Solutions Manual for

Solutions Manual for Managerial Accounting, 3e Charles Davis, Elizabeth Davis (All Chapters) 1 / 4

Chapter 1 – Accounting as a Tool for Management

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Accounting as a Tool for Management

Learning Objectives

• Define managerial accounting. (Unit 1.1)
• Describe the differences between managerial and financial accounting. (Unit 1.1)
• List and describe the four functions of managers. (Unit 1.1)
• Explain how the selection of a particular business strategy determines the information that

managers need to run an organization effectively. (Unit 1.2)

• Discuss the importance of ethical behavior in managerial accounting. (Unit 1.3)

Summary of End of Chapter Material

Difficulty: E = Easy, M = Moderate, D = Difficult

Bloom: K = Knowledge, C = Comprehension, AP = Application, AN = Analysis, S = Synthesis, E = Evaluation

AACSB: A = Analytic, C = Communication, E = Ethics

AICPA FN: DM = Decision modeling, RA = Risk Analysis, M = Measurement, R = Reporting, RS = Research, T = Technology AICPA PC: C = Communication, I = Interaction, L = Leadership, P = Professional demeanor, PM = Project Management, PS = Problem Solving and Decision Making, T = Technology IMA: BA = Business applications, BP = Budget Preparation, CM = Cost Management, DA = Decision Analysis, PM = Performance Measurement, R = Reporting, SP = Strategic Planning

Item L. O. Difficulty Level Minutes to Complete Bloom’s Taxonomy

AACSB AICPA

FN AICPA PC IMA Ethics Coverage

GUIDED UNIT PREPARATION

Unit 1.1

1 1 E 2 K C R C R

2 2 E 2 K C R C R

3 2 E 2 K C R C R

4 2 M 5-10 C C R C R

5 3 E 5-7 K C R C DA

Unit 1.2

1 4 M 4 C A R C PM, SP

2 4 D 5-7 C A R C SP

Unit 1.3

1 5 M 4 C E R C BA 

2 5 M 4 C, E A, E R C BA 

EXERCISES

1-1 1 M 12 AP A DM PS DA

1-2 2 D 10-15 AP C R C R

1-3 3 D 10-12 C A R C DA

1-4 4 M 12 AP A M PS SP

1-5 4 D 15-20 S, AN A DM PS DA,SP

1-6 4 M 10-15 C C R C PM

1-7 5 D 20 AP, AN A, E R C BA 

PROBLEMS

1-8 1, 3,

4

M 15-20 AP, AN A DM PS DA, SP 2 / 4

Solutions for Davis & Davis, Managerial Accounting, 3 rd ed.

1-2

Item L. O. Difficulty Level Minutes to Complete Bloom’s Taxonomy

AACSB AICPA

FN AICPA PC IMA Ethics Coverage

1-9 5 M 15-20 C, AN E R C BA 

CASES

1-10 3 M 15-20 S, AN A DM PS DA, SP

1-11 5 D 15-20 AN, E A, E R C BA 

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Chapter 1 – Accounting as a Tool for Management

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SOLUTIONS TO GUIDED UNIT PREPARATION

Unit 1.1

• Managerial accounting is the generation of relevant information to

support managers’ decision making activities.

• The primary users of financial accounting are decision makers who

are external to the organization. These decision makers might include investors, creditors, banks, and financial analysts.

• The primary users of managerial accounting are managers within the

organization. These managers may be in any department, such as marketing, operations, finance, human resources, and research and development.

4.Managerial Accounting Information Financial Accounting Information • Prepared for internal managers • Prepared for external users • Not subject to mandated rules • Must follow GAAP • Focuses on segments of the organization, such as product lines, regions, and divisions • Focuses on the organization as a whole • Uses results of past performance to project future results • Reports results of past performance • Prepared as needed to meet decision requirements • Prepared after the end of the accounting period • Timeliness is not sacrificed for absolute accuracy • Emphasis is on accuracy rather than timeliness

• Planning means setting a direction for the organization. Long-term,

or strategic planning, provides direction for a five- to ten-year period.Short-term, or operational planning, provides more detailed guidance for the coming year; it translates the company’s strategy into action steps. Controlling is the monitoring of day-to-day operations to identify any problems that require corrective action. Evaluating is the process of comparing a particular period’s actual results to planned results, for the purpose of assessing managerial

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