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.
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 18
MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES
DISCUSSION QUESTIONS
18-1
CHAPTER 18 Managerial Accounting Concepts and Principles
PE 18–1A
Controlling (a)
PE 18–1B
Planning (a)
PE 18–2A
a. DL
PE 18–2B
a. DM (or FO if the cost is immaterially small)
PE 18–3A
a. B
PE 18–3B
a. P
PRACTICE EXERCISES
18-2
CHAPTER 18 Managerial Accounting Concepts and Principles
PE 18–4A
a. Product cost
PE 18–4B
a. Period cost
PE 18–5A
a. Work in process inventory, March 1……………………………
…
$ 87,500
Cost of direct materials used in production…………………
…
$21,000
Direct labor…………………………………………………………
…
54,250
…
…
b. Finished goods inventory, March 1……………………………
…
$ 36,750
PE 18–5B
a. Work in process inventory, July 1………………………………
…
$ 32,800
Cost of direct materials used in production…………………
…
$67,200
…
…
…
b. Finished goods inventory, July 1………………………………
…
$ 37,600
18-3
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–1
a. Factory overhead cost e. Factory overhead cost
Ex. 18–2
a. Factory overhead cost f. Direct labor cost
b. Factory overhead cost g. Factory overhead cost
Ex. 18–3
a, b, d, f, g
Ex. 18–4
a. Period cost j. Product cost
b. Product cost k. Product cost
c. Product cost l. Product cost
EXERCISES
18-4
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–6
a. improving e. strategic
Ex. 18–7
a. direct g. indirect
b. indirect h. indirect
Ex. 18–8
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:
Maintenance salaries $ 84,400
Indirect materials 56,200
MARCHING ANTS INC.
Manufacturing Costs
For the Quarter Ended June 30, 2016
18-5
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–9
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. 18–10
Current assets:
Cash $112,000
FLAT TOP COMPANY
Balance Sheet
December 31, 2016
VIDEO WAVE MANUFACTURING COMPANY
Income Statement
For the Month Ended January 31, 2016
18-6
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–11
Materials inventory, June 1, 2016…………………………………………………
…
$ 279,000
Ex. 18–12
a. $179,200 ($22,400 + $156,800)
b. $145,600 ($179,200 – $33,600)
Ex. 18–13
Work in process inventory, January 1, 2016…………………
…
$ 162,000
Add manufacturing costs incurred during January:
Cost of direct materials used in production………………
…
$390,000
Ex. 18–14
a. $390,600 ($61,600 + $329,000)
b. $317,800 ($390,600 – $72,800)
18-7
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–15
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
b. Finished goods inventory, March 1, 2016……………………………………
…
$ 163,800
1,328,760
MIX-A-LOT MANUFACTURING COMPANY
Statement of Cost of Goods Manufactured
For the Month Ended March 31, 2016
18-8
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–16
a. Finished goods inventory, October 1, 2016…………………
…
$101,250
Cost of goods manufactured…………………………………… 450,000
b. Sales………………………………………………………………… $911,250
Cost of goods sold………………………………………………
…
457,450
Gross profit………………………………………………………… $453,800
Net income…………………………………………………………
…
$233,400
Ex. 18–17
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
e. Total manufacturing costs………………………………………
…
$455,400
…
18-9
…
…
…
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–18
The Hotel Monaco has excess capacity for this day, so it is willing to accept
additional customers. To determine whether or not to accept Natalie Mooney’s
bid, the Hotel Monaco could use managerial accounting information to determine
18-10
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–1A
Direct Direct Factory
Materials Labor Overhead Selling Administrative
Cost Cost Cost Cost Expense Expense
aX
bX
cX
dX
eX
fX
gX
zX
PROBLEMS
Product Costs Period Costs
18-11
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–2A
Direct Direct Factory
Materials Labor Overhead Selling Administrative
Cost Cost Cost Cost Expense Expense
aX
bX
cX
dX
eX
fX
gX
hX
iX
jX
kX
wX
xX
Product Costs Period Costs
18-12
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–3A
1. The most logical definition for the final cost object would be the patient. The
2. Cost Direct Indirect
a
X
b
X
c
X
d
X
e
X
u
X
18-13
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–4A
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)
2.
Work in process inventory, December 1, 2016 $ 442,500
Direct materials:
Materials inventory, December 1, 2016 $177,000
Purchases 342,000
VOLT COMPANY
Statement of Cost of Goods Manufactured
For the Month Ended December 31, 2016
18-14
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–4A (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
18-15