Finance Chapter 14 The function of coordinating diverse activities

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subject Words 2985
subject Authors Paul Kimmel; Jerry Weygandt; Donald Kieso

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Managerial Accounting
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Solution 180 (1217 min.)
Ex. 181
Fill in the missing information on the cost of goods manufactured schedule of Noland
Manufacturing Company:
NOLAND MANUFACTURING COMPANY
Cost of Goods Manufactured Schedule
For the Year Ended December 31, 2013
Work in process (1/1) $320,000
Direct materials
Raw materials inventory (1/1) $ ?
Raw materials purchases 246,000
Raw materials available for use ?
Raw materials inventory (12/31) 37,000
Direct materials used $255,000
Direct labor ?
Manufacturing overhead
Indirect labor 19,000
Factory depreciation 38,000
Factory utilities 39,000
Total overhead ?
Total manufacturing costs ?
Total cost of work in process ?
Less: Work in process (12/31) 322,000
Cost of goods manufactured $440,000
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Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Solution 181 (69 min.)
Ex. 182
Data for the cost of direct materials for the month ended March 31, 2013, are as follows:
Materials inventory, March 1, 2011 $76,000
Materials inventory, March 31, 2011 70,000
During March, the company purchased $240,000 of raw materials on account from Reed
Company and $92,000 of raw materials for cash from Frye Company. In addition, $50,000 was
paid on the Reed account balance.
Instructions
Compute the cost of direct materials used during March.
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Ex. 183
Presented below are incomplete 2013 manufacturing cost data for Tardy Corporation.
Direct Materials
Used
Direct Labor
Factory
Overhead
Total Manufacturing
Costs
(a)
$56,000
$72,000
$54,000
?
(b)
?
$53,000
$90,000
$252,000
(c)
$53,000
?
$96,000
$300,000
Instructions
Determine the missing amounts.
Ex. 184
Indicate whether each of the following would appear on the:
ACost of goods manufactured schedule
BIncome statement
CBalance sheet
Note: If it would appear in more than just one, indicate which ones.
______ 1. Cost of goods sold
______ 2. Finished goods inventory, 12/31
______ 3. Direct materials used
______ 4. Raw materials inventory, 1/1
______ 5. Insurance on factory equipment
______ 6. Work in process, 12/31
______ 7. Indirect labor
______ 8. Property taxes on office building
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Solution 184 (5 min.)
Ex. 185
Listed below are current asset items for Lester Company at December 31, 2013.
Finished goods inventory $35,000 Short-term investments $25,000
Cash 20,000 Raw materials inventory 17,000
Prepaid expenses 2,000 Work in process inventory 18,000
Accounts receivable 4,000 Supplies 500
Instructions
Prepare the current assets section of the balance sheet. (Include a complete heading.)
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COMPLETION STATEMENTS
186. Financial accounting information is prepared mainly for ______________ users, while
managerial accounting information is prepared primarily for ______________ users.
187. The types of reports prepared in managerial accounting are often ______________-
purpose reports prepared for a specific decision.
188. Managerial accounting reports generally pertain to ______________ of a business and
may be very detailed.
189. Three broad managerial functions are: (1)______________, (2)______________, and
(3)______________.
190. The ______________ function is concerned with setting goals and objectives for the
entity.
191. Exercising good judgment in performing the managerial functions and choosing among
alternative courses of action is called ______________.
192. The three cost elements in manufacturing a product are (1)______________,
(2)______________, and (3)______________.
193. The work of factory employees that can be physically and directly associated with
converting raw materials into products is classified as ______________.
194. Indirect materials and indirect labor are classified as ______________.
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195. Each of the manufacturing cost components is a ______________ cost.
196. A major difference between the income statements of a merchandising company and a
manufacturing company is that the cost of goods sold section of a merchandising
company shows cost of goods______________, whereas a manufacturing company
shows cost of goods ______________.
197. ___________________ is added to direct labor and manufacturing overhead to get total
manufacturing costs for the current period.
198. The ending work in process inventory is subtracted from the total cost of work in process
to calculate ______________________.
199. A manufacturing company computes cost of goods sold by adding cost of goods
manufactured to the ___________________ and subtracting the __________________.
200. A manufacturing company usually has three inventory accounts which are
(1)___________________, (2)___________________, and (3)___________________.
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Answers to Completion Statements
MATCHING
201. Match the items in the two columns below by entering the appropriate code letter in the
space provided.
A. Managerial accounting F. Work in process inventory
B. Financial accounting G. Direct materials
C. Planning H. Manufacturing overhead
D. Directing I. Period costs
E. Controlling J. Value chain
_____ 1. The cost of products that are partially complete.
_____ 2. The function of keeping activities in accordance with plans.
_____ 3. Primarily concerned with internal users and reports pertain to subunits of the entity.
_____ 4. Materials that can be physically and directly associated with manufacturing a
product.
_____ 5. The function of setting goals and objectives.
_____ 6. Indirect costs of manufacturing a product.
_____ 7. Primarily concerned with external users and reports pertain to the entity as a whole.
_____ 8. Costs that are noninventoriable.
_____ 9. All business processes associated with providing a product or service.
_____ 10. The function of coordinating diverse activities to produce a smooth-running
operation.
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Answers to Matching
SHORT-ANSWER ESSAY QUESTIONS
S-A E 202
Financial and managerial accounting are both concerned with the economic events of an
enterprise. Similarities between financial and managerial accounting do exist, but they do have a
different focus. Briefly distinguish between financial and managerial accounting as they relate to
(1) the primary users, (2) the type and frequency of reports, (3) the purpose of reports, and (4) the
content of reports.
S-A E 203
Julie Mills is studying for her accounting mid-term examination. Summarize for Julie what she
should know about management functions.
Ans: N/A, LO: 2, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Communications, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC:
Communication, IMA: Business Economics
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Solution 203
S-A E 204
A manufacturing company makes the products that it sells. Briefly identify and define the cost
elements that are incurred in making a product. After product cost elements are identified, how is
the cost of goods manufactured for a period determined?
S-A E 205
Kevin Scott is confused about the differences between a product cost and a period cost. Explain
the differences to Kevin.
S-A E 206
Assume you have just taken a position as controller for a new company that manufactures and
sells wrought iron wall hangings. Although the founder of the company, who is the president and
CEO, is a great artisan, she has very limited knowledge of accounting.
Instructions
To help your new boss better understand accounting for a manufacturing organization, prepare a
response to her in which you: (1) identify, (2) describe, and (3) provide examples of the three
manufacturing costs and the three inventory accounts used in accounting for a manufacturing
company.
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Solution 206
S-A E 207 (Ethics)
Million Dollar Mills is a textile manufacturing firm located in the southern United States. The
company carefully prepares all financial statements in accordance with GAAP, and gives a copy
of all financial statements to each department. In addition, the company keeps records on quality
control, safety, and environmental pollution by the company. It then prepares "scorecards" for
each department indicating their performance. Recently, the financial impact of the second set of
information was added, and the information has been used in the evaluation of employees for
merit pay and promotions.
At the most recent employee meeting, Tyler Hanes, marketing manager, expressed his
discomfort with the system. He said there was no guarantee that the second set of information
was fair, since there were no generally accepted principles for this kind of information. He also
said that it was kind of like keeping two sets of booksone following all legal requirements, and
the other one actually used by the company.
Required:
1. Is it ethical to evaluate managers in the way described? Explain briefly.
2. Name at least two safeguards the company could build into its system to ensure the ethical
treatment of employees.
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Solution 207
S-A E 208 (Communication)
Volumetrica, a producer of audio equipment for large computer systems, is reviewing its policies
as part of a biannual self-examination of the company. As part of this process, all managers have
been asked to carefully examine costs and determine as closely as possible which costs are
direct and which are indirect.
Linda Bedard and Sam Hilton, managers of different manufacturing departments in the same
building, have been working together. They found the following four costs that could be
economically traced to the products, but have historically been a part of overhead:
Cost of setting up the machinery for a different production run.
Cost of minor assembly components such as knobs and switches.
Cost of packaging, which is quite different for each model.
Cost of inspecting and testing each model.
None of the costs is significant by itself, but together these four costs make up between 10 and
15% of the total cost of the product. Linda favors "leaving well enough alone," as she puts it, and
leaving these costs in overhead. She is afraid that her volunteering to trace these costs will result
in her having to trace many more costs in the future. Sam, on the other hand, prefers to have the
product cost as accurate as possible. He points out that these costs are already known, and the
process would require little extra work.
Required:
You have been called on in your function as accounting manager to resolve the dispute. Write a
memo to Linda and Sam, supporting one or the other position. Be sure to adequately defend your
position, but be brief.
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Solution 208

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