enterprise resource planning (ERP) system is a software system that provides a comprehensive, centralized source of integrated information. Its primary benefits are that it replaces the many individual systems typically used for receivables, payables, inventory, human resources, etc. Also, it can be used to get information from, and provide information to, the company’s customers and suppliers. 12. In a just-in-time inventory system the company has no extra inventory stored. Consequently, if some units that are produced are defective, the company will not have enough units to deliver to customers. 13. Activity-based costing is an approach used to allocate overhead based on each product’s relative use of activities in making the product. Activity-based costing is beneficial because it results in more accurate product costing and in more careful scrutiny of all activities in the value chain.

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    1-5 Questions Chapter 1 (Continued) 14. The balanced scorecard is called “balanced” because it strives to not over emphasize any one performance measure, but rather uses both financial and non-financial measures to evaluate all aspects of a company’s operations in an integrated fashion.

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    1-6 SOLUTIONS TO DO IT! REVIEW D1-1 1. False. Preparation of budgets is part of managerial accounting. 2. False. Financial accounting reports pertain to the entity as a whole and are highly aggregated. It is managerial accounting reports that pertain to subunits of the business and are very detailed. 3. False. Financial accounting must adhere to Generally Accepted Accounting Principles and are subject to an audit by chartered accountants. 4. True. 5. True. 6. True. D1-2 1. (f) Just-in-time (JIT) inventory 2. (a) Activity-based costing 3. (c) Total quality management (TQM) 4. (d) Research and development, and product design 5. (e) Service industries 6. (b) Balanced scorecard

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    1-7 SOLUTIONS TO EXERCISES E1-1 Financial Accounting Managerial Accounting Primary users External users Internal users Types of reports Financial statements Internal reports Frequency of reports Monthly, quarterly and annually As frequently as needed Purpose of reports General-purpose Special-purpose information for specific decisions Content of reports Generally accepted accounting principles Relevance to decisions Verification Annual audit by Chartered Accountant No independent audits E1-2 The four specific standards are: (1) Competence (2) Confidentiality (3) Integrity (4) Objectivity E1-3 (a) (1) Planning. (b) (2) Directing. (c) (3) Controlling. SOLUTIONS TO EXERCISES (Continued)

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    1-8 E1-4 (a) (6) Chief executive officer (b) (5) Line position (c) (2) Chief financial officer (d) (1) Board of directors (e) (7) Staff position (f) (4) Controller (g) (3) Treasurer E1-5 1. F 2. M 3. F 4. M 5. F 6. M 7. F 8. F 9. M 10. F E1-6 1. False. Financial accounting focuses on providing information to external users. 2. True. 3. False. Preparation of budgets is part of managerial accounting. 4. False. Managerial accounting applies to service, merchandising and manufacturing companies. 5. True. 6. False. Managerial accounting reports are prepared as frequently as needed . 7. True. 8. True. 9. False. Financial accounting reports must comply with Generally Accepted Accounting Principles. SOLUTIONS TO EXERCISES (Continued)

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    1-9 10. False. Managerial accountants are expected to behave ethically, and there is a code of ethical standards for managerial accountants. E1-7 (a) 3. Balanced scorecard (b) 4. Value chain (c) 2. Just-in-time inventory (d) 1. Activity-based costing

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    1-10 SOLUTIONS TO CASES CASE 1 - 10 Since the questions were fairly open-ended, the following are only suggested results. The class may be able to think of others, or of more items for each one. (a) Hayley Geagea Needs information on sales, perhaps by salesperson and by territory. Luc Lemieux Needs cost information for his department. Gary Richardson Needs all accounting information. Manny Cordoza Needs product cost information. Patrick Dumoulin Needs information on component costs and costs for his department. (b) Hayley Geagea Income statement Luc Lemieux None. Gary Richardson All. Manny Cordoza Income statement and cost of goods manufactured schedule. Patrick Dumoulin None. (c) Hayley Geagea Sales by Territory—Detailed information, possibly by product line, issued daily or weekly. Luc Lemieux Cost of Computer Programs—Accumulated cost incurred for each major program used including maintenance and updates of program, issued monthly. Gary Richardson Cost of Preparing Reports—Detailed analysis of all reports provided, their frequency, time, and estimated cost to prepare, issued monthly. Manny Cordoza Cost of Product—Detailed cost by product line, comparing actual with estimated costs. Issued as each batch of production is completed. Patrick Dumoulin Cost of Product Design—Accumulated total costs of each new product, issued at end of each project. SOLUTIONS TO CASES (Continued)

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    1-11 CASE 1 - 11 (1) It is ethical to use different performance measures to evaluate employees, if and only if, the performance that is being measured is performance that is under the direct control or responsibility of the individual being evaluated. This is not as much an ethics problem as it is a management problem—management is responsible for putting systems in place that are fair to all employees. (2) Firstly, a company can establish a Code of Conduct that provides guidelines to employees who are unsure of what should be done in questionable situations. Secondly, a company can practice transparent reporting—allow all employees to see the financial statements, and encourage them to question what they don’t understand, or what they think might not be right.

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    1-12 WCP-1

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    1-13 Legal Notice Copyright Copyright © 2012 by John Wiley & Sons Canada, Ltd. or related companies. The data contained in these files are protected by copyright. This manual is furnished under licence and may be used only in accordance with the terms of such licence. The material provided herein may not be downloaded, reproduced, stored in a retrieval system, modified, made available on a network, used to create derivative works, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise without the prior written permission of John Wiley & Sons Canada, Ltd.

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    2-1 CHAPTER 2 ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Do It! Review Exercises Problems 1. Define the three classes of manufacturing costs and distinguish between product and period costs. 10, 11, 12, 13 1, 2, 3, 9, 10, 12 14 18, 19, 20, 21, 22, 29, 35 40A, 41A, 45A, 46A, 48A, 49B, 50B, 53B, 2. Explain how costs are affected by changes in the levels of business activity. 1, 2, 3, 4, 5, 6, 7 4, 5, 6, 7, 8 15, 16, 17 23, 24, 25, 26, 27, 28 47A, 55B 3. Explain the difference between a merchandising income statement and a manufacturing income statement. 8, 14, 15, 16, 17, 18 13 30, 31, 32, 33, 34, 35, 36, 37, 38, 39 42A, 43A, 45A, 46A, 48A, 51B, 52B, 54B, 56B, 57B, 58B 4. Explain the difference between a merchandising balance sheet and a manufacturing balance sheet. 9, 19 11 37, 38, 39 42A, 43A, 51B, 52B, 53B

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    2-2 ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 40A Classify manufacturing costs into different categories and calculate the unit cost. Simple 20 – 30 41A Classify manufacturing costs into different categories and calculate the unit cost. Simple 20 – 30 42A Indicate the missing amount of different cost items, and prepare a condensed cost of goods manufactured schedule, an income statement, and a partial balance sheet. Moderate 30 – 40 43A Prepare a cost of goods manufactured schedule, a partial income statement, and a partial balance sh eet. Moderate 30 – 40 44A Prepare a cost of goods manufactured schedule and a correct income statement Moderate 30 – 40 45A Calculate raw materials purchased, cost of goods manufactured, and cost of goods sold. Moderate 20–30 46A Calculate raw ma terials purchased, cost of goods manufactured, and cost of goods sold. Moderate 20 – 30 47A Determine missing amounts in the cost of goods manufactured and sold schedules and compare fixed and variable costs. Challenging 30 – 40 48A Determine missing amounts and calculate costs for schedules of cost of goods manufactured and sold. Challenging 30 – 40 49B Classify manufacturing costs into different categories and calculate the unit cost. Simple 20–30 50B Classify manufacturing costs into different categories and calculate the unit cost. Simple 20 – 30 51B Indicate the missing amount of different cost items, and prepare a condensed cost of goods manufactured schedule, an income statement, and a partial balance sheet. Moderate 30 – 40 52B Prepa re a cost of goods manufactured schedule, a partial income statement, and a partial balance sheet. Moderate 30 – 40 53B Calculate prime cost, conversion cost and cost of goods manufactured. Moderate 20–30 54B Prepare income statement schedules for cost of goods sold and cost of goods manufactured. Moderate 30 – 40 55B Determine missing amounts in the cost of goods manufactured and sold schedules and compare fixed and variable costs. Challenging 20–30 56B Prepare a cost of goods manufactured s chedule and a correct income statement Moderate 30 – 40 57B Calculate selected costs for the income statement, and schedules of cost of goods manufactured and sold. Moderate 20–30 58B Determine missing amounts, prepare cost of goods manufactured an d calculate inventory values. Challenging 40–50

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