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Reporting in Action — BTN 16-1
1. These costs are part of getting the products that Apple sells to its
2. These costs would either be expensed as cost of sales or as selling
and administrative expenses. Thus, net income will not be affected.
3. Answers will vary depending on information obtained.
Comparative Analysis — BTN 16-2
1.
Apple Google
($ millions) Current Year Prior Year Current Year Prior Year
Expenses
Cost of goods sold....... $106,606 $ 87,846 $25,858 $20,634
Operating expenses.... 15,305 13,421 20,001 16,781
Total expenses.............. $121,911 $101,267 $45,859 $37,415
2. Apple had a higher ratio in both the current year and the prior year.
Ethics Challenge — BTN 16-3
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Instructor note: The student’s solution will vary depending on the industry, product, and process
chosen. It will also depend on the sources obtained.
The memorandum should initially identify an industry (say, steel), a product
(say, cans), and a process (say, forming).
Generally, there are at least three approaches to maintaining and
expanding one’s knowledge about a particular industry, product, and
process—students are likely to have additional insights.
(1) First, the professional should read a quality trade journal in the selected
(2) The second step is to join an industry organization, such as a local
(3) The third step is to learn as much as one can from the management and
Financial and Managerial Accounting, 6th Edition
Communicating in Practice — BTN 16-4
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
The main focus of this memorandum should be to explain the difference
between determining direct and indirect costs in a job order versus a
process cost accounting system since this appears to be the primary
source of confusion. In addition to the memorandum’s content, the
instructor should look for a student’s ability to be diplomatic in the
communication.
Points the memorandum should make include:
1. The reason for the assistant’s confusion. Given the assistant’s
2. Since your company does not limit production to specific batches of
3. It is important to recognize that the cost object is the process, not the
job. If costs are traceable to the cost object, they are direct costs.
4. In job order cost accounting, materials and labor used exclusively on
5. A process cost accounting system uses the concepts of direct and
6. Some costs classified as manufacturing overhead in a job order system
Taking It to the Net — BTN 16-5
There are several ways that such software is helpful to a business.
This software allows companies to create process maps so they can
analyze and communicate processes and workflows.
It allows companies to identify, visualize and quantify problems and
improvement potentials in the processes to eliminate wasted time and
money.
Teamwork in Action — BTN 16-6
Each member of the team should participate in the activity to improve and
reinforce his/her understanding of the entries that correspond to Exhibit
16.14. (Note: The entries below are pro forma entries since information for
amounts are not provided in this activity.)
1. Raw Materials Inventory................................................#
2. Work in Process Inventory............................................#
3. Factory Overhead...........................................................#
Financial and Managerial Accounting, 6th Edition
Teamwork in Action (concluded)
4. No journal entry required
7. Factory Overhead ..........................................................#
Prepaid Insurance ................................................... #
Accrued Utilities Payable ....................................... #
Cash........................................................................... #
Accum. Depreciation—Factory Equip.................... #
To record manufacturing overhead incurred.
9b. Finished Goods Inventory.............................................#
Work in Process Inventory-Blending..................... #
To record the transfer of completed
goods from blending to finished
goods inventory.
1. Using separate process cost summary reports for each process
enables managers to better understand costs and make decisions. For
example, Kar’s Nuts adds nuts in its first process and other
ingredients (e.g. chocolate pieces) in its second process. Separate
2. If a business unnecessarily holds materials, it will be less profitable
than a company that maintains appropriate raw materials inventory
levels. First, the inventory requires costs for storage space. Second,
when inventory is perishable, additional costs must be incurred to
3. A hybrid system combines features of both process and job order
operations. Kar’s Nuts resembles a process operation in that each
Financial and Managerial Accounting, 6th Edition
Hitting The Road — BTN 16-8
Instructor note: This assignment is designed to help students identify
specific costs in a service process costing system. The answers are likely
to be unique for each student. Below are a few suggestions. This problem
is also a review of cost classifications.
Cost
Description
Direct
Material
Direct
Labor Overhead
Variable
Cost
Fixed
Cost
Manually
moving mail
– between
departments
X X
If hired on
a temp.
basis
X
Full time
labor under
contract
Sorting
equipment
X X
Overhead allocation suggestions:
Not all components should be allocated the same. Some examples:
Global Decision — BTN 16-9
1. Ratio of Cost of Goods Sold to Total Expenses
( billions)₩Current Year Prior Year
₩126,651.9 /
(From BTN 16-2)
($ millions) Current Year Prior Year
$87,846 /
($ millions) Current Year Prior Year
Google........................... $25,858 /
$45,859
= 56.4%
$20,634 /
$37,415
= 55.1%
2. As a percentage of total expenses, Apple spends less on selling and
administrative expenses (and more on cost of goods sold) than does
either Samsung or Google. Like Apple, the ratio of cost of goods sold to
Financial and Managerial Accounting, 6th Edition
