Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
Chapter 14
Managerial Accounting Concepts
and Principles
QUICK STUDIES
Quick Study 14-1 (5 minutes)
1. Its primary users are company managers …………………………..
Managerial
3. Its primary focus is on the organization as a whole ……………
Financial
5. It focuses mainly on past results ……………………………………….
Financial
Quick Study 14-2 (10 minutes)
1. Indirect cost
2. Direct cost
Quick Study 14-3 (10 minutes)
1. Direct materials
2. Factory overhead
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Quick Study 14-4 (10 minutes)
1. Product cost
2. Period cost
Quick Study 14-5 (10 minutes)
1. Prime cost
Quick Study 14-6 (10 minutes)
Ending work in process inventory is computed as:
Work in process inventory, beginning …………..
$ 26,000
Direct materials used ……………………………….
74,000
Direct labor used………………………………………
55,000
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
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Quick Study 14–6 (continued)
Alternative calculation using T-account:
Work in Process Inventory
Beginning
Direct materials
Factory overhead
COGM
Quick Study 14-7 (10 minutes)
Cost of goods sold is computed as:
Finished goods inventory, beginning ……………
$ 500
Goods available for sale ……………………………….
Less finished goods inventory, ending………….
Quick Study 14-8 (10 minutes)
Finished goods inventory, beginning …………..
$ 345,000
Goods available for sale ………………………………
Less finished goods inventory, ending…………
Alternative calculation using T-account:
Finished Goods Inventory
Beginning
345,000
COGM
COGS
Ending
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
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Quick Study 14-9 (5 minutes)
Cost of goods sold is computed as:
Quick Study 14-10 (10 minutes)
(1)
(2)
(3)
Cost of merchandise purchased ……..
$181,000
$140,000
$289,000
Merchandise inventory, beginning ….
106,000
21,000
28,000
Merchandise inventory, ending ……….
(3) $28,000 + $289,000 – $267,000 = End. Inv. ➔End. Inv. = $50,000
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
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Quick Study 14-11 (15 minutes)
REX MANUFACTURING
Income Statement
For Year Ended December 31
Sales ……………………………………………………….
$92,000
Cost of goods sold
Finished goods inventory, beginning …….
$ 19,000
Cost of goods manufactured …………………
Goods available for sale ………………………..
Less finished goods inventory, ending…..
Cost of goods sold ………………………………..
Gross profit ……………………………………………..
Selling expenses ……………………………………..
General and administrative expenses ……….
14,000
Quick Study 14–12 (10 minutes)
BIN MANUFACTURING
Current Assets Section of the Balance Sheet
December 31
Cash ……………………………………………………….
$22,000
Accounts receivable, net …………………………..
12,000
Raw materials inventory …………………………..
Work in process inventory …………………………..
18,000
894
Quick Study 14–13 (10 minutes)
Raw materials inventory, beginning ………………………..
Raw materials purchased ……………………………………….
Raw materials available for use ………………………………
Alternative calculation using T-account:
Raw Materials Inventory
Beginning
855
Purchased
Used
717
Quick Study 14-14 (15 minutes)
(1)
(2)
(3)
Direct materials used ……………..
$ 8,000
$14,000
$32,000
Direct labor used…………………….
4,000
13,000
18,000
5,000
22,000
72,000
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
Quick Study 14-15 (15 minutes)
Barton Company
Schedule of Cost of Goods Manufactured
For Year Ended December 31
Direct materials …………………………………………..
$190,000
Direct labor ………………………………………………..
63,000
Factory overhead ………………………………………..
24,000
Add work in process inventory, beginning …..
157,000
Less work in process inventory, ending ………
142,000
Verification calculation (not substitute) using T-account:
Work in Process Inventory
Beginning
157,000
Direct materials
190,000
Factory overhead
COGM
Ending
142,000
Quick Study 14-16 (10 minutes)
Raw materials inventory, beginning …………..
$ 6,000
Raw materials available for use …………………
Direct materials used ………………………………..
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
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Quick Study 14–17 (20 minutes)
Part A
Direct materials used* ………………………………..
$122,000
Direct labor ……………………………………………….
94,000
Factory overhead ……………………………………….
Total manufacturing costs …………………………
$255,000
Part B
Schedule of Cost of Goods Manufactured
Direct materials
Raw materials inventory, beginning …………
$ 6,000
Raw materials purchases ………………………..
123,000
Raw materials available for use ………………
Less raw materials inventory, ending ……….
7,000
Direct materials used ……………………………..
Direct labor ………………………………………………..
94,000
Factory overhead
Indirect labor …………………………………………..
20,000
Depreciation expense—Factory ……………….
15,000
Factory utilities ……………………………………….
4,000
Total factory overhead …………………………….
Total manufacturing costs …………………………
Add work in process inventory, beginning ….
Total cost of work in process …………………….
Less work in process inventory, ending ……..
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Quick Study 14–18 (15 minutes)
(1)
(2)
(3)
Total manufacturing costs …………………..
$179,000
$150,000
$217,000
Work in process inventory, beginning …
105,000
10,000
32,000
Work in process inventory, ending ………
Quick Study 14–19 (5 minutes)
Average manufacturing cost per unit = Cost of goods manufactured / Units produced
Cost of goods manufactured ……….
$918,700
Units produced …………………………...
Average unit cost ………………………..
Quick Study 14–20 (10 minutes)
1. E 4. A
Quick Study 14–21 (10 minutes)
Raw materials used …………………………………………………………..
$5,000
Raw materials inventory, beginning …………………………………..
900
Raw materials inventory, ending ……………………………………….
1,100
Total beginning plus ending raw materials inventory …………
$2,000
Average raw materials inventory (Total / 2) ………………………..
$1,000
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
EXERCISES
Exercise 14-1 (10 minutes)
Business Decision
Primary
Information Source
1. Determine whether to lend to a company……………….
Financial
2. Evaluate a purchasing department’s performance ….
Managerial
3. Report financial performance to shareholders ………..
Financial
4. Estimate product cost for a new line of shoes ………..
Managerial
Managerial
6. Measure profitability of an individual store …………….
Managerial
7. Prepare financial statements according to GAAP ……
Financial
8. Determine location and size for a new plant …………..
Managerial
Exercise 14-2 (10 minutes)
Product Cost
Direct or Indirect
1.
Leather cover for soccer balls ………………………..
Direct
2.
Annual flat fee paid for factory security …………..
Indirect
3.
Coolants for machinery ………………………………….
4.
Wages of product assembly workers ………………
Direct
5.
Factory supervisor salary ……………………………….
6.
Taxes on factory …………………………………………….
7.
Machinery depreciation (straight-line) ……………
8.
Rubber bladder interior for balls ……………………..
Direct
9.
Ink for labeling soccer balls …………………………...
10.
Exercise 14-3 (10 minutes)
1. Indirect 5. Indirect
2. Indirect 6. Direct
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
Exercise 14-4 (10 minutes)
Cost
Classification
1. Advertising …………………………………………..
Selling
2. Beverages served on plane …………………..
Direct
3. Accounting manager salary ………………….
4. Depreciation on plane …………………………..
5. Fuel used for plane flight ………………………
Direct
6. Flight attendant wages for flight ……………
Direct
7. Pilot wages for flight …………………………….
Direct
Exercise 14-5 (10 minutes)
1. Direct material 5. Factory overhead
Exercise 14-6 (15 minutes)
Product Costs
Period Costs
Costs
Direct
Materials
Direct
Labor
Factory
Overhead
Selling
Expense
General &
Admin.
Expense
1.
Factory electricity ……………………….
X
2.
Advertising …………………………………
X
3.
Depreciation on factory machine …
X
4.
Batteries for electric cars ……………
5.
Office supplies used …………………..
X
6.
Wages to assembly workers ……….
7.
Salesperson commissions ………….
X
8.
Steel for cars ………………………………
9.
Depreciation on office equipment ..
X
Leather for car seats …………………..
Cost of goods manufactured …………………….
96,680
139,860
Less finished goods inventory, ending………
17,650
13,300
Cost of goods sold ……………………………………
$ 91,030
$143,010
Exercise 14-7 (30 minutes)
Garcon
Company
Pepper
Company
1. COST OF GOODS MANUFACTURED
Direct materials
Raw materials inventory, beginning ………..
$ 7,250
$ 9,000
Raw materials purchases ……………………….
33,000
52,000
Raw materials available for use ………………
40,250
61,000
Direct labor ………………………………………………
19,000
35,000
Factory overhead
Rental cost on factory equipment …………..
27,000
22,750
Factory utilities ………………………………………
9,000
12,000
Indirect labor ………………………………………….
9,450
10,860
Repairs—Factory equipment ………………….
4,780
1,500
Add work in process inventory, beginning…
14,500
19,950
Total cost of work in process …………………….
Less work in process inventory, ending …….
22,000
16,000
Cost of goods manufactured …………………….
$ 96,680
$139,860
2. COST OF GOODS SOLD
Finished goods inventory, beginning ………..
$ 12,000
$ 16,450
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
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Exercise 14-8 (30 minutes)
(1)
GARCON COMPANY
Income Statement
For Year Ended December 31
Sales …………………………………………………………
Cost of goods sold
Finished goods inventory, beginning ……….
Cost of goods manufactured ……………………
$12,000
96,680
PEPPER COMPANY
Income Statement
For Year Ended December 31
Sales …………………………………………………………
$290,010
Cost of goods sold
Finished goods inventory, beginning ……….
Cost of goods manufactured ……………………
$16,450
139,860
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Exercise 14-8 (continued)
(2)
GARCON COMPANY
Balance Sheet—Current Assets Section
December 31
Cash ………………………………………………….
$20,000
Accounts receivable, net ……………………
13,200
Raw materials inventory …………………….
Work in process inventory …………………
22,000
Total current assets …………………………..
$78,150
PEPPER COMPANY
Balance Sheet—Current Assets Section
December 31
Cash ……………………………………………………….
$15,700
Accounts receivable, net ………………………….
19,450
Work in process inventory ……………………….
16,000
Total current assets …………………………..
$71,650
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
Exercise 14-9 (20 minutes)
Garcon
Company
Pepper
Company
1. PRIME COSTS
Direct materials
Raw materials inventory, beginning ………..
$ 7,250
$ 9,000
Raw materials purchases ……………………….
Raw materials available for use ………………
Less raw materials inventory, ending ……..
Direct materials used ……………………………..
2. CONVERSION COSTS
Direct labor (from part 1) …………………………..
Factory overhead
$19,000
$35,000
Rental cost on factory equipment …………..
Factory utilities ………………………………………
Indirect labor ………………………………………….
Repairs—Factory equipment ………………….
Total factory overhead …………………………...
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Exercise 14–10 (20 minutes)
Merchandising Business
UNIMART
Computation of Cost of Goods Sold
Cost of goods sold
Merchandise inventory, beginning ………………..
$275,000
Cost of merchandise purchased …………………..
Goods available for sale ……………………………….
Less merchandise inventory, ending …………….
Cost of goods sold ……………………………………….
$660,000
Confirming calculation:
Merchandise Inventory
Beginning
275,000
Purchases
660,000
Cost of Goods Sold
Ending
Manufacturing Business
BARE MANUFACTURING
Computation of Cost of Goods Sold
Cost of goods sold
Finished goods inventory, beginning …………..
$ 450,000
Cost of goods manufactured ……………………….
Goods available for sale ……………………………..
Less finished goods inventory, ending ………..
Cost of goods sold ……………………………………..
$ 975,000
Confirming calculation:
Finished Goods Inventory
Beginning
450,000
Cost of Goods Manufactured
975,000
Cost of Goods Sold
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
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Exercise 14–11 (20 minutes)
Part 1
Company 1 = Sunrise Foods
Explanation: Data shows a merchandising firm as there is only one
Part 2
Company 1
Sunrise Foods
Current Assets Section of Balance Sheet
December 31
Cash ………………………………………
$ 7,000
Company 2
Rayzer Skis Mfg.
Current Assets Section of Balance Sheet
December 31
Cash ………………………………………
$ 5,000
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Exercise 14-12 (15 minutes)
Account
Selling
Expense
General &
Admin.
Expenses
Cost of Goods
Manufactured
Advertising …………………………………………..
✓
Work in process inventory, beginning …..
✓
Computer supplies used in office ………….
Depreciation expense—Factory …………….
✓
Depreciation expense—Office ………………
Wages for assembly workers ………………..
✓
✓
Property taxes on factory ……………………..
✓
Raw materials purchases ……………………..
✓
✓
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Exercise 14-13 (25 minutes)
DELRAY MFG.
Schedule of Cost of Goods Manufactured
For Year Ended December 31
Direct materials
Raw materials inventory, beginning ……………
$ 37,000
Raw materials purchases …………………………..
Raw materials available for use ………………….
Less raw materials inventory, ending …………
Direct materials used …………………………………
Direct labor ………………………………………………….
225,000
Factory overhead
Indirect labor ……………………………………………..
47,000
Repairs—Factory equipment ……………………..
23,000
Rent cost of factory building ………………………
57,000
Total factory overhead ……………………………….
Total manufacturing costs …………………………...
Add work in process inventory, beginning…….
Total cost of work in process ………………………..
Less work in process inventory, ending ………..
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 14
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Exercise 14-14 (20 minutes)
DELRAY MFG.
Income Statement
For Year Ended December 31
Sales …………………………………………………………..
$1,250,000
Cost of goods sold
Finished goods inventory, beginning ………..
$ 62,700
Cost of goods manufactured …………………….
Less finished goods inventory, ending………
Cost of goods sold ……………………………………
Selling expenses …………………………………………