1. Financial accounting and managerial accounting are different in several ways. Financial
accounting information is reported in statements that are useful to persons or groups outside of
a company. These statements objectively report the results of past operations for fixed periods of
2. a. A line department is directly involved in the basic objectives of the organization, while a
5. Product costs are composed of three elements of manufacturing costs: direct materials cost,
direct labor cost, and factory overhead cost. These costs are treated as assets until the product
6. The three inventory accounts for a manufacturing business are as follows:
7. Finished goods, work in process, and materials
8. The cost of finished goods and the cost of work in process included the following:
a. Direct materials—the costs of materials that enter directly into the finished product.
CHAPTER 16 (FIN MAN); CHAPTER 1 (MAN)
MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES
DISCUSSION QUESTIONS
16-1
PE 16–1A (FIN MAN); PE 1–1A (MAN)
PE 16–1B (FIN MAN); PE 1–1B (MAN)
PE 16–2A (FIN MAN); PE 1–2A (MAN)
PE 16–2B (FIN MAN); PE 1–2B (MAN)
PE 16–3A (FIN MAN); PE 1–3A (MAN)
PE 16–3B (FIN MAN); PE 1–3B (MAN)
a. P
PRACTICE EXERCISES
16-2
PE 16–4A (FIN MAN); PE 1–4A (MAN)
a. Product cost
PE 16–4B (FIN MAN); PE 1–4B (MAN)
a. Period cost
PE 16–5A (FIN MAN); PE 1–5A (MAN)
a. Work in process inventory, January 1…………………………… $ 70,000
Cost of direct materials used in production……………………
…
$16,800
…
…
PE 16–5B (FIN MAN); PE 1–5B (MAN)
a. Work in process inventory, July 1………………………………
…
$ 32,800
Cost of direct materials used in production……………………
…
$67,200
Direct labor……………………………………………………………
…
88,000
…
16-3
Ex. 16–1 (FIN MAN); Ex. 1–1 (MAN)
a. Direct materials cost e. Direct labor cost
b. Factory overhead cost f. Direct materials cost
Ex. 16–4 (FIN MAN); Ex. 1–4 (MAN)
a. Period cost j. Period cost
b. Product cost k. Period cost
EXERCISES
16-4
Ex. 16–6 (FIN MAN); Ex. 1–6 (MAN)
a. product e. materials inventory
b. operational f. indirect
Ex. 16–8 (FIN MAN); Ex. 1–8 (MAN)
1. The maintenance salaries and indirect materials should be included as factory
2. The factory overhead incorrectly includes the following items: sales salaries,
promotional expenses, corporate office insurance and property taxes, and corporate
office depreciation. These items should not be included as factory overhead. The
corrected report is as follows:
Cost of direct materials used in production $ 612,500
Direct labor 531,250
Factory overhead:
FARRAR INC.
Manufacturing Costs
For the Quarter Ended June 30, 2014
16-5
Ex. 16–9 (FIN MAN); Ex. 1–9 (MAN)
a.
Revenues $450,000
Cost of goods sold 280,000
b. Inventory balances on January 31, 2014:
Ex. 16–10 (FIN MAN); Ex. 1–10 (MAN)
Current assets:
BERENTE COMPANY
Balance Sheet
December 31, 2014
CHATERJEE MANUFACTURING COMPANY
Income Statement
For the Month Ended January 31, 2014
16-6
Ex. 16–11 (FIN MAN); Ex. 1–11 (MAN)
Materials inventory, April 1, 2014……………………………………………………
…
$ 310,000
Ex. 16–12 (FIN MAN); Ex. 1–12 (MAN)
a. $153,600 ($19,200 + $134,400)
Ex. 16–13 (FIN MAN); Ex. 1–13 (MAN)
Work in process inventory, January 1, 2014………………………
…
$135,000
Add manufacturing costs incurred during January:
Ex. 16–14 (FIN MAN); Ex. 1–14 (MAN)
a. $334,800 ($52,800 + $282,000)
16-7
Ex. 16–15 (FIN MAN); Ex. 1–15 (MAN)
a.
Work in process inventory, May 1, 2014 $ 142,800
Direct materials:
Factory overhead:
Indirect labor $ 40,320
Machinery depreciation 24,000
b. Finished goods inventory, May 1, 2014………………………………………… $109,200
TIWANA MANUFACTURING COMPANY
Statement of Cost of Goods Manufactured
For the Month Ended May 31, 2014
16-8
Ex. 16–16 (FIN MAN); Ex. 1–16 (MAN)
a. Finished goods inventory, July 1, 2014…………………………
…
$ 81,000
Operating expenses:
Selling expenses…………………………………………………
…
$114,750
Ex. 16–17 (FIN MAN); Ex. 1–17 (MAN)
$792,000
16-9
Prob. 16–1A (FIN MAN); Prob. 1–1A (MAN)
Direct Direct Factory
Materials Labor Overhead Selling Administrative
Cost Cost Cost Cost Expense Expense
aX
bX
cX
kX
lX
mX
nX
PROBLEMS
Product Costs Period Costs
16-10
Prob. 16–2A (FIN MAN); Prob. 1–2A (MAN)
Direct Direct Factory
Materials Labor Overhead Selling Administrative
Cost Cost Cost Cost Expense Expense
aX
gX
hX
iX
jX
kX
lX
mX
nX
oX
Product Costs Period Costs
16-11
Prob. 16–3A (FIN MAN); Prob. 1–3A (MAN)
1. The most logical definition for the final cost object would be the patient. The
2. Cost Direct Indirect
aX
bX
cX
dX
16-12
Prob. 16–4A (FIN MAN); Prob. 1–4A (MAN)
1. Prius Company
a. $240,680 ($712,800 + $280,280 – $752,400)
b. $2,138,400 ($752,400 + $1,058,400 + $327,600)
Volt Company
a. $339,000 ($177,000 + $342,000 – $180,000)
2.
Work in process inventory, December 1, 2014 $ 442,500
Direct materials:
Materials inventory, December 1, 2014 $177,000
VOLT COMPANY
Statement of Cost of Goods Manufactured
For the Month Ended December 31, 2014
16-13
Prob. 16–4A (FIN MAN); Prob. 1–4A (MAN) (Concluded)
3.
Sales $1,675,500
Cost of goods sold:
Finished goods inventory, December 1, 2014 $ 204,000
VOLT COMPANY
Income Statement
For the Month Ended December 31, 2014
16-14
Prob. 16–5A (FIN MAN); Prob. 1–5A (MAN)
1.
Work in process inventory, January 1, 2014 $ 526,500
Direct materials:
Factory overhead:
Indirect labor $ 65,620
Depreciation expense—factory equipment 46,800
Heat, light, and power—factory 18,720
Property taxes—factory 15,210
THE LUCILLE CORPORATION
Statement of Cost of Goods Manufactured
For the Year Ended December 31, 2014
16-15