Managerial Accounting Tools for Business Decision Making 8th Edition Weygandt Solutions Manual

CHAPTER 1

Managerial Accounting

ASSIGNMENT CLASSIFICATION TABLE

Learning Objectives

Questions

Brief

Exercises

Do It!

Exercises

A

Problems

*1. Identify the features of

managerial accounting and

the functions of

management.

1, 2, 3, 4, 5,

6, 7

1, 2

1

*2. Describe the classes of

manufacturing costs and the

differences between product

and period costs.

8, 9, 10

3, 4, 5, 6

2

2, 3, 4, 5, 6,

7, 13

1A, 2A

*3. Demonstrate how to compute

cost of goods manufactured

and prepare financial

statements for a

manufacturer.

11,12, 13, 14,

15, 16,

7, 8, 9, 10

3

8, 9, 10, 11,

12, 13, 14, 15,

16, 17

3A, 4A, 5A

*4. Discuss trends in managerial

accounting.

17, 18, 19, 20,

21, 22, 23, 24,

25

11

4

18

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ASSIGNMENT CHARACTERISTICS TABLE

Problem

Number

Description

Difficulty

Level

Time

Allotted (min.)

1A

Classify manufacturing costs into different categories and

compute the unit cost.

Simple

20–30

2A

Classify manufacturing costs into different categories and

compute the unit cost.

Simple

20–30

3A

Indicate the missing amount of different cost items, and

prepare a condensed cost of goods manufactured schedule,

an income statement, and a partial balance sheet.

Moderate

30–40

4A

Prepare a cost of goods manufactured schedule, a partial

income statement, and a partial balance sheet.

Moderate

30–40

5A

Prepare a cost of goods manufactured schedule and a

correct income statement.

Moderate

30–40

BLOOM’S TAXONOMY TABLE

Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End–of-Chapter Exercises and Problems

Learning Objective

Knowledge

Comprehension

Application

Analysis

Synthesis

Evaluation

* 1. Identify the features of managerial

accounting and the functions of

management.

Q1-1

Q1-2

Q1-3

Q1-4

Q1-5

Q1-6

BE1-1

BE1-2

DI1-1

E1-1

* 2. Describe the classes of

manufacturing costs and the

differences between product and

period costs.

Q1–10

Q1-8

Q1-9

BE1-3

BE1-4

BE1-5

BE1-6

DI1-2

E1-2

E1-3

E1-5

E1-6

E1-4

E1-7

E1–13

P1–1A

P1–2A

* 3. Demonstrate how to compute cost of

goods manufactured and prepare

financial statements for a

manufacturer.

Q1-7 Q1–11

Q1–12

E1–15

Q1–13

Q1-14

Q1–15

BE1-7

BE1-8

BE1-9

BE1-10

DI1-3

E1-8

E1–12

E1–13

E1–14

E1–16

E1–17

P1–4A

E1-9

E1–10

E1–11

P1–3A

P1–5A

* 4. Discuss trends in managerial

accounting.

Q1–16

Q1–18

Q1–17

Q1–19

Q1-20

Q1-21

Q1-22

Q1-23

Q1-24

Q1-25

BE1-11

DI1-4

E1–18

Continuing Problems

CD1

WP1

Expand Your Critical Thinking

CT1-3

CT1-6

CT1-1

CT1-2

CT1-4

CT1-5

CT1-7

ANSWERS TO QUESTIONS

1. (a) Disagree. Managerial accounting is a field of accounting that provides economic and financial

information for managers and other internal users.

(b) Joe is incorrect. Managerial accounting applies to all types of businesses—service, merchandising,

and manufacturing.

LO1 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement IMA: Cost Management

2. (a) Financial accounting is concerned primarily with external users such as stockholders, creditors,

and regulators. In contrast, managerial accounting is concerned primarily with internal users such

as officers and managers.

(b) Financial statements are the end product of financial accounting. The statements are prepared

quarterly and annually. In managerial accounting, internal reports may be prepared as frequently

as needed.

(c) The purpose of financial accounting is to provide general-purpose information for all users.

The purpose of managerial accounting is to provide special-purpose information for specific

decisions.

LO1 BT: C Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Measurement IMA: Cost Management

3. Differences in the content of the reports are as follows:

Financial

Managerial

 Pertains to business as a whole and is highly

aggregated.

 Limited to double-entry accounting and cost

data.

 Generally accepted accounting principles.

 Pertains to subunits of the business and

may be very detailed.

 Extends beyond double-entry accounting

system to any relevant data.

 Standard is relevance to decisions.

In financial accounting, financial statements are verified annually through an independent audit

by certified public accountants. There are no independent audits of internal reports issued by

managerial accountants.

LO1 BT: C Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Measurement IMA: Cost Management

4. Linda should know that the management of an organization performs three broad functions:

(1) Planning requires management to look ahead and to establish objectives.

(2) Directing involves coordinating the diverse activities and human resources of a company to

produce a smooth-running operation.

(3) Controlling is the process of keeping the company’s activities on track.

LO1 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement IMA: Cost Management

5. Disagree. Decision making is not a separate management function. Rather, decision making involves

the exercise of good judgment in performing the three management functions explained in the

answer to question four above.

LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement IMA: Cost Management

6. Employees with line positions are directly involved in the company’s primary revenue generating

operating activities. Examples would include plant managers and supervisors, and the vice president

of operations. In contrast, employees with staff positions are not directly involved in revenue-

generating operating activities, but rather serve in a support capacity to line employees. Examples

include employees in finance, legal, and human resources.

LO1 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement IMA: Cost Management

Questions Chapter 1 (Continued)

7. The difference in balance sheets pertains to the presentation of inventories in the current asset

section. In a merchandising company, only inventory is shown. In a manufacturing company,

three inventory accounts are shown: finished goods, work in process, and raw materials.

LO3 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement IMA: Cost management

8. Manufacturing costs are classified as either direct materials, direct labor, or manufacturing overhead.

LO2 BT: C Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Measurement IMA: Cost management

9. No, Mel is not correct. The distinction between direct and indirect materials is based on two criteria:

(1) physical association and (2) the convenience of making the physical association. Materials which

cannot be easily associated with the finished product are considered indirect materials.

LO2 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement IMA: Cost management

10. Product costs, or inventoriable costs, are costs that are a necessary and integral part of producing

the finished product. Period costs are costs that are identified with a specific time period rather

than with a salable product. These costs relate to nonmanufacturing costs and therefore are not

inventoriable costs.

LO2 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement IMA: Cost management

11. A merchandising company has beginning inventory, cost of goods purchased, and ending

inventory. A manufacturing company has beginning finished goods inventory, cost of goods

manufactured, and ending finished goods inventory.

LO3 BT: C Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Measurement IMA: Cost management

12. (a) X = total cost of work in process.

(b) X = cost of goods manufactured.

LO3 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement IMA: Cost management

13. Raw materials inventory, beginning …………………………………………………………….. $12,000

Raw materials purchases ………………………………………………………………………….. 170,000

Total raw materials available for use ……………………………………………………………. 182,000

Raw materials inventory, ending …………………………………………………………………. (15,000 )

Direct materials used ………………………………………………………………………… $167,000

LO3 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Measurement IMA: Cost management

($12,000 + $170,000 – $15,000 = $167,000)

(Beg. RM + RM purch. – End. RM = DM used)

14. Direct materials used ………………………………………………………………………………… $240,000

Direct labor used ……………………………………………………….…………………………….. 220,000

Total manufacturing overhead ……………………………………………………………………. 180,000

Total manufacturing costs ………………………………………………………………….. $640,000

LO3 BT: AP Difficulty: Easy TOT: 2 min. AACSB: Analytic AICPA FC: Measurement IMA: Cost management

($240,000 + $220,000 + $180,000 = $640,000)

(DM used + DL used + Tot. MOH = Tot. mfg. costs)

15. (a) Total cost of work in process ($26,000 + $640,000) ……………………………….. $666,000

(b) Cost of goods manufactured ($666,000 – $32,000) ……………………………….. $634,000

LO3 BT: AP Difficulty: Easy TOT: 2 min. AACSB: Analytic AICPA FC: Measurement IMA: Cost management

[(a: $26,000 + $640,000 = $666,000); (b: $666,0000 – $32,000 = $634,000)]

[(a: Beg. WIP + Tot. mfg. costs = Tot. cost of WIP); (b: Tot. cost of WIP – End. WIP = COGM)]

16. The order of listing is finished goods inventory, work in process inventory, and raw materials inventory.

LO3 BT: K Difficulty: Easy TOT: 1 min. AACSB: None AICPA FC: Measurement IMA: Cost management

Questions Chapter 1 (Continued)

17. The products differ in how each are consumed by the customer. Services are consumed

immediately; the product is not put into inventory. Meals at a restaurant are the best example

where they are consumed immediately by the customer. There could be a long lead time before

the product is consumed in a manufacturing environment.

LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement IMA: Cost management

18. The product costing techniques apply equally well to manufacturers and service companies. Each

needs to keep track of the cost of production or services in order to know whether it is generating

a profit. The techniques shown in this chapter, to accumulate manufacturing costs to determine

manufacturing inventory, are equally useful for determining the cost of services.

LO4 BT: K Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement IMA: Cost management

19. The value chain refers to all activities associated with providing a product or service. For a manufac–

turer, these include research and development, product design, acquisition of raw materials, production,

sales and marketing, delivery, customer relations, and subsequent service.

LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Decision Modeling IMA: Strategic Planning

20. An enterprise resource planning (ERP) system is an integrated software system that provides a

comprehensive, centralized resource for information. Its primary benefits are that it replaces the

many individual systems typically used for receivables, payables, inventory, human resources,

etc. Also, it can be used to get information from, and provide information to, the company’s customers

and suppliers.

LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Decision Modeling IMA: Strategic Planning

21. In a just-in-time inventory system, the company has no extra inventory stored. Consequently, if

some units that are produced are defective, the company will not have enough units to deliver to

customers.

LO4 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Decision Modeling IMA: Strategic Planning

22. The balanced scorecard is called “balanced” because it strives to not over emphasize any one

performance measure, but rather uses both financial and non-financial measures to evaluate all

aspects of a company’s operations in an integrated fashion.

LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Decision Modeling IMA: Strategic Planning

23. Budgets are prepared by companies to provide future direction. Because the budget is also used

as an evaluation tool, some managers try to game the budgeting process by underestimating

their division’s predicted performance so that it will be easier to meet their performance targets.

On the other hand, if the budget is set at unattainable levels, managers sometimes take unethical

actions to meet targets to receive higher compensation or in some cases to keep their jobs.

LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: Ethics AICPA PC: Professional Demeanor IMA: Business Applications

24. CEOs and CFOs must now certify that financial statements give a fair presentation of the company’s

operating results and its financial condition and that the company maintains an adequate system

of internal controls. In addition, the composition of the board of directors and audit committees receives

more scrutiny, and penalties for misconduct have increased.

LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: Ethics AICPA FC: Measurement AICPA PC: Professional Demeanor IMA: FSA, Business

Applications

25. Activity-based costing is an approach used to allocate overhead based on each product’s relative

use of activities in making the product. Activity-based costing is beneficial because it results in

more accurate product costing and in more careful scrutiny of all activities in the value chain.

LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Decision Modeling IMA: Cost management

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 1-1

Financial Accounting

Managerial Accounting

Primary users

External users

Internal users

Types of reports

Financial statements

Internal reports

Frequency of reports

Quarterly and annually

As frequently as needed

Purpose of reports

General-purpose

Special-purpose information

for specific decisions

Content of reports

Generally accepted

accounting principles

Relevance to decisions

Verification process

Annual audit by certified

public accountant

No independent audits