Solution manual for managerial accounting 13th edition by warren

Product costs are composed of three elements of manufacturing costs: direct materials cost, direct labor cost, and factory overhead cost.. Factory overhead—the costs, other than direct m

1 Financial accounting and managerial accounting are different in several ways Financial

accounting information is reported in statements that are useful to persons or groups outside of

a 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 the specific needs of management This non-GAAP information can be reported periodically or as needed 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 a

staff department provides service, assistance, or advice to line departments or other staff departments

b. (1) Sales Department(2) Personnel Department

3 Direct materials cost

4 Prime costs are the combination of direct materials and direct labor costs, while conversion

costs 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, direct

labor 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 revenue during 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 not entered the manufacturing process

7 Finished goods, work in process, and materials

8 The cost of finished goods and the cost of work in process included the following:

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

CHAPTER 16 (FIN MAN); CHAPTER 1 (MAN) MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES

DISCUSSION QUESTIONS

PE 16-1A (FIN MAN); PE 1–1A (MAN)

PE 16–2B (FIN MAN); PE 1–2B (MAN)

a DM (or FO if the cost is immaterially small)

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PE 16–4A (FIN MAN); PE 1–4A (MAN)

PE 16–5A (FIN MAN); PE 1–5A (MAN)

a Work in process inventory, March 1……… $ 87,500 Cost of direct materials used in production……… $21,000

Direct labor……… 54,250 Factory overhead……… 35,000 Total manufacturing costs incurred during March……… 110,250 Total manufacturing costs……… $197,750 Less work in process inventory, March 31……… 92,750 Cost of goods manufactured……… $105,000

b Finished goods inventory, March 1……… $ 36,750 Cost of goods manufactured……… 105,000 Cost of finished goods available for sale……… $141,750 Less finished goods inventory, March 31……… 42,000

PE 16–5B (FIN MAN); PE 1–5B (MAN)

a Work in process inventory, July 1……… $ 32,800 Cost of direct materials used in production……… $67,200

Direct labor……… 88,000 Factory overhead……… 44,800 Total manufacturing costs incurred during July……… 200,000 Total manufacturing costs……… $232,800 Less work in process inventory, July 31……… 29,600 Cost of goods manufactured……… $203,200

b Finished goods inventory, July 1……… $ 37,600

Ex 16–1 (FIN MAN); Ex 1–1 (MAN)

a Factory overhead cost e Factory overhead cost

b Direct materials cost f Factory overhead cost

c Direct materials cost g Direct materials cost

d Direct materials cost h Direct labor cost

Ex 16–2 (FIN MAN); Ex 1–2 (MAN)

a Factory overhead cost f Direct labor cost

b Factory overhead cost g Factory overhead cost

c Factory overhead cost h Direct materials cost

d Direct labor cost i Direct materials cost

e Direct materials cost j Factory overhead cost

Ex 16–3 (FIN MAN); Ex 1–3 (MAN)

a, b, d, f, g

Ex 16–4 (FIN MAN); Ex 1–4 (MAN)

i Period cost

Ex 16–5 (FIN MAN); Ex 1–5 (MAN)

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Ex 16–6 (FIN MAN); Ex 1–6 (MAN)

c period g electricity used to run assembly line

Ex 16–8 (FIN MAN); Ex 1–8 (MAN)

1 The maintenance salaries and indirect materials should be included as factory overhead.

2 The factory overhead incorrectly includes the following items: sales salaries, promotional expenses, corporate office insurance and property taxes, and corporate office depreciation These items should not be included as factory overhead The corrected report is as follows:

Cost of direct materials used in production $ 551,300

Insurance and property taxes—plant 151,900 Depreciation—plant and equipment 123,750 1,074,400

MARCHING ANTS INC.

Manufacturing Costs For the Quarter Ended June 30, 2016

Ex 16–9 (FIN MAN); Ex 1–9 (MAN)

Ex 16–10 (FIN MAN); Ex 1–10 (MAN)

FLAT TOP COMPANY Balance Sheet December 31, 2016

VIDEO WAVE MANUFACTURING COMPANY

Income Statement For the Month Ended January 31, 2016

16-6

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Ex 16–11 (FIN MAN); Ex 1–11 (MAN) Materials inventory, June 1, 2016……… $ 279,000 Add materials purchased during June……… 828,000 Cost of materials available for use……… $1,107,000 Less materials inventory, June 30, 2016……… 252,000 Cost of direct materials used in production……… $ 855,000

Ex 16–12 (FIN MAN); Ex 1–12 (MAN)

Cost of direct materials used in production……… $390,000 Direct labor……… 336,000 Factory overhead……… 234,000 Total manufacturing costs incurred……… 960,000 Total manufacturing costs……… $1,122,000 Less work in process inventory, January 31, 2016……… 170,400 Cost of goods manufactured……… $ 951,600

Ex 16–14 (FIN MAN); Ex 1–14 (MAN)

Ex 16–15 (FIN MAN); Ex 1–15 (MAN)

b Finished goods inventory, March 1, 2016……… $ 163,800 Cost of goods manufactured……… 1,328,760 Cost of finished goods available for sale……… $1,492,560 Less finished goods inventory, March 31, 2016……… 189,000 Cost of goods sold……… $1,303,560

MIX-A-LOT MANUFACTURING COMPANY Statement of Cost of Goods Manufactured For the Month Ended March 31, 2016

16-8

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Ex 16–16 (FIN MAN); Ex 1–16 (MAN)

a Finished goods inventory, October 1, 2016……… $101,250 Cost of goods manufactured……… 450,000 Cost of finished goods available for sale……… $551,250 Less finished goods inventory, October 31, 2016……… 93,800

Ex 16–17 (FIN MAN); Ex 1–17 (MAN)

b Cost of goods manufactured……… $396,000 Less cost of goods sold……… 330,000 Finished goods inventory……… $ 66,000

Direct materials cost……… $211,200

d Total manufacturing costs……… $455,400 Less: Direct materials……… $211,200

Factory overhead costs (indirect labor and factory depreciation)*……… 198,000 409,200

* $171,600 + $26,400

e Total manufacturing costs……… $455,400 Less cost of goods manufactured……… 396,000 Work in process inventory……… $ 59,400

Ex 16–18 (FIN MAN); Ex 1–18 (MAN)

The Hotel Monaco has excess capacity for this day, so it is willing to accept

additional customers To determine whether or not to accept Natalie Mooney’s bid, the Hotel Monaco could use managerial accounting information to determine the additional cost of servicing the room during and following Natalie’s stay

These costs would include the housekeeping labor cost per room, the cost of

room supplies (soap, paper, etc.), laundry labor and material cost, and utility cost during her stay If Natalie’s bid is greater than the additional cost of servicing

Natalie’s room for the night, then the Hotel Monaco will likely accept her bid

This use and analysis of managerial accounting information is called differential analysis and is discussed in greater detail in Chapter 24.

16-10

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Prob 16–1A (FIN MAN); Prob 1–1A (MAN)

Prob 16–2A (FIN MAN); Prob 1–2A (MAN)

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Prob 16–3A (FIN MAN); Prob 1–3A (MAN)

1 The most logical definition for the final cost object would be the patient The reason is that the cost can be accumulated at the patient level for billing and insurance reimbursement purposes.

Prob 16–4A (FIN MAN); Prob 1–4A (MAN)

Total manufacturing costs incurred during December 1,035,000

VOLT COMPANY Statement of Cost of Goods Manufactured For the Month Ended December 31, 2016

16-14

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Prob 16–4A (FIN MAN); Prob 1–4A (MAN) (Concluded) 3.

Cost of goods sold:

Finished goods inventory, December 1, 2016 $ 204,000

Cost of finished goods available for sale $1,228,500 Less finished goods inventory, December 31, 2016 177,000

VOLT COMPANY Income Statement For the Month Ended December 31, 2016

Prob 16–5A (FIN MAN); Prob 1–5A (MAN)

Factory overhead:

Depreciation expense—factory equipment 56,160

Total manufacturing costs incurred during

Less work in process inventory,

THE NEWQUEST CORPORATION Statement of Cost of Goods Manufactured For the Year Ended December 31, 2016

16-16

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Prob 16–5A (FIN MAN); Prob 1–5A (MAN) (Concluded) 2.

Cost of goods sold:

Finished goods inventory, January 1, 2016 $ 608,400

Cost of finished goods available for sale $2,124,970 Less finished goods inventory,

THE NEWQUEST CORPORATION

Income Statement For the Year Ended December 31, 2016

Prob 16–1B (FIN MAN); Prob 1–1B (MAN)

* Item h might also be classified as direct material cost if the cost is significant because it

can be directly traced to the end product.

16-18

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Prob 16–2B (FIN MAN); Prob 1–2B (MAN)

Prob 16–3B (FIN MAN); Prob 1–3B (MAN)

1 The most logical definition for the final cost object would be a hotel guest Guests consume services such as a meal, a night’s stay in a hotel room, room service,

a telephone call, etc.

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Prob 16–4B (FIN MAN); Prob 1–4B (MAN)

* Note: The student must calculate part (b) prior to calculating part (a) because

the solution to part (b) is needed as an input to part (a).

Total manufacturing costs incurred during

ON COMPANY Statement of Cost of Goods Manufactured For the Month Ended December 31, 2016

Prob 16–4B (FIN MAN); Prob 1–4B (MAN) (Concluded)

3.

Cost of goods sold:

Finished goods inventory, December 1, 2016 $ 224,000

Cost of finished goods available for sale $1,024,800 Less finished goods inventory, December 31, 2016 197,400

ON COMPANY Income Statement For the Month Ended December 31, 2016

16-22

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Prob 16–5B (FIN MAN); Prob 1–5B (MAN) 1.

Factory overhead:

Depreciation expense—factory equipment 14,560

SHANIKA COMPANY Statement of Cost of Goods Manufactured For the Year Ended December 31, 2016

Prob 16–5B (FIN MAN); Prob 1–5B (MAN) (Concluded)

2.

Cost of goods sold:

Finished goods inventory, January 1, 2016 $113,750

Cost of finished goods available for sale $481,260 Less finished goods inventory,

Depreciation expense—office equipment 22,750 Property taxes—headquarters building 13,650 $113,750 Selling expenses:

SHANIKA COMPANY Income Statement For the Year Ended December 31, 2016

16-24

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CP 16–1 (FIN MAN); CP 1–1 (MAN) Although Fred may appear to have technically complied with company policy, his computation of the cost of lumber is unethical Fred has created an apparent conflict-of-interest situation Thus, although it is appropriate for Fred to take advantage of H Jeckel’s policy of allowing employees to purchase materials at cost, he should have had someone else (such as his supervisor) determine the amount that he owed for the lumber Clearly, selecting the lowest price has opened the door for criticism.

CP 16–2 (FIN MAN); CP 1–2 (MAN) The objectives of managerial accounting and financial accounting are different; therefore, the vice president’s statement is very incomplete In one sense, the statement may be true at only very high levels in the organization For example, the division manager may be evaluated on the basis of financial accounting profit Thus, the divisional manager would be evaluated by central management in nearly the same way that central management is evaluated by shareholders.

Lower in the organization, the financial concerns of the stockholder begin to diverge significantly from the day-to-day operating decision needs of the manager.

As such, the statement becomes very inaccurate the closer one gets to the actual operations Operational performance measures will focus on cost, quality, delivery time, equipment availability, inventory levels, scrap, waste, and efficiency This list

is much broader and more detailed than the financial statement numbers provided

to the stockholders.

The stockholders’ interest in profit is related to increasing shareholder value.

Managers must increase long-term shareholder value by engaging in strategies that enhance people, product, and processes in the delivery of value to customers These strategies can be measured by both financial and nonfinancial means

Therefore, it is not surprising to see a much broader set of objective and subjective measures used internally in the organization to guide strategy and operations.

CASES & PROJECTS