CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
Prob. 15–2B (FIN MAN); Prob. 1–2B (MAN)
Cost
Product Costs
Period Costs
Direct
Materials
Cost
Direct
Labor
Cost
Factory
Overhead
Cost
Selling
Expense
Administrative
Expense
a.
X
b.
X
c.
d.
X
e.
X
X
g.
X
h.
i.
X
k.
X
l.
X
m.
X
n.
X
o.
X
p.
X
q.
X
r.
X
s.
u.
X
v.
X
X
x.
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
Prob. 15–3B (FIN MAN); Prob. 1–3B (MAN)
1. The most logical definition for the final cost object would be a hotel guest. Guests
2.
Cost
Direct
Indirect
a.
X
b.
X
X
d.
X
e.
X
X
g.
X
h.
X
X
X
k.
X
l.
X
m.
X
n.
X
o.
X
p.
X
q.
X
X
s.
X
X
u.
X
v.
X
X
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
Prob. 15–4B (FIN MAN); Prob. 1–4B (MAN)
1. On Company
a. $30,800 ($282,800 + $65,800 – $317,800)
Off Company
a. $581,560 ($685,720* + $91,140 – $195,300)
b. $685,720 ($1,519,000 – $256,060 – $577,220)
* Note: The student must calculate part (b) prior to calculating part (a) because
the solution to part (b) is needed as an input to part (a).
2.
On Company
Statement of Cost of Goods Manufactured
For the Month Ended December 31
Work in process inventory, December 1
$ 119,000
Direct materials:
Materials inventory, December 1
$ 65,800
Purchases
282,800
Cost of materials available for use
$ 348,600
Materials inventory, December 31
(30,800)
Direct labor
387,800
Factory overhead
148,400
Total manufacturing costs incurred in December
854,000
Total manufacturing costs
$ 973,000
Work in process inventory, December 31
(172,200)
Cost of goods manufactured
$ 800,800
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
Prob. 15–4B (FIN MAN); Prob. 1–4B (MAN) (Concluded)
3.
On
Company
Income
Statement
For the Month Ended December
31
Sales
$1,127,000
Cost of goods sold:
Finished goods inventory, December
1
$ 224,000
Cost of goods
Cost of finished goods available for sale
Gross profit
Operating expenses
Net
$ 182,000
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
Prob. 15–5B (FIN MAN); Prob. 1–5B (MAN)
1.
Shanika
Company
Statement of Cost of Goods
Manufactured
For the Year Ended December 31,
20Y6
Work in process inventory, January 1, 20Y6
$109,200
Direct materials:
Materials inventory, January 1,
20Y6
$
77,350
Cost of materials available for use
Materials inventory, December 31, 20Y6
Direct labor
186,550
Factory overhead:
Indirect
labor
$
23,660
Depreciation expense—factory equipment
14,560
Heat, light, and power—factory
5,850
Property
taxes—factory
4,095
Rent expense—factory
6,825
62,660
Total manufacturing costs incurred in 20Y6
354,510
Total manufacturing costs
Work in process inventory, December 31,
Cost of goods manufactured
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
Prob. 15–5B (FIN MAN); Prob. 1–5B (MAN) (Concluded)
2.
Shanika
Company
Income
Statement
For the Year Ended December 31,
20Y6
Sales
$ 864,500
Cost of goods sold:
Finished goods inventory, January 1,
20Y6
$ 113,750
Cost of goods
manufactured
367,510
Cost of finished goods available for sale
$ 481,260
Finished goods
inventory,
December 31,
20Y6
(100,100)
Cost of goods sold
(381,160)
Gross
profit
$
483,340
Operating
expenses:
Administrative
Office salaries expense
$ 113,750
Selling expenses:
Advertising
Sales salaries expense
Net income
$ 164,840
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
MAKE A DECISION
MAD 15–1 (FIN MAN); MAD 1–1 (MAN)
a.
Comfort Plus:
Number of Guests
Nights per Visit
Guest Nights
3,680
×
1
=
3,680
1,100
×
2
=
2,200
500
×
3
=
1,500
Total guest nights
7,380
Connors:
Number of Guests
Nights per Visit
Guest Nights
4,390
×
1
=
4,390
700
×
2
=
1,400
800
×
3
=
2,400
Total guest nights
8,190
b. Comfort Plus: 300 rooms × 30 days = 9,000 available room nights for April
Connors: 350 rooms × 30 days = 10,500 available room nights for April
MAD 15–2 (FIN MAN); MAD 1–2 (MAN)
a. The occupancy change is favorable for Hilton Hotels. The company improved occupancy
from 72.2% to 74.6%, or a 2.4 percentage point increase over the year.
b. The occupancy change is favorable for Marriott International. The company improved
occupancy from 71.3% to 73.3%, or a 2.0 percentage point increase over the year.
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
MAD 15–2 (FIN MAN); MAD 1–2 (MAN) (Concluded)
d. An important question beyond occupancy is the price at which the rooms are sold. Price
will influence occupancy. For example, it is possible to increase occupancy by reducing
price. However, a reduced price may reduce revenue by more than the revenue increase
MAD 15–3 (FIN MAN); MAD 1–3 (MAN)
a.
Number of
Guests
Average Length
of Visit (in
Nights)
Guest Nights (Number of
Guests × Average Length of
Visit)
Sunrise Suites
183,600
×
1.5
=
275,400
Nationwide Inns
228,000
×
1.2
=
273,600
Number of
for June
Sunrise Suites
×
Nationwide Inns
×
c. Occupancy Rate =
Guest Nights
Available RoomNights
Sunrise Suites:
275,400 85%
324,000 =
Nationwide Inns:
273,600 80%
342,000 =
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
MAD 15–4 (FIN MAN); MAD 1–4 (MAN)
a.
April
May
June
Admitted patients
1,440
1,860
2,250
Average length of stay per patient
× 4.0
× 3.5
× 3.0
In-patient days
5,760
6,510
6,750
b.
Available beds:
Private
Semi-Private
Total
Number of rooms
Beds per room
Total bed capacity
Available bed days:
April
May
June
Bed capacity
300
300
300
Days per month
× 30
× 31
× 30
Available bed days
9,000
9,300
9,000
c.
Occupancy rate:
April
May
June
In-patient days [from (a)]
5,760
6,510
Available bed days [from (b)]
÷ 9,000
÷ 9,000
÷ 9,000
Occupancy rate
d. The occupancy rate increased from April to May and again from May to June. This
suggests the hospital bed capacity is being utilized more efficiently over time. A closer
examination of the data reveals that the average length of stay is declining, while the
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
MAD 15–5 (FIN MAN); MAD 1–5 (MAN)
a.
Available seat capacity for each flight number for June:
Number of seats per flight
Number of flights in June (one per day)
180
× 30
Total seat capacity per flight number (June)
5,400
b.
Flight
Number
Number of
Seats Sold
Available Seat
Capacity [from (a)]
Passenger
Load*
* Number of seats sold ÷ Available seat capacity
c. The passenger load information indicates that Flight 57 flies very near to capacity, but
Flights 85 and 94 fly at less than half of capacity. This suggests the management of
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
TAKE IT FURTHER
TIF 15–1 (FIN MAN); TIF 1–1 (MAN)
Brian has behaved unethically and violated several of the IMA’s principles of ethical
conduct. By determining the price of the lumber that he is buying, Brian has created a
conflict-of-interest situation that violates the principle of objectivity. For professionals to be
TIF 15–2 (FIN MAN); TIF 1–2 (MAN)
Answers may vary slightly by restaurant chosen. A suggested answer for a pizza restaurant
follows:
Cost
Direct
Materials
Direct
Labor
Overhead
Selling
Expenses
Ingredients ………………………………………….
X
Cook wages ………………………………………..
X
Manager salary ……………………………………
X
X
Coupon costs ……………………………………..
X
Advertising ………………………………………… .
X
X
Disposable plates, utensils, cups………….
X
Nondisposable plates, utensils, cups ……
X
Repair costs ………………………………………..
X
Property taxes …………………………………….
X
Store depreciation ……………………………….
X
Cashier salary ……………………………………..
X
Beverages …………………………………………..
X
Building heat and A/C ………………………….
X
Salad ingredients …………………………………
X
Delivery person wages …………………………
X
Power costs for ovens …………………………
X
In service businesses, the distinction between direct labor and overhead will not always be
clear.
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
TIF 15–3 (FIN MAN); TIF 1–3 (MAN)
Memo
To: Todd Johnson
From: A+ Student
Re: Financial vs. Managerial Accounting Information
The objectives of financial and managerial accounting are quite different, and your
statement does not fully consider these differences. In one sense, your statement may be
appropriate at high levels in the organization. For example, it is appropriate to evaluate a
division manager who is responsible for the overall performance of a division using the
The stockholders’ interest in profit is related to increasing shareholder value. Managers
must increase long-term shareholder value by engaging in strategies that enhance people,
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
TIF 15–4 (FIN MAN); TIF 1–4 (MAN)
a. The vice president of the Information Systems Division can use managerial accounting
b. The hospital administrator can use managerial accounting information in a number of
ways. One way is for cost planning and control. The administrator could use managerial
information to keep costs commensurate with services provided and to plan for staffing
c. The CEO of the food company will use managerial accounting information to support the
control of the three divisions. Each of the three divisions will be subject to a number of
d. The copy shop manager needs fairly simple managerial accounting information. At the
most basic level, the copy shop manager needs to know the costs of performing various
copy tasks, such as one-sided copy, two-sided copy, collating, and binding. These
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
TIF 15–5 (FIN MAN); TIF 1–5 (MAN)
a. The High Times manager will use managerial accounting information to accumulate the
costs associated with different menu items. The costs, direct and indirect, will help in
determining the pricing strategy.
b. The plant manager is going to use cost information on scrap and rework to identify the
amount of waste occurring in the plant. This measure of waste is fairly common in
c. The cost of ending inventory must be determined as financial statements are prepared.
The division controller will likely require inventory valuation at the close of every month
in order to have a good understanding of the month-by-month earnings of the division.
The division controller will provide the ending inventory information by using managerial
accounting information in determining the cost of products. To determine the
appropriate cost, the product cost is multiplied by the units left in inventory.
d. The Maintenance Department manager needs to be able to plan the resources used by
his department. The planning process involves identifying the required resources to
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
TIF 15–6 (FIN MAN); TIF 1–6 (MAN)
a. Obie’s bill has a number of points that should be considered. Some of the points, with
the appropriate argument, are identified below.
● The trip back to the shop resulted in an $80 labor charge. Obie should argue that the
whole hour should not be billed. The hour is the result of stocking out of a circuit
● The overtime premium should not have been charged to Obie. What if Obie was the
first appointment in the morning? If he was, there would be no overtime premium. It’s
only if the decision for overtime was caused by or required by Obie.
Thus, the labor portion of the bill should only be $70 + $60 + $60 = $190.
There are other parts of the bill that should not be in dispute.
● The materials storage and handling charge is a normal charge of maintaining a parts
inventory for the benefit of clients that need parts.
costs.
● The additional charge for the first hour is also reasonable. The first hour charge
covers the costs of transit, which are directly attributable to making a home visit.
Obie requires a home visit, so Obie should be responsible for the costs of making the
visit. If Obie brought the computer to the shop, this cost would not be incurred.
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
TIF 15–6 (FIN MAN); TIF 1–6 (MAN) (Concluded)
b.
Cost
Direct Materials
Direct Labor
Overhead
Circuit board ………………………………………
X
Storage and handling ………………………….
X
Straight-time labor ………………………………
X
Fringe benefits* …………………………………..
X
Overhead ……………………………………………
X
Vehicle depreciation and fuel ………………
X
Overtime premium ………………………………
X
CHAPTER 15 (FIN MAN); CHAPTER 1 (MAN) Introduction to Managerial Accounting
CERTIFIED MANAGEMENT ACCOUNTANT (CMA®)
EXAMINATION QUESTIONS (ADAPTED)
1. b. Sales commissions on cars would be part of the selling expense for the car
2. c. Plunkett’s product costs are $656,100 and the period costs are $493,000, as follows:
Product
Costs
Direct materials
$ 56,000
Direct labor
179,100
Overhead
421,000
Total
$656,100
Period
Costs
Selling expenses
Administrative expenses
229,400
Fire loss
27,700
Total
$493,000
3. c. Prime costs of $150,000 are the combination of direct material costs of $100,000 and
direct labor costs of $50,000. Conversion costs of $130,000 are the combination of
direct labor costs of $50,000 and overhead costs of $80,000.
4. c. Factory overhead includes those items that cannot be directly traced to any one