Solution manual introduction to management accounting 14e by horngren

For example, many instructors requested a more straightforward coverage of activity-based costing in Chapter 4, primarily because most of their students were not accounting majors and ne

INTRODUCTION TO

MANAGEMENT ACCOUNTING

Fourteenth Edition

Charles T Horngren

Gary L Sundem William O Stratton David Burgstahler

Jeff Schatzberg

Upper Saddle River, New Jersey 07458

Solutions Manual

AVP/Executive Editor: Steve Sartori

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Copyright © 2008 by Pearson Education, Inc., Upper Saddle River, New Jersey, 07458

Pearson Prentice Hall All rights reserved Printed in the United States of America This

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This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials

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CONTENTS

Page

General Comments v

Sample Assignment Schedules vii

Linking of 13th Edition Problems to those in the 14th Edition xi

Comments on Choices of Problems in Each Chapter xvii

Presentation of Solutions in Class xxv

Conducting the Course xxvi

Key Amounts from Suggested Solutions to Selected Problems xxviii

Solutions by Chapter 1 Managerial Accounting, the Business Organization, and Professional Ethics 1

2 Introduction to Cost Behavior and Cost-Volume Relationships 40

3 Measurement of Cost Behavior 105

4 Cost Management Systems and Activity-Based Costing 175

5 Relevant Information for Decision Making with a Focus on Pricing Decisions 246

6 Relevant Information for Decision Making with a Focus on Operational Decisions 311

7 Introduction to Budgets and Preparing the Master Budget 382

8 Flexible Budgets and Variance Analysis 438

9 Management Control Systems and Responsibility Accounting 495

10 Management Control in Decentralized Organizations 552

11 Capital Budgeting 616

12 Cost Allocation ……… .687

13 Accounting for Overhead Costs 770

14 Job-Costing and Process-Costing Systems 841

15 Basic Accounting: Concepts, Techniques, and Conventions 881

16 Understanding Corporate Annual Reports: Basic Financial Statements 918

17 Understanding and Analyzing Consolidated Financial Statements 971

iv

GENERAL COMMENTS

Please read the textbook preface before examining this material Because this book may

be used in a wide variety of courses, several sample assignment schedules have been prepared

We recommend using these as a starting point for building a tailored schedule The scope and depth of a particular assignment schedule largely depend on the instructor's personal evaluation

of the relative importance of various topics In turn, his or her evaluation will be influenced by students' backgrounds and other courses in the curriculum For example, many instructors requested a more straightforward coverage of activity-based costing in Chapter 4, primarily because most of their students were not accounting majors and needed only fundamental concepts At the same time, others prefer a more demanding coverage such as for courses with accounting majors or graduate-level accounting courses We have significantly revised the ABC coverage to address these needs, providing a three-tiered coverage that meets the needs of several course objectives Chapter 4 includes an introduction to ABC, Appendix 4 provides a more detailed example, and Chapter 12 (especially Appendix 12) gives more details

This edition, as previous editions, contains both straightforward assignment material, homework that can be solved simply by referring to the presentations in the chapters, and more challenging problems, which require more thoughtful analysis

This book's approach divorces product costing for financial reporting purposes from planning and control For example, Chapters 1 through 11 assume that no changes take place in the level of beginning and ending inventories This sharpens the analysis of planning and control, enhances clarity, and eases the learning process The problems of product costing are then considered in Chapters 12 through 14 This approach may be unconventional, but classroom experience and experimentation have convinced us of its superiority over the traditional approach, which interweaves product costing, planning, and control If students raise thorny questions regarding inventory valuation when Chapters 1 through 11 are being covered,

we usually ask them to postpone their queries until Chapters 12 through 14 are discussed If desired, Chapters 12, 13, and 14 may be studied at any time after Chapter 4

For comments on how to choose among the various problems in each chapter, see the section entitled "Comments on Choices of Problems in Each Chapter." Other teaching aids for use with this textbook are an Instructor's Resource Manual (which includes chapter overviews, chapter outlines organized by objectives, teaching tips, a chapter quiz, transparency masters, suggested readings and a video guide that carefully integrates the videos into classroom lectures), Solutions Transparencies (which includes acetates for all the end-of-chapter assignments), a Test Item File (including multiple choice, true/false, comprehensive problems, short-answer problems, and critical thinking questions), the Prentice Hall Custom Test (a computerized testing package), On Location Video Library (which includes segments on companies such as Three Dog Bakery, Nantucket Nectars, Oracle, McDonalds, and many more), the PH Professor: A Classroom Presentation on PowerPoint (includes over 50 PowerPoint slides for each chapter), and Power Notes (derived from the PH Professor, this efficient note-taking supplement can be downloaded from our website at www.prenhall.com/myPHLIP An Instructor's Resource CD-ROM, complete with all instructor support materials, is available upon adoption

vi

Available for students is a Study Guide that provides overviews, study tips and chapter reviews formatted for easy note-taking, and self-tests including a variety of test questions to prepare for examinations Spreadsheet Templates are also available for selected exercises and problems are identified in the text by a CD icon Students may opt to purchase the Student Resource CD-ROM rather than download spreadsheets, PowerPoints, etc from the web site

SAMPLE ASSIGNMENT SCHEDULES

Summary of Potential Assignments Suggested alternative schedules are summarized here in terms of the relative percentage of time to be devoted to various chapters Detailed assignment schedules are shown after this summary These schedules all assume a straightforward coverage of ABC is desired For a more in-depth coverage see Table A on pages xix –xx

Sequence A Sequence B Sequence A Sequence B

Chapter of Time Chapter of Time Chapter of Time Chapter of Time

* For students who have taken one term of elementary financial accounting immediately prior to this course

** For students who have not taken elementary financial accounting recently Students with

no background in elementary financial accounting will have to spend more time on Chapters

15 and 16 than is suggested in the above tables

Use of Fundamental Assignment Material Some instructors may prefer to assign all the problems in either the A series or the B series

of problems under "Fundamental Assignment Material" Each series includes a set of problems that covers the most important topics in the chapter In addition to the A or B series, selected problems from "Additional Assignment Material" can be assigned as time allows However, for those who wish to select particular problems in each chapter, some suggestions follow

viii

Alternative 1, Sequence A

Designed for one semester of 15 weeks with three 50-minute meetings per week Note that longer semesters permit either more intensive or extensive coverage, depending on instructor preferences

Problem Assignments

No of Class Meeting Chapter in Text

Normal: Based on Approximately Two Hours

of Homework per session

Selected Additional Problems if Time Permits

shortly, "COMMENTS ON CHOICE OF PROBLEMS IN EACH CHAPTER."

3 Ch 2 - Excluding appendices

A1, A2 (or 46) and A3 (or B1, B2) and 30 (or 31)

No of Class Meeting Chapter in Text

Problem Assignments:

Normal: Based on Approximately Two Hours

of Homework per session

Selected Additional Problems if Time Permits

24 Review for Exam

Alternative 1, Sequence B This is the same as the above, except that many instructors may prefer to interweave product costing and corresponding material on planning and control Assignments 35-40 may be used immediately after meeting 10 Furthermore, assignments 30 through 34 may be used

immediately after 16, and assignments 41 through 43 may be used immediately after 23

x

Alternative 2, Sequence A

Problem Assignments

No of Class Meeting Chapter in Text

Normal: Based on Approximately Two Hours

of Homework per session

Selected Additional Problems if Time Permits

12-44 Same as alternative 1, Sequence

A, from session 3 thru 37, omitting sessions 17 and 18

45 Final examination

Students with no background in accounting will need to spend more time on Chapters 15, 16, and 17 than is suggested in the tables above Some instructors may wish to omit parts of Chapters 16 and 17

Alternative 2, Sequence B This is basically the same as Alternative 2, Sequence A, except that those instructors who wish to cover the chapters on planning and control earlier in the course may prefer to delay sessions 7 through 11 until the end of the course Moreover, the sessions for Chapters 10 and 17 may be deleted, whereas Chapters 7, 13, and 14 may be included

Other Possibilities

Some instructors prefer to concentrate on a few chapters in greater depth and to delete other chapters An example is expanding the coverage of activity-based costing to include cost-system design and use, multistage ABC, and integrating service-department allocation, product

profitability, and customer profitability When we use this approach, we delete Chapters 13 through 17 and occasionally Chapters 7 and 11 Other instructors prefer to cover all the chapters

To do so effectively, an instructor must obviously concentrate on the Normal Problem Assignments above and condense the number of sessions per chapter

LINKING OF 13TH EDITION PROBLEMS TO THOSE IN THE 14TH EDITION

Users of the 13th Edition of Introduction to Management Accounting may have favorite

problems that they want to continue to use To help select a problem in the 14th Edition that is similar, the following table links the problems in the two editions The first column for each chapter lists the problem numbers from the 13th Edition, and the second column shows the corresponding problem in the 14th Edition

Problems Problems Problems Problems Problems Problems Chapter 13 th Ed 14th Ed Chapter 13th Ed 14 th Ed Chapter 13th Ed 14 th Ed

Problems Problems Problems Problems Problems Problems Chapter 13th Ed 14th Ed Chapter 13th Ed 14 th Ed Chapter 13 th Ed 14 th Ed

Problems Problems Problems Problems Problems Problems Chapter 13 th Ed 14 th Ed Chapter 13th Ed 14 th Ed Chapter 13th Ed 14 th Ed

COMMENTS ON CHOICES OF PROBLEMS IN EACH CHAPTER

Throughout the book, the "fundamental assignment material" contains two sets of problems, an "A" series (such as 1-A1 and 1-A2) and a "B" series (such as 1-B1 and 1-B2) To cover the basics of any chapter, you can assign either the "A" or the "B" series To reinforce the basics or to explore issues in more depth, you can use items in the "additional assignment material" We especially encourage use of some of the cases These are generally not overly long cases, but they allow discussion of material that is not straightforward They are a good basis for class discussions

The cognitive exercises in each chapter are short and designed to cover issues across the various value chain functions and disciplines other than accounting These exercises present an opportunity to explore the role of accounting in support of other disciplines such as marketing, production, and general management

There is a problem in each chapter based on Nike’s 10-K report, a condensed version of which is included in the text as Appendix C This is intended to give students experience finding publicly available information and using that information to make inferences about managerial accounting issues

The Excel application exercise in each chapter gives step-by-step instructions on how to use a spreadsheet to solve one of the chapter’s problems Use of a few of these exercises throughout the quarter will help students who do not already have spreadsheet expertise

The collaborative learning exercise is designed for assignment to a group or for a class exercise They will help students learn from one another

The Internet exercise at the end of assignment material gives students an opportunity to relate the concepts presented in the text to actual company experiences These exercises require the use of company Web sites The information and format of these Web sites change frequently

so the instructor should review each exercise prior to assigning it

We especially encourage coverage of some of the ethics questions There is at least one in each chapter These provide a great basis for class discussion

Chapter 1: Managerial Accounting, the Business Organization, and Professional Ethics

The distinctions between scorekeeping, attention directing, and problem solving are frequently subject to argument We do not find such disputes fruitful, so we cut them short Despite their fuzziness, these distinctions help the student to recognize that accounting is a rich discipline that is not confined solely to data accumulation These issues can be explored using problem 1-A1 or 1-B1

Management by exception is covered in problems 1-A2, 1-B2, and 1-33 Problems 1-41 and 1-42 stress the cost-benefit approach to the design of systems Problem 1-44 covers the value chain We encourage the use of one or more of the following oroblems that cover ethics: 1-A3, 1-B4, 1-37, 1-38, 1-47, 1-48, 1-49, and 1-51