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CURRENT DESIGNS
CD19
The answers to parts (a) and (b) may vary from student to student.
(a) What are the primary information needs of each manager?
Mike Cichanowski, CEO, needs to know the overall financial picture of
the company. He also needs to have a general picture of sales by
territory and product line, and of cost per unit by product line.
Diane Buswell, Controller, needs all accounting-related information.
Deb Welch, Purchasing Manager, needs to know the costs of the
components for each product.
Bill Johnson, Sales Manager, needs to know sales by territory and
product line.
Dave Thill, Kayak Plant Manager, needs to know all the costs of
producing each type of kayak.
Rick Thrune, Production Manager for Composite Kayaks, needs to
know the costs related to the composite kayak production.
CD19 (Continued)
(b) Name one special-purpose management accounting report that could
be designed for each manager. Include the name of the report, the
information it would contain, and how frequently it should be issued.
Manager
Name of
report
Information report
would contain
How frequently
should it be
issued?
Mike Cichanowski
Analysis of
proposed
new product
line
Projected revenues
and expenses for a
possible new
product line
As needed and
requested
Deb Welch
Purchasing
History
List of items
purchased and most
recent cost for each
item
Monthly or
available on-
line
Bill Johnson
Sales
Summary
Sales by product
line and by
customer
Monthly or
weekly
19-34 Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only)
CD19 (Continued)
(c) When Diane Buswell, controller for Current Designs, reviewed the
accounting records for a recent period, she noted the following items.
Classify each item as a product cost or a period cost. If a cost is a
product cost, note if it is a direct materials, direct labor, or manufactur-
ing overhead item.
Payee
Purpose
Product Costs
Period
Costs
Direct
Materials
Direct
Labor
Manufacturing
Overhead
Winona Agency
Property insurance for
the manufacturing plant
X
Bill Johnson
(sales manager)
Payroll–payment to
sales manager
X
Xcel Energy
Electricity for
manufacturing plant
X
Winona Printing
Price lists for salespeople
X
Jim Kaiser (sales
representative)
Sales commissions
X
Fastenal
Shop supplies–brooms,
paper towels, etc.
X
Ravago
Polyethylene powder
which is the main
ingredient for the
rotational molded kayaks
X
Winona County
Property taxes on
manufacturing plant
X
North American
Composites
Kevlar fabric for
composite kayaks
X
Waste Management
Trash disposal for the
company office building
X
None
Journal entry to record
depreciation of
manufacturing equipment
X
BYP 19-1 DECISION-MAKING ACROSS THE ORGANIZATION
Ending Raw Materials Inventory
Beginning raw materials + Raw materials purchased
= Raw materials available for use
= $19,000 + $365,000 = $384,000
Ending Work in Process Inventory
Direct materials + Direct labor + Manufacturing overhead
= Total manufacturing costs
= $350,000 + $250,000 + ($250,000 X 60%) = $750,000
Ending Finished Goods Inventory
Sales – Cost of goods sold = Gross profit
$1,240,000 – Cost of goods sold = $1,240,000 X 40%
Cost of goods sold = $1,240,000 – $496,000 = $744,000
BYP 19-2 MANAGERIAL ANALYSIS
Since the questions were fairly open-ended, the following are only sug-
gested results. The class may be able to think of others, or of more items
for each one.
(a) Jason Dennis Needs information on sales, perhaps by salesper-
son and by territory.
(b) Jason Dennis Income statement.
Peggy Groneman None.
Dave Marley All.
(c) Jason Dennis Sales by Territory—Detailed information, possibly
by product line, issued daily or weekly.
Peggy Groneman Cost of Computer Programs—Accumulated cost
incurred for each major program used including
maintenance and updates of program, issued
monthly.
BYP 19-3 REAL-WORLD FOCUS
(a) The IMA has more than 60,000 members. These members include
business leaders, managers, and decision makers in accounting and
finance.
(b) Student and Associate members receive most of the benefits of Regular
membership at a significant savings.
• Unique access to the professional designation, the Certified Manage-
BYP 19-4 COMMUNICATION ACTIVITY
Ms. Shelly Phillips
President
Phillips Company
Dear Shelly:
As you requested, I corrected the income statement for October from the
information you gave me. The corrected statement is enclosed and it shows
one for you.
The income statement your assistant accountant prepared was not correct for
two primary reasons. First, product costs were not separated from selling and
administrative expenses. Second, and more importantly, the reported net loss
did not reflect changes in inventories. This had the effect of treating these
costs as expenses rather than assets. A reconciliation of the reported net loss
of $23,000 to net income of $2,000 is as follows:
Net loss as reported .................................................... $(23,000)
Increase (decrease) in inventories
Raw materials ($29,000 – $18,000) ...................... $11,000
BYP 19-4 (Continued)
I have also modified the form of the income statement to recognize the dis-
tinction between product costs (cost of goods sold) and period costs (operating
expenses) as required by generally accepted accounting principles.
BYP 19-5 ETHICS CASE
(a) The stakeholders in this situation are:
• The users of Newton Industries’ financial statements.
• Steve Morgan, controller.
(b) The ethical issues in this situation pertain to the adherence to sound
and acceptable accounting principles. Intentional violation of generally
accepted accounting principles in order to satisfy a practical short-term
(c) Ethically, the management of Newton Industries should be trying to report
the financial condition and results of operations as fairly as possible;
BYP 19-6 ALL ABOUT YOU
Student responses will vary. We have provided some basic examples that
may represent common responses.
(a) Individuals must often make purchase decisions which involve choosing
between an item that has a more expensive initial purchase price, but
is expected to either last longer, or provides some form of cost savings.
(b) In order to increase control over their financial situation and reduce
the probability of financial hardship, all people should prepare personal
budgets. Preparation of a personal budget requires the individual to plan
for the future and to prioritize expenditures.
(c) Companies employ the balanced scorecard as a mechanism to ensure
that their financial goals are consistent with their efforts. Use of the
(d) Capital budgeting involves financial evaluation of long-term assets. Compa-
nies routinely make capital budgeting decisions, but so do individuals.
The purchase of a home or car is a decision that has implications for your
BYP 19-7 CONSIDERING YOUR COSTS AND BENEFITS
Discussion guide: This is a difficult decision. While the direct costs of
outsourced tax return preparation may in fact be lower, you must also
consider other issues: Will the accuracy of the returns be as high? Will your
relationships with your customers suffer due to the loss of direct contact?
