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:
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
PE 18–1B
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, January 1……………………………
…
$ 70,000
Cost of direct materials used in production……………………
…
$16,800
b. Finished goods inventory, January 1……………………………
…
$ 29,400
PE 18–5B
a. Work in process inventory, July 1………………………………… $ 32,800
Cost of direct materials used in production……………………
…
$67,200
18-3
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–1
a. Direct materials cost e. Direct labor cost
Ex. 18–2
a. Factory overhead cost f. Direct materials cost
Ex. 18–3
Ex. 18–4
a. Period cost j. Period cost
Ex. 18–5
a. improve e. conversion
EXERCISES
18-4
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–6
a. product e. materials inventory
Ex. 18–7
a. direct g. 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 $ 612,500
Direct labor 531,250
FARRAR INC.
Manufacturing Costs
For the Quarter Ended June 30, 2014
18-5
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–9
a.
Revenues $450,000
b. Inventory balances on January 31, 2014:
Ex. 18–10
Current assets:
Cash $ 89,600
BERENTE COMPANY
Balance Sheet
December 31, 2014
CHATERJEE MANUFACTURING COMPANY
Income Statement
For the Month Ended January 31, 2014
18-6
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–11
Materials inventory, April 1, 2014……………………………………………………
…
$ 310,000
Ex. 18–12
a. $153,600 ($19,200 + $134,400)
Ex. 18–13
Work in process inventory, January 1, 2014………………………
…
$135,000
Add manufacturing costs incurred during January:
Ex. 18–14
a. $334,800 ($52,800 + $282,000)
18-7
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–15
a.
Factory overhead:
Indirect labor $ 40,320
b. Finished goods inventory, May 1, 2014………………………………………… $109,200
TIWANA MANUFACTURING COMPANY
Statement of Cost of Goods Manufactured
18-8
CHAPTER 18 Managerial Accounting Concepts and Principles
Ex. 18–16
a. Finished goods inventory, July 1, 2014…………………………
…
$ 81,000
Cost of goods manufactured………………………………………
…
360,000
Ex. 18–17
a. Sales……………………………………………………………………
…
$792,000
…
d. Total manufacturing costs…………………………………………
…
$455,400
…
…
18-9
…
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
kX
lX
mX
PROBLEMS
Product Costs Period Costs
18-10
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
Product Costs Period Costs
18-11
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
aX
bX
18-12
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)
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
18-13
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, 2014 $ 204,000
VOLT COMPANY
Income Statement
For the Month Ended December 31, 2014
18-14
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–5A
1.
Work in process inventory, January 1, 2014 $ 526,500
Direct materials:
Materials inventory, January 1, 2014 $292,500
THE LUCILLE CORPORATION
Statement of Cost of Goods Manufactured
For the Year Ended December 31, 2014
18-15