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 operations for fixed periods of
2. a. A line department is directly involved in providing goods and services to customers, while a
staff department provides service, assistance, or advice to line departments or other staff
departments.
b. (1) Sales Departmen
t
3. Direct materials cos
t
5. Product costs are composed of three elements of manufacturing costs: direct materials cost, direc
t
6. The three inventory accounts for a manufacturing business are as follows:
a. Finished goods inventory consists of completed (or finished) products that have not been sold.
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.
10. A merchandising business purchases merchandise (products) in a finished state for resale to
CHAPTER 16 (FIN MAN); CHAPTER 1 (MAN)
MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES
DISCUSSION QUESTIONS
16-1
CHAPTER 16 Managerial Accounting Concepts and Principles
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)
a. DL
PE 16–2B (FIN MAN); PE 1–2B (MAN)
a. DM (or FO if the cost is immaterially small)
PE 16–3A (FIN MAN); PE 1–3A (MAN)
a. B
PE 16–3B (FIN MAN); PE 1–3B (MAN)
a. P
PRACTICE EXERCISES
16-2
CHAPTER 16 Managerial Accounting Concepts and Principles
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, March 1……………………………
$ 87,500
Cost of direct materials used in production…………………
$21,000
Direct labor…………………………………………………………
54,250
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
CHAPTER 16 Managerial Accounting Concepts and Principles
Ex. 16–1 (FIN MAN); Ex. 1–1 (MAN)
a. Factory overhead cost e. Factory overhead cost
a, b, d, f, g
Ex. 16–4 (FIN MAN); Ex. 1–4 (MAN)
a. Period cost j. Product cost
b. Product cost k. Product cost
c. Product cost l. Product cost
EXERCISES
16-4
CHAPTER 16 Managerial Accounting Concepts and Principles
Ex. 16–6 (FIN MAN); Ex. 1–6 (MAN)
a. improving e. strategic
Ex. 16–7 (FIN MAN); Ex. 1–7 (MAN)
a. direct g. indirect
b. indirect h. indirect
Ex. 16–8 (FIN MAN); Ex. 1–8 (MAN)
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 $ 551,300
Direct labor 478,100
Factory overhead:
MARCHING ANTS INC.
Manufacturing Costs
For the Quarter Ended June 30, 2016
16-5
CHAPTER 16 Managerial Accounting Concepts and Principles
Ex. 16–9 (FIN MAN); Ex. 1–9 (MAN)
a.
Revenues $652,000
Cost of goods sold 365,000
b. Inventory balances on January 31, 2016:
Materials ($133,200 – $94,080)…………………………………………………
…
$39,120
Ex. 16–10 (FIN MAN); Ex. 1–10 (MAN)
Current assets:
Cash $112,000
Accounts receivable 105,000
FLAT TOP COMPANY
Balance Sheet
December 31, 2016
VIDEO WAVE MANUFACTURING COMPANY
Income Statement
For the Month Ended January 31, 2016
16-6
CHAPTER 16 Managerial Accounting Concepts and Principles
Ex. 16–11 (FIN MAN); Ex. 1–11 (MAN)
Materials inventory, June 1, 2016…………………………………………………
…
$ 279,000
Add materials purchased during June…………………………………………… 828,000
Ex. 16–12 (FIN MAN); Ex. 1–12 (MAN)
a. $179,200 ($22,400 + $156,800)
b. $145,600 ($179,200 – $33,600)
Ex. 16–13 (FIN MAN); Ex. 1–13 (MAN)
Work in process inventory, January 1, 2016…………………
…
$ 162,000
Add manufacturing costs incurred during January:
Cost of direct materials used in production………………
…
$390,000
Direct labor………………………………………………………
…
336,000
16-7
CHAPTER 16 Managerial Accounting Concepts and Principles
Ex. 16–15 (FIN MAN); Ex. 1–15 (MAN)
a.
Work in process inventory, March 1, 2016 $ 214,200
Direct materials:
Materials inventory, March 1, 2016 $315,000
Factory overhead:
Indirect labor $ 60,480
Machinery depreciation 36,000
Heat, light, and power 12,600
Supplies 10,080
Property taxes 8,820
Miscellaneous cost 16,380
Total factory overhead 144,360
Total manufacturing costs incurred during March 1,353,960
MIX-A-LOT MANUFACTURING COMPANY
Statement of Cost of Goods Manufactured
For the Month Ended March 31, 2016
16-8
CHAPTER 16 Managerial Accounting Concepts and Principles
Ex. 16–16 (FIN MAN); Ex. 1–16 (MAN)
a. Finished goods inventory, October 1, 2016…………………
…
$101,250
Cost of goods manufactured…………………………………… 450,000
Cost of finished goods available for sale……………………
…
$551,250
Ex. 16–17 (FIN MAN); Ex. 1–17 (MAN)
a. Sales………………………………………………………………… $792,000
Less gross profit…………………………………………………
…
462,000
Cost of goods sold………………………………………………
…
$330,000
…
d. Total manufacturing costs………………………………………
…
$455,400
Less: Direct materials…………………………………………
…
$211,200
Factory overhead costs (indirect labor
and factory depreciation)*…………………………… 198,000 409,200
Direct labor cost…………………………………………………
…
$ 46,200
*$171,600 + $26,400
…
…
16-9
…
…
…
CHAPTER 16 Managerial Accounting Concepts and Principles
Ex. 16–18 (FIN MAN); Ex. 1–18 (MAN)
The Hotel Monaco has excess capacity for this day, so it is willing to accept
16-10
CHAPTER 16 Managerial Accounting Concepts and Principles
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
dX
eX
fX
gX
hX
iX
oX
pX
qX
rX
sX
zX
PROBLEMS
Product Costs Period Costs
16-11
CHAPTER 16 Managerial Accounting Concepts and Principles
Prob. 16–2A (FIN MAN); Prob. 1–2A (MAN)
Direct Direct Factory
Materials Labor Overhead Selling Administrative
Cost Cost Cost Cost Expense Expense
aX
bX
cX
lX
mX
nX
oX
pX
qX
Product Costs Period Costs
16-12
CHAPTER 16 Managerial Accounting Concepts and Principles
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
gX
hX
iX
jX
kX
lX
mX
rX
sX
tX
uX
16-13
CHAPTER 16 Managerial Accounting Concepts and Principles
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)
b. $516,000 ($1,035,000 – $339,000 – $180,000)
c. $453,000 ($1,477,500 – $1,024,500)
2.
Work in process inventory, December 1, 2016 $ 442,500
Direct materials:
Materials inventory, December 1, 2016 $177,000
Purchases 342,000
Cost of materials available for use $519,000
Less materials inventory, December 31, 2016 180,000
Cost of direct materials used in production $339,000
VOLT COMPANY
Statement of Cost of Goods Manufactured
For the Month Ended December 31, 2016
16-14
CHAPTER 16 Managerial Accounting Concepts and Principles
Prob. 16–4A (FIN MAN); Prob. 1–4A (MAN) (Concluded)
3.
Sales $1,675,500
Cost of goods sold:
Finished goods inventory, December 1, 2016 $ 204,000
Cost of goods manufactured 1,024,500
VOLT COMPANY
Income Statement
For the Month Ended December 31, 2016