CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–5A
1.
Work in process inventory, January 1, 2016 $ 631,800
Direct materials:
Materials inventory, January 1, 2016 $351,000
Purchases 659,800
Factory overhead:
Indirect labor $ 78,750
Depreciation expense—factory equipment 56,160
Heat, light, and power—factory 22,460
Property taxes—factory 18,500
THE NEWQUEST CORPORATION
Statement of Cost of Goods Manufactured
For the Year Ended December 31, 2016
18-16
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–5A (Concluded)
2.
Sales $3,010,000
Cost of goods sold:
Finished goods inventory, January 1, 2016 $ 608,400
Cost of goods manufactured 1,516,570
Gross profit $1,461,030
Operating expenses:
Administrative expenses:
Office salaries expense $185,000
THE NEWQUEST CORPORATION
Income Statement
For the Year Ended December 31, 2016
18-17
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–1B
Direct Direct Factory
Materials Labor Overhead Selling Administrative
Cost Cost Cost Cost Expense Expense
aX
bX
cX
mX
nX
oX
pX
qX
rX
sX
Product Costs Period Costs
18-18
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–2B
Direct Direct Factory
Materials Labor Overhead Selling Administrative
Cost Cost Cost Cost Expense Expense
a
X
b
X
c
X
n
X
o
X
p
X
q
X
Product Costs Period Costs
18-19
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–3B
1. The most logical definition for the final cost object would be a hotel guest. Guests
consume services such as a meal, a night’s stay in a hotel room, room service,
a telephone call, etc.
2. Cost Direct Indirect
aX
bX
cX
dX
eX
mX
nX
oX
pX
qX
rX
sX
18-20
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–4B
1. On Company
a. $30,800 ($282,800 + $65,800 – $317,800)
b. $854,000 ($317,800 + $387,800 + $148,400)
Off Company
a. $581,560 ($685,720* + $91,140 – $195,300)
b. $685,720 ($1,519,000 – $256,060 – $577,220)
2.
Work in process inventory, December 1, 2016 $119,000
Direct materials:
Materials inventory, December 1, 2016 $ 65,800
Purchases 282,800
ON COMPANY
Statement of Cost of Goods Manufactured
For the Month Ended December 31, 2016
18-21
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–4B (Concluded)
3.
Sales $1,127,000
Cost of goods sold:
Finished goods inventory, December 1, 2016 $ 224,000
Cost of goods manufactured 800,800
ON COMPANY
Income Statement
For the Month Ended December 31, 2016
18-22
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–5B
1.
Work in process inventory, January 1, 2016 $109,200
Direct materials:
Materials inventory, January 1, 2016 $ 77,350
Purchases 123,500
Factory overhead:
Indirect labor $ 23,660
Depreciation expense—factory equipment 14,560
Heat, light, and power—factory 5,850
SHANIKA COMPANY
Statement of Cost of Goods Manufactured
For the Year Ended December 31, 2016
18-23
CHAPTER 18 Managerial Accounting Concepts and Principles
Prob. 18–5B (Concluded)
2.
Sales $864,500
Cost of goods sold:
Finished goods inventory, January 1, 2016 $113,750
Cost of goods manufactured 367,510
Cost of finished goods available for sale $481,260
Less finished goods inventory,
December 31, 2016 100,100
Cost of goods sold 381,160
SHANIKA COMPANY
Income Statement
For the Year Ended December 31, 2016
18-24
CHAPTER 18 Managerial Accounting Concepts and Principles
CP 18–1
Although Fred may appear to have technically complied with company policy, his
computation of the cost of lumber is unethical. Fred has created an apparent
conflict-of-interest situation. Thus, although it is appropriate for Fred to take
CP 18–2
The objectives of managerial accounting and financial accounting are different;
therefore, the vice president’s statement is very incomplete. In one sense, the
statement may be true at only very high levels in the organization. For example,
the division manager may be evaluated on the basis of financial accounting profit.
Thus, the divisional manager would be evaluated by central management in nearly
the same way that central management is evaluated by shareholders.
CASES & PROJECTS
18-25
CP 18–3
1. The vice president of the Information Systems Division can use managerial
accounting information in a number of different ways. For example, the vice
president might use these data to determine resources that will be required
2. The hospital administrator can use managerial accounting information in a
number of different ways. One way is for cost planning and control. The
administrator could use managerial information to keep costs commensurate
with services provided and to plan for staffing and nursing levels. This
3. The CEO of the food company will use managerial accounting information
to support the control of the three divisions. Each of the three divisions will
4. The copy shop manager needs fairly simple managerial accounting information.
At the most basic level, the copy shop manager needs to know the costs of
performing various copy tasks, such as one-sided copy, two-sided copy,
CP 18–4
1. Obie’s bill has a number of points that should be considered. Some of the
points, with the appropriate argument, are identified below.
a. The trip back to the shop resulted in an $80 labor charge. Obie should
argue that the whole hour should not be billed. The hour is the result of
stocking out of a circuit board on the truck. The circuit board should
b. The overtime premium should not have been charged to Obie. What if
Obie was the first appointment in the morning? If so, then there would be
no overtime premium. It’s only random misfortune that Obie was the last
client of the day and therefore received the overtime premium. Add to
this the fact that the overtime would not have been necessary without
Thus, the labor portion of the bill should only be $70 + $60 + $60 = $190.
There are other parts of the bill that should not be in dispute.
●The materials storage and handling charge is a normal charge of
maintaining a parts inventory for the benefit of clients that need parts.
CP 18–4 (Concluded)
Direct Direct
2. Cost Materials Labor Overhead
Circuit board………………………………
…
X
Storage and handling……………………
…
X
CP 18–5
1. The High Times manager will use managerial accounting information
2. The plant manager is going to use cost information on scrap and rework to
identify the amount of waste occurring in the plant. This measure of waste is
3. The cost of ending inventory must be determined as financial statements
are prepared. The division controller will likely require inventory valuation
4. The Maintenance Department manager needs to be able to plan the resources
to be used by his department. The planning process involves identifying the
required resources to fulfill the department’s objective. For example, the
18-28
CHAPTER 18 Managerial Accounting Concepts and Principles
CP 18–6
Note to Instructors: Consider having the teams compete for the most examples.
Have half the class do the pizza restaurant and the other the copy shop, and
compare results.
Some examples that may be offered by the students are the following:
Copy and Graphics Shop
Direct Direct Selling
Cost Materials Labor Overhead Expenses
Paper………………………………………
…
X
Graphic designer wages………………… X
Manager salary……………………………
…
X
Lease cost of copy machine……………
…
X
Coupon costs……………………………
…
X
Advertising………………………………… X
…
CP 18–6 (Concluded)
Pizza Restaurant
Direct Direct Selling
Cost Materials Labor Overhead Expenses
Ingredients……………………………………
…
X
Cook wages…………………………………
…
X
Manager salary………………………………
…
X
Depreciation on equipment
…
…
…
18-30