Managerial Accounting Workbook (Version 1.0) Tony Bell
Managerial AccountingWorkbook(Version 1.0)Tony Bell Tony Bell, 2016
Table of ContentsA Note to Instructors . 3Module 1: Introduction to Managerial Accounting . 4Module 2: Cost Concepts and the Schedule of Cost of Goods Manufactured . 7Module 3: Job-Order Costing . 13Module 4: Process Costing . 22Module 5: Activity-Based Costing . 31Module 6: Cost Behaviour . 36Module 7: Cost-Volume-Profit Analysis . 42Module 8: Budgeting . 50Module 9: Standard Costs and Variance Analysis . 62Module 10: Flexible Budgeting. 69Module 11: Performance Measurement: ROI, Residual Income and the Balanced Scorecard 72Module 12: Relevant Costs for Decision Making . 76Module 13: Capital Budgeting . 86
A Note to InstructorsI hope you find this workbook useful, I just want to point out three key features:1.) This book is totally free to you and your students. Feel free to copy it or post it to yourcourse website and feel free to share it with colleagues.2.) Although I am widely distributing a PDF file, I have gone to great effort to make a fullyeditable Word version of this document. Please contact me if you’d like to have a copyof the Word version. You can edit any of these problems to better fit in your class orsimply copy and paste an entire problem into an assignment or test, with the attribution“Source: accountingworkbook.com”, or “Adapted from: accountingworkbook.com”.3.) Every problem in this workbook has a video walkthrough available athttp://accountingworkbook.com. I suspect the true value in this book lies in the videowalkthroughs, as it will be useful for homework and particularly useful for “flipping theclassroom”.Please let me know if you would like to see additional question-types or topics included inthe future. I intend to add to this book frequently based on your input. Also, any feedbackyou can provide (particularly student feedback) would be greatly appreciated.Please note, you do not have my permission to use this for a commercial purpose, nor do youhave permission to recreate the videos found at http://accountingworkbook.com. Send me anemail if you have any questions about use or attribution.Thanks for checking out this workbook, and I hope you’ll have a look at the companionwebsite: http://accountingworkbook.com !Tony Belltbella@gmail.com
Module 1: Introduction toManagerial Accounting
Author’s note regarding Module 1 content:This workbook was created to mirror most introductory management accounting textbooks; assuch, this is an unusual module. The first chapter in most textbooks is composed of purelyqualitative content and this workbook was built to match. Subsequent modules in this workbookwill have A and B versions of numerical questions to allow students the opportunity to practice.1-1 – Financial vs Managerial AccountingDistinguish between financial and managerial accounting.1-2 - EthicsExplain the importance of ethics in accounting.
1-3 – Planning, Directing and ControllingThe three main tasks of a manager are said to be planning, directing and controlling. Explain thethree tasks.1-4 – Terminology and acronymsDefine: JIT, TQM, ABC, theory of constraints, Six Sigma, and the balanced scorecard.
Module 2: Cost Concepts andthe Schedule of Cost ofGoods Manufactured
2-1A – Cost ClassificationThe following are costs of Big Rig Trucks, a manufacturer of large diesel vehicles.1.) Aluminum used in manufacturing each truck’s body.2.) Factory supervisor’s salary.3.) Company president’s salary.4.) Cleaning supplies used for daily cleanup.5.) Wages of workers who build the engines.6.) Patent lawyer’s costs.7.) Accounting fees.8.) Depreciation on sales person’s car.Required:For each cost, identify it as:a.) Variable or Fixedb.) Product or Periodc.) Direct Material, Direct Labour, Manufacturing Overhead, Selling, Administrative or Research andDevelopment.2-1B – Cost ClassificationThe following are costs of Betty’s Burger Truck – a food truck operating in downtown Seattle.1.) Cooks’ wages.2.) Propane costs to heat the grill.3.) Gasoline costs to travel to events.4.) Painting company logo on the side of the truck.5.) Business license.6.) Depreciation on the cooking equipment.7.) Costs of improving the recipe for new bison burger.8.) Burger meat.Required:For each cost, identify it as:a.) Variable or Fixedb.) Product or Periodc.) Direct Material, Direct Labour, Manufacturing Overhead, Selling, Administrative or Research andDevelopment.
2-2A – Schedule of Cost of Goods ManufacturedKelowna Plumbing Supplies shows the following data related to its December 31, 2017 fiscalyear:Raw materials inventory, January 1, 2017Raw materials inventory, December 31, 2017Work in process inventory, January 1, 2017Work in process inventory, December 31, 2017Finished goods inventory, January 1, 2017Finished goods inventory, December 31, 2017AdvertisingFactory supervisor's salaryCompany president's salaryProperty taxes - factoryDepreciation - factoryFactory maintenanceSales commissionsDepreciation - officeUtilities expense - factoryUtilities expense - officePurchases of raw materialsDirect labour 0,000Required:Based on the information above, prepare a schedule of cost of goods manufactured.
2-2B – Schedule of Cost of Goods ManufacturedVernon Bakery shows the following data related to its August 31, 2017 fiscal year:Raw materials inventory, September 1, 2016Raw materials inventory, August 31, 2017Work in process inventory, September 1, 2016Work in process inventory, August 31, 2017Finished goods inventory, September 1, 2016Finished goods inventory, August 31, 2017Rent on the commercial kitchenDepreciation of delivery vehicleSalary paid to head bakerPurchases of raw materialsDelivery costsUtilities expense - officeDepreciation - kitchen equipmentDividends paid to shareholdersUtilities expense - kitchenMarketingWages paid to kitchen cleaning staffWages paid to assistant bakers ed on the information above, prepare a schedule of cost of goods manufactured.
2-3A – Schedule of COGM, Schedule of COGS and Income StatementOutdoor Supplies manufactures gear for hunting and camping. The company shows thefollowing data related to its December 31, 2017 fiscal year end:Raw materials inventory, January 1, 2017Raw materials inventory, December 31, 2017Work in process inventory, January 1, 2017Work in process inventory, December 31, 2017Finished goods inventory, January 1, 2017Finished goods inventory, December 31, 2017Direct labourFactory supervisor's wagesCompany president's salaryPurchases of raw materialsDepreciation (60% factory, 40% office)Property taxes (80% factory, 20% office)Sales commissionsRepairs and maintenance (100% relate to the factory)Utilities expense (90% factory, 10% office)Sales revenueAdvertisingRequired:Based on the information above:a.) Prepare a schedule of cost of goods manufactured.b.) Prepare a schedule of cost of goods sold.c.) Prepare an income statement (assuming a tax rate of 20%.) ,000215,000
2-3B – Schedule of COGM, Schedule of COGS and Income StatementHiSing manufactures beverages for the Taiwanese market. The following data relate to its July31, 2017 fiscal year end:Raw materials inventory, August 1, 2016Raw materials inventory, July 31, 2017Work in process inventory, August 1, 2016Work in process inventory, July 31, 2017Finished goods inventory, August 1, 2016Finished goods inventory, July 31, 2017Direct labourSales commissionsFactory supervisors’ wagesCompany president's salaryPurchases of raw materialsProperty taxes (75% factory, 25% office)Depreciation (90% factory, 10% office)Repairs and maintenance (95% factory, 5% office)Utilities expense (90% factory, 10% office)Sales revenueAdvertisingRequired:Based on the information above:d.) Prepare a schedule of cost of goods manufactured.e.) Prepare a schedule of cost of goods sold.f.) Prepare an income statement (assuming a tax rate of 25%.) 00600,00010,300,0002,000,000
Module 3: Job-Order Costing
3-1A – Job Order Costing vs Process CostingFor each of the companies listed below, note which costing method would be more appropriate:Job Order Costing (J), or Process Costing (P):a.)b.)c.)d.)e.)f.)g.)h.)A company that does car repairA company that does architectural designA company that makes yoga matsA company that gives immigration consulting adviceA company that refines oil into gasolineAn accounting firmA company that manufactures crayonsA company that makes designer handbags
3-1B – Job Order Costing vs Process CostingFor each of the companies listed below, note which costing method would be more appropriate:Job Order Costing (J), or Process Costing (P):a.)b.)c.)d.)e.)f.)g.)h.)A company that produces cutleryAn engineering companyA home renovation contractorA fire extinguisher manufacturerA custom cabinet manufacturerA pop songwriterA cellphone makerA cellphone repair shop
3-2A – Predetermined overhead rate: costing an individual jobTony’s Tables makes high-end, custom boardroom tables. The company applies overhead coststo jobs on the basis of direct labour hours. The company estimates manufacturing overhead forthe year to be 320,000. The company expects its direct labour workforce to work for 20,000hours during the year.Job #1843 shows the following cost information:Walnut:300 board feet used at a cost of 15 per board foot.Labour:240 hours at a cost of 20 per hour.Required:a.) Compute the cost of the job.b.) Assuming the company marks up their price to by three times the cost, what will thecompany charge its customer for the table?
3-2B – Predetermined overhead rate: costing an individual jobReady Brakes specializes in brake repair in automobiles. The company applies overhead costs tojobs on the basis of direct labour hours. For the current year, total manufacturing overhead wasexpected to cost 50,000. The total expected direct labour hours were anticipated to be 8,000.The company was working on job #842, a brake pad replacement on a Volkswagen Golf. Thefollowing costs were incurred:New Brake Pads: 8Labour:40 minutes of employee time – wage rate of 9 per hour.Required:a.) Determine the cost of the job.b.) Assuming the company charges a flat rate of 50 to replace brake pads, how much grossprofit will have been earned on Job #842?
3-3A – Predetermined Overhead Rate, Overapplied and Underapplied OverheadCabinets4U makes and installs custom cabinets for home renovations. The company appliesoverhead on the basis of direct labour hours. The company estimates its annual overhead to be 125,000 and it expects employees to work 10,000 hours. During the year, employees actuallyworked 11,000 hours and the actual amount spent on overhead was 130,000.Required:a.) Compute the predetermined overhead rate.b.) How much overhead would be applied to jobs during the year?c.) By how much was overhead overapplied or underapplied for the year?
3-3B – Predetermined Overhead Rate, Overapplied and Underapplied OverheadJake’s Autobody is a car repair shop. The company uses direct labour cost as a basis forapplying manufacturing overhead costs to jobs. The company estimates its annual overhead tobe 140,000 and it expects employees to work 20,000 hours at an average wage rate of 12 perhour. During the year, employees actually worked 18,000 hours (at a wage rate of 12.25 perhour) and the actual amount spent on overhead was 150,000.Required:a.) Compute the predetermined overhead rate.b.) How much overhead would be applied to jobs during the year?c.) By how much was overhead overapplied or underapplied for the year?
3-4A – Journal Entries of Job Order CostingIntercity Roofing manufactures and installs custom shingles for use on damaged roofs ofresidential houses and apartments. The company uses a specialized manufacturing process toensure the replacement shingles are an exact match with the existing roof. The company uses ajob order costing system to apply manufacturing overhead on the basis of direct labour cost. Thecompany estimates that during the next year, it will incur 70,000 in overhead costs and will pay 140,000 in direct labour costs. During the year, the following transactions occurred:a.) Purchased 180,000 of direct materials on account.b.) Purchased 5,000 of supplies on account. (The supplies consisted of glue and cleaningsupplies.)c.) Requisitioned 170,000 of direct materials and 4,500 of supplies for use in production.d.) Incurred employee costs:i. Direct labour 150,000ii. Indirect labour40,000iii. Administrative salaries 190,000iv. Sales salaries30,000v. Sales commissions90,000e.) Advertised on local television: 5,000f.) Rent: 12,000. 40% of the space related to sales offices, 60% was a shop used inproduction of roofing materials.g.) Depreciation: 25,000. 70% relates to roofing equipment, 30% relates to officeequipment.h.) Insurance expired: 15,000. 90% relates to the factory, the remainder relates to insuranceon the office equipment.i.) Manufacturing overhead costs were applied to production.j.) Goods costing 375,000 were completed.k.) The company had sales on account of 800,000. According to cost data, the jobs cost 350,000.Required:a.) For items a.)-k.) above, record journal entries. Unless otherwise noted, assume alltransactions were on account.b.) Was overhead overapplied or underapplied for the period? By how much?c.) Record a journal entry to close overhead to cost of goods sold.d.) Based on the information above, prepare an income statement for the company – assumea 20% tax rate.
3-4B – Journal Entries of Job Order CostingAce Cakes makes cakes and desserts for all festive occasions. The company uses a job ordercosting system to allocate manufacturing overhead costs to jobs on the basis of direct labourhours. The company’s wages are unusually high as it employs highly skilled pastry chefs inmaking desserts and pays its chefs 25 per hour. The company anticipates overhead costs for theupcoming year to be 150,000 and expects to see its pastry chefs work for a combined total of16,000 hours. The following transactions occurred during the year:a.)b.)c.)d.)e.)f.)g.)h.)i.)j.)k.)Purchased 250,000 of direct materials on account.Purchased 10,000 of cleaning supplies on account.Requisitioned 240,000 of direct materials and 9,500 of supplies for use in production.Incurred employee costs:i. Direct labour 450,000ii. Indirect labour50,000iii. Administrative salaries 200,000iv. Sales wages80,000Advertising: 3,000Property taxes: 8,000. 10% of the space related to sales offices, 90% was the kitchen.Depreciation: 55,000. 80% relates to kitchen equipment, 20% relates to officeequipment.Insurance expired: 15,000. 90% relates to the kitchen, the remainder relates toinsurance on the office equipment.Manufacturing overhead costs were applied to production.Desserts costing 790,000 were completed.The company had sales on account of 1,800,000. According to cost data, the jobs cost 720,000.Required:a.) For items a.)-k.) above, record journal entries. Unless otherwise noted, assume alltransactions were on account.b.) Was overhead overapplied or underapplied for the period? By how much?c.) Record a journal entry to close overhead to cost of goods sold.d.) Based on the information above, prepare an income statement for the company – assumea 25% tax rate.
Module 4: Process Costing
4-1A – Production ReportBertuzzi Tires has three departments. Its first department (the Processing Department) shows thefollowing data for the month of July:Work in process, beginning:Units in process8,000Stage of completion with respect to materials80%Stage of completion with respect to conversion35%Costs in the beginning inventory:Materials costLabour costOverhead costUnits started into production during the monthUnits completed and transferred outCosts added to production during the month:Materials costLabour costOverhead costWork in process, ending:Units in processStage of completion with respect to materialsStage of completion with respect to conversion 110,500 33,000 26,00094,00092,000 950,000 310,000 170,000?90%60%Required:Using the weighted average method, prepare a production cost report for the company.
4-1B – Production ReportRitchie Company has two departments. Its first department (the Melting Department) shows thefollowing data for the month of April:Work in process, beginning:Units in process400Stage of completion with respect to materials60%Stage of completion with respect to conversion85%Costs in the beginning inventory:Materials costLabour costOverhead cost 170 160 300Units started into production during the monthUnits completed and transferred out1,1001,400Costs added to production during the month:Materials costLabour costOverhead costWork in process, ending:Units in processStage of completion with respect to materialsStage of completion with respect to conversion 1,300 800 1,700?70%80%Required:Using the weighted average method, prepare a production cost report for the company.
4-2A – Production ReportStable Platforms manufactures tables. Materials are added at the beginning of the process andconversion costs are incurred evenly throughout the process. Data for February follows:Production DataUnitsPercent CompleteUnits in process, February 112075%Units started into production380Units in process, February 2810050%Cost DataWork in process, Feb 1:MaterialsLabourManufacturing overhead 1,000500750Costs added:MaterialsLabourManufacturing overheadRequired:Using the weighted average method, prepare a production cost report for the company. 4,0003002,500
4-2B – Production ReportDaring Watercraft manufactures small boats. Materials are added at the beginning of the processand conversion costs are incurred evenly throughout the process. Data for April follows:Production DataUnitsPercent CompleteUnits in process, April 1100060%Units started into production4000Units in process, April 30150020%Cost DataWork in process, April 1:MaterialsLabourManufacturing overhead 25,5003,0006,000Costs added:MaterialsLabourManufacturing overheadRequired:Using the weighted average method, prepare a production cost report for the company. 90,00012,00018,900
4-3A – Production ReportMom’s Cookies has two departments, Baking and Packaging. Raw materials are introduced atthe beginning of the baking process. The following is the department’s work in process TAccount for May:Work in Process – Baking DepartmentMay 1 balance: (50 kilograms; 60% complete as toCompleted and transferred to theconversion)750 packaging department ( ? kilograms)Costs added:Materials (1,5
2.) Factory supervisor’s salary. 3.) Company president’s salary. 4.) Cleaning supplies used for daily cleanup. 5.) Wages of workers who build the engines. 6.) Patent lawyer’s costs. 7.) Accounting fees. 8.) Depreciation on sales person’s car. Required: For each cost, id
H2: Financial Versus Managerial Accounting 5) A budget is a managerial accounting tool used in the planning process. Answer: TRUE Diff: 1 LO: 16-1 AICPA Functional: Reporting PE Question Type: Concept H2: Financial Versus Managerial Accounting Test Bank for Horngrens Financial and Managerial Accounting The Managerial Chapters 5th Edition by .
Horngren, Datar & Rajan. Cost Accounting: A Managerial Emphasis, 14th Ed. 2012 Reference Books Garison. Noreen and Brewer, Managerial Accounting, 13th Ed. 2010 Gray and Ricketts; “Cost and Managerial Accounting” Heltger and Matulich; “Managerial Accounting” Moore - Jaedicke- Anderson; “Managerial Accounting”
Textbook Equity Paperback, Principles of Accounting, Volume 1 , Financial Accounting (Chapters 9 – 18), List Price 14.95 PDF Version, Accounting Principles: Managerial Accounting, Free Download Textbook Equity Paperback, Accounting Principles: Managerial Accounting, 316 pages, (chapters 19 – 26 of the original volume).
Textbook Equity Paperback, Principles of Accounting, Volume 1 , Financial Accounting (Chapters 9 - 18), List Price 14.95 PDF Version, Accounting Principles: Managerial Accounting, Free Download Textbook Equity Paperback, Accounting Principles: Managerial Accounting, 316 pages, (chapters 19 - 26 of the original volume).
Managerial Accounting Study Guide . Table of Contents 1. Introduction to Managerial Accounting 2. Introduction to Cost Terms and Cost Concepts . It is important to note that even though financial accounting reports are aimed primarily at external users and managerial accounting reports are aimed primarily at internal users, managers also make .
Garrison, Managerial Accounting, 12th Edition 3 True/False Questions 1. Although financial and managerial accounting differ in many ways, they are similar in that both rely on the same underlying financial data. Answer: True Level: Medium LO: 1 2. Managerial accounting is a branch of financial accounting and serves essentially the
FINANCIAL ACCOUNTING : MEANING, NATURE AND ROLE OF ACCOUNTING STRUCTURE 1.0 Objective 1.1 Introduction 1.2 Origin and Growth of Accounting 1.3 Meaning of Accounting 1.4 Distinction between Book-Keeping and Accounting 1.5 Distinction between Accounting and Accountancy 1.6 Nature of Accounting 1.7 Objectives of Accounting 1.8 Users of Accounting Information 1.9 Branches of Accounting 1.10 Role .
Page 1-5 Managerial Accounting Basics Managerial accounting, also called management accounting, is a field of accounting that provides economic and financial information for managers and other internal users. Managerial accounting applies to all types of
