Chapter 18 – Managerial Accounting Concepts and Principles
Problem 18-5B (40 minutes)
Part 1
MERCHANDISING BUSINESS
TEEMART
Partial Income Statement
For Year Ended December 31, 2015
Cost of goods sold
Merchandise inventory, December 31, 2014……………………….…..$100,000
Merchandise purchases……………………………………………………….. 250,000
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Chapter 18 – Managerial Accounting Concepts and Principles
SERIAL PROBLEM — SP 18
Serial Problem, Business Solutions (50 minutes)
1.
Product Costs Variable Fixed Direct Indirect
1. Monthly flat fee to clean workshop......... X X
2. Laminate coverings for desktops………… X X
3. Taxes on assembly workshop..…............ X X
2.
Business Solutions
Schedule of Cost of Goods Manufactured
For Month Ended January 31, 2016
Direct materials……………………………………………………….………………….$2,200
Direct labor ……………………………………………………………………………….. 900
Factory overhead costs…………………………………………………………....… 490
Chapter 18 – Managerial Accounting Concepts and Principles
Reporting in Action — BTN 18-1
1. Apple’s warranty reserve is established at the time the related revenue is
recognized, based on historical and projected warranty claim rates and
costs-per-claim. The company also considers knowledge of specific
2. It is commonly the managerial accountant’s responsibility to try to
3. Factors that could impact the warranty accrual include improved (or
4. Solutions depend on the annual report information collected.
Comparative Analysis — BTN 18-2
1. The purpose of Apple’s audit committee is to:
a. Assist the Board in oversight and monitoring of:
i. the Corporation’s financial statements and other financial
information provided to shareholders and others;
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Chapter 18 – Managerial Accounting Concepts and Principles
b. Prepare the report required under SEC rules to be included in
the Corporation’s annual proxy statement.
2. The purpose of Google’s audit committee is to:
a. Oversee Google’s accounting and financial reporting processes.
3. Management accountants would be involved in:
Ensuring compliance with regulations.
Ethics Challenge — BTN 18-3
1. Raw materials are part of inventory and should be capitalized (set up as
assets). Their costs are subsequently reported as part of cost of goods
2. The challenge is how to handle a request to use one’s accounting skills
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Education.
Chapter 18 – Managerial Accounting Concepts and Principles
an individual.
Communicating in Practice — BTN 18-4
Instructor note: The solution to this project depends on the database and career fields reviewed.
The objective of this Communicating in Practice project is to make
students aware of the earnings potential of different professions—
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Chapter 18 – Managerial Accounting Concepts and Principles
Taking It to the Net — BTN 18-5
1. Standards of Ethical Conduct for Management Accountants are posted
at the Web site: http://www.IMAnet.org.
These standards (in abbreviated form) are:
2. The four overarching principles are: Honesty, Fairness, Objectivity, and
Responsibility.
3. The IMA suggests first trying to resolve ethical conflicts by applying the
policies of your organization. If this is unsuccessful, contact your
immediate supervisor (unless he or she is involved in the ethical
advisor, and/or your personal attorney.
Teamwork in Action — BTN 18-6
Part 1
a. Materials used = Beg. Materials + Materials purchased – End. materials
= $177,500 + $872,500 – $168,125
= $881,875
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Chapter 18 – Managerial Accounting Concepts and Principles
building + Maintenance on factory equipment
=$32,500 + $122,500 + $15,750 + $36,250 + $60,000 + $8,500 + $79,750 + $27,875
= $383,125
e. Cost of goods manufactured
= Total cost of work in process (from d) – Ending WIP Inventory
= $1,931,625 – $14,000
= $1,917,625
Part 2
Requires that the team check answer to part (1e) with instructor before
proceeding to part (3).
Teamwork in Action (Continued)
Part 3
a. Net sales
= Sales – Sales discounts
= $3,275,000 – $57,500
= $3,217,500
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Chapter 18 – Managerial Accounting Concepts and Principles
= $1,264,500
d. Total operating expenses
= Advertising expense + Depreciation expense on office equipment +
e. Net income before taxes
= Gross profit (from c) – Total operating expenses (from d)
= $1,264,500 – $471,875
= $792,625
Entrepreneurial Decision — BTN 18-7
1. Manufacturing costs for SunSaluter include (a) direct materials such as
solar panels and water filters, (b) direct labor to install the systems, and
2. Four goals of a total quality management (TQM) process include reduced
waste, better inventory control, fewer defects, and continuous
a higher quantity of electricity and clean water for users.
Hitting the Road — BTN 18-8
Instructor note: Student responses will vary depending on the restaurant chosen.
The general framework of a good response includes:
1. The usual activities are
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Chapter 18 – Managerial Accounting Concepts and Principles
2. Costs associated with each activity include
Direct and indirect materials – such as meat, bread, pickles, and
other direct and indirect material costs.
3. Answers will vary because classification of fixed or variable depends
on the costs identified in part 2.
Global Decision — BTN 18-9
1. From its 2013 annual report, Samsung reports a warranty expense
2. From its 2013 10-K report, Apple reports warranty expense (“accruals
3. Based on this one year of data, Samsung was more accurate in
estimating warranty expense. Samsung’s warranty expense for the year
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