CHAPTER 16 (FIN MAN); CHAPTER 1 (MAN) MANAGERIAL .

CHAPTER 16 (FIN MAN); CHAPTER 1 (MAN)MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLESDISCUSSION QUESTIONS1.Financial accounting and managerial accounting are different in several ways. Financialaccounting information is reported in statements that are useful to persons or groups outside ofa company. These statements objectively report the results of operations for fixed periods oftime and the financial condition of the business under generally accepted accounting principles.Managerial accounting information uses both subjective and objective information to meet thespecific needs of management. This non-GAAP information can be reported periodically or asneeded by management and can be reported for the entire entity or for segments of the organization.This information includes (i) historical data, which provide objective measures of past operations,and (ii) estimated data, which provide subjective estimates about future decisions.2.a.A line department is directly involved in providing goods and services to customers, while astaff department provides service, assistance, or advice to line departments or other staffdepartments.b.(1) Sales Department(2) Personnel Department3.Direct materials cost4.Prime costs are the combination of direct materials and direct labor costs, while conversioncosts are the combination of direct labor costs and factory overhead costs.5.Product costs are composed of three elements of manufacturing costs: direct materials cost, directlabor cost, and factory overhead cost. These costs are treated as assets until the product is sold.Period costs consist of selling and administrative expenses that are used in generating revenueduring the current period. They are recognized as expenses on the current period’s income statement.6.The three inventory accounts for a manufacturing business are as follows:a.Finished goods inventory consists of completed (or finished) products that have not been sold.b.Work in process inventory consists of the direct materials, direct labor, and factory overheadcosts for products that have entered the manufacturing process, but are not yet completed.c.Materials inventory consists of the costs of the direct and indirect materials that have notentered the manufacturing process.7.Finished goods, work in process, and materials8.The cost of finished goods and the cost of work in process included the following:9.10.a.Direct materials—the costs of materials that enter directly into the finished product.b.Direct labor—the wages of factory workers who convert materials into a finished product.c.Factory overhead—the costs, other than direct materials and direct labor, that are incurred inthe manufacturing process.Cost of goods soldA merchandising business purchases merchandise (products) in a finished state for resale tocustomers. The cost of product sold is called cost of merchandise sold. A manufacturer makesthe product it sells using direct materials, direct labor, and factory overhead. The cost of theproduct sold is generally called cost of goods sold.16-1 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Full file at l-Accounting-13th-Edition-by-Warren

CHAPTER 16Managerial Accounting Concepts and PrinciplesPRACTICE EXERCISESPE 16-1A (FIN MAN); PE 1–1A (MAN)Controlling (a)Planning (c)Decision making (b)PE 16–1B (FIN MAN); PE 1–1B (MAN)Planning (a)Directing (c)Controlling (b)PE 16–2A (FIN MAN); PE 1–2A (MAN)a.b.c.d.DLFODMFOPE 16–2B (FIN MAN); PE 1–2B (MAN)a.b.c.d.DM (or FO if the cost is immaterially small)DLFODMPE 16–3A (FIN MAN); PE 1–3A (MAN)a.b.c.d.BCPCPE 16–3B (FIN MAN); PE 1–3B (MAN)a.b.c.d.PBC (or P if significant)C16-2 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Full file at l-Accounting-13th-Edition-by-Warren

CHAPTER 16Managerial Accounting Concepts and PrinciplesPE 16–4A (FIN MAN); PE 1–4A (MAN)a.b.c.d.Product costProduct costPeriod costPeriod costPE 16–4B (FIN MAN); PE 1–4B (MAN)a.b.c.d.Period costProduct costProduct costPeriod costPE 16–5A (FIN MAN); PE 1–5A (MAN)a.b.Work in process inventory, March 1 Cost of direct materials used in production 21,000Direct labor 54,250Factory overhead 35,000Total manufacturing costs incurred during March Total manufacturing costs Less work in process inventory, March 31 Cost of goods manufactured Finished goods inventory, March 1 Cost of goods manufactured Cost of finished goods available for sale Less finished goods inventory, March 31 Cost of goods sold 87,500110,250 197,75092,750 105,000 36,750105,000 141,75042,000 99,750PE 16–5B (FIN MAN); PE 1–5B (MAN)a.Work in process inventory, July 1 Cost of direct materials used in production 67,200Direct labor 88,000Factory overhead 44,800Total manufacturing costs incurred during July Total manufacturing costs Less work in process inventory, July 31 Cost of goods manufactured b.Finished goods inventory, July 1 Cost of goods manufactured Cost of finished goods available for sale Less finished goods inventory, July 31 Cost of goods sold 32,800200,000 232,80029,600 203,200 37,600203,200 240,80027,200 213,60016-3 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Full file at l-Accounting-13th-Edition-by-Warren

CHAPTER 16Managerial Accounting Concepts and PrinciplesEXERCISESEx. 16–1 (FIN MAN); Ex. 1–1 (MAN)a.b.c.d.Factory overhead costDirect materials costDirect materials costDirect materials coste.f.g.h.Factory overhead costFactory overhead costDirect materials costDirect labor costf.g.h.i.j.Direct labor costFactory overhead costDirect materials costDirect materials costFactory overhead costj.k.l.m.n.o.p.q.Product costProduct costProduct costPeriod costPeriod costProduct costProduct costProduct coste.f.g.work in process inventoryconversiondecreasesEx. 16–2 (FIN MAN); Ex. 1–2 (MAN)a.b.c.d.e.Factory overhead costFactory overhead costFactory overhead costDirect labor costDirect materials costEx. 16–3 (FIN MAN); Ex. 1–3 (MAN)a, b, d, f, gEx. 16–4 (FIN MAN); Ex. 1–4 (MAN)a.b.c.d.e.f.g.h.i.Period costProduct costProduct costPeriod costPeriod costProduct costProduct costPeriod costPeriod costEx. 16–5 (FIN MAN); Ex. 1–5 (MAN)a.b.c.d.periodimprovecostscost object16-4 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Full file at l-Accounting-13th-Edition-by-Warren

CHAPTER 16Managerial Accounting Concepts and PrinciplesEx. 16–6 (FIN MAN); Ex. 1–6 g.strategicmaterials inventoryelectricity used to run assembly rectindirectEx. 16–7 (FIN MAN); Ex. 1–7 tindirectEx. 16–8 (FIN MAN); Ex. 1–8 (MAN)1.The maintenance salaries and indirect materials should be included as factoryoverhead.2.The factory overhead incorrectly includes the following items: sales salaries,promotional expenses, corporate office insurance and property taxes, and corporateoffice depreciation. These items should not be included as factory overhead. Thecorrected report is as follows:MARCHING ANTS INC.Manufacturing CostsFor the Quarter Ended June 30, 2016Cost of direct materials used in productionDirect laborFactory overhead:Maintenance salariesIndirect materialsSupervisor salariesHeat, light, and powerInsurance and property taxes—plantDepreciation—plant and equipmentTotal 551,300478,100 84,40056,200517,500140,650151,900123,7501,074,400 2,103,80016-5 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Full file at l-Accounting-13th-Edition-by-Warren

CHAPTER 16Managerial Accounting Concepts and PrinciplesEx. 16–9 (FIN MAN); Ex. 1–9 (MAN)a.VIDEO WAVE MANUFACTURING COMPANYIncome StatementFor the Month Ended January 31, 2016RevenuesCost of goods soldGross profitOperating expenses:Selling expensesAdministrative expensesTotal operating expensesNet incomeb. 652,000365,000 287,000 86,52071,250157,770 129,230Inventory balances on January 31, 2016:Materials ( 133,200 – 94,080) 39,120Work in Process ( 94,080 180,320 211,680 – 425,320) 60,760Finished Goods ( 425,320 – 365,000) 60,320Ex. 16–10 (FIN MAN); Ex. 1–10 (MAN)FLAT TOP COMPANYBalance SheetDecember 31, 2016Current assets:CashAccounts receivableInventories:Finished goodsWork in processMaterialsSuppliesPrepaid insuranceTotal current assets 112,000105,000 40,250157,50087,500285,25071,30027,500 601,05016-6 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Full file at l-Accounting-13th-Edition-by-Warren

CHAPTER 16Managerial Accounting Concepts and PrinciplesEx. 16–11 (FIN MAN); Ex. 1–11 (MAN)Materials inventory, June 1, 2016 279,000828,000Add materials purchased during June Cost of materials available for use 1,107,000252,000Less materials inventory, June 30, 2016 Cost of direct materials used in production 855,000Ex. 16–12 (FIN MAN); Ex. 1–12 (MAN)a.b.c.d.e.f. 179,200 145,600 243,600 226,800 9,800 8,400( 22,400 156,800)( 179,200 – 33,600)( 294,000 – 50,400)( 294,000 – 67,200)( 68,600 – 58,800)( 68,600 – 60,200)Ex. 16–13 (FIN MAN); Ex. 1–13 (MAN)Work in process inventory, January 1, 2016 Add manufacturing costs incurred during January:Cost of direct materials used in production Direct labor Factory overhead Total manufacturing costs incurred Total manufacturing costs Less work in process inventory, January 31, 2016 Cost of goods manufactured 162,000 390,000336,000234,000960,000 1,122,000170,400 951,600Ex. 16–14 (FIN MAN); Ex. 1–14 (MAN)a.b.c.d.e.f. 390,600 317,800 214,200 198,800 55,200 26,400( 61,600 329,000)( 390,600 – 72,800)( 260,400 – 46,200)( 260,400 – 61,600)( 540,000 – 484,800)( 540,000 – 513,600)16-7 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Full file at l-Accounting-13th-Edition-by-Warren

CHAPTER 16Managerial Accounting Concepts and PrinciplesEx. 16–15 (FIN MAN); Ex. 1–15 (MAN)a.MIX-A-LOT MANUFACTURING COMPANYStatement of Cost of Goods ManufacturedFor the Month Ended March 31, 2016Work in process inventory, March 1, 2016 214,200Direct materials:Materials inventory, March 1, 2016Purchases 315,000604,800Cost of materials available for useLess materials inventory, March 31, 2016 919,800277,200Cost of direct materials used inproduction 642,600Direct labor567,000Factory overhead:Indirect labor 60,480Machinery depreciation36,000Heat, light, and power12,600Supplies10,080Property taxesMiscellaneous cost8,82016,380Total factory overhead144,360Total manufacturing costs incurred during March1,353,960Total manufacturing costsLess work in process inventory, March 31, 2016 1,568,160239,400Cost of goods manufactured 1,328,760b. Finished goods inventory, March 1, 2016 Cost of goods manufactured Cost of finished goods available for sale Less finished goods inventory, March 31, 2016 Cost of goods sold 163,8001,328,760 1,492,560189,000 1,303,56016-8 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Full file at l-Accounting-13th-Edition-by-Warren