Chapter 1
Introduction to Managerial Accounting
Concept Questions*
1. (LO1—Data, information, and knowledge)
Data include items such as sales invoices, purchase orders, customer lists, and
2. (LO2—Managerial versus financial accounting)
The primary purpose of financial accounting is the preparation of general-use
3. (LO2—Strategic and operational planning)
4. (LO2—Role of finance function)
The finance function is responsible for managing the financial resources of the
5. (LO3—Role of the managerial accountant)
Advances in accounting information systems and other changes in the past 5 or
6. (LO3—Sunk and opportunity costs)
Sunk costs are costs that have already been incurred. As a result, they cannot be
*Concept Questions are found on the student review cards.
Solutions Manual
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7. (LO4—Ethics)
Because there is no one correct answer to this question, student responses will
Brief Exercises
1. (LO1—Data, information, and knowledge)
a. Data
2. (LO2—Managerial versus financial accounting)
Managerial accounting Financial accounting
Timeliness is critical Must follow GAAP
3. (LO3—Factors in decision making)
a. False
4. (LO4—Ethics and decision making)
Note to Instructors: The full statements follow, and the answers are underlined.
Chapter 1: Introduction to Managerial Accounting
1-3
c. Corporate scandals such as that at Enron led to the passage of the
Exercises
5. (LO2—Users of accounting information)
Note to Instructors: Student responses to this question will vary. You may find
that students will have difficulty identifying the types of information needed by
these individuals and organizations because the students lack experience with
accounting. You may find that this question is useful as an in-class discussion
exercise. Following are a few of the potential answers that students may provide.
a. Financial statements, cash flow projections, sales projections, and budgets.
6. (LO2—Types of business managers)
a. finance managers
b. marketing managers
c. human resource managers
d. operations/production managers
Solutions Manual
7. (LO4—Decision making and ethics)
Note to Instructors: This question is loosely based on the facts surrounding the
Ford Explorer/Firestone tire rollover problems in 2000. As part of the discussion,
you may want to discuss the role of risk in analyzing and making decisions.
A. Regardless of fault, Henry Powell, Inc., should immediately advise suppliers
and consumers of the potential danger and try to either fix the problem or
design a safeguard for the mower to protect users.
Problems
8. (LO2—Financial versus managerial accounting)
A. Financial accounting is concerned with the preparation of general-purpose
financial statements used by external parties, whereas managerial
9. (LO3—Decision making and relevant factors)
Not all of the factors are relevant in choosing among flights. For example,
since the cost of beverages is the same for flights 1, 2, and 3, it is not
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10. (LO3, 4—Decision making and ethics)
Note to Instructors: This question is loosely based on the facts surrounding the
Space Shuttle Challenger disaster in 1986.
A. Knowing that the part may fail certainly requires the company to take some
C. Knowing that the part may fail certainly requires the company to take some
remedial action. At the very least, the company should inform the airplane
manufacturers and the airlines that the problem exists. The company would
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