Chapter 18 – Managerial Accounting Concepts and Principles
EXERCISES
Exercise 18-1 (10 minutes)
Exercise 18-2 (20 minutes)
Most fixed costs are indirect. Fixed costs normally are resources acquired to
support the production process rather than being traceable to individual
products or batches of product. However, not all indirect costs are fixed.
Some, like indirect materials, are variable.
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Chapter 18 – Managerial Accounting Concepts and Principles
Exercise 18-3 (10 minutes)
1. Fixed, indirect
2. Fixed, indirect
Exercise 18-4 (20 minutes)
Cost Variable Fixed Direct Indirect
1. Advertising…..………………………………… X X
2. Beverages and snacks..…..….…..…...... X X
3. Regional VP salary………………….….…... X X
4. Depreciation on ground equip……...…. X X
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Chapter 18 – Managerial Accounting Concepts and Principles
Exercise 18-5 (15 minutes)
1. Direct material
2. Factory overhead
Exercise 18-6 (20 minutes)
Exercise 18-7 (20 minutes)
Part 1
Company 1, Sunrise Foods, is a merchandising firm with only one
Chapter 18 – Managerial Accounting Concepts and Principles
Exercise 18-7 (concluded)
Part 2
Company 1
Sunrise Foods
Balance Sheet–Current Asset Section
December 31, 2015
Cash…………………………………………………………………………………………………$ 7,000
Total current assets………………………………………………..…..….…..…..….…...$115,500
Company 2
Rayzer Skis Mfg.
Balance Sheet–Current Asset Section
December 31, 2015
Cash…………………………………………………………………………………………………$ 5,000
Accounts receivable……………………………………………….….…..…..….…..…... 75,000
Discussion: The current asset section of the balance sheet for these two
companies differs because one is a merchandiser and one is a
Exercise 18-8 (30 minutes)
Garcon
Company
Pepper
Company
1. COST OF GOODS MANUFACTURED
Direct materials
Beginning raw materials inventory.…....…...... $ 7,250 $ 9,000
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Chapter 18 – Managerial Accounting Concepts and Principles
Factory supplies used……..…..…..….…..…..…... 8,200 3,200
Indirect labor……………………………………………... 1,250 7,660
Repairs—Factory equipment…….…..…..….…… 4,780 1,500
Total factory overhead……………….…..….…..….. 50,230 47,110
Total manufacturing costs………………………….…. 104,180 135,910
Beginning work in process inventory.…..…...…. 14,500 19,950
Total cost of work in process…………………..….... 118,680 155,860
2. COST OF GOODS SOLD
Beginning finished goods inventory….….…..….. $ 12,000 $ 16,450
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Chapter 18 – Managerial Accounting Concepts and Principles
E EExercise 18-9 (30 minutes)
GARCON COMPANY
Income Statement
For Year Ended December 31, 2015
Sales………………………………………………………………….….…..…..… $ 195,030
Cost of goods sold (from Ex. 18-8)……………………………….….... 91,030
Gross profit……………………………………………………………….….….. 104,000
Operating expenses
Income before tax……………………………………………………………... $ 33,000
PEPPER COMPANY
Income Statement
For Year Ended December 31, 2015
Operating expenses
Selling expenses………………………………………….…..….…..…..….
General and administrative expenses…………………………..…..
46,000
43,000
Income before tax……………………………………………………………... $ 58,000
Exercise 18-9 (continued)
GARCON COMPANY
Partial Balance Sheet
As of December 31, 2015
Cash………………………………………………………..….…..…..….….... $20,000
Accounts receivable, net…………………………………………….….. 13,200
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Chapter 18 – Managerial Accounting Concepts and Principles
Inventories
Raw materials inventory…………………………………………..…..$ 5,300
PEPPER COMPANY
Partial Balance Sheet
As of December 31, 2015
Cash………………………………………………………..….…..…..….….... $15,700
Accounts receivable, net…………………………………………….….. 19,450
Inventories
Exercise 18-10 (20 minutes)
Garcon
Company
Pepper
Company
1. PRIME COSTS
Direct materials
Beginning raw materials inventory.…....…...... $ 7,250 $ 9,000
Raw materials purchases……………..….…..….... 33,000 52,000
Raw materials available for use……….….…..…. 40,250 61,000
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Chapter 18 – Managerial Accounting Concepts and Principles
2. CONVERSION COSTS
Direct labor……………………….…..….…..…..….…..…
Factory overhead
$19,000 $35,000
Rental cost on factory equipment..…....…....… 27,000 22,750
Factory utilities…………………………………..…..…. 9,000 12,000
Exercise 18-11 (20 minutes)
Merchandising Business
UNIMART
Partial Income Statement
For Year Ended December 31, 2015
Cost of goods sold
Merchandise inventory, December 31, 2014…………………..…... $ 275,000
Merchandise purchases…………………………..…..…..….…..…..….. 500,000
Exercise 18-11 (concluded)
Manufacturing Business
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Chapter 18 – Managerial Accounting Concepts and Principles
PRECISION MANUFACTURING
Partial Income Statement
For Year Ended December 31, 2015
Cost of goods sold
Finished goods inventory, December 31, 2014………………… $ 450,000
Cost of goods manufactured………………………………………….. 900,000
Cost of goods sold……………………………………………..….…..…. $ 975,000
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